In modern day business, the majority of organisations operate in line with a business strategy that aims to achieve the desired goals of the company, such as maximising profits, increasing shareholder wealth, or gaining a larger market share. Such strategies are therefore by no means similar for each separate organisation even if they have the same overall objective, as many different factors, internal and external, lead to each strategy being tailor made for the organisation which it aims to serve.Just as the content of strategies differ from company to company, so too do the ways in which they are created and developed, and with this factor in mind the following report aims discuss whether successful business strategies should come about as a result of extensive analysis or alternatively whether it is more important to have a clear sense of purpose when developing such strategies. It is the argument of many strategists that it is of key importance for businesses to know exactly were they are going and more importantly were they want to be, before finalising their strategies.Such people would argue that if a company does not know were it wants to be, in ten years time for example, then there is not really any possible way that they can end up there. The following quote is taken from an article that suggests that the first and one of the most important stages in developing a business strategy will always be establishing ‘the vision’; ‘The first step is to develop a realistic vision for the business.
This should be presented as a pen picture of the business in three or more years time in terms of its likely physical appearance, size, activities, etc. [www. planware. org/strategy. htm? source=trpanel] In a similar way, establishing the mission statement of the company is often seen as one of the most important stages, and is one that can be largely determined (often by company owners/directors etc. ) before carrying out any detailed analysis.
Such a statement acts as an indication of the purposes of the business, explaining things such as the main intentions and aspirations of the organisation, providing a description of the organisations main activities, and acting as a statement of the organisations key values.Such a statement is therefore often seen as a crucial part of the strategy development process as it conveys a sense of purpose to employees and projects a company image to customers, in-turn setting the mood of where the company should go. In addition to establishing the ‘vision’ and the ‘mission statement’, the third thing that makes up the trio of elements concerning themselves with an organisations sense of purpose is the companies chosen objectives.
Such objectives act as concrete goals that the organisation seeks to reach, and also enable the organisation to monitor its progress and make corrections as needed. Although such things do help to define the purposes and aims of the organisation, it is alternatively the opinion of some that elements such as the mission statement are bland and too wide ranging to be of any realistic benefit. Such people could therefore argue that establishing the overall purposes and aims of an organisation are far less significant, and that carrying out detailed analyses would be of far greater benefit.Such voices would suggest that the most important part of developing a successful business strategy begins with an assessment of the current economic situation affecting the region or country that the organisation operates in.
This, combined with an economic forecast for the appropriate region and analysis into how such trends may affect the organisations activity will allow the organisation to start work on more educated strategy decisions.It would be suggested that such analysis would need to take place as soon as possible, normally at least three months before the beginning of the formal planning process. The importance of such research can be seen in the following quote; ‘After you have collected sufficient data, assess its present and future impact on your business.
For example, slow housing starts, weak automobile sales, reduction in real disposable personal income and increasing levels of unemployment signal reduced future demand for goods and services. ‘ [Policastro M L, 2003]Such a quote demonstrates how important external economic factors can be, and therefore suggests that a company’s failure to take them into account could render the entire strategy development process redundant. Such analysis can also be used in conjunction with a method known as SWOT analysis, which analyses the strengths, weaknesses, opportunities, and threats posed to an organisation by the business environment as well as assessing strategic capability. The usefulness of the SWOT technique in determining future strategy can be explained in the following quote; The aim is to identify the extent to which the current strengths and weaknesses are relevant to, and capable of, dealing with the threats or capitalising on the opportunities in the business environment…
This can be useful as a basis against which to judge future courses of action… ‘ [Johnson G ; Scholes K, 2002] The attitude that suggests that such analysis is the most important part of creating a business strategy can also be expressed as one of the three strategy lenses; design.The ‘strategy of design’ promotes the idea that strategy should be formulated by top management through careful analysis and planning, and implemented down through the organisation.
It suggests that careful and thorough analysis is necessary to identify which external and internal forces are most likely to influence the organisation significantly, possibly allowing management to forecast, predict or build scenarios about the potential future impacts of such forces.The ‘design’ based approach to strategy also promotes the idea of everything being approached in a logical manner. The principles of this strategy lens can be shown in the following quote; ‘…
there is careful and thorough analysis of the factors internal and external to the organisation that might affect its future and inform management about the strategic position of the organisation, and a range of options for future strategic direction are considered and evaluated in terms of the objectives and forces at work on the organisation. ‘ [Johnson G ; Scholes K, 2002]From this we can see and to an extent understand the reasons for the popularity of such research and knowledge based approaches to developing successful business strategies. However, there are two other such lenses which both offer alternative methods; firstly, there is the ‘experience-lens’, which draws on peoples experience and cultural processes in and around the organisation, and secondly there is the ‘ideas-lens’, which explains why some organisations are more innovative than others and seem to cope better with a fast changing business environment.In conclusion it must therefore be said that although a company needs to establish what its key aims are and have a distinct sense of purpose, the issues of purpose and objectives etc. is one that can only be successfully if decided upon after the relevant research and investigation has been carried out. If such research is not carried out then achieving the ‘purpose’ of the company may not be feasible, nor will the organisation have any idea how they could achieve it.
By carrying out such in depth research and analyses an organisation will also have a better idea of what ‘purpose’ will be most beneficial in the long run. In a similar way, however, a company should be careful not to abandon its key principles and objectives just because the analysis suggests it should. For example, if a company undertakes research that suggests they should totally change their product range in favour a more profitable one, the company should consider its initial aims and objectives carefully before acting.
Therefore, the best way for an organisation to act with regards to developing successful business strategies would be to combine the two different approaches by deciding on the ‘purpose’, aims and objectives of the company while at the same time taking into account the data from extensive research and analysis. One thing it must not do however, is to ignore such research completely and pursue courses of action based totally on the company’s perceived ‘purpose’.