Business is a cricket game and only the team with the best players will win. To beat the competition will require everyone’s collective effort. It’s not just a task for the marketing department or top management; it’s everyone’s responsibility. So, as one of the marketers of your business, it’s very important that you enlist the support of the whole organisation once you’ve agreed on the ‘strategies’ to adopt in dealing with your competition.
In a business sense, a strategy is a set of related actions that a business takes to increase its performance in a particular field. In the case of marketing strategy, it is about how to win the hearts of chosen customers. It is not just beating the competition.
If a company’s strategies result in superior performance, it is said to have a ‘competitive advantage’. If a company has a sustained competitive advantage, it is likely to gain market share from its rivals and thus grow its profits more rapidly than those of rivals. The key to understanding competitive advantage is appreciating how managers pursue different strategies over time and create activities that fit together to make a company unique or different from its rivals and able to persistently outperform them.
This is where the concept of ‘business model’ comes into existence. A business model is a kind of mental model, prepared by the managers of how the various strategies (with capital investments made by a company) should fit together to generate above-average profitability and profit growth.
A business model encompasses the totality of how a company will:
Achieve and sustain a high level of profitability
Organise activities within the company
Produce goods or services
Create value for its customers
Select its customers
Define and differentiate its product offerings
Acquire and keep customers
Deliver those goods and services to the market
Configure its resources
Grow the business over time
It is important to recognize that in addition to its business model and marketing strategies, a company’s performance is also determined by the characteristics of the industry in which it competes. Different industries are characterized by different competitive conditions. In some, demand is growing rapidly and in others it is contracting. Some might be beset by excess capacity and persistent price wars, others by excess demand and rising prices. In some, technological change might be revolutionizing competition. Others might be characterized by a lack of technological change.
Managers are the lynchpins in the strategy-making process. It is individual managers who must take responsibility for formulating strategies to attain a competitive advantage and for putting those strategies into effect. One of the key strategic roles of both general and functional managers is to use all their knowledge, energy and enthusiasm to provide strategic leadership for their subordinates and develop a high-performing organisation.
There are six key characteristics of good strategic leaders that do lead to high performance:
Astute use of power: Effective leaders tend to be very astute in their use of power. It is argued that strategic leaders must often play the power game with skill and attempt to build consensus for their ideas rather than use their authority to force ideas through; they must act as members of a coalition or its democratic leaders rather than as dictators.
Being well informed: Effective strategic leaders develop a network of formal and informal sources who keep them well informed about what is going on within their company.
Vision, eloquence and consistency: Strong strategic leaders seem to have a clear and compelling vision of where the organisation should go, are eloquent enough to communicate this vision to others within the organisation in terms that energize people and consistently articulate their vision until it becomes part of the organisation’s culture.
Commitment: Strong leaders demonstrate their commitment to their vision and business model by actions and words and they often lead by example.
Willingness to delegate and empower: High-performance leaders are skilled at delegation. They recognize that unless they learn how to delegate effectively, they can quickly become overloaded with responsibilities. They also recognize that empowering subordinates to make decisions is a good motivation tool and often results in decisions being made by those who must implement them. At the same time, astute leaders recognize that they need to maintain control over certain key decisions.
Emotional intelligence: This topic needs more explanation.
Emotional intelligence is a bundle of psychological attributes that many strong and effective leaders exhibit:
Empathy—the ability to understand the feelings and viewpoints of subordinates and to take those into account when making decisions
Self-regulation—the ability to control or redirect disruptive impulses or moods, that is, to think before acting
Self-awareness—the ability to understand one’s own moods, emotions and drives, as well as their effect on others
Motivation—a passion for work that goes beyond money or status and a propensity to pursue goals with energy and persistence
Social skills—friendliness with a purpose
Leaders who possess these attributes exhibit a high degree of emotional intelligence. They tend to be more effective than those who lack these attributes.
We can now turn our attention to the process by which managers formulate and implement strategies. This process has five main steps:
1.Select the corporate mission and major corporate goals.
2.Analyze the organisation’s external competitive environment to identify opportunities and threats.
3.Analyze the organisation’s internal operating environment to identify the organisation’s strengths and weaknesses.
4. elect strategies that build on the organisation’s strengths and correct its weaknesses in order to take advantage of external opportunities and counter external threats. These strategies should be consistent with the mission and major goals of the organisation. They should constitute a viable business model.
5.Implement the strategies.
The first component is the task of analysing the organisation’s internal environment and then selecting appropriate strategies. The action is two-fold. As the first step, such issues as identifying the quantity and quality of a company’s resources and capabilities and ways of building unique skills and company-specific competencies are considered. Second step includes taking actions consistent with the selected strategies of the company at the corporate and functional levels, allocating roles and responsibilities among managers (typically through the design of organisation structure), allocating resources (including capital and money), setting short-term objectives and designing the organisation’s control and reward systems.
The second component of the strategic management process is an analysis of the organisation’s external operating environment. The essential purpose of the external analysis is to identify strategic opportunities and threats in the organisation’s operating environment that will affect how it pursues its mission. Three interrelated environments should be examined at this stage: The industry environment in which the company operates, the national environment and the wider socioeconomic environment.
The third component of strategic thinking requires the generation of a series of strategic alternatives or choices of future strategies to pursue, given the company’s internal strengths and weaknesses and its external opportunities and threats. Its central purpose is to identify the strategies that will create the business model that will best align, fit or match a company’s resources and capabilities to the demands of the environment in which it operates.
The strategic planning is always ongoing; it never ends. Once a strategy has been implemented, its execution must be monitored to determine the extent to which strategic goals and objectives are actually being achieved and to what degree competitive advantage is being created and sustained.
(Lionel Wijesiri, a corporate director with over 25 years’ senior managerial experience, can be contacted at firstname.lastname@example.org)
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