A strategy is a plan of action in order to give the company a sense of purpose and begins by asking what the activities and goals of the business are, relating both to the present position of the company and the likely future resources and opportunities available to the organisation. These strategic decisions encompass a very wide range of data and is inevitably decided upon by the top end of the hierarchy.

It begins with the Mission Statement determining the organisations’ fundamental purpose for existence and the way it perceives itself. They are broad in purpose whilst reflecting the views and the philosophy of top management. It should clearly identify the customers, the needs it is satisfying and the key products as well providing employees and other stakeholders with a vision they can believe and want to adopt as their own. The vision is the long term view and aspiration of the owner and is a perception of what the firm could achieve. The mission and vision are in interchangeable and this provides the framework for the objectives of the company which in turn should support the mission, these are however expected to change in time.

Companies will have multiple objectives which can be both long and short term, should be SMART and are likely to include: market share, shareholder payments, and social responsibility. These may conflict and priorities will be established and some form of measure to quantify and define the objective. Objectives indicate the distinctive competences or strengths whilst providing guidelines for measuring internal performance in the company and are the cornerstone of any management activity. The ultimate objective is to gain a superior position over the competition (using Porter’s Generic Strategy) but is dependent on market conditions.

Analysing the External (Micro) Environment is the next stage using a Stakeholder Analysis. This determines the group of people with influence and power internally and will benefit from its success (i.e. Directors, Government, etc). The monitoring of the environment is imperative in order to recognise trends, price cuts from competitors, market place analysis and the power of the customer etc. The Macro Environment includes a PEST Analysis, examining the global environment where the company operates, considering each of the aspects which could have a direct impact upon the company and its strategic plan. Products decline for a number of reasons but can include technological advancement to the products, supply and demand, social changes (culture or fashion), saturation of the market, legislation and Health and Safety.

The Analytical Tools include McKinsey’s 7 S Model. It is a powerful framework for internal analysis considering the interaction of 7 sub systems, when one is changed, the other 6 may also require modifying in order to obtain optimum efficiency and effectiveness. These comprise of the structure which shows how to co-ordinate tasks, the strategy – planned responses to environmental changes to achieve organisational objectives, the systems in place to ensure the company gets things done effectively, the style – management techniques, the staff – human resources including morale, recruitment and promotions, the skills – what it does or needs to do best in order to be successful and finally superordinate goals and shared values – these are the guiding principles which include the aspirations, mission, values and ethos of the business.

Porter’s 5 Forces is a model of competitive analysis within a particular market, helping the business understand the market it’s located in by illustrating how the competitive forces shape a business and the relationship between market structure and market behaviour. It identifies new entrants, suppliers, substitutes, buyers and industry competitors determining the level of competition, capacity and identifies the 5 major influences on the profitability of a market which incorporates Competitive rivalry, Ease of Entry and Barrier to Entry, Determinants of Supplier Power and Price sensitivity/bargaining Leverage. These forces of competition are the motivating factors which moves an industry forward towards a sufficient profit and is crucial to establish the importance of each force and scrutinise the most relevant, assessing their strength in a situation in order to create a plan to obtain strategic advantage.

Ansoff’s Product/Market Matrix indicates the direction a business is likely to pursue with a product strategy as it relates environmental factors to internal ones. It is designed to transform the firm from the present position to one described by the objectives, subject to constraints of the capabilities and the overall potential of the organisation. This model specifically illustrates two concepts, gap analysis which is designed to evaluate the difference (gap) between the current position of the firm and its objectives. The organisation chooses the strategy that “substantially closes the gap.” Synergy refers to the idea that firms must seek “product-market posture with a combined performance that is greater than the sum of its parts,” more commonly known as “2+2=5″ formula.

BCG Matrix analyses the portfolio of a company by identifying where a product is within its life cycle (i.e. Cash Cow) and is determined by two variables, the rate of growth and the relative market share. It offers an understanding of a variety of markets by identifying the probable direction to be taken. The vertical axis represents external factors and identifies the rate of industry growth when all being equal the prospects are favourable whereas the horizontal axis shows internal characteristics like the relative market share or competitive strength of the largest competitor. Assumptions are made concerning profit and market share being related, no barriers to entry/exit and the market is still growing whilst the maturity of the industry can be recognised. The balanced portfolio has Stars, Cash cows and problem children – dogs are not necessary as they indicate failure.

Porter’s Generic Strategy is an industry analysis providing information on which competitive strategies may be based in order to obtain the most advantageous position within the market place. It identifies the 3 strategies as cost leadership, differentiation and focus with the need for every business to adopt one of the strategies in order to succeed enabling competitive advantage.

A SWOT Analysis is used to carry out a systematic and searching appraisal of the company through the identification of its strengths and weaknesses whilst also identifying potential assets and opportunities still to be exploited. It can identify policy changes required in order to meet long term objectives, can prove beneficial in the more effective use of resources which can in turn improve profitability and finally help prepare defence strategies to combat external threats on the company.  These, along with considerations of societal and company values, lead to creation, evaluation, and choice of strategy. SWOT’s objective is to recommend strategies that ensure the best alignment between the external environment and internal situation by analysing factors that may affect desired future outcomes of the organisation.

Strategy Review

An Internal Audit considers the financial performance which would ideally cover the past few years if the figures are available in order to identify trends (comparing to the norm for the industry and then against the performance of competitors), and thus hopefully identifying improvement and danger areas. There is usually the standard list of parameters used in this analysis which include financial ratios. The functioning of every individual department should also be considered (i.e. R & D, marketing etc) with close scrutiny being paid towards its effectiveness and efficiency as well as its individual strengths and weaknesses. The organisational structure needs to be reviewed also since this encompasses the framework which holds the departments together, and finally the intangibles – this indicates organisational effectiveness and covers the culture and style of management, the motivating elements and other factors which are not clearly visible but nevertheless still exist.

The Marketing Audit bases its assumptions on the business recognising the environment where it exists and having knowledge and experience of the market forces in order to be successful in the promotion of its products. By fulfilling the needs of the customer and being perceived as “different” or “better” than the competition becomes highly important in order to become a market leader since “branding” and product profile can be the cause of success or failure.

MCKINSEY’S SEVEN “S’s”

It is a powerful framework for internal analysis considering the interaction of 7 sub systems, when one is changed, the other 6 may also require modifying in order to obtain optimum efficiency and effectiveness. These comprise of the structure which shows how to co-ordinate tasks, the strategy – planned responses to environmental changes to achieve organisational objectives, the systems in place to ensure the company gets things done effectively, the style – management techniques, the staff – human resources including morale, recruitment and promotions, the skills – what it does or needs to do best in order to be successful and finally superordinate goals and shared values – these are the guiding principles which include the aspirations, mission, values and ethos of the business.

Managers:- These are people appointed by the company owners to superivse the day to day activities. The need information about the company’s current financial situation and what it is expected to be in the future. This enables them to manage the business efficiently and to take effective control and planning decisions.

Shareholders:- In plc’s the shareholders (who will receive annual reports) will be interested in the Company’s financial accounts to see how well their investments are performing, what the profit is being spent on, the rate of earnings per share and dividends payable and the future direction and status of the market, plans for expansion and growth, planned mergers and buyouts and any other influential factors likely to affect their investment. They will want to also assess how effectively management is performing its function and how profitably managment is running the company’s operation as well as how much money they can afford to withdraw from the business for their own use.

Financial providers:- Banks and other lending agencies will want to see the documents, to regularly analyse the performance of the business, therefore reassuring themselves of the business’s on-going ability to service any loans and their credit worthiness.

Managers/Directors will use the documents to monitor performance and target areas etc. to improve the performance and sales of the business, to ensure accuracy and performance is to standard otherwise their jobs are in jeopardy.

Tax and VAT:- The Inland Revenue (Corporation Tax) and Customs and Excise will use the documents to calculate any taxes and VAT which are due on the given financial accounts and to decide the financial state of the business. They will want to scrutinise figures to ensure there is no evidence of creative accounting, fraud or anything else untoward within these accounts.

Employees:- In regard to job security and the overall position of the company within market sectors, payment of their salaries, expansion opportunities and potential buyouts etc., which will have direct impact on their future.

Potential investors:- in order to monitor the performance of the business, the likely value of returns on their investment, the financial position and whether the company is a good or bad risk

Customers:- Customers need to know that the company is a secure soruce of supply for their purchases and there is no danger of it closing down.

Competitors:- In order to compare sales revenue, market share, profit and losses, future direction and the general overall state of the business.

Trade Associations:- They will be interested in the market overall and in the company’s within it to measure the market, the future prospects, demands and opportunities.

Suppliers:- (Trade Creditors);- Suppliers will want to ensure payment and settlement of the company’s debts and so the financial statements are a good indication of the position of the company at that moment in time and whether they have cash and assets available to settle their outstanding debts.

Trade Unions:- Trade Unions will not only be interested in the company’s terms and conditions and working practices, but also in its financial position for the benefit of their members to ensure continued work, payment of salaries etc.

Statistics:- Government statistics organisations etc will be interested in the market sector as a whole and the financial performance of the businesses within this in order to monitor market performance, identify trends and fashions and generally analyse business and consumer behaviour.

Government:- The government will be interested in the financial accounts of a company, in order to monitor market growth and trends, to ensure they are accurate to truly representative of the sector and not involved in creative accounting, for continued employment in the area, taxes, VAT and to ensure a healthy economy.

Financial Analyists and Advisors:- Will need information for their clients or audience, for example stockbrokers will need information to advise investors in stocks and shares, credit agencies will need information to advise potential suppliers of the company and journalists need information for their reading public.

The strategy of an organisation has a life cycle: a dormant phase and a development phase. Because strategic issues are rarely considered by continuous review, many organisations spend most of their time in the dormant phase.

Most large companies employ whole departments to monitor the Strategic Management of their businesses. Small and medium sized firms cannot afford this. Neither can they afford to employ and train their own employees to perform this task, nor can they afford the time necessary to carry out these functions themselves due to daily pressures and administration. In any case, if Strategic Planning and Management is done internally, owners often find it difficult to be fully objective.

Often there is need for a fundamental reappraisal of where the business is going to go, if the company is to set a course towards sustainable and improved profitability. Ideally, strategic reviews should be monthly or quarterly, but AT THE VERY MINIMUM, companies should have their strategic direction externally and objectively analysed once a year to maximise profitability.

Strategy Health-Checks can cover the whole business or, in more depth, a critical function such as marketing, business development, export, Internet marketing, market research, funding, acquisitions and mergers, purchasing, communications, management, etc.

Strategy Health-Check Stages Include:

* Detailed M.O.S.T. Analysis
* Corporate Mission
* Corporate Objectives
* Strategic Options
* Tactics, Timescales, Responsibilities
* Monitoring and Control Procedures
* Detailed S.W.O.T. Analysis
* Internal Strengths
* Internal Weaknesses
* External Opportunities
* External Threats
* Strategic Options from S.W.O.T.

One of the key tools used in Strategic Planning is the M.O.S.T. Analysis. This helps to clarify where the business intends to go (Mission), they key goals which will help to achieve this (Objectives), analyses what options there are for proceeding forward (Strategies) and how these strategies are going to be put into action (Tactics).

The key is for this whole process to hang together from top to bottom and also in reverse. From the top, clarifying the mission drives the objectives which creates strategic options which forces tactical actions to be taken. From the bottom, every action at tactical level should help to make the strategies work, all strategies should help to achieve the objectives, and all the objectives should take the business towards the mission.

•MISSION •OBJECTIVES •STRATEGIES •TACTICS

Businesses fall into many traps by attempting to tackle strategy internally -
Getting distracted from moving the business forward by day-to-day actions or demands from customers, suppliers and competitors
*Failing to clarify where it wants to get to and in what timescale
*Omitting to get Board and management agreement to this mission
*Not clarifying the key objectives that need to be reached (and in what timescale) for the mission to be successful
*Not getting external and objective assistance in analysing the strategic options available to satisfy the key objectives
*Missing out the strategy stage altogether by going straight from objectives to tactics which leads to a lot of “dead ends”
*Not ensuring that everything done at tactical level helps to ensure success of the strategies
*Failing to properly define timescales, responsibilities, monitoring and control procedures to ensure that implementation moves forward at the necessary speed.

External Strategic Planning helps companies avoid these traps and keeps the business moving forward with a sense of urgency and in a clear direction which “hangs together” from Director to shop floor level.

Leadership in the managerial context is about organising, directing, guiding and helping people to do their work well. All the different leadership styles can all be effective, but at different times, and with different groups of people.

The best managers are those who do not use just one style all the time, who recognise that during some situations they will have to exercise autocratic leadership, while during other circumstances they will be most effective by leaving people to work out their own goals and method of operation. The mark of a good manager knows which style will be most effective in any given situation.

There is democratic, autocratic and paternal management styles of leadership, with followers and leaders. A democratic leadership encourages discussion, consultation and involves staff in decision making.

An autocratic leadership issues instructions without explanation, avoids discussion and has dominant control. Paternal leadership is when the leader is like a father figure and the atmosphere would be as such.

Leadership is the ability of one person to exert influence over others and are able to motivate. A leader does not need the ‘manager’ in the job title to carry out leadership functions. Management must be flexible and able to respond to every situation in an appropriate manner.

A combination of styles, techniques and personals skills is essential. A leader must also be an effective team member. The mark of a good manager knows which style will be most effective in any given situation.

Management must be able to evaluate alternative lines of action and make appropriate decisions and identify degrees of urgency for decisions. The manager who responds to situations quickly and demonstrates flexibility is shown to be a good manager.

Decision-making is essential to the whole task of management, and is closely linked to the management process of planning and problem solving, and will reduce the risk of making costly mistakes. Good decisions are based on good information and an effective and efficient management should improve the quality of decisions at all levels of the organisations.

Every Organisation has a culture, its self-beliefs, values and learned ways of managing – and this is reflected in its structures, systems and approach to the development of corporate strategy.

Its culture derives from its past, its present, its current people, technology and physical resources and from the aims, objectives and values of those who work in the organisation.

Leadership and Management Styles
Interaction and communication

Regular interaction and communication with others leads to the development of strong emotional and social ties. Individual workers interact with others through non-verbal communication; this is body language as well as ‘implied meanings’ and ‘reading between the lines’.

Communicating is a vital part of management, it links all the management processes together. Communicating involves an exchange of ideas and information between two or more people. For managers to lead and motivate their staff they must be able to communicate with them. A good motivator and leaders is one who listens to people.

Ansoff’s Product/Market Matrix indicates the direction the business is likely to pursue with a product strategy as it relates environmental factors to internal ones.

It is designed to transform the firm from the present position to one described by the objectives, subject to constraints of the capabilities and the overall potential of the organisation. The organisation chooses the strategy that “substantially closes the gap.” Synergy refers to the idea that firms must seek “product-market posture with a combined performance that is greater than the sum of its parts,” more commonly known as “2+2=5″ formula.

BCG Matrix can be used to analyse the portfolio of a business by identifying where the product is within its life cycle (i.e. Cash Cow) and is determined by two variables, the rate of growth and the relative market share.

It offers an understanding of a variety of markets by identifying the probable direction to be taken by the business. The vertical axis represents external factors and identifies the rate of industry growth when all being equal the prospects are favourable whereas the horizontal axis shows internal characteristics like the relative market share or competitive strength of the largest competitor.

The balanced portfolio has Stars, Cash cows and problem children – dogs are not necessary as they indicate failure.