Synonymous terms for this topic
Strategic management / strategy implementation
The following concept for strategic planning or strategy development is elaborated in such a way that it can be used by an individual (strategy in social interaction) as well as by a company (strategy in business as a long-term market behavior aligned with long-term company goals).
For successful action it is essential
- for the individual to have his or her own strategy in terms of social interaction
- for strategic management a corporate strategy
- for strategic marketing a marketing strategy
to develop.
The strategy is communicated in (larger) company by the management primarily through the following topics:
- The mission/ mission statement as part of the strategy describes the purpose. It clarifies the raison d’être: “Why do we exist?”
- The vision as part of the strategy projects into the future: “What we want to be”.
- Goals (management objective): The part of the strategy for concrete operationalization of the goals.
- General values “What we believe in and how we will behave”. On which values / beliefs all actions are worked off to achieve the strategic goals.
- The competitive advantage, formulated as a USP and as ambitious goals
A strategy is particularly successful when it is based on big, hairy, ambitious goals.
In economics, strategic planning and strategy development is reserved for the board of directors and is inherently somewhat elitist. In this article, however, it is shown, especially through the strategies for social interaction, that everyone can successfully achieve their own goals through their own strategic actions.
Strategic management/ strategic planning
Strategic management or strategic planning requires certain steps, which are presented below as a holistic strategic concept.
- Basic Beliefs (General Values)
- Strategic positioning
- Corporate purpose with mission and vision
- Corporate goal or goals as desired location – Determining desired locations – “Where do we want to go?”
- Strategic analysis as environment analysis, among others SWOT analysis
- Strategy development as business strategy, innovation strategy, marketing strategy, or social interaction strategy – defining the route – “How do we get there?”
- Tactics as individual actions or activities – Choice of transportation – “What do we need to use to reach our desired location (destination) on the established route (strategy)?”
1. General values (basic beliefs)
In the following, these points (1 to 7) are explained individually in more detail.
Binding corporate principles set out in writing the responsibilities towards all internal and external interest groups (stakeholders and shareholders). These principles provide a clear framework for the actions of the company and its employees.
Example of corporate principles:
- People, whether customers, colleagues or employees, are at the center of everything we do.
- We know no compromise when it comes to quality.
- Leading means being a role model and taking responsibility.
- We are fair, progressive, friendly, high-performance, dynamic and live team spirit.
2. Strategic positioning
The following three questions should be answered clearly in order for successful strategic positioning to work:
Target group: For which specific target group do I offer my services?
Output: What is my unique selling proposition – my raison d’être – in the market? A clearly defined solution is developed for a clearly defined problem.
Advertising message: What is the emotional message so that I reach the target group defined above?
3. Corporate purpose with mission and vision
The mission is the consistent pursuit of a specific corporate activity. It has a meaning-giving function, and its concrete answer is characterized by these basic questions:
- What are we?
- Why do we exist?
- What do we stand for?
Example of a mission: “With our shoes we solve special gait disorders”.
The vision formulates an ambitious claim for mobilizing an organization’s performance reserves – a feasible future space/ utopia to be achieved. A newly developed/ novel customer solution serves as the basic orientation. The vision is characterized by a concrete answer to the following basic questions:
- What do we dream of – where do we need to go?
- How do we need to evolve?
- …
The vision should be reviewed and revised every X years. Why X years? The industries are very different. For example, the fashion industry or even the food industry is subject to more significant changes. Therefore, companies in such rapidly changing industries need to revise their corporate vision in shorter periods (2 to 5 years). Other industries, such as the fertilizer industry or companies for truck semi-trailers, are subject to little change and may have to revise their vision every 10 to 15 years. It follows that a vision should be revised on a company-specific basis and whenever it has been achieved or is obsolete.
Example of a vision:
- TED: “Spreading ideas”
- Apple: “We believe we’re on Earth to make great products, and that’s not going to change.”
Strategy implementation
Strategic management or strategic planning requires the above two points (general values and corporate purpose) for strategy development or for the formulation of corporate strategy.
For a successful strategy implementation, however, the following three topics are particularly crucial.
- Clear definition or formulation of goals
- Starting from the formulation of the goal, the research and analysis of internal and external factors to find out what all is necessary to know, ie: what information and resources are needed to achieve the goal?
- Strategy development or strategy planning: The strategy process or strategy development process is primarily concerned with the question of which activities / tactics should be used (differently and better). But above all, also which activities / tactics should NOT be pursued – strategy trade-off!
Company goals – goal definition or goal formulation
In order to achieve the desired strategic positioning, the next step is goal definition, also called goal formulation.
Effective goals are simple, consistent and defined for the long term, providing good guidance for successful action.
A) Target dimensions – target system of the company
The overriding objective of every private-sector company is to secure its existence or to generate profits. Just as we humans need air to live, companies must generate profits in order to continue to exist. Otherwise, at least in the long term, these companies are forced to file for insolvency.
This overall objective must be broken down to the individual sub-objectives.
Examples of sub-goals of a company:
| Economic goals | Ecological goals | Social goals |
| Sales increaseCost reductionDisplacement of the competitionAcquisition of new marketsIncrease customer loyalty | Reduction of production emissionsConservation of natural resourcesNoise reduction | Ergonomic workplace designEqual opportunitiesInvolving employees in operational issues |
B) Target definition or target formulation
In order to achieve a goal, it should be formulated as precisely as possible. Here are two options for defining and formulating goals. Both alternatives are quite similar.
| 1. General definition of goal | 2. Goal definition common in project management. |
| goal content – specified, precise | S – specified |
| goal extent – measurable/ how much of it? | M – measurable |
| A – actively reachable (accepted, attractive) | |
| R – realistic | |
| Goal time? | T – time / scheduled |
As can be seen here, Alternative #1 includes three components to define a goal:
- Goal content
- Goal dimension
- Goal time reference
Alternative #2 includes five components (S, M, A, R, and T).
- Goal content is equal to S (specified)
- Goal dimension is equal to M (measurable)
- Goal time reference is equal to T (time/terminated).
Only the components A and R can only be found in the SMART alternative of the goal definition. The SMART alternative is mainly used in project management, because here several and different project members are involved and for them it is important to make the goals acceptable/attractive (the A from SMART) and realistic (the R from SMART).
However, operationalizing components A and R from SMART is difficult. After all, what is attractive or realistic – both are subject to a great deal of subjective judgment. The other three components are easier to operationalize and thus more objective to review. For example:
Goal Content / S (Specified): An education in strategy
Goal grade / M (measurable): With a very good grade
Goal time reference / T (time / scheduled): Within six months
Since these three components of goal definition/formulation appear to be important, here again is a more detailed explanation.
- Goal content: What is to be achieved? (Be specific: define the goal in concrete terms). Target contents can be:
- Formal targets: success of the company expressed in various ratios (e.g. return on equity)
- Factual targets: area- and product-related targets subordinate to the formal targets (e.g. cost reduction by 5%). Formal and factual targets together form the economic targets!
- Social goals (a good working atmosphere, voluntary social benefits)
- Ecological goals (environmental protection, sensible and careful use of resources)
- Target extent: How much of this is to be achieved? (e.g. increase sales by 1000 units)
- Target time reference: At what point in time or within what period of time should the target be achieved? (e.g. by DD.MM.YYYY or within the next 6 months)
C) Target relationships
The previously formulated goals can be related to each other in these three goal relationships
- Complementary: goals support each other (employee training and the increase in productivity).
- Competing goals/ conflicting goals: Occurs very often between the economic and ecological goals. For example: Greater production volume causes greater environmental impact.
- Indifferent: Without context
In the real world, only the first two goal relationships are actually found: The goals support each other or compete with each other (e.g. for the given resource).
The indifferent goal relationship does not actually exist in the real world. Meanwhile, some institutions also give examples of indifferent goal relationships, but these goals can only be indifferent at the departmental level, if at all. Viewed from the overall perspective of an organization, these goals can only be complementary or competitive.
One example:
An improvement in customer service (Goal A) and a training of the employees from the logistics area of the company (Goal B). At first glance, these two goals are indifferent, but from the overall perspective of a company, these two goals (goal A and B) have multiple synergy effects – i.e. a complementary goal relationship.
An indifferent target relationship, as mentioned earlier, does not exist in the real world. In the real world, events are interdependent (complementary or competitive). In the casino world, in gambling, the events are independent of each other (indifferent). For example, if you flip a coin, it may fall on your head after the seventh flip, just like the six times before. A coin will not think to itself, now I have fallen on my head six times, the seventh time I should now fall on the number. The coin has a 50/50 chance of falling either on its head or on the number on each flip.
Strategic analysis
In order to develop a strategy, information must first be obtained – various strategic analyses must be performed.
The strategic analysis provides us with information on the following aspects (depending on what is required):
The industry environment
Effective environmental analysis provides a distinction between the important and the not so important environmental factors.
For the company to make a profit, it must create value for customers. Therefore, it must understand its customers.
Second, in creating value, the company acquires inputs from suppliers. Therefore, it must understand its suppliers and cultivate relationships with them. Since strategy development is important not only for companies but also for individuals (people who want to succeed in their careers, self-employed, sole proprietors), the social network (family, friends, circle of acquaintances) should be taken into account in this case.
Third, the ability to achieve profitability depends on the intensity of competition between companies. Therefore, the company must understand the competition.
So the important environmental factors/industry environment are:
- Customers,
- Suppliers or the network and
- Competitors
From this, the strategist gains the essential information needed to develop his own successful strategy.
PEST or PESTLE as environmental analysis
Then the macro environment must be considered in the analysis. These can be the following macro factors:
| Political factors of influence – information on the state of state organization ● Economic order of a country (totalitarian states, democratic states). ● Current and targeted foreign policy (self-restraint agreements on exports, import surveillance measures). ● Stability of the political system (unrest, civil war). | Economic factors of influence – analysis of economic development ● Economic growth ● Population size ● Interest rate level ● Inflation rate ● Investments ● Exchange rates ● Unemployment ● Import and export business |
| Socio-cultural factors of influence -description of the social environment Population structure (age, gender, social class) ● Education ● Cultural characteristics (language, norms, values, attitudes, religion, understanding of roles) | Technological influencing factors – analysis of technological development ● Information and communication technology ● Development of government and private R&D expenditures. |
| Ecological-geographical influencing factors – market-specific key data on condition and infrastructure ● Location (climate, topography, size) Infrastructure (connection to shipping) ● Availability of natural resources (raw materials, mineral resources) ● Emissions | Legal factors of influence – market-specific legal organization ● Legal system and state constitution (common law or code law). ● Legal awareness (contracting as an obligation or as a bargaining chip). ● Fields of law (competition law, environmental law) |
While the industry environment is essential for any strategist, macro factors vary in importance. For example, luxury manufacturers experience sales declines during a recessionary phase, while everyday goods tend to be less affected.
It is therefore necessary to examine in detail the extent to which these macro-environment factors affect the industry environment (own customers, suppliers/own network and competition).
Porter’s Five Forces of Competition Model
In order to analyze a sector/industry in greater depth, the competitive analysis tool developed by Michael E. Porter – Porter’s Five Forces – is particularly suitable.
Michael Porter’s five competitive forces are the most commonly used tool for analyzing competition within industries.
It looks at the profitability of an industry (indicated by its return on capital relative to its cost of capital), which is determined by five forces of competitive pressure.
These five competitive forces include three forces of “horizontal” competition:
- competition from substitutes/ substitute products
- competition from new market participants and
- competition from established competitors
and two forces of “vertical” competition:
- the power of suppliers and
- the power of the buyers
Source: Michale E. Porter
The intensity of competition results from the manifestations of the other four forces and, according to Porter, is the central driving force of the industry.
SWOT analysis
Why is SWOT analysis problematic for practical work?
Beforehand, the explanation of the SWOT analysis will follow shortly. First, the internal influencing factors are recorded.
Strengths and weaknesses: Relate to the company’s internal environment, especially its resources and capabilities.
Then the external influencing factors are recorded.
Opportunities and Threats: External events that can develop as opportunities or risks.
Finally, all influencing factors are compared or linked with each other; this serves to derive an optimal strategy.
In practice, these distinctions between internal and external factors are problematic. Is global climate change a threat or an opportunity for the world’s automakers? Through higher taxes on fuel and restrictions on car use, it is a threat. But by encouraging consumers to switch to fuel-efficient powertrains and electric cars, automakers are providing an opportunity for new sales.
As you can see, the division of external factors into opportunities and threats and that of internal factors into strengths and weaknesses in the SWOT analysis is done arbitrarily.
It is important to carefully identify the external and internal factors that affect the business and then analyze how they may impact the strategist.
Strategy implementation
The strategic positioning or the goal is the desired location – that is where it is important to arrive. With the development of the strategy, the route is defined – which route should be taken to reach the goals.
Organizations that are in a stable environment, such as state-owned enterprises or nonprofit organizations, can develop a detailed strategy (precise plans) for achieving their goals.
However, in the private sector, especially in today’s world of constant changes (technological, socio-demographic, etc.), a strategy cannot be elaborated as a concrete plan.
Rather, it is important to define certain guidelines and use them to consistently pursue one’s own direction or goal. Overall, this approach is more appropriate the more unstable and unpredictable one’s business environment is. Robert M. Grant advocates the development of concise strategic principles that guide and empower employees to combine consistent direction (focus on goals) with adaptability and responsiveness. For example, Southwest Airlines summarizes its strategy in a simple statement, “Meet customers’ short-haul travel needs at fares competitive with the cost of automobile travel.”
In the article on strategy, the elements of strategy have already been explained – they can be used here for strategy development.
This article presented a holistic concept for strategic management.
In business, a separate strategy can be developed for each operational function, such as:
- A procurement strategy
- a production strategy
- an investment strategy
- a distribution strategy
- etc..
Strategy implementation takes place through tactics
As already explained, the essence of the strategy lies in the tactics or in the individual measures – also called strategic activities by me. Now you have learned the strategy definition and, in this article, also the strategic planning or the strategy development.
Depending on the area for which you want to develop your own strategy, you need different tactics.
Among these posts you will find:
- Tactics for the strategies “social interaction” or complete in the e-book 500 TACTICS (suitable for everyone)
- Tactics for marketing strategy (suitable for marketing enthusiasts)
- Tactics for innovation strategy (suitable for founders)