Resetting personal and business strategies, goals in the New Year

A new calendar year marks new beginnings. As individuals and businesses set new goals to accomplish during the calendar year, it is important to reflect on how the short-term goals align with the overall personal or professional strategy.

Business mogul Morris Chang famously said, “Without strategy execution is aimless, without execution strategy is useless”. The Kenyan economy is slowly showing signs of recovery although businesses are yet to realize the pre-pandemic levels of business.

With rising inflation and little personal disposable income, the circulation of money or exchange of hands has been impacted. In such times, the economy and industries alike must strategize on ways to lead to thriving businesses.

Business strategy deals with the planned decisions used by a business unit to compete in an industry. If the organisation is a single company that operates within one industry, the business strategy and corporate strategy are the same.

If the business firms have many strategic business units, the corporate strategy will be the same for all units and the business strategy will be unique and different for each strategic business unit. Selecting business strategy alternatives involves several tasks.

Competitive advantage

Determining the critical success factors in a particular business includes those unique characteristics of an organisation that are essential for competitive advantage, for example, the critical success factor of the Walmart retail outlets in the USA is "everyday low pricing" and that of technology giant Apple is innovation, new products, and services.

Thereafter, businesses must identify the organisational strengths and weaknesses and search for an effective competitive advantage factor that gives a superior edge over competitors. Further steps include accessing the opportunities and threats in a particular market or particular product, especially during these rapidly evolving marketplaces, evaluating rival organisations and competitive strategies, and matching organisational strengths with the business opportunities available in the market to improve business performance. 

Finally the selection of the best business strategy and implementing it with the support of the organisational workforce.

Several approaches can be viewed to choose the best alternative business strategy by the firm. These approaches include the contingency theory approach, genetic material approach, product lifecycle model, descriptive characteristics approach, and an approach known as the Miles and Snow adaptation model.

Contingency approach

The contingency approach to strategy formulation suggests that the best strategy exists for the given set of circumstances. This approach is mainly concerned with brand action strategies, manufacturing, marketing, and other functional strategies. The genetic theory approach to strategy formulation is based on the fact that successful firms participate in similar identifiable patterns of behaviour.

According to Michael Porter, there are three strategies that can be adopted at the business level, namely, cost leadership, differentiation and cost focus. These are called genetic strategies because they could be used in a variety of situations across diverse industries at various stages of development. These industries can be manufacturing, service, or nonprofit enterprises. 

This strategy seeks to attain low cost of production than the competitors by improving the efficiency of production, distribution or other organisational systems. By cutting costs without sacrificing quality, managers can beat the competition and thus gain market share with higher profits.

Because the costs are lower, a cost leader is able to charge lower prices than its competitors without compromising the profit potential.

Cost advantage

The cost advantage can be obtained with high capacity utilization, economies of scale, technological advancements, and a highly skilled and experienced workforce. According to Renee Mauborgne “focusing on beating the competition and aiming to build competitive advantages frequently leads to an imitative, not innovative approach to the markets. Focusing on competition puts the competitors, rather than the customers at the core of strategy”. 

The Miles and Snow strategy is an organizational framework to help companies look at their existing operations, define their current strategy, and cost leadership, and plan for future positioning. The miles and snow adaptation model believe that business organisations should relate their business strategies to their environment, and should meet the challenges of risk and uncertainty in the external environment.

Through this adaptation, some strategies include a defender, prospector, analyser, and reactor. In a defender strategy, the business firm concentrates on its existing line of business and its market share, by aggressively practising efficient internal operations, rather than focusing on the external environment. 

In a prospector strategy, a prospector seeks and exploits new products and new market opportunities. If a firm follows this strategy, it is very receptive to changes in the external business environment and is prepared to take risks in its business.

The prospector innovates new products and services, responding to the changing needs of the customer and maintaining a competitive edge. For example, Apple’s “i-products” have very many innovative products and features having a competitive advantage. Analysis strategy is a combination of defender and prospector strategies. 

The business maintains a firm base of existing products and customers selectively responding to opportunities for innovation and change. An analyzer examines the new business ideas thoroughly and usually follows the direction that prospectors finally take by imitating those who are successful. They do not take unnecessary high risks.

Reactor strategy

The reactor strategy is not proactive in nature, the organizations pursuing the strategy are primarily responding to competitive pressures in order to survive. The lack of a set of consistent mechanisms for adaptation in responding to environmental changes is challenging.

During these times, owing to the global economic slowdown and geo-political turmoil there is great economic uncertainty. If firms cannot react fast enough due to a lack of resources or capabilities, or inability to exploit their available resources and capabilities, the reactor usually has very poor strategic direction.

Some organisations in the manufacturing sector may focus on the product life cycle model. This model provides a direction for the managers to formulate the strategy over the time of the product life. We know that any product has to undergo four stages of the lifecycle. Namely, introduction, growth, maturity, and decline. 

When a product is developed and introduced into the market, the customers get to know and use the product. If they are satisfied, they may make a repeat purchase and refer to their friends. If unsatisfied they will switch to another product.

Once the customer starts buying the product it takes up rapid growth. The product sales get maximum to reach the maturity stage. Once the next version of the product or the innovative product in the market is launched, the existing product loses its market and starts declining. The product life cycle approach advocates different business strategies should be adopted to support product sales in different stages of the lifecycle.

In addition to the product, market and pricing, the organisation must also focus on the staff, people’s well-being, strategic flexibility, and the future of work. Organisations should identify operational metrics and cascade key performance indicators and goals at the individual level. Employee engagement is a critical issue that all organizations need to focus on in 2023. Prioritising efficiency in systems and processes is good business sense during these times of financial uncertainty.

Refining processes down to what truly produces results is the best use of time and resources. After all the layoffs during the pandemic, focus on recruitment, training and retention will also be key during the year 2023. HR guru Lisa Shuster suggests organisations must consistently ask themselves “where can we improve?” 

This focus will ideally enhance reputation, productivity, retention, and hiring ability." With so many components to choose from, making a clear business strategy should not be impossible but what organisations also need are leaders who can constantly make these dreams possible.

Barot is a business and financial analyst  [email protected]