Factors and Trends that Influence Strategy Development

Module 3 Overview

This module is designed to help you review, assess, and apply resources and tools that support development of an effective strategy. You will study a number of strategy planning tools and techniques in the assigned readings and apply them in your assignments.

Key concepts in this Module

· Environmental Scanning / SWOT—The proposition behind the SWOT methodology is to allow an organization to assess its strengths, weaknesses, opportunities, and threats that will impact the business. When implemented in tandem with environmental scanning (that focuses on what is going on in the marketplace) and the economy, a SWOT can help an organization shore up its position in the marketplace. Ultimately it is how the organization responds to the data and the subsequent actions that dictate the value of environmental scanning and SWOT.

· Five Forces Analysis—Porter developed the Five Forces Analysis process which includes exploring the threat of new competition, understanding the threat of substitute products or services, the bargaining power of customers (buyers), the bargaining power of suppliers, and the reality of the level of intensity of competitive/industry rivalry.

· Value Chain Analysis—This tool encompasses analyzing direct and indirect activities that generate and deliver a company’s product or service to its customers. The analysis assesses each activity’s contribution to the competitive proposition through cost or differentiation. The analysis also explores any disadvantages. The culmination of information provides insight on informing the strategy.

· Performance Analysis / Benchmarking—The purpose of benchmarking is to establish a reflective point to compare against. For example, a company may send out a customer feedback survey asking for input on its service. If the company receives an average rating of a 3 on a 5-point Likert scale, it may create a plan/initiative to improve this to secure a higher satisfaction rating of 4 over a period of time. The benchmark is 3 internally, and they may also choose to look at industry data on similar companies/organizations and benchmark against industry averages. This is one tool often used to help organizations to concretely measure the results of initiatives.

· Strategic Issues—Strategic issues often develop as a result of misaligned internal capabilities and external trends. This often prevents pursuing the right opportunities and not paying attention to marketplace (external) conditions that may threaten viability of the organization. Strategic reevaluation on a regular basis can help prevent strategic issues from popping up. Using environmental scans, SWOT analysis, and Porter’s Five Force Analysis can help reveal issues and provide ways to address them.

Porter, M. (1996). What is strategy? Harvard Business Review 74(6), 61–68. Retrieved from http://libproxy.edmc.edu/login?url=http://search.ebscohost. com/login.aspx?direct=true&db=bsh&AN=9611187954&site=ehost-live

ABC Case Study—Evolving the Strategy

Organizations may choose different strategic approaches including the following:

· Retrenchment strategies that focus on tightening the belt (i.e., reducing operating costs and divestment of non-core assets). This often occurs in hard economic or recessionary times.

· Investment strategies involving expenditure on innovation and market diversification. These approaches are often short-term and focused to make fast adjustments. They can also be risky when balanced with long-term strategies.

· Ambidextrous strategies are exactly as the word suggests, a combination of retrenchment and investment. These approaches have inherent short-term benefits as well as some long-term risks.

Truly, it’s about assessing which strategy is best for the organization. ABC eLearning’s management attributed the company’s growth and success to the following using a general to specific and measurable approach:

· Developing a Strategy—This allowed for flexibility and included critical factors such as core business, marketplace needs/trends/demands, economic indicators for industry growth, and the ability to build in channel partners and easily expand the business beyond its core services.

· Executing the Strategy—This covered what, who, and how the plan would be executed. It also covered the clear metrics established each fiscal year that would demonstrate the strategy was executed properly and working.

Although ABC was set up in 2003, developing the strategy was an evolving process. The leader of the organization came across and referenced Change by Design by Tim Brown as a resource that helped articulate one of the efforts within the organization. The leader found the following particularly inspiring:

· Don’t look at things like a problem, look at them like a project to work on and improve.

· Use cross-functional teams within the organization to innovate, ideate, implement, and keep evolving.

Brown, T. (2009). Change by design: How design thinking transforms organizations and inspires innovation. New York, NY: Harper Collins.