Included in collection: Business Management
Strategic Planning Lecture
The term “strategy” originated in military language, and was used to describe the high level plan which an army would use in order to succeed in their campaign. In more recent years, strategy has been adopted in a business context but retains a very similar meaning, relating to the executive plan of an organisation and setting out how it will achieve its goals and objectives. As a strategic plan is intended to be comprehensive, it usually comprises several sub-elements relating to the tactics and operations of the organisation. Because strategy is so important for businesses, and particularly business growth, there are several things which must be considered as part of developing a strategic plan. This chapter covers the most popular tools for developing a strategic plan, as well as putting in place measures to prevent or manage any problems with strategy.
2.0 The Principles of Strategy
There are a number of fundamental strategic principles which have remained constant in business for many years. Ultimately, successful strategies are those which deliver sustainable value for organisations, ideally in a way which cannot be easily copied, if at all, by a rival firm. The basic principles of strategy are as follows:
- The development of a suitable business goal. In real terms this means providing a product or service which delivers economic value (i.e. profitability). It must cost less to produce and sell a product than the customer is prepared to pay for it.
- A strategy must deliver a value proposition. Some aspect of the business, product, or service which is noticeably different from anything else a competitor can offer.
- There must be demand for the value proposition in the marketplace. Without this, it will be very difficult to sell the product or service. It is usually possible to stimulate demand, and a plan for this should be included within the strategy.
- Strategy must be integrated. It must fit with every other aspect of the business in terms of operations, resources, and delivery. Everyone in the organisation must understand what the strategy is and why it is important.
- The strategy must deliver business objectives. This means that it unifies all aspects of the business and serves as a guiding roadmap for the business in the short term, medium-term and long-term.
- A strategy almost always involves a trade-off. Typically this relates to location, market, or price point. Attempting to be all things to all customers is likely to be unsustainable for any length of time, if at all.
The most important point to remember with strategy is that it must be a well-defined way of a business differentiating itself. Ideally, this differentiation should be sustainable, meaning it is difficult if not impossible for a rival firm to copy the strategy. This differentiation helps firms survive, grow, and thrive.
However, although a strategy needs to be a defined plan, it is not necessarily a static or fixed document. This is because market circumstances change, sometimes without warning, and so a strategic plan must be developed in such a way that unforeseen changes can be accommodated and ideally exploited. This means that when developing and implementing a strategic plan it is always important to remember to regularly review and update any significant change in circumstances. This helps businesses to stay agile and ahead of the competition.
3.0 Setting the Vision, Mission and Goals
The first step in developing a strategic plan is determining the vision, mission and goals of the organisation. Although these terms are used almost interchangeably by some, they are in fact quite different.
- Vision - the overall purpose of the organisation, for example “to be the most innovative firm in the market sector”. Although a vision should be ambitious, it should also be well-defined and realistic.
- Mission - the objectives of the organisation. For example, to become the most innovative firm in the sector by investing in learning and development and treating our employees with integrity.
- Goals - the specifics of how the mission and vision will be delivered. We will become the most innovative firm in the sector by making sure that every employee attends at least 2 development courses every year.
The purpose of the vision, mission and goals is so that the organisation and everyone involved understands the business, its ethos, and its culture. It is worth spending some time thinking about these aspects before starting the main strategic plan, because the vision, mission and goals will inform the specifics of the strategic plan.
Imagine you were setting up your own business - what would the vision, mission and goals be? How would you make sure that your employees and your customers understood what they meant?
4.0 Mapping the Marketplace
Once the vision, mission, and goals have been set, the next step is to consider the marketplace in which a business operates. No organisation operates in a vacuum. There are always other businesses either in the immediate vicinity, or in the same market space trying to attract the same customers. A business situation can be influenced by external and internal factors, some of which can be outside of the control organisations, for example a change in legislation or a shock to the economy. This is why it is important for a business to understand its marketplace, and, critically, to continually monitor the marketplace for changes.
There are several things to consider when mapping the marketplace and identifying how best to achieve the strategy the organisation in light of external or market circumstances. This section presents three helpful frameworks to analyse the external marketplace. These are
- 5 Forces
- Competitor/Industry Matrix
A PEST, PESTLE or PESTEL analysis (sometimes you will see the acronyms presented in different ways) is a step-by-step assessment of critical influences in the external marketplace which can shape a businesses’ strategy. These are as follows:
The main political influences in a market. For example, is a country or a region known to be a democracy? If it is this means it is more likely that business and trade will be encouraged, or perhaps it operates as a military state. Some political parties are known as being ‘pro-business’ meaning that they are likely to introduce incentives for businesses, and other countries can have monopoly control of certain aspects of business infrastructure. Understanding the political environment is important, because some governments can effectively shut down market opportunities with little or no notice. This is unlikely in a democracy but could be a significant consideration as part of international expansion where foreign businesses have more stringent controls and limits are imposed by the local government.
The economic situation in a marketplace is likely to be very important. This determines amongst other things how much disposable income consumers have and are likely to spend, and also how much they are likely to be willing to pay for certain products and services. In uncertain economic times where income is falling in real terms this usually directly translates to reduced likelihood of discretionary spending, or spending on non-essential items. Economic uncertainty also tends to limit business investment, and can impact business in terms of direct costs, for example rising utility bills and increased import costs. Understanding wider economic circumstances can help to identify potential demand business and also new business opportunities. For example, in times of economic uncertainty adopting a different business strategy may be necessary.
Understanding the way that consumers behave is important as this influences how businesses shape their products and services and also market them. In wealthy developed economies where discretionary consumer spending is likely to be higher, there is usually increased opportunity to target consumers willing to purchase non-essential items. In marketplaces where there are different social norms and expectations this can influence business strategy. Examples might include subdividing target markets so it is possible to develop products and services which are better suited to local customer needs. This may be as simple as producing items with different packaging, through to more complicated segmentation such as producing a product for a specific area. In some industry sectors the social dimension is very important, because this can be used to forecast consumer trends.
This refers to the state of technological advancement in the marketplace. Developed economies typically have well-developed technology infrastructure and consumers are usually comfortable using technology to interact with organisations. In emerging economies technology and infrastructure can be unstable meaning that it may be necessary to adapt products and technological solutions. It is important to consider consumer attitudes towards technology and also the installation and maintenance of technology in different countries, as this is likely to be governed by local legislation and regulation. Data privacy and the management of data is likely to become a very important issue and so technological security is also an aspect which should be considered.
Every organisation must ensure that it abides by the laws of the country in which it operates. These vary from one country to the next and if an organisation operates internationally then it is vital that it considers the possible impact of legislation, and also develops a plan for managing situations where legislation might conflict. The UK has a great deal of legislation concerning business operations spanning many distinct elements such as employment legislation, health and safety legislation, financial legislation, and the sale of goods and services. However in some instances this legislation directly contradicts with legislation in other countries. In these circumstances it is the responsibility of any organisation to assess the implications of this when considering their marketplace. It is very likely that a failure to meet legislative obligations will damage the business in some way.
Environmental concerns are becoming increasingly important to consumers, and legislation and regulation regarding environmental compliance is also increasing. The environmental dimension is not necessarily critical to every organisation, it depends on the sector in which they operate. However, it is usually useful for business to understand their environmental impact and also the way in which their customers value the importance of demonstrating environmental credentials. If this is likely to be a critical dimension for an organisation, perhaps they may operate in the oil and gas sector, then more attention should be devoted to this element of the analysis.
The overarching aim with a PESTLE analysis is to consider the wider external factors which can have a very significant impact on business, but where they are unlikely to have much control or influence. Awareness of these issues can enable the business to devise a suitable strategic plan such that they take account of these considerations and know to monitor aspects which may have a positive or detrimental impact on their operations. Economic considerations are likely to be some of the most important as unless customers can afford to pay for goods and services, then it is unlikely that the business will survive for any sustained period.
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4.1.2 Five Forces
Michael Porter (2008) developed the idea of a model to assess the overall level of competition in a marketplace. Known as the Five Forces analysis, (sometimes written as a 5 Forces analysis), this is used to analyse the main sources of competition in the marketplace, and to help an organisation to make an assessment of the overall likelihood of being able to generate economic advantage. Remembering that one of the main principles of strategy is this organisation can identify an opportunity for sustainably generating economic or supernormal profit, a Five Forces analysis is a very valuable tool. Figure 1 below shows a five forces analysis and the different dimensions which it comprises.
- Bargaining power of supplies
- Bargaining power of customers
- Threat of new entrants
- Threat of substitutes
Figure 1: Porter’s Five Forces Analysis
Bargaining Power of Suppliers
The bargaining power of suppliers can be quite important, because this directly influences the overall cost of producing and providing a product or service. If there is a limited supply, this usually means that the suppliers can charge more and this is likely to erode profit. Conversely, if there are many suppliers, then this gives an advantage to purchasing organisations and they can usually negotiate supply costs.
Bargaining Power of Customers
Customers can also have a varied degree of bargaining power. For example if there are many organisations which supply similar products, then customers are likely to have a great deal of bargaining power and are also likely to be very sensitive to price and level of service. If something is expensive compared to similar products or is not properly delivered it will almost certainly mean that the customer will take their business elsewhere. Conversely, if an organisation can develop a product or service which is unique and offers value to the customer (remember the principles of strategy) then this weakens the bargaining power of customers and puts the organisation in a superior position. It is important to remember that offering the lowest price is not necessarily the best idea, it is more important to understand what it is that customer’s value in a specific target market.
Threat of New Entrants
For the threat of new entrants, if it becomes obvious that a new market offers new opportunities then it is very likely that rival firms will try and enter the marketplace offering a superior or substitute product or service. This often happens in technology, for example firms producing superior hardware or software in order to meet customer demand. If an organisation has a source of sustainable differentiation, perhaps intellectual property or unique resources, then they can usually stop competitors or new entrants from taking market share.
Threat of Substitutes
Substitute products is an issue which can be overlooked, as substitutes may be indirect. Direct substitutes are obvious, for example different brands of baked beans, but indirect substitutes are not as easy to identify. These might include customers buying prepared pasta shapes as opposed to baked beans, as they are both served in tomato sauce. If a substitute is superior in some way, this could be a major source of threat to an organisation.
The fifth force or dimension refers to the overall level of competition. Simply because competition exists this does not mean that the market is not attractive, it is still possible to generate supernormal profit in a competitive marketplace, particularly for market-leading firms. However, as a market becomes more and more crowded this tends to erode the possibility of profit generation and makes it more difficult for new firms to enter the marketplace. This is why it is so important to remember the principles of strategy and the main idea that it is imperative to develop a product or service which is in some way unique, and for which there is demand.
4.1.3 Competitor / Industry Analysis
Having considered the wider marketplace it is sensible to take a closer look at direct competitors and the overall industry. An easy way to do this is with a matrix which lists the key attributes, features or services of a competitive firm and ranks or measures their success. Figure 2 below provides an example.
Figure 2: Competitor Matrix
This matrix is a useful way of identifying sources of unique value, or a key attribute or feature which can serve as a source of sustainable differentiation. For example, a rival firm may offer a cheaper product but by offering a better quality product at a slightly higher price is more likely to offer value for customers and is therefore a source of differentiation. It is important to be honest in the assessment of the attributes and features, to properly identify how an organisation compares to rival firms in the eyes of customers.
An internal analysis is a means for an organisation identify how it can use its resources in order to achieve its strategic plan, taking into account the wider competitive marketplace. This is important, because even if a firm has excellent resources, these must be compared to the marketplace to be certain that the firm can offer some form of unique value. This section will consider three alternative tools for internal analysis, SWOT, RBV and Value Chain.
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats and is usually presented in a matrix form is shown in Figure 3.
Figure 3: SWOT Analysis general example
Ideally, the strengths of the firm should be matched to the opportunities, and the weaknesses are typically aligned with potential threats. Strengths may include tangible and intangible resources such as the brand or reputation the organisation and its infrastructure, or the particular skill of its employees. Opportunities could represent a growing marketplace, or the fact that a competitor firm is in distress. Weaknesses may represent financial exposure or a firm with poor management structure. Threats might stem from changes in the external environment which are outside of the control of the organisation for example a rival firm introducing a new product, or changes in legislation.
A SWOT matrix is a useful way of linking together internal resources and external market factors to ensure that a firm will be able to achieve its long-term strategic objectives. Obviously, if a firm has more weaknesses and/or threats than it does strengths and opportunities, then it would be sensible to review the strategic plan and consider how resources can be better used within the constraints of the current environment. Alternatively, a firm might develop an interim plan to boost resources and help an organisation to meet the minimum standards necessary to launch the desired strategic plan.
4.2.2 Resourced Based View
Barney (1991) first proposed the idea of the Resource-Based View (RBV), explaining that organisations can create strategic advantage for themselves if they understand their unique resources. The theory of the RBV is that organisations carefully analyse their internal resources, whether these are people, intellectual property, brand, or infrastructure (amongst others), and determine which of these are unique and sustainable. Generally speaking, intangible resources such as intellectual property or particular skills of employees are likely to be the most valuable resources which a business possesses and also, critically the most difficult for a rival firm to copy. Understanding what these resources are and how they can be used is fundamental for firms seeking to develop a value proposition which will help them to attract customers.
Tangible resources are important, as these can help a firm to deliver their products and services, but because tangible resources are easier to copy they are generally considered to be of less significance. However, there can be some exceptions, especially where infrastructure is very expensive and it has taken a long time to acquire. Examples might include the significant infrastructure in a large retail organisation which has many shops and warehouses and a highly efficient means of moving products from the warehouses into their retail outlets. Similarly, energy firms or passenger transport firms which have very significant tangible resources can also use this as a means of securing their position in the marketplace, because the financial investment associated with these tangible resources is so large that relatively few other firms could try and copy it.
It is important for firms to fully understand their resources, tangible and intangible, and how they are used to generate value and therefore competitive advantage. This should be the linchpin of any strategic plan, remembering the fundamental strategic principles, the critical need to have a unique product or service which offers value to customers and for which there is demand.
4.2.3 Value Chain
Another helpful means for an organisation to ascertain its sources of value is that of the value chain, also developed by Porter (2004) and reflected in Figure 4 below.
Figure 4: The Value Chain
This model can help organisations to understand where their unique or intangible sources of value are likely to be generated, for example in the infrastructure, level of service provision, or human resources. Ideally, each step in the process should add an additional source of value. This creates an overall product and delivery which, through the process of incremental gains, offers something which cannot easily be replicated by competitors and offers sustained value to customers.
It is important to recognise that there are some academics who support this model and some who criticise it, because the model works more easily if an organisation has a tangible product to sell. For intangible products, for example professional services such as accountants or management consultants, it can be more difficult to understand the distinct stages in the service delivery process, making it more challenging to identify value. However, it is still a useful process to consider each aspect of delivering a product or service, as the factors necessary to support it, for example infrastructure, HR, and overall delivery, are likely to remain constant. This illustrates why it is important to make sure that any model is used with the end product in mind in order to contribute to the development of the strategic plan.
5.0 Creating and Sustaining Competitive Advantage
Once an organisation understands its resources, and how they are mapped to the marketplace, the next part of the plan to consider is how to create and then sustain competitive advantage. As has been emphasised in this chapter, creating and sustaining a unique place in the market is absolutely fundamental to a successful business strategy. So the next question is, how can an organisation transform their plan into action?
This section considers some of the possible ways in which an organisation can transform the idea of their plan into practical reality.
5.1 Generic Strategies
Strategist Michael Porter (who also developed the Five Forces model), suggested that there are four fundamental routes which an organisation can take when they try and create space for themselves in a marketplace. This is reflected in Figure 5.
Figure 5: Generic Strategy
The framework is referred to as generic, because it is up to the organisation to come up with their own unique plan. However, Porter determined that organisations can typically compete in one of two ways. Either they focus on cost, or they focus on product. Depending on whether they choose to target a very wide marketplace or a very narrow marketplace ultimately determines which one of the generic strategies they can be said to adopt.
Cost leadership - this is the lowest price offering in the entire marketplace. Normally it is only possible for very large organisations to adopt this approach because they are able to secure economies of scale which can be passed on to customers. Discount supermarkets are usually said to adopt cost leadership strategies
Cost focus - this is the lowest cost in a specific market segment. This strategy typically applies to a very narrow market, perhaps defined geographically. It also depends on the competition and can occasionally be linked to the idea of creating a ‘loss leader’, which is a deliberately under-priced product designed to attract customers to the organisation or product range.
Differentiation - this is when an organisation offers a highly unique product or service which no rival firms in the wider marketplace can copy. This is most likely to generate value and profit. An example might include the brand Apple, which is globally recognised as differentiated product, but their niche is high end consumer electronics.
Differentiation focus - this is when a product is differentiated in a local or targeted marketplace. Examples might include the production of Artisan products. They cannot easily be offered to a large marketplace because it would be impossible to produce them in sufficient quantity, but they are unique in the local market.
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VRIO - this stands for Valuable, Rare, Costly to imitate and the question of whether the organisation is able to capture the Organisational value. Figure 6 reflects this.
Figure 6: VRIO Framework (Credit: Management Mania)
This is consistent with other aspects of strategic theory which focus on the crucial importance of creating a source of value in order to deliver organisational advantage. It is important for a firm to understand how it generates value, and also how it protects the value it generates for example whether it is rare, non-imitable or at the very least very expensive to imitate thereby making it cost prohibitive for rivals. Also, whether or not an organisation is set up in such a way that it can take advantage of its own unique resources. Rothaermel (2013) suggests that it is the final aspect which often lets firms down because they do not understand their own sources of value and how to take advantage of them. To avoid this, careful analysis of the internal strengths and weaknesses of the firm is important.
Can you think of an example where a firm has created a sustained competitive advantage and then been overtaken by a rival firm? What happened? What does this tell us about strategy and strategic planning?
5.3 Strategic Clock
One other model to consider is that of the strategic clock developed by Bowman (1996, cited in Johnson et al., 2010) and this is often more useful for service delivery instead of Porter’s generic strategies. It is reflected in the model in Figure 7 below.
Figure 7: Strategy Clock (Adapted from Johnson et al., 2010, p.378)
The model is perhaps more useful in a service setting, and ultimately presents six viable alternative strategic options. The options numbered 7 and 8 are typically considered a quick route to failure in strategic terms.
Hybrid: this is a low-cost approach where the focus is on consistent service at an affordable price - most major supermarkets adopt this strategy
Differentiation: has a higher price point which can be justified by value to the consumer - large consumer electronics firms or automotive firms often adopt this approach.
Focus differentiation: targets a specific niche segment facilitating a price premium - typically associated with luxury items whereby there are large price margins and the market is small.
Increase prices: typically used to protect margins against fluctuating costs in times of economic uncertainty. It attracts risk as it may mean the loss of customers if they are price sensitive - often seen in transport firms where they will either choose to pass on the cost or absorb it in the short-term.
Increase prices and reduced value: a high risk strategy typically only feasible in a monopoly situation - potentially possible in a local marketplace, for example a local corner shop where customers will tolerate price increase or reduction in product availability as a trade-off against the convenience of locality.
Cost leader: the least cost provider in the marketplace competing only on price and offering little or no additional value in product or service. Discount retailers often adopt this strategy.
The choice of strategy to pursue will depend very much on the organisation in question, and as the examples provided here illustrate much is determined by the situation in the wider marketplace. This is why the external and internal market analysis is so important before determining the best strategic path
6.0 Alternative Strategies
If an organisation is keen to grow, there are a number of ways this could be managed.
Organisations may choose to adopt an organic growth plan to expand, which may include recruiting more staff in order to sell more products, or increasing the size of existing premises in order to attract new customers. Alternatively, they may wish to enter a new geographical area, for example open a new store or site in a different location. In each instance it will be important to conduct a cost/risk/benefit analysis to decide the most appropriate route to take and to consider how well this fits with the strategic plan in terms of achieving the vision, goal, and objectives. Another means of achieving expansion is through merger or acquisition (M&A), whereby one organisation purchases another one and takes the controlling interest because they are seeking particular assets within the firm. M&A activity is relatively rare because of the costs involved are also noted difficulties of bringing together two firms with very different cultures and ideals. M&A activity typically takes several years before the benefits are fully appreciated which is why it is seldom a first choice as a strategic plan.
Alternatively, an organisation might choose to form a strategic alliance. This is a negotiated agreement with another firm or firms in order that they can bring together their resources and create a product or service which is entirely unique, or a relationship which is mutually beneficial. An example might include a retailer forming an alliance with the supplier so that they share information internally about market or customer demand and then use this to create a unique product. Alternatively, two organisations could produce complimentary products and might work collaboratively to create a new product or service for a specific event or occasion. Usually alliances operate for a defined period of time, they are not indefinite, and do not involve the complete amalgamation of firm resources. Each organisation retains its distinct identity, and there is a mutually beneficial aspect often through access to the specific market niche. Another aspect of alliance which it is important to note is that usually all of the firms which are part of the alliance have similar power and influence, unlike a M&A situation where a stronger firm purchases a weaker one.
Internationalisation occurs when an organisation seeks to penetrate a marketplace in a different country. There are alternative ways of achieving this strategy, and none without risk. Much depends on the organisation's tolerance for risk and also what is hoping to achieve. The safest or least risk form of internationalisation is to sell a product or service through an intermediary in a new country, taking advantage of local knowledge and preventing the risk of overexposure in an unfamiliar marketplace. A higher risk form of entry and international market is to approach it directly and to establish full infrastructure in the country in question. This can be very costly and often challenging due to a lack of familiarity with local legislation and customs, and the potential for subtle differences in market need and expectation. It is also difficult to manage organisations remotely, especially if they are in a location that does not have particularly strong infrastructure. However, despite the risks it can be an extremely successful strategy if the product or service has no direct rivals. Examples of this working successfully have included Chinese mobile phone companies entering developing marketplaces such as Africa and securing very significant market share, effectively blocking the entry of European rivals.
7.0 Emergent v. Deliberate
Although in an ideal world organisations should carefully plan their strategies in order to take advantage of their resources and new market opportunities, it can occasionally be the case that in reality strategies emerge in response to market conditions. This can occur due to sudden changes in the external marketplace which create unforeseen opportunities and can be exploited in order to generate profits and value. Examples might include finding alternative uses for existing products and services, or being approach by another firm to adapt existing infrastructure in order to provide additional services. This is why it is important for organisations to continually scan their market environment and not overlook such emergent opportunities when they arise. However, it is important for organisations to consider such opportunities relative to the risks, costs and benefits involved as it may take the organisation too far away from their mission and goals, meaning that firm loses sight of its sources of unique value. Unfortunately there can be no definitive answers to these questions, and these are problems which businesses must always face.
8.0 Stopping Strategic Drift
Another problem which firms might encounter is strategic drift. This happens when businesses find themselves continually adapting their strategic plan because of market changes, and in the process of concentrating on the plan for its own sake achieves very little. This is why it is important to appreciate the core value of the business and remain focused on long-term goals and objectives. Although in practice it may be the case that there are small variations from the plan, any significant variation might suggest strategic drift. At this point consideration should be given to whether this is the new direction for the organisation, or whether it is important to refocus and concentrate on the original plan. Also, as the strategic models have demonstrated, there can be a tendency for organisations to try and do too much at once and this can also result in strategic drift. Concentrating on one thing and doing it particularly well is more likely to be effective as opposed to trying to do too much and not achieving very much at all.
This chapter has presented an overview of strategic planning, and some examples of how to use business tools associated with strategic planning in order to create a solid and successful strategic plan. As the chapter has shown, there are several things to consider, and the most important thing to remember is that organisations must find a way of offering value to customers so that they remain focused on organisational outcomes. No business operates in a static environment, which is why it is vital that firms always consider how this strategy will fit with market circumstances now and in the future.
10.0 Case Study
MoneySkills is a small business helping people to better understand their finances and plan for their financial future. They offer short training courses to people, often from disadvantaged backgrounds, to give them the skills they need to manage their money more effectively and also to help them understand how to save and better manage household budgets. They are funded through a combination of government investment and revenue from delivering their courses within organisations. They have found that increasing numbers of organisations are looking to help their own employees manage their finances more effectively, particularly future financial planning, and MoneySkills has seen significant growth in demand for delivering in-house courses to organisations looking to help their own employees.
MoneySkills currently employs 8 people, 4 of whom work as trainers developing and delivering financial courses. There is one administrator, one salesperson, one accounts clerk and the owner of the business who can work as both a sales person and as a trainer if necessary. Feedback from the courses delivered by MoneySkills has been very positive, but it has been suggested that it would be helpful if there was the opportunity to provide alternative courses in schools to help younger people understand their finance and hopefully prevent them getting into debt, and also starting to save for their financial future when they are younger.
MoneySkills would like to take advantage of this demand, but at the moment, MoneySkills are already operating at capacity, and in order to grow the business successfully, the business owner recognises that it will be necessary to consider strategic alternatives so that business can grow sustainably without overextending finance, or diminishing quality of the courses which they offer. MoneySkills is also aware that in the current period of financial austerity there is some likelihood that government funding will be reduced and they will need to become more self-sufficient in terms of commercial sales opportunities.
The dilemma currently facing the owner of MoneySkills is how best to expand the range of courses that they offer and market them successfully, and doing so within existing resource constraints. Ideally, MoneySkills would like to take on an apprentice, not only because this fits with the vision and mission of the business, but also because training apprentices is proving to be a much better way of attracting engaged and enthusiastic staff. However, given that MoneySkills is already operating at capacity in terms of the work that employees are capable of completing, the owner of the business is unsure as to how to make best use of resources available.
MoneySkills are also aware that in the current economic environment some organisations are reducing their training budgets and seeking greater value for money from any training courses in which they invest. This means that MoneySkills must continually ensure they deliver the highest possible standard of courses and that they can demonstrate that they are offering value to their clients. Furthermore, the attractiveness of the marketplace means that another rival firm offering very similar courses has also recently established itself.
The owner of MoneySkills believes that working with schools is likely to be an excellent opportunity, but she is unsure about how best to create a course which would suit young adults who are at a different stage in their financial life. She is also aware that all other staff are currently operating at capacity and she is considering whether it would be better to focus exclusively on schools as a better opportunity, or whether to stay in the market offering corporate courses to other businesses. She is also considering the opportunities that e-learning can offer as a more cost-effective means of delivering courses which learners can take in their own time.
The reputation of MoneySkills is very good with existing clients, but they are finding it difficult to attract new business, and they are unsure whether it is due to external market conditions or whether they are not communicating effectively with their target market and pursuing an appropriate strategy. The business owner has relatively little strategic experience or knowledge, and is considering external help to undertake all strategic analysis of the business and current opportunities. The business owner recognises that there are resource constraints and it will not be possible pursue every opportunity simultaneously, even though they are all attractive.
The business owner is also concerned about current economic conditions and how these may affect the business and whether there will be necessary to take strategic action in order to protect the business in periods of uncertainty. She is considering whether it might be sensible to forge an alliance with another similar sized firm in order to better protect the business against economic fluctuation and potentially offer a wider range of courses to existing and future potential clients.
In your capacity as a business consultant conduct a strategic analysis of MoneySkills. Identify the strengths and main sources of value within the organisation. Are there any weaknesses? If so, what is the effect of these weaknesses on the strengths and value in the business?
Given the resource constraints of MoneySkills, can you think of any ways that they can be more effective with existing resources?
What are the advantages and disadvantages of expanding the business at the current time?
Critically analyse the alternative opportunities identified by the owner of MoneySkills and make recommendations for the most suitable strategic option
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11.0 References and Further Reading
Barney, J. B., (1991) Firm resources and sustained competitive advantage. Journal of Management, 17(3), pp. 99-120.
Johnson G., Scholes, K., and Whittington, R., (2010) Exploring Corporate Strategy: Text and Cases (9th Ed) London: Prentice Hall.
Management Mania (2016) VRIO Analysis [online] available at https://managementmania.com/en/vrio-analysis. [04 October, 2017].
Porter, M. E., (2004) Competitive advantage: Creating and sustaining superior performance London: Free Press.
Porter, M., (2008) The five competitive forces that shape strategy, Harvard Business Review, 86 (1), pp. 78-93.
Rothaermel, F. T., (2013) Strategic Management: Concepts and Cases. London: McGraw-Hill Irwin.
11.2 Further Reading
Grant, R., (2013) Contemporary strategic analysis. (8th Ed) London: Wiley and Sons.
Peng, M.W., (2014) Global strategic management. (3rd Ed) Sydney: South-Western Cengage Learning.
Treacy, M., and Wiersema, F., (2005) The Discipline of Market Leaders: Choose Your Customers, Narrow Your Focus, Dominate Your Market Bristol:Perseus Books.
Whittington, R., (2001) What is Strategy and What Does it Matter? (2nd Ed) London: Cengage Learning.
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