Month: May 2020

Management Notes

Porter Five Forces Model

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The main purpose of industry analysis, in the context of strategic choice is to determine the industry attractiveness, and to understand the structure and dynamics of the industry with a view to find out the continued relevance to strategic alternatives that are there before a firm.

It follows that, for instance, if the industry is not, or no longer, sufficiently attractive (i.e. it does not offer long-term growth opportunities), then the strategic alternatives that lie within the industry should not be considered. It also means that alternative may have to be sought outside the industry calling for diversification moves.

Porter’s Five Forces is a business analysis model that helps to explain why different industries are able to sustain different levels of profitability. The model was originally published in Michael Porter’s book, “Competitive Strategy: Techniques for Analyzing Industries and Competitors” in 1980.

The model is widely used to analyze the industry structure of a company as well as its corporate strategy. Porter identified five undeniable forces that play a part in shaping every market and industry in the world. The forces are frequently used to measure competition intensity, attractiveness and profitability of an industry or market.

These Forces are:

  1. Threat of New entrants

This force determines how easy (or not) it is to enter a particular industry. If an industry is profitable and there are few barriers to enter, rivalry soon intensifies. When more organizations compete for the same market share, profits start to fall. It is essential for existing organizations to create high barriers to enter to deter new entrants.

  • Low amount of capital is required to enter a market;
  • Existing companies can do little to retaliate;
  • Existing firms do not possess patents, trademarks or do not have established brand reputation;
  • There is no government regulation;
  • Customer switching costs are low (it doesn’t cost a lot of money for a firm to switch to other industries);
  • There is low customer loyalty;
  • Products are nearly identical;
  • Economies of scale can be easily achieved.

New entrants raise the level of competition in an industry and reduce its attractiveness. Threat of new entrants depends on barriers to entry. More barriers to entry reduce the threat of new entrants. Some of the key entry barriers are:

  • Economies of scale

Industries where the fixed investment is high (such as automobiles), yield higher profits with larger scale of operations. In such industries, established players may have economies of scale of production which new entrants will not have, thus acting as a barrier.

  • Capital requirements

Industries that require large seed capital for establishing the business (such as steel) discourage new entrants that cannot invest this amount.

  • Switching costs

Customers may face some switching cost like having to buy new spare parts or train employees to run the new machine, in moving from one company to the other, thus discouraging movement of customers from existing players to new entrants.

  • Access to distribution

Established players may have access to the most efficient distribution channels. Distribution channel members may not tie up with new entrants who pose competition to their existing partners.

  • Expected retaliation

If existing players have large stakes in continuing their business (large investment, substantial revenues, strategic importance), or if they are dominant players, they would retaliate strongly to any new entrant.

  • Brand equity

Existing players have established product reputation and built a strong brand image over the years. New players would find it hard to convince customers to switch over to their offering. To incumbent competitors, industry attractiveness can be increased by raising entry barriers. In fact, one of the main objectives of existing players in the industry is to erect strong entry barriers to prevent new competitors from entering the industry.

  1. Bargaining Power of Suppliers

Strong bargaining power allows suppliers to sell higher priced or low quality raw materials to their buyers. This directly affects the buying firms’ profits because it has to pay more for materials. Suppliers have strong bargaining power when:

  • There are few suppliers but many buyers
  • Suppliers are large and threaten to forward integrate
  • Few substitute raw materials exist
  • Suppliers hold scarce resources
  • Cost of switching raw materials is especially high

Bargaining power of suppliers will be high when:

  • Many buyers and few sellers

There are many buyers and few dominant suppliers. Suppliers would be in a position to charge higher prices or cause instability in supply of essential products. The buyers should develop more suppliers by agreeing to invest in them and helping them with technologies.

  • Differentiated supplies

When suppliers offer differentiated and highly valued components, their bargaining power is higher, since the buyer cannot switch suppliers easily. When many suppliers offer a standardized product, their bargaining power reduces. The buyer should bring the processes that enable the supplier to make differentiated products in-house and buy only standard components from the supplier.

  • Crucial supplies

If the product sold by the supplier is a key component for the buyer, or it is crucial for its smooth operations, then the bargaining power of suppliers is higher. The buyer should always keep the production of key components with itself.

  • Forward integration

When there is a threat of forward integration into the industry by the suppliers, their bargaining power is higher. There is a strong threat of forward integration when the supplier supplies a very crucial part of the final product. The supplier of engines to an automobile maker is in a very strong position to contemplate making automobiles because it already has expertise over a key component of the final product.

  • Backward integration

When there is threat of backward integration by buyers, the bargaining power of suppliers becomes weaker, as the supplier may become redundant if the buyer starts making the same product. The buyer should always have an idea of the technologies that are being employed in making crucial and differentiated products and should be capable of putting together the resources to make these components. Suppliers should always understand that if the buyer is cornered, he will start making the components himself.

  • Level of dependence

When the industry is not a key customer group for suppliers, their bargaining power increases. Buyers are dependent on suppliers, though suppliers do not focus on the customer group. The suppliers can survive even when they stop supplying to the buyers as the major part of their business is coming from some other industry. The buyers should be careful in selecting their suppliers. They should select suppliers who have strong stake in the buyers’ industry and not those who only have peripheral interests in the buyers’ industry.

  1. Bargaining Power of Buyers

Buyers have the power to demand lower price or higher product quality from industry producers when their bargaining power is strong. Lower price means lower revenues for the producer, while higher quality products usually raise production costs. Both scenarios result in lower profits for producers. Buyers exert strong bargaining power when:

  • Buying in large quantities or control many access points to the final customer
  • Only few buyers exist
  • Switching costs to other supplier are low
  • They threaten to backward integrate
  • There are many substitutes
  • Buyers are price sensitive

Higher bargaining power of customers implies that they can seek greater compliance from the companies of the industry.

  • Few dominant customers

When there are few dominant customers and many sellers, customers can exercise greater choice. They also dictate terms and conditions to the supplier. This is true in industrial markets where many suppliers make standard components for a few Original Equipment Manufacturers. The OEMs are able to extract big concessions on price and coerce the suppliers to provide expensive services like just-in-time supplies. The suppliers have to agree to debilitating terms of the buyers if they have to continue to supply to them.

  • Non-differentiated products

If products sold by the players in the industry are standardized, or there are little differences among them, buyers can easily switch over to competitors, increasing their bargaining power. This is increasingly happening in consumer markets. Customers are not able to tell one manufacturer’s product from that of another. The result is that the customers are buying mostly on price and the manufacturers are reducing prices to lure customers.

The problem with such an approach is that with reduced profits, a company’s ability to differentiate its product further goes down. The manufacturer is caught in the spiral of low differentiation-low price-low profits- further low differentiation-further low prices-further low profits. The manufacturer has to break this chain and collect resources to differentiate its product so that it can fetch a higher price and profit.

  • Small proportion of customer’s total purchase

If the product offered by the firm is not important or critical for the customer, the bargaining power of customers is higher. The product may be of a relatively smaller value in the overall disposable income of the customer. This may work out to be to the advantage of the seller.

The customer will not be overly worried if the supplier raises its price by small amount as the slightly increased expenditure will not be a big dent in the income of the customer. As level of economic prosperity rises, manufacturers of packaged foods and other fast moving consumer goods can increase the quality and price of their products. Customers would not mind paying slightly higher prices for better products.

  • Backward integration

Customers may threaten to integrate backward into the industry, and compete with suppliers. This may be a reality in industrial markets but it is very rare in consumer markets. Most customers do not have the resources to start making what they buy.

  • Forward integration

Suppliers can threaten to integrate forward into customers’ industry. The customers have to understand and contain the imminent threat of competition from their suppliers. This threat is meaningless in consumer markets but the threat is real in industrial markets, particularly when the supplier is supplying a key component.

  • Key supplies

The industry is not a key supplying group for buyers. In consumer markets, one manufacturer supplies only a small fraction of his total purchases.

  1. Threat of Substitutes

This force is especially threatening when buyers can easily find substitute products with attractive prices or better quality and when buyers can switch from one product or service to another with little cost. For example, to switch from coffee to tea doesn’t cost anything, unlike switching from car to bicycle.

  • Buyer’s willingness to substitute

Buyers will substitute when the industry’s product is not strongly differentiated, so the buyers will not have developed strong preference for the product. In industrial markets, the product should be either enhancing value of the final product it becomes a part of, or is enhancing the operation of the buyer.

  •  Relative prices and performance of substitutes

If the substitute enhances the operation of the customer without incurring additional costs, substitute product would be preferred.

  • Costs of switching over to substitutes

In industrial markets, if a company has to buy another manufacturer’s product, the company will have to buy new spare parts and will have to train its operations and maintenance staff on the new machine.

The substitute products satisfy the same general need of the customer. The customer evaluates various aspects of the substitute products such as prices, quality, availability, ease of use etc. Relative substitutability of products varies among customers. The threat of substitute products depends on how sophisticated the needs of the buyers are, and how strongly entrenched their habits are. Some people will continue to drink coffee, and will never ever switch to drinking tea, no matter how costly coffee may become.

A company can lower threat of substitute products by building up switching costs, which may be monetary or psychological-by creating strong distinctive brand personalities and maintaining a price differential commensurate with perceived consumer value.

  1. Rivalry among existing competitors

This force is the major determinant on how competitive and profitable an industry is. In competitive industry, firms have to compete aggressively for a market share, which results in low profits. Rivalry among competitors is intense when:

  • There are many competitors
  • Exit barriers are high
  • Industry of growth is slow or negative
  • Products are not differentiated and can be easily substituted
  • Competitors are of equal size
  • Low customer loyalty

The intensity of rivalry between competitors depends on:

  • Structure of competition

An industry witnesses intense rivalry amongst its players, when it has large number of small companies or a few equally entrenched companies. An industry witnesses less rivalry when it has a clear market leader. The market leader is significantly larger than the industry’s second largest player, and it also has a low cost structure.

  • Structure of costs

In an industry which has high fixed costs, a player will cut price to attract competitors’ customers to fill capacity. A player may be willing to price just above its marginal cost, and since the industry’s marginal cost is low, it is not unusual to see price cuts of 50-70 per cent Such price cuts are almost always matched by competitors, because all of them are trying to fill capacity. The inevitable result is a price war.

  • Degree of differentiation

Players of an industry whose products are commoditized will essentially compete on price, and hence price cuts of a player will be swiftly matched by competitors, resulting in intense rivalry. But when players of an industry can differentiate their products, they understand that customers do not associate the industry’s products with a single price, and that the price of a product is dependent on its features, benefits and brand strength. Players of such an industry compete on features, benefits and brand strength, and hence rivalry is less intense. When a player cuts price, its competitor can react by adding more features, providing more benefits, or hiring a celebrity in its advertisements, instead of cutting price.

  • Switching costs

Switching cost is high when product is highly specialized, and when the customer has expended lot of resources and efforts to learn how to use it. Switching cost is also high when the customer has made investments that will become worthless if he uses any other product. Since a customer of a company is not likely to be lured by competitors’ price cuts and other manoeuvres, competitive rivalry is less in such an industry.

  • Strategic objectives

When competitors are pursuing build strategies, they will match the price cuts of a player because they do not want to lose market share to the player who has cut price. Therefore, rivalry will be intense. But when competitors are pursuing hold or harvest strategies, they will not be too keen to match the price cuts of a player, because they are more interested in profits than market share. Therefore, rivalry will be less intense.

  • Exit barriers

When players cannot leave an industry due to factors such as lack of opportunities elsewhere, high vertical integration, emotional barriers or high cost of closing down a plant, rivalry will be more intense. In such an industry, players will compete bitterly as they do not have the option to quit. But, when exit barriers are low, players who are not good enough, or who have found more attractive industries to enter, can exit. With fewer numbers of players in the industry now, rivalry will be less intense.

Although, Porter originally introduced five forces affecting an industry, scholars have suggested including the sixth force: complements. Complements increase the demand of the primary product with which they are used, thus, increasing firm’s and industry’s profit potential. For example, iTunes was created to complement iPod and added value for both products. As a result, both iTunes and iPod sales increased, increasing Apple’s profits.

Management Notes

McKinsey’s 7’s Framework, Elements, Scope, Steps

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McKinsey’s 7-S Framework is a Management model developed in the 1980s by McKinsey consultants, including Tom Peters and Robert Waterman, to diagnose and organize a company effectively. It outlines seven interdependent factors that are categorized as either “hard” or “soft” elements: Strategy, Structure, and Systems are “hard” elements that are tangible and easier to identify. They refer to the actual processes and organizational arrangements necessary for operations. Shared Values, Skills, Style, and Staff are “soft” elements, often less tangible and influenced by culture. These components must be aligned for a company to achieve success. The framework is particularly useful for understanding organizational change and ensuring that all aspects of the organization work harmoniously towards common goals.

Elements of McKinsey’s 7’s Framework:

McKinsey’s 7-S Framework is a comprehensive model that breaks down the essential elements that organizations need to align for effective strategy implementation and organizational performance. Each element interacts with the others, making it crucial that they are all aligned when any change is made.

  1. Strategy:

The plan devised to maintain and build competitive advantage over the competition. It defines how the organization intends to achieve its goals.

  1. Structure:

The way the organization is structured and who reports to whom. This includes the organizational hierarchy, departmental setup, and reporting lines.

  1. Systems:

The daily activities and procedures that staff members engage in to get the job done. This includes all formal and informal procedures that govern everyday operations.

  1. Shared Values:

Originally called “Superordinate goals,” these are the core values of the company that are evident in the corporate culture and the general work ethic. This is the central element of the model that ties all other elements together.

  1. Skills:

Actual skills and competencies of the employees within the organization. It encompasses the capabilities and abilities that the workforce brings to their work engagements.

  1. Style:

Style of leadership adopted by the organization. This can refer to how key managers behave in achieving the organization’s goals, how decisions are made, and how leaders interact with their teams.

  1. Staff:

The employees and their general capabilities. It involves how the organization recruits, develops, and retains its staff.

Scope of McKinsey’s 7’s Framework:

  • Organizational Alignment and Change Management:

Helps in aligning departments and processes during a change. The framework ensures that all aspects of the organization are harmonized to support the change, making it ideal for managing mergers, acquisitions, or any major organizational restructuring.

  • Strategy Development and Implementation:

Facilitates a holistic view of the organization when planning and implementing strategies. It ensures that the strategy is supported across all seven elements for effective execution.

  • Performance Improvement:

Assists in identifying areas of improvement by examining the interactions between the elements. Organizations can use the framework to pinpoint why certain areas are underperforming and what can be optimized.

  • Organizational Design and Structure:

Guides the design or restructuring of an organization’s architecture by considering how various elements like structure, systems, and staff need to interrelate.

  • Integration of New Processes or Technology:

Supports the integration of new technology or processes by checking alignment across the elements to ensure that the adoption is seamless and enhances operational effectiveness.

  • Cultural Assessment and Development:

Helps in understanding and evolving an organization’s culture. By analyzing shared values, style, and staff, leaders can better cultivate a culture that supports the organization’s goals.

  • Leadership Development and Team Building:

Useful in developing leadership styles and team dynamics that are congruent with achieving organizational objectives. It examines how leadership (style) and team capabilities (staff) align with the overall strategy.

  • Corporate Diagnostics:

Acts as a diagnostic tool to assess the health of the organization across multiple dimensions, identifying misalignments that could hinder performance and suggesting areas for improvement.

Steps of McKinsey’s 7’s Framework:

  • Identify the Objective:

Start by clarifying what you want to achieve with the framework. This could be to facilitate a merger, support a new strategy, or improve organizational efficiency.

  • Assess Current State:

Collect data and analyze each of the seven elements (Strategy, Structure, Systems, Shared Values, Skills, Style, Staff) to understand their current state. This assessment should identify how each element is currently aligned with the others.

  • Compare Against Desired State:

Define the ideal state for each of the seven elements aligned with the organizational goals and objectives. This involves outlining how you ideally want each element to operate and interact with the others.

  • Identify Gaps and Inconsistencies:

Compare the current state with the desired state to identify discrepancies and areas that require change. This gap analysis will highlight where changes are needed and what those changes should involve.

  • Develop Action Plans:

Based on the gaps identified, create detailed action plans for each of the seven elements. These plans should specify what needs to be changed, how the change should be implemented, who will be responsible, and by when these changes should be completed.

  • Implement Changes:

Execute the action plans, ensuring that changes in one element are complemented by and supportive of changes in the others. This step may involve restructuring, retraining staff, changing management practices, or updating systems and processes.

  • Monitor and Adjust:

Continuously monitor the effects of these changes and evaluate how they are impacting the organization. Use feedback to adjust elements and further refine strategies and operations. This step ensures that the organization remains aligned with its strategic objectives and can adapt to new challenges or opportunities.

  • Review and Reinforce:

Regularly review the entire framework and reinforce the changes made. This may involve ongoing training, repeated assessments, and recalibrations of strategies and structures to ensure long-term alignment and success.

Management Notes

Implementation: Meaning and Steps

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Strategy implementation is the translation of chosen strategy into organizational action so as to achieve strategic goals and objectives. Strategy implementation is also defined as the manner in which an organization should develop, utilize, and amalgamate organizational structure, control systems, and culture to follow strategies that lead to competitive advantage and a better performance. Organizational structure allocates special value developing tasks and roles to the employees and states how these tasks and roles can be correlated so as maximize efficiency, quality, and customer satisfaction-the pillars of competitive advantage. But, organizational structure is not sufficient in itself to motivate the employees.

Strategic implementation is critical to a company’s success, addressing the who, where, when, and how of reaching the desired goals and objectives. It focuses on the entire organization. Implementation occurs after environmental scans, SWOT analyses, and identifying strategic issues and goals. Implementation involves assigning individuals to tasks and timelines that will help an organization reach its goals.

An organizational control system is also required. This control system equips managers with motivational incentives for employees as well as feedback on employees and organizational performance. Organizational culture refers to the specialized collection of values, attitudes, norms and beliefs shared by organizational members and groups.

Following are the main steps in implementing a strategy:

  • Developing an organization having potential of carrying out strategy successfully.
  • Disbursement of abundant resources to strategy-essential activities.
  • Creating strategy-encouraging policies.
  • Employing best policies and programs for constant improvement.
  • Linking reward structure to accomplishment of results.
  • Making use of strategic leadership.

Steps in Strategy Implementation

To ensure an effective and successful implementation of strategies, it’s a good idea to have a system to go about it. Take a look at the steps to ensure that happens.

Step 1: Evaluation and communication of the Strategic Plan

The strategic plan, which was developed during the Strategy Formulation stage, will be distributed for implementation. However, there is still a need to evaluate the plan, especially with respect to the initiatives, budgets and performance. After all, it is possible that there are still inputs that will crop up during evaluation but were missed during strategy formulation.

There are several sub-steps to be undertaken in this step.

(a) Align the strategies with the initiatives

First things first, check that the strategies on the plan are following the same path leading to the mission and strategic goals of the organization.

(b) Align budget to the annual goals and objectives

Financial assessments conducted prior will provide an insight on budgetary issues. You have to evaluate how these budgetary issues will impact the attainment of objectives, and see to it that the budget provides sufficient support for it. In the event that there are budgetary constraints or limitations, they must first be addressed before launching fully into implementation mode.

(c) Communicate and clarify the goals, objectives and strategies to all members of the organization

Regardless of their position in the organization’s hierarchy, everyone must know and understand the goals and objectives of the organization, and the strategies that will be employed to achieve them.

Step 2: Development of an implementation structure

The next step is to create a vision, or a structure, that will serve as a guide or framework for the implementation of strategies.

  • Establish a linking or coordination mechanism between and among the various departments and their respective divisions and units. This is mainly for purposes of facilitating the delegation of authority and responsibility.
  • Formulate the work plans and procedures to be followed in the implementation of the tactics in the strategies.
  • Determine the key managerial tasks and responsibilities to be performed, and the qualifications required of the person who will perform them.
  • Determine the key operational tasks and responsibilities to be performed, and the qualifications required of the person who will perform them.
  • Assign the tasks to the appropriate departments of the organization.
  • Evaluate the current staffing structure, checking if you have enough manpower, and if they have the necessary competencies to carry out the tasks. This may result to some reorganization or reshuffling of people. In some cases, it may also require additional training for current staff members, or even hiring new employees with the required skills and competencies. This is also where the organization will decide if it will outsource some activities instead.
  • Communicate the details to the members of the organization. This may be in the form of models, manuals or guidebooks.

Step 3: Development of implementation-support policies and programs

Some call them “strategy-encouraging policies” while others refer to them as “constant improvement programs”. Nonetheless, these are policies and programs that will be employed in aid of implementation.

(a) Establish a performance tracking and monitoring system

This will be the basis of evaluating the progress of the implementation of strategies, and monitoring the rate of accomplishment of results, or if they were accomplished at all. Define the indicators for measuring the performance of every employee, of every unit or section, of every division, and of every department.

(b) Establish a performance management system

Quite possibly, the aspect of performance management that will encourage employee involvement is a recognition and reward structure. When creating the reward structure, make sure that it has a clear and direct link to the accomplishment of results, which will be indicated in the performance tracking and monitoring system.

(c) Establish an information and feedback system

Establish an information and feedback system that will gather feedback and results data, to be used for strategy evaluation later on.

Again, communicate these policies and programs to the members of the organization.

Step 4: Budgeting and allocation of resources

It is now time to equip the implementors with the tools and other capabilities to perform their tasks and functions.

  • Allocate the resources to the various departments, depending on the results of financial assessments as to their budgetary requirements.
  • Disburse the necessary resources to the departments, and make sure everything is properly and accurately documented.
  • Maintain a system of checks and balances to monitor whether the departments are operating within their budgetary limits, or they have gone above and beyond their allocation.

Step 5: Discharge of functions and activities

It is time to operationalize the tactics and put the strategies into action, aided by strategic leadership, utilizing participatory management and leadership styles.

Throughout this step, the organization should also ensure the following:

  • Continuous engagement of personnel by providing trainings and reorientations.
  • Enforce the applicable control measures in the performance of the tasks.
  • Evaluate performance at every level and identify performance gaps, if any, to enable adjusting and corrective actions. It is possible that the corrective actions may entail changes in the policies, programs and structures established and set in earlier steps. That’s all right. Make the changes when necessary.

Basically, the results or accomplishments in Step 5 will be the input in the next step, which is the third stage of Strategic Management: “strategy evaluation”.

Some argue that implementation of strategies is more important than the strategies themselves. But this is not about taking sides or weighing and making comparisons, especially considering how these two are important stages in Strategic Management. Thus, it is safe to say that formulating winning strategies is just half the battle, and the other half is their implementation.

Management Notes

Implementation at Project

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In project implementation or project execution, we put it all together. Project planning is complete, as detailed as possible, yet providing enough flexibility for necessary changes. In a customer-contractor relationship, the contract is signed, based on the right decisions about the contract structures, and including clauses for change and claim management.

  1. Prepare the infrastructure

Many solutions are implemented into a production environment that is separate and distinct from where the solution was developed and tested. It is important that the characteristics of the production environment be accounted for. This strategy includes a review of hardware, software, communications, etc. In our example above, the potential desktop capacity problem would have been revealed if we had done an evaluation of the production (or real-world) environment. When you are ready for implementation, the production infrastructure needs to be in place.

  1. Coordinate with the organizations involved in implementation

This may be as simple as communicating to your client community. However, few solutions today can be implemented without involving a number of organizations. For IT solutions, there are usually one or more operations and infrastructure groups that need to be communicated to ahead of time. Many of these groups might actually have a role in getting the solution successfully deployed. Part of the implementation work is to coordinate the work of any other groups that have a role to play. In some cases, developers simply failed to plan ahead and make sure the infrastructure groups were prepared to support the implementation. As a result, the infrastructure groups were forced to drop everything to make the implementation a success.

  1. Implement training

Many solutions require users to attend training or more informal coaching sessions. This type of training could be completed in advance, but the further out the training is held, the less information will be retained when implementation rolls around. Training that takes place close to the time of implementation should be made part of the actual implementation plan.

  1. Install the production solution

This is the piece everyone remembers. Your solution needs to be moved from development to test. If the solution is brand new, this might be finished in a leisurely and thoughtful manner over a period of time. If this project involves a major change to a current solution, you may have a lot less flexibility in terms of when the new solution moves to production, since the solution might need to be brought down for a period of time. You have to make sure all of your production components are implemented successfully, including new hardware, databases, and program code.

  1. Convert the data

Data conversion, changing data from one format to another, needs to take place once the infrastructure and the solution are implemented.

  1. Perform final verification in production

You should have prepared to test the production solution to ensure everything is working as you expect. This may involve a combination of development and client personnel. The first check is just to make sure everything is up and appears okay. The second check is to actually push data around in the solution, to make sure that the solution is operating as it should. Depending on the type of solution being implemented, this verification step could be extensive.

  1. Implement new processes and procedures

Many IT solutions require changes to be made to business processes as well. These changes should be implemented at the same time that the actual solution is deployed.

  1. Monitor the solution

Usually the project team will spend some period of time monitoring the implemented solution. If there are problems that come up immediately after implementation, the project team should address and fix them.

Management Notes

Process and Structural of Implementation

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Process of Strategy Implementation

  • Building an organization, that possess the capability to put the strategies into action successfully.
  • Supplying resources, in sufficient quantity, to strategy-essential activities.
  • Developing policies which encourage strategy.
  • Such policies and programs are employed which helps in continuous improvement.
  • Combining the reward structure, for achieving the results.
  • Using strategic leadership.

The process of strategy implementation has an important role to play in the company’s success. The process takes places after environmental scanning, SWOT analyses and ascertaining the strategic issues.

Structural of Implementation

Before implementing a new or revised strategy, company leaders must ensure the organizational structure can support the planned activities. After identifying the tasks that the company must perform well to succeed, company executives configure organizational hierarchies to support primary strategic goals and achieve competitive advantages. They also identify areas of weakness that pose risks and devise techniques for handling crises. Successful strategic implementation depends on structuring the organization’s employees so they can most effectively use the tools and resources available to create quality products and services.

Structuring Activities

To prevent their staff from spending time on activities not directly related to achieving companies’ strategic goals, managers identify tasks that can be outsourced to third-party vendors. Structuring work this way allows experts to perform these jobs, typically at a lower cast, while employees focus on their core competencies supporting main businesses. For example, computer manufacturers typically outsource assembly while focusing internally on design, sales and distribution duties.

Aligning Functions to Strategic Objectives

Before corporate leaders can implement new strategyies, they need to ensure that all personnel in the organizational structure possess the necessary skills, knowledge and resources to accomplish the tasks. Work must flow from one function to another so leaders should establish clear processes with policies and procedures that define roles and responsibilities. The strategy must be consistent across all departments, adaptive to changes, competitively advantageous and technically feasible.

Establishing Authority

Successfully implementing a new strategy requires that managers and employees understand what activities require executive approval and which decisions employees have the empowerment to make without further approval. Ideally, decision makers should be those people who are closest to the situation and most knowledgeable about the impact. By avoiding micro-managing the organization, managers streamline operations and eliminate wasteful tasks. If the organization is structured to allow employees the flexibility to make critical decisions, they must also be held accountable for their actions.

Developing Partnerships

Strategic implementations require personnel to work together to achieve specific, measurable, attainable, relevant and time-constrained goals and objectives. Establishing a common balanced scorecard prevents groups from competing against each other to succeed individually at the expense of the whole company. If company executives foster a cooperative environment between departments, managers share resources, personnel and knowledge effectively. Additionally, the organizational structure should encourage new employees to seek out coaching and mentoring from corporate executives. By encouraging learning and development, company leaders establish a framework for sustainable growth.

Management Notes

Behavioral in Strategic Implementation

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It is vital to bear in mind that organizational change is not an intellectual process concerned with the design of ever-more-complex and elegant organization structures. It is to do with the human side of enterprise and is essentially about changing people’s attitudes, feelings and above all else their behavior. The behavioral of the employees affect the success of the organization. Strategic implementation requires support, discipline, motivation and hard work from all manager and employees.

  1. Influence Tactics

The organizational leaders have to successfully implement the strategies and achieve the objectives. Therefore the leader has to change the behavior of superiors, peers or subordinates. For this they must develop and communicate the vision of the future and motivate organizational members to move into that direction.

  1. Power

It is the potential ability to influence the behavior of others. Leaders often use their power to influence others and implement strategy. Formal authority that comes through leaders position in the organization (He cannot use the power to influence customers and government officials) the leaders have to exercise something more than that of the formal authority (Expertise, charisma, reward power, information power, legitimate power, coercive power).

  1. Empowerment as a way of Influencing Behavior

The top executives have to empower lower level employees. Training, self managed work groups eliminating whole levels of management in organization and aggressive use of automation are some of the ways to empower people at various places.

  1. Political Implications of Power

Organization politics is defined as those set of activities engaged in by people in order to acquire, enhance and employ power and other resources to achieve preferred outcomes in organizational setting characterized by uncertainties.   Organization must try to manage political behavior while implementing strategies. They should;

  • Define job duties clearly.
  • Design job properly.
  • Demonstrate proper behaviors.
  • Promote understanding.
  • Allocate resources judiciously.

  1. Leadership Style and Culture Change

Culture is the set of values, beliefs, behaviors that help its members understand what the organization stands for, how it does things and what it considers important. Firms culture must be appropriate and support their firm. The culture should have some value in it. To change the corporate culture involves persuading people to abandon many of their existing beliefs and values, and the behaviors that stem from them, and to adopt new ones. The first difficulty that arises in practice is to identify the principal characteristics of the existing culture. The process of understanding and gaining insight into the existing culture can be aided by using one of the standard and properly validated inventories or questionnaires that a number of consultants have developed to measure characteristics of corporate culture. These offer the advantage of being able to benchmark the culture against those of other, comparable firms that have used the same instruments. The weakness of this approach is that the information thus obtained tends to be more superficial and less rich than material from other sources such as interviews and group discussions and from study of the company’s history. In carrying out this diagnostic exercise, such instruments can be supplemented by surveys of employee opinions and attitudes and complementary information from surveys of customers and suppliers or the public at large.

  1. Values and Culture

Value is something that has worth and importance to an individual. People should have shared values. This value keeps the everyone from the top management down to factory persons on the factory floor pulling in the same direction.

  1. Ethics and Strategy

Ethics are contemporary standards and a principle or conducts that govern the action and behavior of individuals within the organization. In order that the business system function successfully, the organization has to avoid certain unethical practices and the organization has to bound by legal laws and government rules and regulations.

  1. Managing Resistance to Change

To change is almost always unavoidable, but its strength can be minimized by careful advance. Top management tends to see change in its strategic context. Rank-and-file employees are most likely to be aware of its impact on important aspects of their working lives. Some resistance planning, which involves thinking about such issues as: Who will be affected by the proposed changes, both directly and indirectly? From their point of view, what aspects of their working lives will be affected? Who should communicate information about change, when and by what means? What management style is to be used?

  1. Managing Conflict

Conflict is a process in which an effort is purposefully made by one person or unit to block another that results in frustrating the attainment of the others goals or the furthering of his interests. The organization has to resolve the conflicts.

Management Notes

Functional Level Implementation

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Functional Strategies are at the heart of competitive advantage of any firm. These strategies are a great help to the implementation of integrated business strategy of the firm. They are as basis for attaining the strategic intent of the firm. Functional strategies are formed in correlation with the changing competitive environment.

Every business firm is built around certain basic functions such as production, marketing, finance, human resources, information system, operational research and development, etc. Many other functions are supporting activities which are significant for the business. Melvin J. Stanford says that for a firm to fulfill its purposes and progress towards it objectives, strategic alternatives within each of these functional areas must be developed, selected and implemented by management.

Functional strategies are the collective activities of day-to-day decisions made by respective functional department heads who are responsible in creating and adding value to the product or service. They are involved in designing product, raising finance, manufacturing the required product, delivering product to customers, and support product or service of each business within the corporate portfolio.

These activities are carried out by efficient utilization of available resources and capabilities; and integrating the activities within the functional area as, for example, coordinating among research in marketing, purchasing, inventory control, promotion, advertising and shipping in production.

Functional strategies are derived from business level strategy. Remember the three generic strategies-low cost leadership; differentiation and focus strategy. For example, take a firm pursuing low cost leadership strategy. When the strategy is implemented, all the functional areas have to be focused on low cost structure.

According to Thompson and Strickland, strategy making is not just a task for senior executives. In large enterprises, decisions about what business approaches to take and what new moves to initiate involve senior executives in the corporate office, heads of business units and product divisions, the heads of major functional areas within a business or division (manufacturing, marketing and sales, finance, human resources, and the like), plant managers, product managers, district and regional sales managers, and lower-level supervisors. In diversified enterprises, strategies are initiated at four distinct organization levels-

These are as follows:

  1. Corporate Strategy

It is a strategy for the company and all of its businesses as a whole.

  1. Business Strategy

It is a strategy for each separate business the company has diversified into.

  1. Functional Strategy

Then there is a strategy for each specific functional unit within a business. Each business usually has a production strategy, a marketing strategy, a finance strategy, and so on.

  1. Operating Strategy

And finally, this is a still narrower strategy for basic operating units — plants, sales districts and regions, and departments within functional areas.

Importance of Functional Strategy

Today, every firm faces challenges in optimizing resources such as finance, production facilities, technology, and marketing opportunities in functional areas. Functional managers need strategies to make the best of opportunities and to identify avenues for growth. They need strategic focus on their decisions in their fields.

The importance of functional strategies is pointed out under the following headings:

  1. Help in Operation of Business Functions

Functional strategies provide operational help in the conduct of various functional activities. For example, a finance manager has to necessarily take decisions on funding opportunities, deploying projects, reducing capital costs, or acquiring another firm. In addition, he has to decide on strategic options to manage working capital, which may be used to decide the various aspects of receivables management, factoring, payables management, inventory strategy, and treasury management.

Similarly, to manage human resource function, a number of strategic initiatives can be deployed by a firm. Managers need strategic focus on various functions. The production and operations management function also involves a number of strategic issues.

  1. Managerial Road Map

Thompson and Strickland write, “A company needs a functional strategy for every major business activity and organizational unit. Functional strategy, while narrower in scope than business strategy, adds relevant detail to the overall business game plan. It aims at establishing or strengthening specific competencies calculated to enhance the company’s market position. Like business strategy, functional strategy must support the company’s overall business strategy and competitive approach. A related role is to create a managerial road map for achieving the functional area’s objectives and mission.”

  1. Help in Implementation of Grand Strategy

Pearce and Robinson state that “functional strategies must be developed in the key areas of marketing, finance, production, R&D, and personnel. Functional strategies help in implementation of grand strategy by organizing and activating specific subunits of the company to pursue the business strategy in daily activities.”

  1. Decisional Guides to Action

Functional strategies guide and translate thought into action designed to accomplish specific annual objectives. Thus, functional strategies may be regarded as decisional guides to action that make the strategies work. They clarify many conflicting issues and problems, giving specific short-term guidance to operating managers and employees.

  1. Improves Effectiveness and Efficiency and Creates Super Profitability

It should be noted that functional strategies aim at improving the effectiveness of a company’s operations and thus its ability to attain superior efficiency, quality, innovation, and customer responsiveness. It is important to keep in mind the relationships of functional strategies, distinctive competencies, differentiation, low cost, value creation, and profitability.

We can note that functional-level strategies can build resources and capabilities of a firm that enhance superior efficiency, quality, innovation. These in turn, create low cost, value and superior profitability.

  1. Builds Competitive Advantage

Functional strategies can improve the efficiency, reliability (quality), and consumer responsiveness of its service. Thus, they can be used to build a sustainable competitive advantage. Functional strategies can increase efficiency of activities and thereby lower their cost structure. In fact, functional strategy is concerned with developing and nurturing a distinctive competence to provide a company or business unit with a competitive advantage.

Types of Functional Strategy

  1. Marketing Strategy

The definition of marketing strategy can be given, as: “A marketing strategy is a practice that allows an organization to focus on the available resources and turn the opportunities into productivity to increase sales and achieve justifiable competitive lead.” Marketing strategies provide detailed information to the necessary plans to be taken, to carry out the marketing program.

By using an effective marketing plan an organization may go for capturing a large share of existing market, develop a new market for its current products, or develop new products for its existing market or even go for total diversification strategy that mean developing a new product for an entirely new market.

The marketing strategy based on building an organization that revolves around customer satisfaction helps the organization in achieving fast growth rate. It describes how the organization is going to engage customers, identify the prospects, and the competition in the market.

  1. Financial Strategy

The financial strategy deals with the availability or sources, usages, and management of funds. It focuses on the alignment of financial management with the corporate and business objectives of an organization to gain strategic advantage. It emphasizes on the aspects such as – how much fund is required. When the fund is required? How the funds should be raised? In addition, by what are the means to use and manage the funds?

  1. Operations Strategy

According to Slack and Lewis, operations strategy can be defined as: “the total pattern of decisions which shape the long term capabilities of any type of operations and their contribution to the overall strategy, through the reconciliation of market requirements with operations resources.” One must not be confused between two terms that are “operations” and “operational”.

However, the words are similar but have different meaning. ‘Operations’ refers to those parts of business which deals with producing goods and services. ‘Operational’ means short term and limited plans. For example, a marketing strategy defines the procedures and approaches to be used by an organization to position its business in the market.

  1. Human Resource Management Strategy

Human resource management (HRM) strategy assists in implementing the specific function of human resource management to any organization. Human resource management strategy provides a practical framework of managing human resource in line with the organization’s corporate objectives.

It involves a four-way approach:

  • Developing a strategic framework
  • Generating HR mission statement
  • Applying SWOT analysis
  • Making HR planning decisions
Management Notes

Business Policy, Meaning, Nature and Importance

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Business Policy is the study of the principles and practices that guide an organization’s decision-making and strategic direction. It defines the framework within which business decisions are made to achieve organizational goals efficiently and ethically. Business policy integrates various functional areas like marketing, finance, operations, and human resources to ensure coordinated action. It involves setting objectives, formulating plans, and aligning resources with long-term goals. Business policy provides guidelines for problem-solving, resource allocation, and responding to environmental changes. It ensures consistency in actions, promotes organizational coherence, and serves as a foundation for effective strategic management and corporate governance.

Nature of Business Policy:

  • Directive in Nature

Business policy serves as a guiding framework that directs managerial decisions and organizational actions. It helps managers understand what actions are acceptable and what are not, thereby eliminating confusion in day-to-day operations. Policies ensure consistency and alignment across departments by providing clear rules and expectations. By acting as a reference point, business policy reduces reliance on individual judgment and ensures that decision-making is structured, predictable, and goal-oriented. This directive nature helps organizations maintain strategic focus and discipline across all levels of management.

  • Integrative in Approach

Business policy integrates various functional areas of management—such as marketing, finance, production, and human resources—into a unified whole. It ensures that all departments work cohesively toward the organization’s overall objectives. This integration promotes coordination, eliminates duplication of effort, and enhances efficiency. By aligning different business functions, business policy creates synergy, allowing the organization to respond effectively to internal challenges and external changes. It also ensures that strategic initiatives are implemented consistently and harmoniously across the entire organization.

  • General and Broad Framework

Business policy is broad and general in nature, unlike operational rules which are specific and detailed. It provides a macro-level framework that sets the boundaries within which strategies and decisions are made. Rather than dictating specific actions, it defines principles, values, and directions to be followed. This allows managers the flexibility to adapt their decisions to changing conditions while still aligning with the company’s core objectives. The general nature of business policy makes it applicable across all levels and departments within the organization.

  • Long-Term Orientation

Business policy is primarily long-term in scope, focusing on sustained growth, profitability, and competitive advantage. It lays down the foundational guidelines that influence strategic planning and major decision-making processes. These policies are designed to withstand short-term market fluctuations and emphasize stability, consistency, and future-oriented thinking. By looking beyond immediate results, business policy ensures that the organization remains focused on its mission and vision over time. This long-term orientation also aids in risk management, resource allocation, and navigating uncertainties in the external environment.

  • Top-Level Function

Formulating business policy is the responsibility of top-level management such as the Board of Directors, CEO, or strategic planning committee. These individuals have a comprehensive understanding of the organization’s goals, environment, and stakeholders. Since policy formulation involves setting the tone, vision, and culture of the organization, it requires authority, experience, and a wide perspective. Once framed, these policies are communicated to middle and lower levels for implementation. Thus, business policy is a top-down process that provides direction and governance throughout the enterprise.

Importance of Business Policy:

  • Provides Direction and Clarity

Business policy offers a clear framework that guides employees and management in decision-making and goal-setting. It defines the organization’s vision, mission, and objectives, ensuring everyone works toward common goals. With a well-defined policy, there is less confusion and ambiguity, which leads to faster and more consistent decisions. It also prevents departments from working in silos by aligning individual efforts with the overall strategic direction of the business. This unified focus enhances productivity, organizational coherence, and operational efficiency, especially in complex and competitive business environments.

  • Facilitates Effective Decision-Making

Business policy simplifies the decision-making process by offering a set of predefined guidelines and principles. It ensures that decisions are consistent with organizational values, long-term objectives, and legal or ethical standards. Managers at all levels can use policies as a reference point, reducing delays and uncertainty. This leads to faster, more confident, and better-informed decisions across the organization. Furthermore, consistent decision-making helps avoid conflicts and reinforces a culture of trust and responsibility among employees, contributing to a stable and well-governed business environment.

  • Enhances Coordination and Integration

Business policy helps integrate various functional areas like finance, marketing, HR, and operations under a common strategic umbrella. This alignment ensures that all departments work together harmoniously toward shared objectives. Policies reduce duplication of efforts, streamline communication, and promote coordination among units and levels of management. When every department is clear on its role and how it contributes to the broader goals, overall efficiency and performance improve. This integration also helps organizations adapt quickly to changes, as coordinated responses are easier to implement across the enterprise.

  • Aids in Strategic Planning

Business policies form the foundation of strategic planning by providing direction, boundaries, and priorities for long-term growth. They help top management analyze internal strengths and weaknesses and assess external opportunities and threats. With policy as a reference, strategies can be formulated that align with the organization’s mission and stakeholder expectations. Moreover, well-framed policies ensure continuity in strategic planning even when leadership changes. They reduce ad hoc or reactive planning by establishing a structured approach that helps the business remain focused, competitive, and proactive in a dynamic environment.

  • Ensures Consistency and Stability

A well-structured business policy ensures consistency in actions and behavior across the organization. Whether it’s customer service, employee conduct, or financial reporting, consistent practices help maintain a uniform corporate image and build stakeholder trust. Stability in internal processes also makes it easier to manage large and complex organizations. With clear policies in place, organizations can maintain order during change or crisis, reducing confusion and resistance. Furthermore, stable practices improve employee morale, as everyone knows what is expected and how to perform within the organization’s framework.

Management Notes

Strategy, Definition, Meaning and Features

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Strategy is a comprehensive plan formulated by an organization to achieve its long-term goals and gain a competitive advantage. It involves setting objectives, analyzing internal and external environments, allocating resources, and implementing actions to meet business goals effectively. Strategy provides direction and guides decision-making to respond to dynamic market conditions. It integrates organizational strengths with opportunities, while minimizing threats and overcoming weaknesses. Strategic management includes formulating, implementing, and evaluating strategies. Overall, strategy is crucial for aligning the organization’s mission with its environment, ensuring sustainability, profitability, and growth in a competitive business landscape.

Definition of Strategy:

  • Alfred D. Chandler (1962)

“Strategy is the determination of the basic long-term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals.”

  • Michael E. Porter (1980)

“Strategy is the creation of a unique and valuable position, involving a different set of activities.”

  • Igor Ansoff (1965)

“Strategy is a rule for making decisions determined by product-market scope, growth vector, competitive advantage, synergy, and resource allocation.”

  • Henry Mintzberg (1994)

“Strategy is a pattern in a stream of decisions.”
(He also proposed the 5 Ps of strategy: Plan, Ploy, Pattern, Position, and Perspective.)

  • William F. Glueck (1980)

“Strategy is a unified, comprehensive, and integrated plan designed to ensure that the basic objectives of the enterprise are achieved.”

  • The Oxford Dictionary of Business (2002)

“Strategy is a plan of action designed to achieve a long-term or overall aim.”

Features of Strategy:

  • Long-Term Orientation

Strategy is fundamentally long-term in nature. It focuses on setting and achieving goals that may span several years, guiding an organization toward sustained growth and competitive advantage. Unlike operational decisions, which are short-term and tactical, strategy aims to shape the future by preparing the organization to deal with changes in the external environment. It influences the direction of the company by setting priorities and allocating resources accordingly. Strategic thinking considers trends, uncertainties, and risks, ensuring the organization’s relevance, survival, and success over time. This long-term view helps in making informed decisions for future sustainability.

  • Direction and Scope

Strategy provides a clear direction and defines the scope of an organization’s activities. It answers the fundamental questions: What business are we in? Where do we want to go? And how will we get there? By identifying specific markets, products, services, and customer segments, strategy aligns the organization’s efforts toward common objectives. It ensures that all departments and units work toward a unified vision. This clarity in direction and scope enables efficient use of resources, facilitates performance tracking, and enhances decision-making across all levels of the organization.

  • Competitive Advantage

One of the key features of strategy is to help an organization achieve and sustain competitive advantage. This involves creating a unique position in the marketplace that allows the business to outperform competitors. It may be achieved through cost leadership, differentiation, or focus strategies. A sound strategy identifies an organization’s core competencies and matches them with market needs in a way that is difficult for competitors to replicate. Competitive advantage leads to higher customer loyalty, increased market share, and improved profitability, thus playing a vital role in long-term success.

  • Environmentally Oriented

Strategy is developed with a strong focus on the external environment, including economic, political, social, technological, legal, and environmental (PESTLE) factors. Strategic planning involves continuous environmental scanning to identify opportunities and threats. By understanding market dynamics, customer preferences, industry trends, and competitor behavior, organizations can craft strategies that are proactive and adaptive. This environmental orientation helps in mitigating risks and exploiting opportunities, ensuring that the organization remains agile and resilient in a rapidly changing business landscape.

  • Integration and Coordination

A good strategy integrates various functions and coordinates activities across the organization. It unifies departments such as marketing, finance, operations, and human resources under a common framework. This ensures that all parts of the organization are aligned and moving toward the same strategic goals. Integration fosters synergy, enhances communication, eliminates redundancy, and promotes efficient use of resources. Strategic management thus bridges the gap between different levels of the organization, enabling better control, execution, and achievement of objectives.

  • Dynamic and Flexible

Strategy is not rigid; it is dynamic and flexible to accommodate changes in the internal and external environment. Businesses operate in unpredictable markets where trends, customer expectations, regulations, and technologies constantly evolve. A successful strategy must be reviewed and revised regularly to remain relevant and effective. Flexibility allows an organization to adapt to unexpected challenges or capitalize on emerging opportunities. This feature of adaptability helps in sustaining long-term performance and competitiveness, especially in volatile or uncertain business conditions.

Management Notes

Process and Level of Strategy

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Strategic management process has following five steps:

  1. Mission and Goals

The first step in the strategic management begins with senior managers evaluating their position in relation to the organization’s current mission and goals. The mission describes the organization’s values and aspirations; and indicates the direction in which senior management is going. Goals are the desired ends sought through the actual operating procedures of the organization. It typically describe short-term measurable outcomes.

  1. Environmental Scanning

Environmental scanning refers to a process of collecting, scrutinizing and providing information for strategic purposes and helps in analyzing the internal and external factors influencing an organization. After executing the process, management should evaluate it on a continuous basis and strive to improve it.

  1. Strategy Formulation

Strategy formulation is the process of deciding best course of action for achieving organizational objectives. After conducting environment scanning process, managers formulate corporate, business and functional strategies.

  1. Strategy Implementation

Strategy implementation implies putting the organization’s chosen strategy in to action and making it work as intended. Strategy implementation includes designing the organization’s structure, distributing resources, developing decision making process, and effectively managing human resources.

  1. Strategy Evaluation

Strategy evaluation which is the final step of strategy management process involves- appraising internal and external factors, measuring performance, and taking remedial/corrective actions. Evaluation assure the management that the organizational strategy as well as its implementation meets the organizational objectives.

These steps are carried by the businesses, in chronological order, when creating a new strategic management plan. Present businesses that have already created a strategic management plan will revert to these steps as per the situation’s requirement, so as to make essential changes.

The Three Levels of Strategy

Strategy is at the heart of business. All businesses have competition, and it is strategy that allows one business to rise above the others to become successful. Even if you have a great idea for a business, and you have a great product, you are unlikely to go anywhere without strategy.

Many of the most successful business men and women throughout history have been great strategic thinkers, and that is no accident. If you wish to take your business to the top of the market as quickly as possible, it is going to be strategy that leads the way.

Of course, before you can get into the process of determining your own business strategies, you need to understand what the word ‘strategy’ really means in a business context. Does it involve long-term planning as to the general course of the business? Or is it related to the day-to-day operations and how they are designed in order to achieve success? Well, in practical application, strategy can refer to both of those things and more.

To help you understand strategy in business, this article is going to look at the three levels of strategy that are typically used by organizations. Only when all three of these levels are carefully considered will your business be able to get on the right path toward a prosperous future.

  1. Corporate Strategy

The first level of strategy in the business world is corporate strategy, which sits at the ‘top of the heap’. Before you dive into deeper, more specific strategy, you need to outline a general strategy that is going to oversee everything else that you do. At a most basic level, corporate strategy will outline exactly what businesses you are going to engage in, and how you plan to enter and win in those markets.

It is easy to overlook this planning stage when getting started with a new business, but you will pay the price in the long run for skipping this step. It is crucially important that you have an overall corporate strategy in place, as that strategy is going to direct all of the smaller decisions that you make.

For some companies, outlining a corporate strategy will be a quick and easy process. For example, smaller businesses who are only going to enter one or two specific markets with their products or services are going to have an easy time identifying what it is that makes up the overall corporate strategy. If you are running an organization that bakes and sells cookies, for instance, you already know exactly what the corporate strategy is going to look like – you are going to sell as many cookies as possible.

However, for a larger business, things quickly become more complicated. Carrying that example forward to a larger company, imagine you run an organization that is going to sell cookies but is also going to sell equipment that is used while making cookies. Entering into the kitchen equipment market is a completely different challenge from selling the cookies themselves, so the complexity of your corporate strategy will need to rapidly increase. Before you get any farther into the strategic planning of your business, be sure you have your corporate strategy clearly defined.

  1. Business Strategy

It is best to think of this level of strategy as a ‘step down’ from the corporate strategy level. In other words, the strategies that you outline at this level are slightly more specific and they usually relate to the smaller businesses within the larger organization.

Carrying over our previous example, you would be outlining separate strategies for selling cookies and selling cookie-making equipment at this level. You may be going after convenience stores and grocery stores to sell your cookies, while you may be looking at department stores and the internet to sell your equipment. Those are dramatically different strategies, so they will be broken out at this level.

Even in smaller businesses, it is a good idea to pay attention to the business strategy level so you can decide on how you are going to handle each various part of your operation. The strategy that you highlighted at the corporate level should be broad in scope, so now is the time to boil it down into smaller parts which will enable you to take action.

  1. Functional Strategy

This is the day-to-day strategy that is going to keep your organization moving in the right direction. Just as some businesses fail to plan from a top-level perspective, other businesses fail to plan at this bottom-level. This level of strategy is perhaps the most important of all, as without a daily plan you are going to be stuck in neutral while your competition continues to drive forward. As you work on putting together your functional strategies, remember to keep in mind your higher level goals so that everything is coordinated and working toward the same end.

It is at this bottom-level of strategy where you should start to think about the various departments within your business and how they will work together to reach goals. Your marketing, finance, operations, IT and other departments will all have responsibilities to handle, and it is your job as an owner or manager to oversee them all to ensure satisfactory results in the end. Again, the success or failure of the entire organization will likely rest on the ability of your business to hit on its functional strategy goals regularly. As the saying goes, a journey of a million miles starts with a single step – take small steps in strategy on a daily basis and your overall corporate strategy will quickly become successful.

Good strategy alone isn’t going to automatically lead you to success in business, but it certainly is a good place to start. Once you have sound strategies in place, the focus of the organization will shift toward executing those strategies properly day after day. Of course, your strategies will need to be continually monitored and adjusted as you move forward to ensure you are staying on a path that is consistent with the goals of the business, so always keep the three levels of strategy near the front of your mind as your guide your company.

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