Why Build a Business Strategy?


By

B. Senthil Kumar
MA (Eco), MBA, M.Phil, (PhD)
Assistant Professor & Research Scholar
Department of Management Studies
Prathyusha Institute of Technology and Management
Aranvoyalkuppam, Tiruvallur-Poonamallee High Road, Tiruvallur-602 025
 


This article radically emphasizes on business strategy that the companies need to craft effectively for achieving the excellence in the life of business.  "If you don't know where you are going, you will likely end up somewhere else." The same is true in business. Unless the company has a carefully crafted business strategy, it is essentially flying blind in the community of business.

Most of the strategists remarked that "a finished plan is generally worthless but careful planning is absolutely essential". The company needs to have an ability to respond to changing market conditions and to continue to ride a dead strategy eventually needed for its excellence in the business life. It's a fact that those organizations that adapt to changing conditions thrive and grow. Those that remain unaware or misjudge these challenges and opportunities and fail to develop a new business strategy eventually die.

Why Build a Strategic Plan?

In a word, the answer to this question is focus. Strategy creates context for operating decisions. It establishes the playing field and provides guidance for decision-making about the types of experience and skills needed by employees, how marketing and advertising should be positioned, the priority of initiatives, how to structure the organization, and a host of other issues. A plan is necessary to guide decision-making, channel resources and define direction. Because of that, building a strategic plan should be well worth the time it will take to develop it, debate it and secure agreement on its direction.

Strategy is the way in which an organization meets the challenges and opportunities of its environment. It is often an overused and misunderstood concept. Strategic thinking does not necessarily imply long term. In some industries, long term is less than one year. It is not tactics, though strategy needs to be supported through tactics. It doesn't necessarily imply something big. The decision to move across town may have more human impact than the decision to do business in another city.

Strategy is a set of choices that defines the nature, direction and value system of an organization. It is not a document. It is a mindset which should be understood by every person in the organization and used to guide all decision-making within the organization. In developing strategy, leaders make conscious and informed choices about who they are and what they stand for:

* What are our core values and beliefs?
* What markets and customer groups will we serve?
* What products or services will, or will we not, deliver?
* What competitive advantages will cause us to succeed?
* What core competencies must we have to fuel our growth?
* What infrastructure, core processes and resources must we have to succeed?
* What financial results will we achieve?
* What should be our planning horizon?
* What is the quality-of-life contribution we want to make to our customers, our employees or the places in which we operate?

Reasons Why Business Plans Fail:

1. Poorly understood strategy -- most organizations have a strategy but, only few employees know what the strategy is.

2. Weak strategy execution Most of the strategies perceive that strategies fail due to execution.

3. Inability to adapt to change -- Once a business makes plans, the chaos of everything changing around it may gradually erodes those plans unless the organization can adapt. Many cannot.

4. Lack of a systematic approach - When an organization reaches a certain size, lack of alignment between different people or departments who handle different functions may hamper success.

5. People are not engaged - An engaged worker is one who is personally committed to the goals of the company. Unfortunately, no improvement will last due to people are engaged in the commitment.

6. A gap between knowing what to do, and doing it. Many things can get in the way including substituting talk for action, employee fear or mistrust of management, using the firm's history instead of sound judgment to dictate action, and badly designed or complex measures.

In the end, a solid business strategy and implementation plan may not solve all of your problems but those firms that do plan enjoy a much brighter track record. Plan well and beware of the pitfalls in implementation and you can enjoy your best year yet.

Business Model Needed For Making Effective Business Strategy:

A good business model provides benefits to all of its stakeholders more effectively than existing competitors or new entrants can. Here are six common ways to provide a greater array and volume of stakeholder benefits:

1. Help your customers add customers for themselves faster than their competitors.

2. Stimulate industry growth through providing more benefits and fewer drawbacks at the current price level.

3. Re-price your offerings to encourage using more of them.

4. Reduce the resources needed to provide and use these offerings.

5. Reinvent the resources generated by your business model to provide even more benefits and fewer drawbacks in the future, faster than your competitors can.

6. Fairly share excess resources with the stakeholders who have supported and provided the business models success in a predictable way, so that no other organization can offer these stakeholders as much benefit now or in the future.

The worst element of a bad business model is that scarce resources are rapidly drained from the company, harming both current and future performance. Such scarce resources include the time and attention of key employees, time to reach the market with new offerings, stakeholder goodwill, and cash. A bad business model will usually favor some stakeholders at the obvious expense of the rest, causing cooperation to decline.

Ultimately a bad business model cannot be sustained. A company with a bad business model finds itself wasting time and resources in a blind alley from which it must eventually retreat in a much diminished condition.

How to Build a Successful Business Plan

A business plan is a formal statement of a set of business goals, the reasons why they are believed attainable and the plan for reaching those goals. They are used in both primary and secondary programs to teach economic principles. A business plan having changes in perception and branding as its primary goals is called a marketing plan. If it identifies and target internal goals but provide only general guidance on how they will be met, they are called strategic plans.

It should contain whatever information is needed to decide whether or not to pursue a goal. It can be helpful to view the business plan as a collection of sub plans, one for each of the main business disciplines. Indeed, there are no fixed content for a business plan. The format of a business plan depends on its presentation context and cost and revenue estimates are central to any business plan for deciding the viability of the planned venture.

An external business plan should list all legal concerns and financial liabilities that might negatively affect investors. However, they may require each party receiving the business plan to sign a contract accepting special clauses and conditions. Traditionally, business plans have been highly confidential and quite limited in audience. Business plans are kept as secret, however, the emergence of free software and open source has opened the model and made the notion of an open business plan possible.

In the free software and open source business model, trade secrets, copyright and patents can no longer be used as effective locking mechanisms to provide sustainable advantages to a particular business and therefore a secret business plan is less relevant in those models. Every business plan is uniquely suited to its company situation but successful plans tend to have several key traits in common.

Moreover, while there is no one perfect length for a business plan, you should make sure your plan hits the right level of detail and meets the expectations of your readers. A good business plan will be the best indicator that can be used to judge your potential for success. Though, in some cases the business plan as a whole contains similar information but for one type of plan it is mere detail and for another it is a key decision making factor.

Sometimes a business plan will seek to earn a superior return by adding superior management talent to an existing weak company. Infact, external business plan should list all legal concerns and financial liabilities that might negatively affect investors. Depending on the amount of funds being raised and the audience to whom the plan is presented, failure to do this may have severe legal consequences.

Moreover, they may require each party receiving the business plan to sign a contract accepting special clauses and conditions. Marketing plan defines all of the components of your marketing strategy. It should also integrate traditional offline programs with new media online strategies. Powerful business plan will be the best indicator that can be used to judge your potential for success.

Nevertheless, a good business plan should indeed contain whatever information is needed to decide whether or not to pursue a certain goal. When preparing a business plan, draw on a wide range of knowledge from many different business disciplines like finance, human resource management, intellectuals, property management, marketing and other sources. A successful business plan is a living roadmap to your future, not a packet of paper in your desk drawer. Start your business planning process with a clear look at where you stand today and what you want to achieve

Mission Statement and Business Strategy

A Mission statement is a fundamental element for preparing business strategy of the firm. It should very quickly and succinctly define the business and its ideals, goals and history in a brief paragraph.

Firstly the firm should look at writing the mission statement as a chance to gain some extra insights about the organization. A mission statement should explore what business does and strives for at the core of its operations. It should provide a big picture look at business history, its ideals and its future direction.

Company mission statement should be a document that is relevant to employees and stakeholders in organization, so one way of approaching it is to simply ask employees for their feedback. Company staff will most likely describe common ideas and express common themes about their work and role in the organization, and incorporating their ideas is a good way to achieve that bigger picture.

Some tips for preparing mission statement are as follows.

* What are you in business to achieve?
* How does your organization differ from competitors?
* What is the nature of your products and services?
* Who are you and your employees?
* What are the philosophies and values that guide your business?

From asking these questions you will aim to uncover the opinions of others. You want to use these responses to be able to develop a statement that will be adopted by your organization. This statement should outline why your business exists and what you are hoping to get out of being in business. You want to demonstrate how you are different to your competitor and describe your niche position within your particular industry. Finally your want to state your principles and this is particularly important as this can have the most emotional value for employees and other stakeholders.

On a final note, once you have written your mission statement it can be worth reviewing it over time; by doing so you can ensure that your mission statement stays true to your organizations values and goals, both now and in the future.

Business Intelligence A Tool for Framing Business Strategy

The term business intelligence (BI) is simply the act of tracking and analyzing company data. Most companies have business intelligence tools for framing business strategy. These tools are generally used to track business events that improve the operations and bottom line of any company.

Business intelligence is actually an umbrella term used to describe a set of concepts and methods to improve business decision-making by using specific tools to provide facts to support decisions. These tools can be spreadsheets (Microsoft Excel is the most widely used), reporting and querying software that extracts, sorts, and reports data (Crystal Reports is a widely used product), dashboards, which gives the user the ability to glance at trends and drill down further into data, and many very technical models which are mostly used by large corporations.

In setting up a business intelligence program, the first step a company will need to take is determining what the short to medium term purpose of the program will be. What goal(s) does the organization want to address by the program? How will it relate to the overall success of the company? Will access to the data eventually improve results and/or performance?

Next is determining if the company has the tools for information gathering in the area to be assessed. Is there the capability to monitor the important sources of information? How much data is needed and how will it be stored and analyzed?

The financial outlay of a new business initiative should be estimated and the cost of present operations assessed to determine value. What is the risk if the initiative fails? What is the gain for succeeding?
How will the data be collected and the benefits measured? Is there a team in place to act as the control? At what point can a determination be made as to if the initiative is successful? Is there a plan in place if the project does not produce the desired results?

A business intelligence initiative can be as simple as a Microsoft Excel spreadsheet to track sales, visits, or other basic data, or it can be so complex that companies purchase entire servers to provide tools for tracking, analyzing, reporting, storing, drilling, and disbursing, to name only a few functions available.

Whatever your business size, all companies can benefit from some form of business intelligence. The most successful business decisions are made on the most accurate data.

Five Common Strategic Planning Mistakes

Many organizations spend a great deal of time clarifying their Vision and Mission statements. Being clear about both of these and ensuring that EVERY member of the organizational community is also clear is essential to successful planning. Many organizations fall down at the first hurdle because the lack of a shared vision and mission means lack of commitment to where the organization is going. Any plan is, therefore, doomed to fail. The time, and sometimes agony, it takes to reach a consensus on what your business does, for whom and where it is going, is worth every hour it takes.

Failure to consult

It is important to have commitment to a shared vision of the company. Failure to communicate the shared value of the company with all stakeholders throughout the strategic planning process is likely to result in a flawed plan, and flawed implementation. Consulting all stakeholders does not mean they must be involved in every step of the planning process, but it does mean that at some time in the planning process employees, managers, board members and other wider community should have the opportunity to provide meaningful input.

Failure to gather data

Knowing about the organization and all of its characteristics, it is essential to gather data for useful strategic planning. Failure to gather data regarding various characteristics of the business will result in waste of valuable time and resources. After clarifying the vision and mission, the next essential step is to collect the data on which the company will base its decisions about the future.

Failure to communicate

Most people are uncomfortable with change if they do not understand how the change might impact on them. Many difficult times in organizations are eliminated, or at least reduced, if management gets the communication process right. When discussing change that may occur as a result of strategic planning, all members of the organizational community need to understand the strategic planning process, need to be kept up to date on how the plan is progressing, need to know when and how they will be consulted, and need to have access to the plan when it is completed.

Failure to implement

A plan is nothing more than words on paper until it is implemented. Stakeholders quickly become cynical if months are spent on developing a strategic plan, and then the plan remains in the office of the CEO or amongst the Board papers. Towards the end of the planning process, the implementation plan must be developed. This involves identifying the strategies and actions to reach the goals outlined in the plan, deciding on the timeline, and identifying the people who are responsible for the actions. And it also means establishing a monitoring process to review on a regular basis how implementation is progressing.
 


B. Senthil Kumar
MA (Eco), MBA, M.Phil, (PhD)
Assistant Professor & Research Scholar
Department of Management Studies
Prathyusha Institute of Technology and Management
Aranvoyalkuppam, Tiruvallur-Poonamallee High Road, Tiruvallur-602 025
 

Source: E-mail April 15, 2009

          

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