Strategic Decision Making

What is Business Strategy?

Business strategy is the plans, choices and decisions used to ensure a company is successful and profitable.

A strategy that is carefully considered provides the motivation for commercial success.  Weaker, misunderstood strategies may lead to business failure.

What constitutes a “strategy”?

To develop business, it is important to understand what constitutes a “strategy”. Not all plans and decisions are strategic. Most involve implementing strategy, rather than setting it.

Strategy should be clear and effectively communicated to everyone concerned with its execution, including employees, shareholders and other stakeholders.

Defining Strategy

“Strategy is a pattern in a stream of decisions” — Henry Mintzberg

Strategy is about shaping the future. In the process, we are involved in making decisions. Where the outcomes are not really in our control, the quality of the decisions taken is within our remit.

To achieve the best decisions, our process demands high quality, consistency and great care to consider the influences that affect our decision making.

Benefits of Strategy

A clear and effective strategy can provide many benefits to understanding your business:

Success and Weakness

Focusing on strategy highlights areas of success and weakness within the business.  The information can be used to identify which areas are making money and why, providing valuable insight to assist with growing cash flow, building profits and increasing shareholder value.

Concentrating Resources

Strategy is a good indicator as to where resources should be concentrated. It allows managers to understand the needs, patterns and requirements of their customers – enabling them to develop products and services in line with its customers’ ever shifting preferences. In addition, it provides crucial information about their competitors. 

Customer Loyalty

Developing and implementing a strategy can strengthen a business, as it makes sure resources are dedicated to the most important customers. This is a positive way to retain their loyalty and get them to buy even more of the products and services.

Markets

Product extensions, i.e. new products based on existing ones, changes to product mix/complimentary merchandise or services, prices adjustment or cost cutting, and product/market abandonment are all areas that can be highlighted by strategy.

Developing Internal Organisations

Managers can use their strategy to identify where business skills need to be added or strengthened. Additionally, it can show how to improve productivity and why certain activities were successful or ineffective. Ultimately, a clear strategy gives a company the drive and focus needed to develop the culture, skills and attitude of its employees required to meet the needs of its customers.

Meaning and Purpose

A strategy should offer guidance on the factors that may influence future decisions, priorities and working method with respect to the employees. Intangible and valuable contributions can be made to employee commitment, performance, output, engagement and creativity. People like to do meaningful work which has purpose. They work better and achieve more if they believe in what they are doing and have clear direction and leadership. Insecurity and doubt may lead to tension or lack of confidence and is not conducive to personal improvement or business success.

Measuring Progress

A strategy can be used to measure how the business is progressing. Short term performance can be masked by events like recession, floods, bad weather, fires etc. This can blur the reality of how a business is performing and whether the right approach, direction and execution method has been taken.

Overall, a strategy must appeal to and benefit the customer if it is to be successful.

Strategy is not…

       ·          Vision or mission

       ·          A goal, budget or business plan

       ·          Data analysis

Choosing a Strategy

When developing a strategy you must consider:

       ·          Your target customer

       ·          Your products and services

       ·          Efficiency

Avoiding Difficulties

All businesses need some form of strategy, which should be reviewed and revised in light of environmental changes. Lack of understanding and clarity can result in difficulties for the business.

To reduce such risks, strategies need to be:

       ·          clear  

       ·          simple

       ·          compelling

Unique Strategic Position (USP)

It is crucial to choose a USP from the many available. The focus must be on target customers and business value proposition i.e. how attractive they will find your offer. The two should be connected as efficiently as possible.

Availability of Resources

Because resources are limited, realistic decisions about how to utilise them for maximum benefit should always be made.

Values and Incentives

It is important to base strategy on the reality of the external and internal environment. External factors include regulatory developments, demographics, economic growth and political stability.

Emotional Commitment

The emotional commitment from all stakeholders is needed to ensure the success of any strategy. Therefore, it is important for the strategy to be explained to, and understood by, the whole organisation.

Be Open to Ideas

Ideas can come from anyone, at any time, from anywhere within the business.