To develop a rigorous business strategy, companies must conduct strategy development that starts with a collective understanding of its current situation and identified strategic challenges. The next steps include forming what the future state vision of the organization is and then going into the details of strategically planning how to get to that state. Strategy development is about value creation, strategy is about competitive selection, and strategy is about business agility. To properly gauge and analyze your strategic challenges, you must begin with a comprehensive current state understanding of your situation.
In the strategy development process, it is always critical to conduct rigorous market analysis. Proper business market analysis involves defining the market scale and the study depth, understanding the core industry issues, and planning for the future. There are a number of market environment analysis variables, including ones that are socio-demographic, economic, legal, technological, and current trends. Remember that you should evaluate what makes a market unique, such as a high degree of government regulations, high competitive fragmentation, and importance of CapEx. There are also several market place evaluation characteristics, including market place sizing, pricing changes, product development, market place characteristics, market force structure, and historical trends. Doing proper market analysis involves the elements of supply analysis and demand analysis, which includes segmentation and segment analysis, understanding consumer buying behavior, and trend analysis.
A pervasive business issue many businesses try to comprehensively evaluate is the challenge of achieving sustainable growth through a successful strategic planning process. Additionally, 80% of them are concentrated across the four super verticals of Financial Service Companies, Healthcare, High-Tech, and Retail & Distribution. It cant be argued that most companies experience difficulty gaining noteworthy growth, year over year. For most of these businesses that are able to see significant growth rates, these growth rates also erode quickly. Only about a fourth of the Fortune 500 businesses are able to sustain revenue growth above the GDP and create returns above the S&P500. Furthermore, real revenue growth fluctuates more than return on invested capital ranging from 1% to 11%. Companies that have greater than 20-25% top line growth almost always erode down to 5% within 5-10 years. Enterprise organizations struggle to grow. Over the last 50 years, Fortune 500 companies experience a median growth rate of in less than 6% in real terms and under 10% in nominal terms.
Strategy development process has evolved through 5 key phases since the early 1900s. Business strategy development started with a focus on financial planning in the 1950s, moving to long-term corporate planning in the 1960s, to strategic planning in the 1970s and ultimately to a focus on strategic management in the present day. A lot of business strategy is also hinged on ideas in the 1970s, where the focus of what business leaders devote their efforts to was around thinking strategically to out maneuver competition and the business frameworks of alternative strategies, portfolio analysis, and the BCG Growth Share Matrix were developed. In the current day, the strategic development theme is on integrating strategic planning and execution with a stress on the key concepts of core competencies, strategy planning and execution, and balance scorecard analysis. Changes to strategic mindset represent an ever evolving, emerging business leaders, and emergence of disruptive technologies and trends.
There are several types of strategic challenges that can be ascertained from the teachings of Mintzberg and Bower. One noteworthy challenge to strategy development is ambiguity, in regards to both the challenge and approach. There is the strategic challenge of aligning execution context, so that strategy can materialize and eventually realized. Defining a strategic intent includes defining objectives, developing relevant battlefields, and choosing the relevant core competencies. In strategy development, framing the type of strategic challenge is considered one of the most important tasks. One important strategic challenge is developing a tops down approach to intervention fueled by revised strategic intent.
There are various key elements to the design of strategy execution. Strategic initiatives should be clearly controlled. Strategy planning/budgeting initiatives include growth scenario planning, strategic planning design, and innovation management. Within the category of strategic initiatives, we should evaluate the companys portfolio and priorities, championing and management, and political tactics. You should design the organization context that governs how the business should operate. organizational context includes governance, organizational structure, performance tracking, incentive plan, as well as management teams capabilities and cognitive frames. Under strategy execution, an important element is developing the annual strategy planning and budgeting process.
Business Strategies
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