Strategy is one of those words that’s used quite a lot in business, but do you really know what it means? If you don’t, this blog is just for you. So, what is strategy? To start with we’ll use the official definition, detailed in ‘Defining Corporate Strategy’ by Johnson and Scoles:
“Strategy is the direction and scope of an organisation over the long-term: which achieves advantage for the organisation through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfil stakeholder expectations”.
What does this mean in real terms? If we look at the words highlighted in bold we can work out what strategy means. So, let’s start:
• direction – this tells the company what long-term plans are in place, where they are trying to get to.
• scope – shows the company which markets they should be competing in.
• advantage – in what ways can the company beat its competitors in that market?
• resources – what resources are available and what is required to compete in the market? This includes people, money, property and so on.
• environment – this is concerned with what factors there may be in the outside world that could prevent the company from competing in the market
• stakeholder – this deals with the expectations and values of the people who have power in the company.
That makes it much easier, doesn’t it? But, strategy doesn’t stop there. There are also different levels of strategy to think about: corporate, business and operational. But for the purposes of this blog, I don’t think we need to go into these, as they are usually only dealt with by those in high positions within the company. And, by the time you’ve reached those dizzying heights, you’ll surely already know what these terms mean.
SWOT Analysis – a core strategy tool!
Now that you know what strategy is, we can move on to learning about one of the most commonly used strategy tools – SWOT analysis. This business tool, which is also known as an Internal-External analysis, was developed by Albert S Humphrey in the 1960s and is as useful now as it was then.
The easiest way to start is by explaining what the letters in SWOT stand for:
S – strengths
W – weaknesses
O – opportunities
T – threats
The different aspects of SWOT analysis can be examined quite easily with questions. We’ll start with strengths. Answer the questions for each point and see what you come up with. Be realistic and honest with yourself about the company’s position and what it can achieve.
Strengths:
Q1. What is unique about what you do?
Q2. What do you do really well?
Q3. What resources can you draw on?
Q4.What can you do better than your competitors?
Q5. What might others in your market see as your advantages?
When answering these questions you should think about them from an internal and external perspective. It’s also useful to think about them in terms of what your competitors can offer too.
Weaknesses:
Q1. What products should you avoid?
Q2. What can you improve?
Q3. What could possibly lose you sales?
Q4. What do you think other people in your business see as your weaknesses
Q5. Is there any area where you lack resources?
It is very important that you are honest in this part of the process, no matter how difficult it might be. If you ignore issues now, you’ll regret it later.
Opportunities:
Q1.What trends are currently circulating in the market you are operating in?
Q2. Can you turn your strengths into opportunities?
Q3. Are there other opportunities you can exploit?
Remember to think about your strengths and weaknesses – is there anything you can turn into an opportunity?
Threats:
Q1. What might be a threat to you?
Q2. Who are your competition and what are they doing?
Q3. Is your cash flow good or could is cause you issues?
Q4. Are there any regulations relating to your products or services that could change soon?
Q5. Are any big technological changes coming up that could affect your business?
A good place to start with this set of questions is your weaknesses list. Ensure that you check to see if any of these might become threats so you can do something about it.
When you use this tool make sure you are serious about it. Really examine your current position and be truly honest with your answers. If you’re not, the SWOT analysis becomes pointless. It also helps if you only accept answers to the questions that are definite. What I mean by that is, if you are looking at your finances or possible sales for example, make sure the figures are as accurate as you can get them!
Once you’ve completed the SWOT analysis you can really see what position your company is in, this will allow you to move forward into the future with confidence. And, don’t forget you can carry out a SWOT analysis at anytime, in fact, it’s useful to do them regularly to make sure that the business is still on track.
