strategy-stage-2aa-framework

When crafting a business strategy, don’t focus on competitors only.

Business Strategy aims to achieve and maintain a favourable posture for the company by influencing the equilibrium between the elements that shape the competing market landscape.

There are four pivotal elements and these are: (a) the company (us), (b) the targeted customer, (c) the competitors, and (d) the environment

All four elements should receive our attention, and not just a single one, something many strategy writings don’t do by their single focus on competitors. Competitors play a big role especially in large volume-advantage industries where market share and leadership are critically important. But we can cite many other cases where the customer, and not the competitor, is central.

Many DTCs (Direct To Consumer) start by creating communities building trust and listening to consumers’ concerns and ideas. In other words, they focus on what is needed by the consumers and subsequently, they work to turn these consumers into customers.

In fragmented markets, it makes no sense to imply that you will watch the numerous competitors. There is no single competitor to watch and start-ups come in the market offering the best they can in terms of consumer wants.

In specialized or blue ocean markets where the game is won by thought innovators, the emphasis is on what different is needed by consumers and less on specific competitors.

In the course of time, competitors make moves, which not only should not escape our attention, but should be made part of the strategy formulation picture. By lowering prices, for example, a competitor could be implementing his strategy to gain market share and subsequently reduce costs. A competitor who starts building capacity should not fall outside the company’s radar and his actions be examined as a strategic move. Similarly, changes of other elements, say a new regulation or a change in the economic policies of the government should be considered as to how they affect our strategy.

All four elements as well as the dynamics from the strategic moves and their other interactions can be represented in a two-stage framework which enables executives to consider all of them comprehensively and dynamically. Stage 1 of the framework represents market elements in stability conditions while stage 2 represents them in a dynamic environment where actions and reactions by all elements take place. The two-stage framework is presented below:

Stage 1 - Strategy elements in stability conditions

strategy-stage-1-framework

Stage 2 - Strategy operates in a dynamic environment. As a quote from Henderson on Corporate Strategy says “Strategy is more than a posture or a pattern; it is a dynamic concept involving sequence, timing, and competitive reaction”

strategy-stage-2-framework

Below we briefly list a few noteworthy points about the four elements and their interactions:

(a)    The company (us) must have a viable mission and the necessary resources to accomplish it, and an infrastructure in readiness of competition to do what it takes to win in the market.

(b)    The targeted customer must be selected by considering both customer needs and company’s skills. Segment selection is a result of the need for the company to focus and concentrate resources for effectiveness. Customers are greatly enticed by prices.

(c)     Competitors remind us that we are not alone in the hunt for the customer and winning the customer means doing it against offers from competitors who are in the same game with us striving for low costs and attractive novel features.

(d)    The environment includes all the other factors that we cannot identify separately, known and unknown, foreseeable and unforeseeable that can influence what is happening like Government regulations, fads & trends, and as we are now seeing, pandemics. Any changes of it necessitate rethinking on our part about how the competing equilibrium is affected.

Note: The dynamic interactions among the market elements should be made part of the strategy process. This brings into play the sequence and timing of actions and reactions.

Strategies need time horizons and lack of understanding it is a common reason for strategy failures. Many strategies fail because they are designed with the goal of bringing results in the near term or even now. A strategy should be designed with long-term objectives, say in 2-5 years’ time with the company working in between to make the strategy alive through purpose-designed projects and other works including changes in leadership, organization and culture.

The two-stage strategy framework presented, brings strategy and its composing elements within the grasp and continuous attention of the top management enabling management not only to comprehensively draft strategy, but equally importantly by necessary adjustments and moves to maintain it current for optimum competitive posture.

 

Panikos Sardos

 

About the author: Panikos Sardos is the Managing Director of P&E Sardos Business Solutions Int., a management consulting firm that offers advisory services, coaching and training. You are welcome to communicate with us by email: psardos@sardossolutions.com or telephone: +357 99640912, +357 24400884, or visit us at www.sardossolutions.com