Design & Implementation

Design & Implementation

Strategic management is critical both for starting a business, running it and for its expansion.

According to Michael E. Porter, strategy is

  • About competitive position, which refers to the firm’s standing in the market relative to its competitors
  • About differentiating yourself in the eyes of the customer
  • About adding value through a mix of activities different from those used by competitors

Overall, strategy could be termed as general plan of action which is formulated to fulfill a firm’s long-term goals and objectives.  Strategic Management has three components, diagnosis, design and implementation.

 

Diagnosis

Before designing a strategy, one should be aware/understand the elements that surround the business. Be it designing a strategy for start-up or existing business, one has to undergo an analysis of the business environment in which an enterprise operates/is going to operate. Some important tools for business diagnosis are given below. The tools given below can be used by the MSME manager to understand the external (PESTLE) and internal (SWOT) business environment.

 

Tools

Description

PESTLE Analysis
(Download a Template on PESTLE Analysis)

PESTLE stands for - Political, Economic, Sociological, Technological, Legal and Environmental. It is in effect an audit of an organization’s environmental influences with the purpose of using this information to guide strategic decision-making.

PRIMO-F

It provides a consistent framework for comparison either from within the organization or to benchmark against a previous analysis or benchmark against other organizations.

SWOT Analysis
(Download a Template on SWOT Analysis)

Is a planning tool used to understand the Strengths, Weaknesses, Opportunities, and Threats involved in a project or in a business. It involves specifying the objective of the business or project and identifying the internal and external factors that are supportive or unfavorable to achieving that objective.

 

Designing

Strategy formulation is the process of determining appropriate courses of action for achieving organizational objectives and thereby accomplishing organizational purpose. It is the second phase in the strategic management process that leads to the establishment of the organization's goals and of a specific strategic plan.

There are three aspects to strategy designing, 1) Corporate Strategy, 2) Business Level Strategy, 3) Functional Level Strategy

1) Corporate Strategy
Corporate strategy is concerned with broad decisions regarding overall scope and direction of the organisation.Basically, corporate strategy pertains to determination of the growth objective and strategy for achieving it, the lines of business, and how these lines of business fit together.  It is useful to think of three components of corporate level strategy:

 

  • Growth or directional strategy -what should be the growth strategy, ranging from retrenchment through stability to varying degrees of growth - and how to accomplish it.
  • Portfolio strategy - what should be the portfolio of lines of business, which implicitly requires reconsidering the degree of concentration or diversification.
  • Parenting strategy - how to allocate resources and manage capabilities and activities across the portfolio -- where to put special emphasis, and how much to integrate the various lines of business.

 

2) Competitive Strategy (also known as Business Level Strategy)
This involves deciding how the company will compete within each line of business (LOB) or strategic business unit (SBU). One of the most authoritative works on competitive strategy is the Porter’s five forces analysis.

PORTER’s FIVE FORCES ANALYSIS

Porter's five forces is a framework for the industry analysis and business strategy development developed by Michael E. Porter. It draws upon Industrial Organization (IO) economics to derive five forces that determine the competitive intensity and therefore overall attractiveness of a market.

PORTER'S FOUR GENERIC COMPETITIVE STRATEGIES

Competitive strategies focus on ways in which a company can achieve the most advantageous position that it possibly can in its industry.

 

3) Functional Strategy:
Functional strategies are relatively short-term activities that each functional area (Marketing, Human resources, finance etc.)  within a company will carry out to implement the broader, longer-term corporate level and business level strategies.  Each functional area has a number of strategy choices that interact with and must be consistent with the overall company strategies.

 

  • Marketing strategy deals with product/service choices and features, pricing strategy, markets to be targeted, distribution, and promotion considerations.
  • Financial strategy includes decisions about capital acquisition, capital allocation, dividend policy, and investment and working capital management. (to read more download "Financial Strategy" document provided at bottom of this webpage)
  • The production or operations functional strategies address choices about how and where the products or services will be manufactured or delivered, technology to be used, management of resources, plus purchasing and relationships with suppliers.  For firms in high-tech industries, R&D strategy may be so central that many of the decisions will be made at the business or even corporate level, for example the role of technology in the company's competitive strategy, including choices between being a technology leader or follower.  However, there will remain more specific decisions that are part of R&D functional strategy, such as the relative emphasis between product and process R&D, how new technology will be obtained (internal development vs. external through purchasing, acquisition, licensing, alliances, etc.), and degree of centralization for R&D activities.
  • Human resources  functional strategy includes many topics, typically recommended by the human resources department, but many requiring top management approval.  Examples are job categories and descriptions; pay and benefits; recruiting, selection, and orientation; career development and training; evaluation and incentive systems; policies and discipline; and management/executive selection processes. (to read more download "Human Resource Strategy" document provided at bottom of this webpage)
  • IT Strategy pertains to organization's overall objectives relating to the technology infrastructure it is going to utilise. To read on efficient use of ICT, click here .

 

Implementation

Developing a good strategy on paper is a job only half done. The capability to continually implement strategy is the key to long-term success. The challenge is to perform strategy processes, turn the strategy into business improvements and implement these changes in the operative business to improve results. Organizations successful at strategy implementation effectively manage six key supporting factors:

 

  • Action Planning
  • Organization Structure
  • Human Resources
  • The Annual Business Plan
  • Monitoring and Control
  • Linkage

Read more on Strategy Implementation.