What is business strategy?

I love strategy, it was the part of the MBA that really stood out for me but it so often misunderstood. I’ve found over the years a lot of people confuse strategy with operational issues and processes, indeed I only achieved true clarity when studying the dynamics of strategy module within my MBA. Within this post I will give a simple guide to strategy and try to remove some of the confusion.

Vision

Let’s start by mentioning vision, every company should have a vision. A vision is simply where the owners/senior managers of the company want to be in the future. My vision for Bona Fide Business Development is to be ‘helping to create clear, accountable, engaged, customer focused, profitable and excellent organisations.’ As the owner this is my goal and where I am aiming for the company to be. This vision is important because all my efforts in making the company successful are related to this, everything I do and every interaction I have has some relation to achieving this vision. Your goal may be market share, to be the best quality product, have the best customer service, to service a particular niche, the choice is personal to your organisation but is obviously one that will be profitable for your business.

So what is strategy?

Strategies are the high level decisions that you make and the actions that you take that move you towards your vision. When I say high level this is because the strategic decisions are the big ones made at Board level that are not easily reversible. They involve committing significant resources whether that be financial, physical assets or human resources to reaching your goal. So for profit making companies strategy is analysing, choosing and implementing how to deploy resources to achieve your profitable vision.

Corporate/Business/Functional strategy

There are three levels of strategy:

  • Corporate – This is the very highest level and defines the organisations reasons for existing and what markets to be in.
  • Business – This is strategy at the strategic business unit level, so may be a subsidiary in a country or a particular division of a multi-national corporation.
  • Functional – The operational level strategy within a strategic business unit, for example Human Resources strategy or Research & Development.

In large organisations these are quite distinct with separate management teams looking after them, in a small business they are usually the same management team making the decisions.

No matter what the size the they are linked to the original vision and strategy of the Corporate level, the corporate strategy will be reflected in the business and functional strategies. All levels of strategy should be aligned to deliver the overall vision.

Competitive advantage

It is worth mentioning competitive advantage here and its link to strategy, to earn higher levels of profits you need to offer something that is better than your competitors. Your strategy should be aiming to gain a competitive advantage over your rivals. This may be having a better and more desirable product, a more efficient distribution system, a lower cost base, better customer service, improved brand image, it is something that will allow you to earn higher profits at least for a short time and preferably longer.

By definition this means that you have to choose to do something or be something different from your rivals, you can’t be better by trying to be the same, it is just not possible.

What affects strategy?

You have your vision and you need to go on a journey to get there, for any journey to be successful you need to know where you are now and then plan the route to get there, navigating any obstacles  that may arise on the way.

The strategic journey to your vision is no different, you need to fully assess where you are, your internal strengths and weaknesses and the external factors that will help or hinder your journey.

Consider a journey of 1 mile, you can run, walk, cycle, drive a car, call a taxi or catch a bus.

The method you choose will depend on a number of factors:

Internal factors

Your fitness – can you run or walk a mile?

Do you possess a bike or a car?

If it is raining do you own an umbrella?

Do you have enough money for a taxi or the bus fair?

External factors

The weather – is it raining? is there snow on the floor?

The terrain – is it a mile across a muddy field or is it a tarmac road?

The neighbourhood? – is it safe to walk?

The time of day you will travel?

Is it on a bus route?

Key Success Factors

These are what define success, what do you need to do to be successful? In this example, maybe be there in five minutes or get there dry as you going to a posh meal at an expensive restaurant.

Analysing/Choosing/Implementing

Strategy can be thought of as analysing, choosing and implementing the best solutions that move you to your vision.

You will create options and choose the ones to implement that suit you best at that moment in time based on internal and external factors.

In business it is similar to the journey example, you assess external factors using a tool such as a PESTLE analysis (Political, Economic, Sociological, Technological, Legal and Environmental Factors), tools such as Porters 5 Forces which analyse the relative profitabilities of markets are useful for working out the market forces.

You should determine Key Success Factors that you believe are essential to achieving your vision. 

Internally you will assess your resources, do you have the financial resources or physical assets to be successful? Does your brand make you a market leader? Are your staff the most skilled? Are they positively engaged? By auditing your resources you can highlight weaknesses to improve as well as strengths to exploit.

By analysing all these factors you have the basis for generating options for strategic choice. A properly done SWOT analysis will highlight the key Strengths, Weaknesses, Opportunities and Threats that are genuinely strategic (a good SWOT won’t just be a long list of factors but they will be tested for relevance and significance).

The options generated need to be tested to ensure the validity and that your assumptions are correct and that consequences of actions are thought through.

Most importantly the strategies chosen need to be implemented, frequently this is the hardest part of the strategy process.

Deliberate or emergent strategy?

In the example a deliberate strategy would be choosing to the get the bus, you have weighed up everything and that is the best option. The bus runs hourly and you have been standing at the stop for 15 minutes, it was due 10 minutes ago. Do you continue the deliberate strategy and hope the bus will turn up? Or do you develop an emergent one? Things aren’t going quite to plan so maybe call a taxi it is more expensive than the bus but more reliable? Walk to the next stop at least you are moving in the right direction and you may still be able to catch the bus if it comes?

Deliberate strategy is important, it is vital that people understand the basis of the strategy and what is happening (and why) for a successful implementation.  Things change though, the environment that your organisation operates in is chaotic and unpredictable, flexibility is needed to handle change,  a new competitor,  a change in Government, changes in technology even a number of small changes can build into a strategic issue that needs addressing.

Therefore strategy needs to be a mixture of deliberate and emergent as things change.

Even if things don’t change the strategy needs to be monitored to ensure it is as effective as originally planned, a review  should be performed regularly to make sure the vision is still relevant and that the chosen actions are relevant in the external conditions. 

Summary

  • Strategy are the actions and decisions that get you to your vision.
  • They help guide and set the framework the operational decisions.
  • The process of setting strategy is analysing, choosing and implementing.
  • This process needs to be regularly reviewed to ensure you are still on course.
  • In my opinion a mixture of deliberate and emergent strategy is required.

Actions

  • If you have found this useful please share on social media to help others.
  • Contact us via email contact@bonafidebd.com to see how we can help your develop the strategy for your business.
  • Have a look at my other posts – click here.
By |2019-01-08T10:51:33+00:00January 8th, 2019|Strategy|0 Comments

About the Author:

Leave A Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.