Strategy development is an expansive but important part of any company, big or small, and thus, there are numerous business practices geared towards this business area. To start with business strategy development, you must determine your strategic barriers by defining where you want your company to be, how you can bring your business to the desired end state, and what your current state situation is. The evolution from your current state to your desired end state is a matter of strategy development and execution of that strategy. Even though the ultimate objective of any strategy is to maximize profitability, it involves a number of important pieces, including defining your companys value proposition, competitive advantages, and organizational transformation.
Strategy development has evolved through a number of key phases since the early 1900s. Changes to strategic mindset represent a changing landscape, new business leaders, and emergence of disruptive technologies and changes. Today, 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. A lot of competitive 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 beat competition and the business frameworks of alternative strategies, portfolio analysis, and the BCG Growth Share Matrix were developed. Business strategy development started with a focus on financial planning in the 1950s, moving to sustainable planning in the 1960s, to strategic planning in the 1970s and eventually to a focus on strategic management in the present day.
An important activity used in strategic planning is scenario planning. Oftentimes, the scenario planning process is performed in a workshop environment, where key stakeholders, management, subject matter experts, and externaladvisors, are gathered in a 2-3 day off-site conference to decide on various future state situations. It is used to help businesses plan for and make flexible long term corporate plans. Scenario planning techniques is also called scenario thinking and scenario planning analysis. An important task in the scenario planning framework is defining the primary axes of uncertainty after building a 2-axis scenario map.
In the strategy development process, it is always critical to conduct rigorous business market analysis. There are also a number of market place evaluation variables, including market sizing, pricing changes, research and development, market place characteristics, market force structure, and historical trends. Proper market analysis example involves defining the market and the study scope, understanding the core industry issues, and planning effectively. Remember that you should evaluate what makes a market unique, such as a high degree of regulation, high competitive fragmentation, and importance of R&D. Understanding how to do a market analysis involves both supply analysis and demand analysis, which includes segmentation and segment analysis, understanding consumer buying behavior, and trend analysis. There are a number of market ecosystem-based evaluation variables, including ones that are socio-demographic, economic, legal, technological, and current trends.
There are various structural elements to strategy execution design. Under the category of strategic initiatives, we should evaluate the companys portfolio and priorities, championing and management, and political tactics. We should design the organization context under which the business operates. Under strategy execution, a critical element is shaping the annual strategy planning and budgeting process. Strategy planning/budgeting activities include growth scenario planning, growth strategy design, and innovation management. Strategy execution projects need to be diligently controlled. organizational context includes initiatives, including governance, organizational structure, balance scorecard metrics, incentives, in addition to managements capabilities and core beliefs.
Within the strategy development process, it is important to come up with a a clear and definitive understanding of the market. Marketing strategy is driven by both supply and demand side drivers that affect the market place itself, which is comprised of goods and services. The market environment can be analyzed by conducting the PEST analysis framework, which focuses on the political, legal, economic, socio-demographic, cultural, and technology factors that are at play in the market. Once we understand the market, a business can form thought out strategic options and recommendations that feed into the overall strategy development. Conducting a market study involves understanding the market environmental factors, the market dynamics, and the market outlook.
Activity Based Costing ABC analysis is a strategy development framework developed to improve upon the accuracy of conventional forms of costing, so that key business decisions can be performed in a way that is well informed. On the other hand, in high level costing methods, indirect and overhead costs are spread across all product offerings based on a standard, volume-based cost allocation, which is quite inaccurate and misleading, and therefore prone to leading to dangerous business decisions. The reason that Activity Based Costing is better is because it follows a in depth process of determining cost objects, cost line items, activities, and resources drivers to understand true cost paths. Activity Based Costing allows for logical profitability to be understood around crucial areas of product lines, customer segments, distribution channels, among other markets.
Strategy Development Process
Source: http://blasite.com/2011/10/mckinsey-report-strategy-development-against-industry-forces/
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