After showing you the basic features, requirements and operational implementations in our Blogs 1 & 2, we would like to review the creative development process of the corporate strategy. This helps you understand the systematic processes of the feasibility check. It is easier to apply the feasibility check with a simple system and the appropriate technical know-how, so we briefly present to you the groundbreaking parameters below.
It’s essential to have an overview of the instruments to be used and the various strategic levels. For this purpose, the tips we share from our practice and the required instruments suggested herein can be easily implemented. The development of a corporate strategy is based on the analysis of the environment and the company, and the insights you’ve gained, combined with your strategic approaches.
In the development of the strategy, we consider 5 systematic process steps with assumed process sequences. This offers the foundation – underpinned with the analyses and evaluations of the first two chapters – to create the strategy variants.
From this we derive the strategy approaches and their alternatives, which are to be evaluated based on suitable criteria. Among other things, focus on the feasibility and its proof.
The strategy process steps can be coordinated and developed as follows:
- Basic strategy – the proof of the existing or newly developed basic strategy must be clearly defined.
- Market strategy – it is necessary to define which business areas are ideal or already envisioned.
- Functional strategy – the functions in detail must be clearly defined or adjusted.
- Alternatives – by means of a creativity technique, further strategic options can be developed at any time and the additional strategy can be derived from them.
- Evaluation – after evaluating the strategic variants based on clear criteria, we trigger our decisions. It’s vital to consider which parts of the value chain must be covered by the company itself and what must be outsourced- a vertical integration with Make or Buy! If long-term cooperation and networks are derived from this as alternatives, these must also be developed.
It is important these processes are decided by a team (board of directors, management and, if necessary, key functionaries) and that they morph into shape in the brainstorming. Ideally, a director or lead for the overall responsibility is appointed, which can be done internally or externally.
Strategy resources and their use – two tools to analyze
Resource allocation is of great importance in this respect. This serves to control and clearly define what can be allocated to whom and to which fields. We distinguish between the following categories If we look at companies that follow a strict “financial logic”:
- Market growth – the business areas must be clearly positioned, either with a view to defending market share or to gaining market share in the long term by means of investments.
- Top or flop – if the business areas are subjected to a critical examination for clear prospects, it is very easy to see what belongs in an investment or disinvestment strategy.
- Problem areas – if there are weak competitive positions, but the fields are still needed, a cautious divestment strategy must be pursued – which means weighing up the benefits and opportunities.
- Cash cow – if strategic business fields remain constant, with low market growth but high market share, care must be taken, and this must be fully exploited on a low-level basis. The refinancing of the other business areas is usually also guaranteed by these high revenues!
With a strategy in place, we can now clearly position the categories and deduce how projected cash flow considerations should be realized. Based on the assumption of non-interdependent business units, decisions can be fixed that exploit the company’s potential.
On the other hand, there is the consideration of companies that follow a “synergic logic”. This means that business units are interwoven and can only achieve their full potential when they act together.
Through the Parenting Matrix, two perspectives are taken, which must be considered with the characteristics of the company in the market.
- key success factors, which are the basis for successful market participation.
- opportunities that the company can achieve through the allocation of resources.
If there is a high “fit” between key success factors, characteristics and opportunities, business areas can be jointly classified as beneficial to the corporate strategy.
This avoids isolated business area considerations and enables an optimal alignment within the business portfolio. If the strategy increases the core competencies and strengthens the positioning, this results in a clear increase in market acceptance.