How strategy and business plan are interlinked
The Business plan that follows the choice of the strategy will determine what are the processes to be followed and the resources to be put in place to achieve the desired goal at least for the coming 12 months. These include enhanced production or selling space, production equipment, human resources and the means of obtaining finance for these plans to materialize. It may also state and call for objectives like a change of the target market or a departure from commodity business to brands or a change in the positioning of the products of the company and its image from low to high or vice versa. There is nothing wrong with a voluntary drop in image if a company desires to move from a niche market to the mass market in search of volume. Often, a too high image can deter the lower segments of the consuming public from buying from a company because of the perception that image is synonymous with higher price.
A strategy which states that the company will only progress by organic growth is hardly a strategy because this sort of philosophy does not call for fundamental changes in the structure of the company, its logistics, its productive equipment or its human resources for it to perform better. A strategy should be more aggressive with a view to progressing by leaps and bounds with more meaningful changes.
Strategies with no growth
Strategies which aim only at organic growth are those of very specialized companies like Coca-Cola whose coverage of the market has reached a saturation point. They will attract only catastrophe if their product changes in taste. Their success lies in the constancy of their products and this defeats the universality of the rule that those who do not change are condemned to disappear. Like all rules, this one also has its exceptions. In such situations, the usual objective is to maintain market share and dominance and to prevent smaller competitors from making inroads in the market. Even then, there must be a strategy to achieve this objective and this course of action may focus on new presentation and packaging, better customer service and more efficient ways of production which take advantage of technological advances in productive equipment or information technology. This is an example of a defensive strategy of a market leader.
Strategies involving fundamental changes
Strategies which lead a company out of its comfort zone into a new activity carry several risks which must be considered. These can disrupt a whole business philosophy to which the workforce was well accustomed. It applies, for example, if the new orientation has no link with the traditional activity of a company to which the staff thinking and routine had been tuned. If the new activity targets a market which is different from the usual and acquired market, this entails communicating with this new audience which has a different customer psychology, in a different language and style. It may also mean switching focus from quantity to quality or vice versa. Big multi-nationals like Unilever, Procter & Gamble and Sony are multi product companies often targeted at different markets and they excel in this type of breadth seeking strategy, which calls for multi-pronged communication methods. They are used to buying expertise and brain power to man any new activity which they take on board, and to monitor them. On the highly positive side, widening their activities and range of products give stability to the sales of multi product companies.
No strategy, even if it is formally laid down or accepted by a Board, is set in concrete. The top hierarchy should meet regularly to take stock of the evolution of the business in its environment to see whether the strategy needs to be modulated or whether it has become un-adapted or ineffective and it should be simply scrapped. This boils down to saying that higher management should always breathe strategy because this will dictate their way of doing business as months go by and will condition their ability to make of progress a continued objective, even in changing circumstances and markets.
Having a Plan B to face meaningful and abrupt changes
Smart companies always have a plan B for likely, and often predictable and fundamental changes. This applies, for example, to the use of plastic bottles in the carbonated drink industry. In as much as the use of plastic bottles has become an integral part of this industry by being cost effective, it should constantly bear in mind that legislation concerning protection of the environment can abruptly put an end to the use of environmentally harmful plastic, and producers must, at short notice, be able to find alternative packaging at affordable prices in order not to modify their cost structure significantly. This can mean going back to glass bottles or having recourse to new bio-degradable material. If this threat is always kept in mind, and the thought process of how to face it, as and when it materialises, is ongoing, the shock will be dampened when it happens.
The last word
Everybody will now have understood the philosophy behind strategy making. It is not an entire management team sitting in a meeting room in a five-star hotel and even less a hired and highly paid consultant having absolutely no feel for the market, the competition and the product who can formulate a strategy. It is the prerogative of a CEO, after he has taken consultative advice from his team, because he will always be held personally accountable for any failure or shortcoming. He must never allow himself to he held to ransom by his risk averse managers and should always have the prerogative to overrule them. The Zuckerberg, the Steve Jobs and the Bill Gates of this world are not people likely to surrender to the dictatorship of the academics in their respective companies, and this is why they will stand out, as icons for many, many years to come.
Mubarak Sooltangos is the author of BUSINESS INSIDE OUT and a lecturer on a variety of business topics