Business Strategy for a Competitive Marketplace
Blaise Brosnan, MRI Wexford, offers a how-to guide on developing business strategies to survive in a competitive marketplace - by managing business resources, maximising business opportunities and focusing on bottom line optimisation.
Your Business Strategy
(Article written by Blaise Brosnan, www.mriwex.ie)
Businesses like plants in the field are governed by the survival of the fittest. Enterprises survive in the longer-term if they serve the needs of their constituents effectively and efficiently at prices that cover the cost incurred in producing and/or delivering the product/service, plus an adequate surplus to justify this investment. Business people must always be focused on the Return on Investment (ROI) and in challenging it. As can be seen from this ROI equation, an investment has to be made before a return can be gained. This is where judgement calls are so critical.
Enterprises have to decide what game they want to be in. The business must constantly respond to the changing needs of its trading environment, if it is to gain and maintain competitive advantage, thus establishing the possibility of optimising its ROI. This is what strategic positioning is all about.
A strategy is about matching business competences (strengths/weaknesses) with the emerging opportunities/threats out there in the marketplace. It’s the link at matching the external opportunities with the internal capability.
There is a hierarchy of strategic decision making and the follow-on implementation. At the highest level we have strategy at:
- Corporate Level
- Here the challenge is deciding what game the enterprise wants to be in. Having decided that, the business is then better informed about where to reallocate scarce resources. - Business Level
- The challenge here is about coming up with strategies and tactics to gain competitive advantage, so that the enterprise can establish a sustainable edge over their competitors, as perceived by its customers. - Functional Area
- The focus here is about maximising resource productivity.
There are a number of models that can be used to help enterprises define the relative attractiveness of their chosen niche(s). Some of the parameters of these models include:
- Market growth
- Market share
- Positioning
- Relative product quality, as perceived by customers
- Distribution channels
- Proprietary
Enterprises can add their own Key Success Factors (KSF) to this list and then give each of the parameters a weighting scale. Companies can thus score alternative opportunities using this formula. This will facilitate businesses to decide, where their 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 the mission of the business?
The company needs to establish a balanced portfolio of business opportunities, with enough cash cows to finance any new potential stars. Identify which parts of the enterprise are investment providers or investment eaters. Balanced portfolios produce steadier growth, which is more predictable than unbalanced portfolios.
The enterprise has to decide which of the following strategies to follow for the various parts of the business:
- Market share strategy
- Market growth strategy
- Profit maximisation strategy
- Market concentration strategy
- Asset reduction strategy
- Turnaround strategy
- Liquidation strategy
Having made these strategic decisions, the enterprise then needs to be professional enough to reallocate scarce resources accordingly. It is now the territory of winners and losers. This is where the rubber hits the road and there will be all sorts of vested interests giving all sorts of reasons why so and so is not possible or desirable. Enterprises have to strip away this nonsense and see it for what it is which is territory preservation and personal agendas.
Don’t either over or under invest. Businesses 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:
- Grow some business projects
- Hold others
- Harvest others
The harvest decisions are the ones most difficult to make and implement clinically.
Which parts of the enterprise are going to grow hold or harvest? Is the business professional enough to allocate scarce resources accordingly? This resource allocation is the acid test. Is the enterprise prepared to have their 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. The business has to be selfish for its own bottom line optimisation.
Our thanks to Blaise Brosnan for providing this article to our readers.
For more information on Blaise Brosnan and MRI Wexford, please visit www.mriwex.ie.