Note #11 Strategy

If one piece is moved wrongly, the whole game is lost

Chinese proverb

The strategy is like a route map. It shows you where you want to be and how you intend to get there-but it does not tell you how to drive or how to deal with all the little hassles that you meet along the way. This is covered in your tactical (or operating) plan. The strategy could be for short term, or even long term.

Four steps to analyzing your collection of businesses;-

1. Consider the attractiveness of each business area.
2. Review the synergy between the business-you’re looking for areas where you can exploit your core competencies and strategic advantages to maximum effect.
3. Weigh-up risk and returns-consider where risks offset each other and where returns are complementary.
4. Look for supporting cash flow.

Seven criteria for evaluating strategy;-

1. Return on investment (ROI).
2. Risk of losing the investment.
3. Ownership and control (what has to be given up?).
4. Potential for growth.
5. Stability of employment and earnings.
6. Prestige.
7. Social responsibility.

Be objective-when developing or reviewing a strategy, try to be objective. Suppose that you conclude your review today, and then an outstanding opportunity pops up over the horizon. It wasn’t part of your strategy, but it looks so tempting. What should you do? Careful analysis, of course. Be flexible but ask thoughtful question before changing course. The mermaid may turn out to be a sea cow (that cannot be milked).

Twelve off-the-shelf business strategies, they are intended primarily to stimulate ideas;

Cost reduction/integration strategies;

1. Backward integration, action:- take ownership of suppliers.
2. Horizontal integration, action;- take ownership of competitors.
3. Forward integration, take ownership of channels to market.

Intensive strategies;

4. Market penetration; increase your share of existing markets.
5. Market development; move into new market.
6. Product development; improve existing products or introduce new products.

Diversification strategies;

7. Concentric; introduce new, related products.
8. Horizontal; introduce new, unrelated products for existing customers.
9. Conglomerate; introduce new, unrelated products.

Defensive strategies;

10. Joint venture and mergers; joint forces with another company.
11. Retrench; sell assets and cut costs.
12. Divest; sell a whole business unit.