Your Business Strategy ?

31 Dec Your Business Strategy ?

Businesses like plants in the field; are governed by the “survival of the fittest”. Businesses survive in the longer-term if they serve the needs of their constituents effectively and efficiently at prices sufficient to cover the cost incurred in producing / delivering the product / service plus an adequate surplus to justify the investment. As business people you must always be focused in and challenging the ROI. As you can see from this ROI equation, you have to make the investment before you can get the return. This is where your judgement calls are so critical.

You have to decide what GAME you want to be in. Your business must constantly respond to the changing needs of its trading environment, if it’s to gain and maintain competitive advantage and thus establish the possibility of optimising its ROI. This is what strategic positioning is all about?

Your strategy is about MATCHING your businesses competences (strengths / weaknesses) with the emerging OPPORTUNITIES / threats out there in the market place. It’s the link at matching the external opportunities with your internal capability.

There is a hierarchy of strategic decision making and the follow-on implementation. At the highest level we have strategy at

1. Corporate level.
   1. Here the challenge is deciding what game you want to be in. Having decided that, then you are better informed about where to reallocate your scarce resources.
2. Business level.
   1. The challenge here is about coming up with strategies and tactics to gain competitive advantage, so that you can establish a sustainable “edge” over your competitors, as perceived by your customers.
3. Functional area.
   1. Your focus here is about maximising your resource productivity.

There are a number of models you can use to help you to define the relative ATTRACTIVENESS of your chosen niche(s). Some of the parameters of these models include;

1. Market growth.
2. Market share.
3. Positioning.
4. Relative product quality, as perceived by your customers.
5. Distribution channels.
6. Proprietary etc.

You can add your own Key Success Factors (KSF) to this list and then give each of the parameters a weighting score. You can thus score alternative opportunities using this formula. This will facilitate you to decide, where your scarce resources should be allocated.

Don’t fall into the politician’s strategy of trying to be all things to all people. They do this by spreading their scarce resources to all options and thus starve the attractive options of the necessary “fertiliser” to kick-start and maintain their growth potential. They eventually finish up being nothing to nobody. Is this your mission?

You need to establish a balanced portfolio of business opportunities, with enough cash cows to finance your new potential stars. Identify which parts of your business are investment providers or investment eaters.   Balanced portfolios produce steadier growth, which is more predictable than unbalanced portfolios.

You have to decide which of the following strategies you are going to follow for the various parts of your business.

1. Market share strategy.
2. Market growth strategy.
3. Profit maximisation strategy.
4. Market concentration strategy.
5. Asset reduction strategy.
6. Turnaround strategy.
7. Liquidation strategy.

Having made these strategic decisions, you then need to be professional enough to reallocate your scarce resources accordingly. You are now into the territory of winners and losers. This is where the rubber hits the road and you will get all sorts of vested interests giving you all sorts of reasons why so and so is not possible or desirable. You have to strip away this crap and see it for what it is which is territory preservation and personal agendas.

Don’t either over or under invest. You mustn’t fall into the trap of over trading, because running out of working capital is the quickest way of going burst. Hard strategic decisions must be made to

1. Grow some of your business projects.
2. Hold others.
3. Harvest others.

The harvest decisions are the ones most difficult to make and implement clinically.

Which parts of your business are you going to grow hold or harvest? Are you professional enough to allocate your scarce resources accordingly? This resource allocation is the acid test. Are you prepared to have your reputation judged pragmatically? The market doesn’t care about any of us. It just pays us based on output. By knowing these rules of the game, we should be smart enough to play them to our advantage. You have to be selfish for your own bottom line optimisation.