The Purpose of a Business Strategy Business strategy is what helps any business to be in control of its growth and maintain

its composition. Strategy is the direction and capacity of an organisation over long-term, and it is very important for the success of any business organisation. Business strategies outline specific actions, procedures or guidelines a company's owner will follow when conducting business operations. Business owners often use strategies in larger business organizations to ensure each employee follows the company’s standard operating procedures. Strategies also maintain a consistency when approaching various business situations in the economic market.

Teamwork

Research

Vision

Strategy

Enterprise

Growth

Stakeholders

Strategies are concerned with the scope of a business' activities i.e. what and where they produce. For example, BIC's scope is focused on three main product areas - lighters, pens, and razors, and they have developed superfactories in key geographical locations to produce these items. Two main categories of strategies can be identified: 1. Generic (general) strategies, and 2. Competitive strategies. The main types of generic strategies that organisations can pursue are: 1. Growth i.e. the expansion of the company to purchase new assets, including new businesses, and to develop new products. The Inland Revenue has expanded from being just a tax collector, to other functions such as collecting student loan repayments and paying tax credits. 2. Internationalisation or globalisation i.e. moving operations into more and more countries. For example companies like Gillette, Coca-Cola, Kellogg's, and Cadbury Schweppes are major multinationals with operations across the globe. 3. Retrenchment involves cutting back to focus on your best lines. The Americans refer to this as 'sticking to the knitting' that is concentrating on what you do best.

Types Three levels of business strategies are common: corporate, business and functional. Corporate-level strategies outline specific goals or objectives for the entire company. Owners use these strategies to create their company mission and vision. Business-level strategies represent specific actions that will create a competitive advantage for the company in the existing business environment. Functional strategies are internal procedures and practices that provide guidance for each function in the business. Benefits Business strategies help companies maintain a minimum standard of operational acceptance. Employees, departments or functions working outside normal operating standards may require attention from the business owner, who often will meet with operational managers to correct issues regarding business strategies. Maintaining business strategies also can create a certain level of expectation from consumers. Consumers may feel more comfortable patronizing a business that conducts itself in a consistent manner.

The Purpose of Business Strategies Business strategies outline specific actions, procedures or guidelines a company owner will follow when conducting business operations. Business owners often use strategies in larger business organizations to

ensure each employee follows the company standard operating procedures. Strategies also maintain a consistency when approaching various business situations in the economic market. Competitive advantage Competitive strategies are also important. Competitive strategies are concerned with doing things better than rivals. To be competitive a firm shouldn't just copy the ideas of rivals. They should seek to out compete rivals. There are two main ways of being competitive. 1. By selling goods at lower prices than rivals. This is possible when a firm is the market leader and benefits from economies of scale. 2. By differentiating your product from those of rivals - which enables you to charge a higher price if desired. The airline industry is divided into two main segments. At one end of the market are the premium price category firms such as British Airways that concentrate on differentiation. They offer better service to passengers, more legroom, in flight entertainment, and more individualised attention. At the other end of the market the emphasis is on being the low cost producer and is exemplified by 'no frills' airlines such as Ryanair. Ryanair focuses on short haul destinations and keeping its planes in the air as frequently as possible in a 24 hour period. Economies of scale - The advantages that large firms have from producing large volumes of output enabling them to spread their costs over more units of output. Differentiation - Making a product different from rival offerings e.g. through packaging and labelling, customer care, additional extra features and many more.

Types Three levels of business strategies are common: corporate, business and functional. Corporate-level strategies outline specific goals or objectives for the entire company. Owners use these strategies to create their company , mission and vision. Business-level strategies represent specific actions that will create a competitive advantage for the company in the existing business environment. Functional strategies are internal procedures and practices that provide guidance for each function in the business. Benefits Business strategies help companies maintain a minimum standard of operational acceptance. Employees, departments or functions working outside normal operating standards may require attention from the business owner, who often will meet with operational managers to correct issues regarding business strategies. Maintaining business strategies also can create a certain level of expectation from consumers. Consumers may feel more comfortable patronizing a business that conducts itself in a consistent manner. Function

Creating business strategies forces business owners to focus on their company’s planning process rather than strictly in conducting operations and earning business profits. Creating strategies maintains their competitive advantage in the business environment. Business owners consistently reviewing their business strategies also may find a new market niche where they can earn higher profits selling goods or services. Considerations Business owners should consider developing business strategies specific to their company’s operations. Using standardized industry strategies may not work well for certain types of businesses. Smaller and home-based businesses can face difficulty implementing business strategies. Strategies should provide more benefits to companies to offset implementation costs. Business owners who spend large amounts of money on unproven business strategies can quickly create difficult business situations from poor cash flow. Expert Insight Small business owners can visit the Small Business Administration (SBA) website to review information to help them understand and develop the best strategy for their company. Established small businesses also can use a management consultant to develop business strategies. Management consultants usually have specific education or expertise in an industry, and these individuals often help business owners create effective strategies to advance business operations.

ELEMENTS OF CORPORATE STRATEGY Introduction The formulation of corporate strategy is a subject which does not lend itself to a generic approach which can be copied and tailored to fit. The various examples on these pages are given as such, and are not put forward as best practice. Even some of the definitions and concepts are interpreted in different ways, and individual circumstances will dictate how a specific strategy should be developed and implemented, depending on the circumstances of the organisation in question. Corporate strategy is based on knowing:

where your organisation is today where you want it to be how you want to get there

The risk of not changing and improving can be as significant as the risks which may affect your plans to develop your business - your competition is almost certainly changing and moving ahead, and you are likely to be left behind in terms of efficiency, reputation and financial success if you do not learn lessons and appreciate what factors may influence your likely success in delivering your business goals. These factors all impact on your corporate strategy and business plan. If the purpose of the plan is business development rather than (just) a means of raising finance, it should be the basis for your management system - if the business plan is finalised on Friday afternoon, the management system is how you will implement it from next Monday morning. Defining corporate strategy is a process. The objective of the process is to combine the activities of the various functional areas of a business in a way which will achieve its organisational objectives. It is not always written down or explicit, but it should determine how you:

are organised set objectives, define policies and allocate resources operate on a day-to-day basis (ie your operational processes)

The output of the process is a strategic plan which will set the parameters for detailed operational and departmental plans. What skills do you need? In the National Occupational Standards for management and leadership, module B3 (develop a strategic plan for your organisation) states in the 'outcomes of effective performance' that you must be able to:

establish a clear, achievable and compelling vision which sets out where the organisation should be going identify and prioritise strategic objectives that are consistent with the vision of the organisation balance risk with desired outcomes balance innovation with tried and tested solutions

ensure that your plan is flexible and open to change develop policies and values that will guide the work of others towards your vision delegate responsibility for achieving goals and allocate resources effectively identify measures and methods for monitoring and evaluating the plan balance the needs and expectations of key stakeholders and win their support

Some key concepts Various terms are commonly used in connection with the overall business planning process (whereby you define your aims and objectives, your strategy for achieving them, and the means by which you will implement the strategy, that is your management system and are explained below. To use an analogy, if the development and progress of an organisation is a journey, its:

vision could be regarded as the reason for making the trip, and selecting the intended destination values influence the choice of path, the direction and speed of travel, and may even affect how you decide on your destination mission is the path it will travel strategy defines the direction and speed it will travel policies influence how the journey is made tactics may be required if the path is blocked or is rougher than expected

Your vision (where you would like to see yourselves in the future) A 'vision' statement communicates both the purpose and values of the organisation. For employees, it gives direction about how they are expected to behave and (should) inspire them to give of their best. Shared with customers, it can influence their attitude to why they should work with the organisation. It should be a concise, compelling statement defining the organisation's long-term direction, what the organisation intends to become in, say, 5 to 10 years time. It should have sufficient detail that it can be recognised as complete once accomplished. It defines what the organisation is working towards. In effect, it says how the organisation would like to be thought of and remembered.

Lou Tice of the Pacific Institute has a view on setting personal goals. In essence, you must make the mental picture of your goal or vision clearer and brighter than the current reality, so that your subconscious can work to help you achieve it. In the same way in business, you should develop the organisation's culture, values and behaviour so that they can help people to achieve your vision without thinking consciously about it. Your values Values are the guiding beliefs about how you should operate. Core values reflect what is important to an organisation, and they may well be a factor in how the overall 'vision' is defined. They do not change from time to time and in different situations, and they underpin the culture of the organisation. With corporate social responsibility (CSR) becoming an increasingly important issue in many quarters, more and more firms are taking action to turn their organisation's values into a competitive asset. Example values - IBM:

dedication to every client's success innovation that matters, for our company and for the world trust and personal responsibility in all relationships

Your mission (why you exist) The 'mission' of an organisation describes its overall function (what is this organisation trying to accomplish?). It defines the key measures of the organisation's success. It should reflect the organisation's purpose, values and intended market (what we do, and for whom). It does not (necessarily) define how you do it. Examples of mission statements: Microsoft: 'To enable people and businesses throughout the world to realise their full potential. As a company, and as individuals, we value integrity, honesty, openness, personal excellence, constructive self-criticism, continual self-improvement, and mutual respect. We are committed to our customers and partners and have a passion for technology. We take on big challenges, and pride ourselves on seeing them through. We hold ourselves accountable to our customers, shareholders, partners, and employees by honoring our commitments, providing results, and striving for the highest quality.'

Yahoo: 'To connect people to their passions, their communities, and the world's knowledge. To ensure this, Yahoo offers a broad and deep array of products and services to create unique and differentiated user experiences and consumer insights by leveraging connections, data, and user participation.' Google: 'To organise the world's information and make it universally accessible and useful.' CQI: 'To place quality at the heart of every organisation.' Your corporate strategy (how you will do it) Corporate strategy is concerned with deploying the available resources to achieve your objectives whereas tactics are concerned with employing them. Strategy will affect the overall direction of the organisation and establish its future working environment. Corporate strategy defines the markets and the businesses in which an organisation chooses to operate. Competitive or business strategy defines the basis on which it will compete. Corporate strategy is typically decided in the context of the organisation's mission and vision (what the organisation does, why it exists, and what it intends to become). Competitive strategy depends on an organisation's capabilities, strengths, and weaknesses in relation to market characteristics and the corresponding capabilities, strengths, and weaknesses of its competitors. According to Porter , competition within an industry is driven by five basic factors:

threat of new entrants threat of substitute products or services bargaining power of suppliers bargaining power of buyers rivalry amongst existing firms

In Top Management Strategy, Benjamin Tregoe and John Zimmerman, of Kepner-Tregoe, Inc, define strategy as 'the framework which guides those choices that determine the nature and direction of an organization. Ultimately, this comes down to selecting products (or services) to offer and the markets in which to offer them.' They propose that executives base these decisions on a single 'driving force' of the business. Although there are nine possible driving forces, they say that only one can serve as the basis for strategy for a given business. The nine possibilities are:

products offered production capability natural resources market needs method of sale size/growth technology method of distribution return/profit

Your policies Policies are the intentions and principles which provide a framework for how an organisation means to operate. Policies must be relevant to the organisation's mission and plans. They will influence how processes are designed, managed and implemented - or even if they need to exist. Compliance with external standards requires that you have a suitable policy for the achievement of quality/environmental management etc, which must be communicated to and understood by your staff. You will also have policies (whether formal or informal) relating to your attitude to staff and their development, the selection of suppliers and a range of other matters. It is important that these are also clear and consistent, so that your people can easily apply them to the processes in which they work. Where are you now? Rather than trying to apply Deming's 'PDSA' cycle to the definition of corporate strategy, it makes more sense to follow an APA (assess/plan/act) process to emphasise:

the importance of the first (Assess) stage the fact that it is not a continuous cycle but a repetitive process carried out at intervals

Whether you are a start-up company deciding on your key priorities or a long-established business facing changing market conditions or planning to expand, there will be times when you as senior management need to:

Assess: consider your current position and capabilities (where do you want to be in your chosen market 'space', what are your 'core competences' - see below, what is the strategic fit?), gather information, identify risks and other factors that might influence how you will operate, clarify overall objectives, consider available options which will take you where you want to get to Plan: define a detailed and costed action plan to deliver the selected option(s), formulate policies, decide how to mitigate risks Act: put your plans into action

The concept of core competences was developed by Prahalad and Hamel through articles in the Harvard Business Review and their book Competing for the Future. The idea is that, over time, an organisation may develop areas of expertise that are both distinctive to the organisation and essential for long term growth. They are most likely to develop in the core functions of the organisation where the most value is added to its products. From time to time, and certainly when significant change (internal or external) is foreseen, you should revisit each aspect of the APA process to:

Review progress, assess the significance of changes which have occurred since the plan was put in place Revise the plan accordingly Refine how you put the plan into action

Assess (Review) You need to consider at least the following key areas: Turnover and growth What are your current (and forecast) financial position and sales trends? Will you need to raise additional funds, and if so how? Product (goods and services) What is the current and planned 'output' of goods and services? How have existing products developed and where are they in their lifecycles?

What new products are needed and when will they be ready? What are the main attributes of the products? People Do you have the right team in place with the required range of skills? If not, how will you fill the gaps? Resources In what condition (age, suitability, reliability) are your premises, plant and equipment? Can new technology enable you to do different things, and to do things differently? Can you strengthen your relationships with partners and suppliers? Market profile and competitor analysis Who are your current and potential customers? Who buys, and who influences the decision? What are their needs? What are the main market segments? What and where is the competition? Who are they, strengths and weaknesses, market sectors? Are your promotional, selling and distribution channels established and working? Answering these questions involves a mix of internal analysis and an analysis of relevant external factors which come together in a SWOT (strengths, weaknesses, opportunities, threats) analysis, the summary of which should inform your strategy selection. Some of the more popular methods of assessing the factors which should influence your strategy include:

PEST: political/economic/socio-cultural/technological PESTLE: political/economic/social/technological/legal/environmental SLEPT: social/legal/economic/political/technological PESTELO (used by UK police forces): political/economic/social/technological/ environmental/legal/organisational

The various factors which have to be considered are:

Social: consumer habits and the status of the general public (eg demography, income profile)

Legal: government and other legislation Economic: retail sales figures, stock market trends, GDP, balance of payments, labour markets and issues (eg a change in the minimum wage) Political: changes in government influence (eg EU legislation) Technological: developments and trends Environmental: aspects and impacts, legislation changes, public attitudes Organisational: organisational culture, availability of trained staff

Strategic objectives might include:

to maintain a virtual business structure that operates electronically through a series of partnerships and associations to seek to acquire a similar organisation in each of our targeted regions within the next 24 months to introduce a new product every 9-12 months to maximise our turnover and profitability for the next 3 years with a view to selling the organisation

Plan (Revise) Where do you want to be? Define the strategic direction of the business, and your objectives, in terms of:

physical appearance size premises and locations products and services methods of distribution staff markets corporate image

How will you get there? Consider all key issues and create a strategic plan for each, all supporting the overall mission:

marketing: segments, promotion, selling, products people: training, communication, culture resources: required and available finance: funding, pricing, profit

Define policies to be followed. Such as:

diversification organic growth or acquisitions methods of funding growth product development in-house or subcontract production

Set clear goals, action plan and timescales. Such as:

what results are needed in the medium term? what has to happen / not happen for the business to develop? what are the main risks and how can they be overcome?

Assess financial implications:

basis for financial calculations (assumptions and constraints, sensitivity analysis) current financial commitments for each major product / project: major elements of cost / expected revenue / timescale

Operational objectives support the longer-term strategic objectives. They should be measurable and should relate to both the vision and mission. They are detailed, costed and timed plans of what you will do to meet each strategic goal. They set out a work plan, typically over a 12month period. Act (Refine)

The usual issues relating to the management of change are further complicated by the fact that some senior managers may have little idea of how the organisation really works, and on the other hand those involved in day-to-day operations are far removed from corporate pressures and priorities. Working to a timetable of major milestones should help to ensure that the plan is followed, the objectives achieved and steps are taken to bring you closer to your long term vision for the organisation.

How Strategy is Managed - Strategic Management In its broadest sense, strategic management is about taking "strategic decisions" - decisions that answer the questions above. In practice, a thorough strategic management process has three main components, shown in the figure below:

Strategic Analysis This is all about the analysing the strength of businesses' position and understanding the important external factors that may influence that position. The process of Strategic Analysis can be assisted by a number of tools, including: PEST Analysis - a technique for understanding the "environment" in which a business operates

Scenario Planning - a technique that builds various plausible views of possible futures for a business Five Forces Analysis - a technique for identifying the forces which affect the level of competition in an industry Market Segmentation - a technique which seeks to identify similarities and differences between groups of customers or users Directional Policy Matrix - a technique which summarises the competitive strength of a businesses operations in specific markets Competitor Analysis - a wide range of techniques and analysis that seeks to summarise a businesses' overall competitive position Critical Success Factor Analysis - a technique to identify those areas in which a business must outperform the competition in order to succeed SWOT Analysis - a useful summary technique for summarising the key issues arising from an assessment of a businesses "internal" position and "external" environmental influences. Strategic Choice This process involves understanding the nature of stakeholder expectations (the "ground rules"), identifying strategic options, and then evaluating and selecting strategic options. Strategy Implementation Often the hardest part. When a strategy has been analysed and selected, the task is then to translate it into organisational action.

Purpose and Srategy purpose and strategy. They seem to fit like peanut butter and jelly. Purpose is the jelly, sweetening our appetites for the work to be done. Strategy is the peanut butter, making it all stick together as we do the work. Even with this thought, leaders lose their desire to define an organizational strategy in terms of a greater purpose. It sounds too lofty, too qualitative. People may snicker or scoff at the very

thought of discussing purpose when it comes to develop a strategy. The diagram highlights what happens when one is missing and when both are well-defined.

Mired. With an undefined purpose and strategy, there is no question about where organizations and people within them stand; they are mired. There is no light ahead; there is no path defined. It is being stuck knee deep, and people are highly frustrated. It is time to define a purpose and a strategy to move forward.

Unmotivated Direction. Most organizations are likely here. They have a strategy but their purpose is undefined. People may have a sense of purpose in their work, as having a defined direction delivers a practical value by itself. However, the higher calling of the organization is likely viewed differently, or not at all. Team members, customers, partners, and other stakeholders may have a mixed view of what the organizations purpose really is. Motivated Unproductivity. Moving up to the Purpose row, we first enter the quadrant where there is a clear purpose for an organization yet the strategy is missing. While people may be energized by the purpose, this will began to fade quickly as progress forward is scattered, inconsistent, and unplanned. Purpose without momentum leads to frustration and attrition. Inspired Alignment. When purpose and strategy come together in a tight fit, inspired work happens. There is a reason for the work is being done, and it is larger in mission than just completing a task. Tasks turn into results; results turn into momentum; and momentum moves an organization to realize a greater purpose in the marketplace. There is a rhythm to the work and a reason for the strategy. Real Organizations Have Purpose Purpose is not fluff. It is the content of our strategys character. It is what makes organizations strong because it inspires people to engage in their work and achieve meaning in what they do. Purpose defines the personality and story of an organization and, in turn, the policies and processes that flow from it. Key points:

Dont be afraid. Engage in strategic conversations on what your organizations purpose is. Purpose is a necessary element of any worthwhile strategy. Define it. Communicate it. Act on it in all you do. Rise up to the challenge of purpose. The Millennial Generation expects it and everyone before and after will embrace it