5- Questions

The Importance of Business Strategies:

A small business owner works with his staff to create business strategies for
marketing, sales, customer service and internal accounting functions. A business
strategy is a definition of the tactics and methods you will use to manage your
business, according to the online business resource More Business. It is
important to have efficient and effective business strategies in place.

What is a Strategy? definition and meaning:

1.A method or plan chosen to bring about a desired future, such as achievement
of a goal or solution to a problem.
2.The art and science of planning and marshalling resources for their most
efficient and effective use. The term is derived from the Greek word for
generalship or leading an army. See also tactics.
The Five Stages of the Strategic Management Process:

The strategic management process is more than just a set of rules to follow. It is
a philosophical approach to business. Upper management must think
strategically first, then apply that thought to a process. The strategic
management process is best implemented when everyone within the business
understands the strategy. The five stages of the process are goal-setting,
analysis, strategy formation, strategy implementation and strategy monitoring.
Goal-Setting
The purpose of goal-setting is to clarify the vision for your business. This stage
consists of identifying three key facets: First, define both short- and long-term
objectives. Second, identify the process of how to accomplish your objective.
Finally, customize the process for your staff, give each person a task with which
he can succeed. Keep in mind during this process your goals to be detailed,
realistic and match the values of your vision. Typically, the final step in this

stage is to write a mission statement that succinctly communicates your goals to

both your shareholders and your staff.
Analysis
Analysis is a key stage because the information gained in this stage will shape
the next two stages. In this stage, gather as much information and data relevant
to accomplishing your vision. The focus of the analysis should be on
understanding the needs of the business as a sustainable entity, its strategic
direction and identifying initiatives that will help your business grow. Examine
any external or internal issues that can affect your goals and objectives. Make
sure to identify both the strengths and weaknesses of your organization as well
as any threats and opportunities that may arise along the path.
Strategy Formulation
The first step in forming a strategy is to review the information gleaned from
completing the analysis. Determine what resources the business currently has
that can help reach the defined goals and objectives. Identify any areas of which
the business must seek external resources. The issues facing the company
should be prioritized by their importance to your success. Once prioritized,
begin formulating the strategy. Because business and economic situations are
fluid, it is critical in this stage to develop alternative approaches that target each
step of the plan.
Strategy Implementation
Successful strategy implementation is critical to the success of the business
venture. This is the action stage of the strategic management process. If the
overall strategy does not work with the business' current structure, a new
structure should be installed at the beginning of this stage. Everyone within the
organization must be made clear of their responsibilities and duties, and how
that fits in with the overall goal. Additionally, any resources or funding for the
venture must be secured at this point. Once the funding is in place and the
employees are ready, execute the plan.
Evaluation and Control
Strategy evaluation and control actions include performance measurements,
consistent review of internal and external issues and making corrective actions
when necessary. Any successful evaluation of the strategy begins with defining
the parameters to be measured. These parameters should mirror the goals set in
Stage 1. Determine your progress by measuring the actual results versus the
plan. Monitoring internal and external issues will also enable you to react to any

substantial change in your business environment. If you determine that the

strategy is not moving the company toward its goal, take corrective actions. If
those actions are not successful, then repeat the strategic management process.
Because internal and external issues are constantly evolving, any data gained in
this stage should be retained to help with any future strategies.

types of strategic management:

Business strategy
Business strategy is primarily concerned with how a company will approach the
marketplace - where to play and how to win. Where to play answers questions
like, which customer segments will we target, which geographies will we cover,
and what products and services will we bring to market. How to win answers
questions like, how will we position ourselves against our competitors, what
capabilities will we employ to differentiate us from the competition, and what
unique approaches will we apply to create new markets.
Senior managers typically create business strategy. After it is created, business
architects play an important role in clarifying the strategy, creating tighter
alignment among different strategies, and communicating the business strategy
across and down the organization in a clear and consistent fashion. Executives
are just beginning to bring advanced, highly credible business architecture
practices into the strategy discussions early to provide tools, models, and
facilitation that enable better strategy development.
Operational strategy
Operational strategy is primarily concerned with accurately translating the
business strategy into a cohesive and actionable implementation plan. This

strategy answers the questions, which capabilities need to be created or

enhanced, what technologies do we need, which processes need improvement,
and do we have the people we need.
The vast majority of business architects are currently working in the operational
strategy domain reaching up into the business strategy domain for direction.
They work from the middle out to bring clarity and cohesiveness to the
organizations operating model typically working vertically within a single
business unit while resolving issues at the business unit boundaries. More
mature business architecture practices work in multiple verticals or move from
one vertical to another creating common business architecture patterns.
Transformational strategy
Transformational strategy is seen less often as it represents the wholesale
transformation of an entire business or organization. This type of strategy goes
beyond typical business strategy in that it requires radical and highly disruptive
changes in people, process, and technology. Few organizations go down this
path willingly.
Transformational strategy is generally the domain of Human Resources,
organizational development, and consultants. These efforts are incredibly
complex and can experience significant benefit from applying business
architecture discipline though it is rare to see business architects playing a
significant role here.
porter's five forces model for strategic competitive analysis:
Five Forces Analysis assumes that there are five important forces that determine
competitive power in a business situation. These are:
1.

Supplier Power: Here you assess how easy it is for suppliers to drive
up prices. This is driven by the number of suppliers of each key input, the
uniqueness of their product or service, their strength and control over you,
the cost of switching from one to another, and so on. The fewer the
supplier choices you have, and the more you need suppliers' help, the more
powerful your suppliers are.
2.
Buyer Power: Here you ask yourself how easy it is for buyers to drive
prices down. Again, this is driven by the number of buyers, the importance
of each individual buyer to your business, the cost to them of switching
from your products and services to those of someone else, and so on. If

you deal with few, powerful buyers, then they are often able to dictate
terms to you.
3.
Competitive Rivalry: What is important here is the number and
capability of your competitors. If you have many competitors, and they
offer equally attractive products and services, then you'll most likely have
little power in the situation, because suppliers and buyers will go
elsewhere if they don't get a good deal from you. On the other hand, if noone else can do what you do, then you can often have tremendous strength.
4.
Threat of Substitution: This is affected by the ability of your
customers to find a different way of doing what you do for example, if
you supply a unique software product that automates an important process,
people may substitute by doing the process manually or by outsourcing it.
If substitution is easy and substitution is viable, then this weakens your
power.
5.

Threat of New Entry: Power is also affected by the ability of people

to enter your market. If it costs little in time or money to enter your market
and compete effectively, if there are few economies of scale in place, or if
you have little protection for your key technologies, then new competitors
can quickly enter your market and weaken your position. If you have
strong and durable barriers to entry, then you can preserve a favorable
position and take fair advantage of it.
These forces can be neatly brought together in a diagram like the one in figure 1
below:
Figure 1 Porter's Five Forces

different levels of strategic planning:

Definition:
Strategic planning is the process of developing a plan, guideline or roadmap for
a small business that, based on its mission/vision/values and stated goals and
objectives, indicates specific strategies and tactics or actions that will be taken
to achieve these goals. Strategic planning should guide the efforts of the entire
organization; however, it is not unusual for more than one strategic plan to be in
place--an overall organizational plan, for instance, that drives the development
and implementation of other related plans that might include marketing plans,
HR plans, finance plans or department-specific plan.

Value of Planning
The value of strategic planning at all organizational levels is twofold: first it
puts a stake in the ground in terms of what the business is hoping to achieve
and, second, it serves as a guide for employees to direct their activities and
resources (time and money) toward goals and objectives that have been
considered and adopted by the organization as a whole.

Challenges
Perhaps the greatest challenge of strategic planning is the actual execution of
the plan. Much time is spent creating the plan, often with numerous meetings
and sometimes with the help of external resources, such as consultants or
facilitators. But, once the plan is completed, companies often face difficulties in
moving forward with the elements of the plan. This can occur for a number of
reasons: employees at all organizational levels were not sufficiently involved or
engaged in the plan's development, clear accountability is not established or
there is no regular followup on plan progress.
Best Practices
Small businesses can increase their ability to execute their strategic plan by
following a number of best practices. These include: identifying an individual
who will be responsible for ensuring the plan's implementation, conducting
regular updates on plan progress and clearly identifying accountability for each
element of the plan's action plans.
Measures of Success
Measures of plan success, ultimately, reflect accomplishment of the goals and
objectives identified in the plan. Importantly, these goals and objectives must be
meaningful and measurable. A goal of "increase sales," for instance, is not
specific enough to determine whether it has been effectively met. A goal of
"increase sales by 10 percent in the next six months" is a goal that two
individuals can review and evaluate.

Techniques used for external environmental analysis:

Environmental analysis is a very important part of decision making.
Managers need to take this aspect of taking decisions very seriously. It has
been proved time and time again that decisions that are made from gut
feelings or instincts may not work how the manager envisioned it to work
out. It is always better for analysis to be done and different scenarios to be
worked out to see how a decision can work out. This reduces the risk
associated with taking decisions. This process of analyzing the environment
is a dynamic process not a static process. The environment in which an
organization works in is divided into internal and external environment its
respective factors. The following article talks about the tools and
techniques which are used in analyzing the factors of the business
environment.
SWOT analysis:
A study of the internal and the external environment is a critical component of
the strategic planning process. The firms internal environmental factors can be
classified as strengths (S) or weaknesses (W), and those factors which act as
external agents to the firm can be classified as opportunities (O) or threats (T).
This is called SWOT analysis. (QuickMBA n.d.). This analysis gives
information that is useful in matching the organization's resources and abilities
to the environment in which it operates.
2.1 The SWOT Matrix:
A matrix of these factors can be constructed. This matrix will be helpful in
developing the strategies for the firm. The SWOT matrix (also known as a
TOWS Matrix)
Strengths
Weaknesses
Opportunities
S-O strategies
W-O strategies

Threats
S-T strategies
W-T strategies
3.2 PEST Analysis
PEST analysis identifies the external forces that affect the organization such as
Political, Economic, Social and Technological drivers. It is very useful for the
organization when used together with other tools such as the SWOT analysis.
(wikipedia n.d.)
Political Factors
These factors may have a direct or an indirect impact on the way the
organization operates. Laws made by the government may have a huge impact
on the way business is conducted by the organization.
Economic Factors
Economic factors such as the market prices and market cycles which in turn
affects the buying power and the behavior of the organizations customers.
Sociological Factors
Sociological factors include the lifestyles, demography characteristics, and the
cultural habits and characteristics of the customers. These factors have a huge
sway on the requirements and desires of the customers and also affects the size
of potential markets.
Technology Factors
Technological changes have an important role in modeling how organizations
operate with the resources that they have. Technology is a factor which is very
important to gain a competitive advantage over the closest competition.
Technological innovations can also improve the efficiency of production, speed
and quality. Evolving technologies will change how organizations operate.
3.3 Porters Five Forces Model Analysis:
Michael Porter is credited for his five forces model of competitive strategy. The
power of each of these forces varies from industry to industry, but taken

together they determine long-term profitability. These five factors will affect the
strategies which will be adopted by the organization and hence should be
carefully analyzed. To be successful, the organization must respond in an
effective manner to the environmental pressures exerted on it.