The planning procedure is important for each organization. It is carried out for a different perspective. The basis of the planning process is the choice of company strategy. This is a prerequisite for the harmonious development of the organization. Strategic planning allows you to set the main goals of the company, to identify ways to achieve them. What is a strategy, features of its choice of implementation will be discussed later.
Definition Approaches
A company’s strategy is a specific model of an organization’s actions that is integrated with existing internal and external conditions. It determines the direction for achieving the goals set for the enterprise. The content of this concept is determined by a number of rules that are taken into account when making decisions in the process of determining the main course of development.
In modern specialized literature, there are two opposing approaches to defining a strategy. In the first approach, this concept is considered as a long-term, well-defined plan that the organization develops to achieve certain goals. For this, the degree of development of the company in the long term is considered. This approach is based on the fact that the goals and strategy of the company are based on predictable phenomena. All processes in this case are deterministic, amenable to management and control.
The second approach involves considering the strategy as a direction of the long-term development of the company, which concerns the means, scope and form of its activity. This progress is determined, among other things, in the organization of internal production relations, the position of the organization in its environment.
In other words, we can say that the strategy of the company is characterized as the direction of its functioning. As part of advancing along this intended path, the organization is as close as possible to its goals. To develop a strategy, an analysis is carried out using BCG matrices, as well as a study using the SWOT technique.
This procedure is interpreted in the business sphere as a concept that allows an organization to achieve its goals. So she can predict the most likely problems, constraints on the path of its development. Long-term planning allows you to choose methods to prevent negative impacts. The strategy allows you to correctly allocate available resources, as well as carry out control at each stage of the implementation of the plan. To this end, a system of goals is being built. It includes, first of all, the mission. Then follow the goals of the corporate and specific type.
The second element in the formation of the strategy is the selected policy of the organization. This is the set of rules that she chose to carry out her activities.
The strategy is being developed with a perspective of several years. Its horizon depends on the characteristics of the market in which the company operates, as well as the characteristics of the organization itself. This kind of planning is concretized in different projects, practical actions. A strategy is rarely adjusted, so it expresses only a general concept.
Varieties of strategies
The strategy of the company is the main master plan of the organization, which identifies a range of priority tasks, resources for their implementation.
It determines the sequence of steps that lead to achieving a goal in the long run. Strategies can be different. There are only 4 varieties of this type of planning:
- Concentrated growth. These strategies involve strengthening the organization’s position in the market where it operates. It can also be long-term planning for the development of the market itself or the promotion of a specific product.
- Integrated growth. This is a development plan for reverse integration of the vertical type. She can also go forward.
- Diversified growth. Such strategies involve the development of a centered or horizontal separation of goals. This allows you to reduce risks, but the resources are distributed in this case in several different directions.
- Abbreviations. This strategy is also called "harvesting." It may also be the liquidation or reduction of the company. In some cases, they resort to it to reduce the amount of expenses.
Also, the company's main strategies can be divided into three levels:
- Corporate Defines company values that are expressed for financial or other purposes. It involves the allocation and acquisition of the required resources, relevant capabilities. This strategy determines in which directions the company plans to operate. There can be several, they can be interconnected. In the course of this planning direction, it is determined in which areas of production resources will be allocated. Some of the company's projects need to be abandoned, while others need to be financed more.
- Competitive This strategy defines the principles on which the company will compete in the market. It allows you to choose the ways to create a favorable position of the organization in the industry. Groups of consumers are determined for whom finished products or services will be produced, as well as methods for promoting products. During the development of this strategy, appropriate activities are identified that will attract new customers and retain old customers. This strengthens the company's potential market advantage.
- Functional. They strengthen competitive strategies, determine areas of activity that will help to maximize the benefits of the company's position in the market. Such planning allows you to better coordinate different functions.
How is the strategy developing?
The company’s management strategy applies in practice different approaches to development. This may be an analysis of profit in the industry, competitive positioning of the organization, identification of the main opportunities for production, etc. There are many approaches to building a strategy. This is a creative process that depends directly on the manager who is involved in its development. The fact is that with the help of strategic planning it is impossible to answer all the questions that arise in the process of company management. To do this, the procedure is supported by analysis, and discoveries happen as insights.
It is worth noting that different approaches to building a strategy to a greater or lesser extent allow the manager to see the future prospects of the company. Understanding this process cannot be stereotyped, based on frozen beliefs. This is due to constantly changing conditions both inside and outside the enterprise.
When developing a company’s business strategy, some managers are guided by the latest, most popular methods. But when comprehending the prospects of the company, this can serve as a bad service. All competitors can choose this approach to developing a strategy. It is much more profitable to adhere to your own style. The original approach allows you to find an unusual, hidden path to achieving a competitive advantage. Although some views of fashion trends should be considered in order to understand what other organizations working in the industry might do.
To win in the competition, you should choose such consumer groups for which no one is producing anything. The company's original strategy in the market allows finding unoccupied niches. To do this, apply unique marketing, production methods.
Creativity in developing a strategy is also welcome. To do this, take several elements of the analysis and combine them into a single system. Regardless of the chosen approach to understanding the prospects and opportunities for the company in the future, the development of a long-term plan is carried out in 7 stages.
Planning stages
The financial strategy of a company or another type of long-term planning goes through 7 main stages:
- Analysis of the market at the moment and in the future.
- Search for competitive advantage.
- A study of the behavior of competitors in the past and a forecast of their actions in the future.
- Stability and influence of the company on the market.
- Analysis of existing opportunities, an overview of new markets, directions for development.
- Assessment of new prospects in the future.
- Making a strategic decision.
Considering the strategies of companies on the example of different companies, it is worth noting that the indicator of profitability in different industries varies. The reason for this is structural differences. So, for example, the profitability of investments in the pharmaceutical industry is 25%, and in road transport - 5%. For this reason, an analysis of the industry is necessarily done. The main thing for the company is to achieve above average performance within its market. If profitability is higher than that of competitors, this is considered a significant advantage.
Analysis of the industry allows you to determine what indicator the company should strive for. Success is relative and is determined only against the background of competitors. Market research provides information on factors affecting the economic performance of a company. Moreover, it is important to evaluate what will affect the level of profitability in the future. These factors significantly affect the choice of strategy for the organization's behavior in the market.
It is also worth noting that in each industry there are attractive and unattractive segments. The analysis identifies the most promising areas for the company.
Research allows you to assess the degree of influence of the organization on the market. In some cases, the potential is quite large. This allows you to improve the structure of the market, to prevent its deterioration in the future. The influence of the company may extend to the entire industry or its individual segment.
Positioning
The company's strategy in the market involves a search for competitive advantage. This stage of the survey is called positioning. In the course of this analysis, it turns out to answer the question why some companies have higher profitability than others. This is due to the high competitive position of the company. She invests resources in new production areas, which allows her to maintain a leadership position.
In order to position its own organization as having superiority, its products must have increased value for consumers. This, for example, may be a low price, special quality, product characteristics, its uniqueness. It is worth remembering that low-quality products cannot be sold even at a low price. Also, some unique products will not be sold at high cost. The wrong strategy in this direction will make the company unprofitable.
To increase the value of a product or service for a buyer, there are 2 factors. This is a differentiation of quality and cost reduction. When choosing a course of action, it is necessary to determine what values products can carry for consumers, which competitors cannot offer them.
In the analysis of company strategies, it can be noted that often in the same market competitive blocks are formed. Several disparate companies come together to gain control in their industry. They are opposed by another block. Unions make general strategic decisions that can increase the value of their products to consumers.
Analysis of competitors in the past
A company's growth strategy cannot do without competitor analysis. Moreover, you need to start such a study from past periods. This allows you to make a forecast on the behavior of major players in the market in the future.
Insufficient analysis of competitors' actions leads to strategic mistakes. This leads to the most sad consequences. Therefore, it is necessary to assess the likely reaction of competitors to the prevailing market environment, as well as possible future behavior. Competitors are also developing strategies that can help them win the battle for market excellence. Therefore, a good manager will definitely consider attentively both past actions of rivals and suggest their steps in the future.
This approach, as practice shows, allows you to influence the decisions of competitors. This work will allow you to look at your own company from a different angle.
In the analysis of the actions of rivals, it is necessary to identify their strengths and weaknesses, past goals and actions. Consider and evaluate the following:
- The strategy of competitors, their market position and advantages.
- Is there a change in leadership?
- Opportunities of rivals, the range of their prices, special features of the product, exclusivity and features of the promotion of goods.
- The goals pursued by them in the present and future.
- Ideas about the future of the market.
- Signals sent by an adversary to other companies.
Analysis of own position
During the construction of the company’s management strategy, an analysis of its own strength, market stability is carried out. In this case, the manager must assess the situation in the industry, the position of competitors and his own organization. For calculation, the financial results of the company are taken. Their analysis provides information on strengths and weaknesses, as well as comparing them with the results of other market participants.
If within the industry there are alliances of competitors, their own position is considered against their background. We need to consider who in this situation can become an ally. After that, an analysis of the actions of the cooperative. Close cooperation, the exchange of information, and the change in some processes can improve our own market position and strengthen our position. It also allows you to manage price, costs.
It is imperative to consider the prospect of such cooperation or your own autonomous position in the industry. It is important not only to gain advantageous positions, but also to be able to hold them in the future. Even the undisputed leaders are vulnerable to changes in market conditions. New products can displace the past leader, taking his place in the industry. There are many examples that without modernization, investment of innovative projects, the company quickly loses its position. Competitors will not stop investing in their own development. Only those who turn out to be better and faster will be able to subdue the consumer.
Opportunity analysis
The company's strategy is a special plan, which is also based on research of our own capabilities. New consumer groups are identified, areas for the development of production. It is important to find unique sales channels, promising technologies and other areas that give superiority.
Future Assessment
In the course of implementing the company's strategy in the future, it is required to realize the organization's full potential. This requires new manufacturing capabilities. They are not created in one day. Strategic planning takes into account the possibilities for the production of new goods.
Strategy selection
The final step is to cut off inappropriate, less profitable options for the development of the company. The selected directions are agreed upon. However, they cannot imitate the strategies of other players. This is obviously a losing option. Own strategy should be unique, thought out to the smallest detail.