The Strategy Process

The Strategy Process

For the beginner, it is important to understand what is 'strategy process'. There are eight steps in strategy process, i.e:

(1) Initiating the strategy process
(2) Market Analysis
(3) Company Analysis
(3) Developing a Vision and Long-term Objectives
(4) Developing Corporate Strategy
(5) Developing Business Strategy
(6) Developing Functional Strategy and
(7) Strategy Implementation and
(8) Performance Monitoring

Initiating the Strategy Process
We start with initiating the strategy process.

Market Analysis

Developing A Vision and Long-Term Objectives
It shows the company must work.

Developing Corporate Strategy
At the corporate level, primary strategy formulation responsibilities include setting the direction of the organization, formulation of a corporate strategy, selection of business to compete, selection of tactics for diversification and growth, and management of corporate resources and capabilities.

BCG Matrix
Before we develop any corporate strategy, it is important to know the market attractiveness, company's market position and resources available.

Direction of Diversification
It depends on the structure of the market and the company's top management attitude in relation to growth, profit and risk profile.

Four types of diversification are:
(a) Vertical diversification (b) Horizontal diversification (c) Concentric diversification and (d) Conglomerates.

BUSINESS STRATEGY

Here we are talking about growth strategies and competitive strategies.

Growth strategies are concerned with increasing the size and viability of of the business overtime. Competitive strategies are concerned with how the firm intends to position itself to create value for its customers in ways that are different from competitors.

GROWTH STRATEGY
Growth strategy has two components: internal growth strategies and external growth strategies.

Internal Growth Strategies
By investing it resources, a business can pursue market penetration, market development,or product development.

Market Penetration - for existing products & existing market: this strategy is suitable if the market is not fully saturated.
Product Development - for existing market, but new product
Market Development - for existing products and new market
Diversification - for new products and new market.

External Growth Strategies
It involves investing organization resources in another company or business to achieve growth targets, and include horizontal integration and joint ventures/strategic alliances.

Horizontal Integration: it involves the acquisition of an organization in the same line of business.This strategy is used to to gain market share in a particular market.

COMPETITIVE STRATEGY
In planning for resources for growth strategy, we must decide the competitive positioning of the business.Both growth and competitive strategies are tightly linked. There are four types of strategies under competitive strategy: cost leadership, differentiation, best cost and focus.

Cost Leadership Firms become the lowest cost producers of a good or service. This firms attempt to serve a large percentage of the total market share. Firms pursuing a low cost strategy will employ one of the following factors: (a) high capacity utilisation, (b) economies of scale, (c) technological advances, and (d) learning/experience effects.

Differentiation For this strategy, the emphasis is on creating value through uniqueness.Uniqueness can be achieved through product innovations, superior quality, superior service, creative advertising,and better supplier relationships.

Best Cost This strategy refers to firms that are not pursuing a distinct strategy.

Focus Focus can be based on differentiation (differentiation cost) or lowest cost (cost focus) or a combination of differentiation and lowest cost (best-cost focus). The key to a focus strategy is providing a product or service that caters to a particular segment in the market.

Developing Functional Strategies

Strategy Implementation
After vision is available and strategies have been developed, it must be followed by implementation

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