STEN 1000 Chapter Notes - Chapter 6: Market Analysis, Imitation, Value Proposition
20 Jun 2018
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CHAPTER 6 – DEVELOPING A BUSINESS STRATEGY
The Concept of Business Strategy
Long-term success of business based on two principles (fig 6.1):
1. The ability to define and create a strategic direction and market position for the
organization (strategic plan)
2. The ability to execute the core tactical initiatives within the plan in a manner that
ensures the organization’s success
Well-directed and positioned strategy + efficient and effective tactics execution = business
growth and profitability
Business strategy is all about understanding what opportunities exist in the marketplace and
which ones should be pursued.
Path of action – business strategy in simple terms (fig. 6.2)
- “Where do we want to play?
- Why is this the best use of
our resources?
- How do we plan to win
Aptitude – resources and assets
Ability – routines and capabilities
Identity – core values
Core Elements for Assessing Business Strategy [L3]
Development of business strategy (fig. 6.3) = making decisions for direction in 6 areas:
1. Purpose – the mission of the organization and the vision its managers have for the
business
- Mission – the fundamental purpose the business has identifies as being its
predominant reason for existence
- Vision is a forward-thinking statement that defines what a company want to
become and where it is going
2. Markets – the specific markets or market segments the business sees itself competing in
- Should be assessed in terms of their current and
future profitability and growth potential
- Harvesting – is a strategy that reflects a
reduced commitment to a particular market
given its perceived weak future growth or
profitability potential
3. Products and Services – a review of the current
products and services offered by a business, as well as
potential new products/services that are to be added to
the products portfolio
- Product/service review is triggered by an
assessment of the opportunities that the
organization has decided to explore as a result of its market assessment
- Which products and related services are to remain part of a business’s portfolio,
as well a s which are receive additional R&D (research and development) support,
and which new ones are to be added
- Portfolio analysis (fig. 6.4)
4. Resources – the allocation of a business’s resources in support of its strategic decisions
- Capacity limitation as to the amount of products businesses can produce, the
amount of money they can commit to projects, and the variety of tasks (incl.
expertise) their workforce can handle at any given time
- Businesses must make decisions as to where to allocate these limited resources
5. Business system configuration – modifying the organization’s infrastructure and the
way it does business to ensure the success of the plan
- Ex. Making changes to organization’s distribution outlets, warehousing or product
delivery, plants and facilities, manufacturing and assembly processes, marketing
campaign etc.
6. Responsibility and accountability – identifying who within the business will be
responsible for each aspect of the strategic plan.
- SMAC principles: specific, measurable, actionable, controllable
- SMART: specific measurable, actionable, realistic, time sensitive
For businesses, a strategic plan is the road map to success. It defines a specific route the business
intends to undertake, provides benchmarks to measure its success along the way, and identifies
where and how the organization will interact with its customers as it seeks to meet its overall
mission and vision.
The Strategic Planning Process
- Strategic plan – a roadmap to success, defining a specific route the business intends to take,
providing benchmarks to measure success, and identifying where and how the business will
interact with customer in meeting its mission and vision
Steps associated with the development of a strategic plan (fig. 6.5):
1. Revisit our purpose – Who are we and where do we intend to go?
- Assessing the fit of the current mission and vision of the organization
2. Undertake and I/E (internal/external) analysis to understand our environment (internal
and external)
- What changes or shifts are occurring that threaten us or that provide us with
opportunities
- Company analysis, customer analysis, macroeconomic analysis, competitor analysis
3. Assess our view of the world
- Based on what we know, what are our choices?
- Identify the opportunities and threats
4. Choose a direction
- Given our capabilities, competencies, competitive advantages, and resources, which
strategic choices should we pursue (where will we play)?
- What threats must we respond to?
- Define our objectives and make strategic choices
Document Summary
Well-directed and positioned strategy + efficient and effective tactics execution = business growth and profitability. Business strategy is all about understanding what opportunities exist in the marketplace and which ones should be pursued. Path of action business strategy in simple terms (fig. 6. 3) = making decisions for direction in 6 areas: purpose the mission of the organization and the vision its managers have for the business. Mission the fundamental purpose the business has identifies as being its predominant reason for existence. Vision is a forward-thinking statement that defines what a company want to become and where it is going: markets the specific markets or market segments the business sees itself competing in. Should be assessed in terms of their current and future profitability and growth potential. Product/service review is triggered by an assessment of the opportunities that the organization has decided to explore as a result of its market assessment.
