Business Strategy - Simply Put!

Introduction

In the Marstan Guide Introduction to Business Management, we said that successful organisations prepare a business strategy which they update regularly and refer to frequently through the year.

The purpose of this Marstan Guide is to explain what a Business Strategy is and to clarify the confusing terminology.

What is a strategy?

A strategy is:

A plan to achieve a long term aim

There are two main things to remember when you prepare a business strategy:

1. Strategy involves thinking about the long term, NOT the immediate horizon
2. Strategy also involves thinking about the big picture, NOT the detail of how you achieve the aims of the business.

The difference between long term/short term or big picture/detail can be highlighted by the military definition of strategy:

The art and science of the planning and conduct of war

In this context, it can be seen that setting the objectives of the war, the policies for how the war will be conducted and defining a plan for various battles is all under the heading of strategy. How each battle is conducted is considered as tactics and delegated to military commanders in the field.

The same thinking applies to business operations. The whole point of strategy is that it has impact on the whole organisation. It is the backdrop to every activity.

What are the four main components of a Business Strategy?

As we said in the Marstan Guide Introduction to Business Management there are four main items to be included in a business strategy, representing long term, “big picture” issues.

These are:

1. Vision statement
2. Mission statement
3. Values statement
4. Strategic objectives

These respectively define:

1. What outcome your business wishes to see.
2. The part that your business plays in delivering this vision.
3. The way in which you will conduct your business.
4. The key objectives which will deliver your vision and mission.

Key strategic questions which a new business should consider

The 4 key strategic questions to be considered by a new business are:

1. What business do we want to be in?

   At first glance, this seems obvious, but the manner in which this is considered can have profound affect on a business. For example firms who originally defined their business as “double glazed windows” might now define themselves as being in the business of “weatherproofing”, adding gutters and fascias to their range of products and thereby creating more income.

2. What is the best way of entering the market?

   Are there any barriers to entry; is there a need for the business to be in a particular location, are there any specific actions that need to be taken such as obtaining licences?

3. What type of company should you have?

   Should it be a sole trader, a limited company or a partnership? Consideration should be given to the future, not the short term after the start-up.

4. What is your overall exit strategy?

   This is where start-ups vary considerably. A very large number of businesses start and remain as sole traders. The main purpose of these businesses is to give the individual a job without the restrictions imposed by employment.

   Other businesses start small and gradually build up their business, bringing in other partners or investors by issuing shares. Often they intend that the business thrives indefinitely and is passed on to future generations.

   Some businesses start with the strategic aim of building up a business in a given period of time with a view to taking it to the market and selling at a considerable profit; the founders then exiting the business.

Key strategic questions which existing businesses should consider

A strategic plan sets the course for the longer term. However, like every journey, it is necessary to check precisely where you are from time to time and decide how you should adjust your course to reach your destination.

Therefore, every business would benefit by revisiting its strategic plan each year and asking the following questions:

1. What is the current business environment?

   What has happened recently in the economy? Has there been any new legislation? Is this likely to prompt other changes in the future and what are these changes likely to be? How would such changes affect our business?

2. What are our competitors doing?

   Have they changed or developed in a way which makes competition fiercer? Are we ahead of them? What should we do to keep ahead of them or widen the gap between us? Should we diversify, expand, change our branding?

3. What are our current strengths, weaknesses, opportunities and threats (SWOTs)?

   In the light of the external events referred to above and the manner in which we have developed in the last year, what are our SWOTs?

4. In the light of the economy, our competitor analysis and SWOT analysis, how do we need to change our strategic plan?

What should you do after you have carried out the analysis and decided you need to change your strategy?

There are two important things to do in order to implement a new strategy or amend an existing one:

1. Work out precisely what you need to do in all aspects of your business, day-by-day, week-by-week and month-by-month, to implement your new plan.

   If you have a team of people running departments, make them responsible for preparing a detailed plan.

2. Communicate the revised plan and the impact which it will have on day-to-day working to everybody in the business.

   The best way of achieving this is to prepare a business plan.