Is your business in the fast lane?
Are you an ambitious business or entrepreneur with the potential to double sales turnover within next three years of trading? If so great! If not read on………..
In this the second article of the series – “Is your business in the fast lane?” – I concentrate on the importance of strategy in helping your businesses reach the fast lane. Subsequent articles will focus on other areas to ensure improvement, growth and sustainability of your business.
Business Strategy is:
- The pursuit of the business owner’s objectives using the business resources
- Selecting the markets in which to compete, which reflects the company’s core competences
- Achieving maximum competitive advantage in these chosen markets
- The organisation and direction of resources to ensure fulfilment of these objectives
Every day, millions of business leaders run their businesses trusting to instincts, learning or trying to learn from their experiences, but with little or no attention to strategy. Few business owners have been trained in strategic planning. The result is many businesses’ struggle to achieve their owners’ ambitions for profit, growth and sustainability.
Every company operates within a strategic framework as follows:
- Vision – including core values and the owner’s aspirations which in turn lead to value creation. Business owners need to understand the type of return they want and in what time frame this return should be delivered. The level of risk that is acceptable in pursuit of these objectives is also a significant factor in making sure that strategic objectives are correctly identified. The Vision, Mission, Goal statement is a good way of bring these thoughts together
- Value creation such as providing a service or manufacturing products. Value creation utilises the company’s core competences to address the market opportunity and gain competitive advantage. To look into a company’s core competencies an organisation can use tools such as a SWOT analysis PEST analysis and benchmarking. Taking this information further by understanding external factors affecting the company and the markets in which it operates and competes is required to be undertaken and this can be done by using Professor Michael Porter’s Five Forces – buyer power; supplier power; availability of substitutes; exit and entry barriers and the nature of the competition.
The organisation also needs to engage in various support activities to facilitate the value creation process and permit the company to operate efficiently and gain competitive market advantage. This leads to product and service positioning.
- Positioning – it is vital to identify the right target market and the right marketing strategies that will enable the company to succeed as it enters the battle.
Positioning is about raising your company’s profile above background noise of competing claims so that your message gets to the right people and is clearly understood. It means, understanding who your customers are and making sure they can see that your product or service provides the benefits they want – better than and other product or service. A common mistake is “trying to be all things to all men”. Companies compete too broadly because they fear missing out on any opportunity. But, the result is that there is always someone better positioned – they compete on a hundred purchasing decisions and come second a hundred times. It is far better to compete, say only ten times, but to come first ten times. Before a company blames its sales force for underperformance, it should question its own positioning
- The battle – where it comes up against market forces and a competitive landscape that are not only major potential obstacles, but which rapidly change. It is in this respect that we can use strategic leverage to calculate how we can outflank other organisations, so as to emerge victorious with a company that is capable of sustained profitable growth. Strategic leverage enables us to analyse the forces at work in a competitive market and establish where we have room for manoeuvre. It eliminates much of the guesswork from key decisions about how we are going to fight our battle and enables us to answer vital questions, such as:
- Should we try to differentiate our product or service offering?
- Should we compete on price, or can we charge a premium?
- Should we invest in our sales channels or new locations?
- Should we spend more money on promotional activities, or would it be ineffective to do so?
These and similar questions need to be answered, with confidence, if you are to compete effectively on the most favourable terms. Strategic leverage theory ensures questions are answered with confidence.
- Sustainable profitable growth – that is ensuring the company has a long-term future, the owners / stakeholders objectives are realised by constant review and realignment of these strategies and that the return on investment (ROI) are realised ensuring the organisation move into the “fast lane.”
Summary – having a strategic / business plan will put you on the right road to being a successful company, provided it is used as an ongoing living document. That is, it needs management and stakeholder involvement and it needs management commitment to ensure it is implemented, measured and corrective action taken as and when appropriate.