Are Business Strategies Important - Literature review Example

Are Business Strategies Important? Strategies have been alleged to be not worth the paper on which they were written. Is the ment true? In thefirst place, what is business strategy? A business strategy is a description of how business can succeed in a market given the competition (MacMillian and Tampoe 2001, p. 170). A business strategy document covers statements on the following (MacMillan and Tampoe 2001, p. 170): 1) the scope of the business to which the strategy applies; 2) current and anticipated needs of customers and potential customers of the business; 3) the specific or special/unique capabilities that give the business an edge over its competitors; and 4) the broad directions of efforts that can ensure survival or leadership of the business in the industry. According to MacMillan and Tampoe, each business must have a business strategy and, thus, multiple of business enterprises must have a number of strategies (2001, p. 171). Yet, at the same time, the situation implies that there is a need to appropriately define the scope of each business (MacMillan and Tampoe, 2001, p. 171). According to MacMillan and Tampoe (2001, p. 172-173), in addition to the four content pointed out earlier, a business strategy document should also contain the following: 1) a statement of intentions; 2) the principal findings of a strategic assessment covering analyses of the business environment and capabilities of the enterprise; 3) the strategic choices that have been made and the reasons for each strategic choice decision; 4) articulation of goals and objectives; and 5) identification of key initiatives that the enterprise would take. Perhaps, a good indication that the use of strategy is not on the way out is a key document from the United Kingdom’s Her Majesty’s Court Service or HMCS. A 2006 document of Her Majesty’s Court Service or HMCS outlined a “business strategy”. The HMCS (2006) business strategy called for observing “strategic principles” that consist in putting the needs of the citizens first, increasing the access to justice among the population, ensuring respect for the courts, transforming business delivery, supporting the independence of the judiciary, and becoming an employer of choice. The HMCS “business strategy” written in 2006 described what the business organization of the HMCS will be like and articulated a business model, defined priorities, and defined a strategy that covered effective case management, modernisation, simplification of procedures, and ensuring compliance. From the 2006 HMCS document alone, it is clear that the use of business strategy is not on the way out. Organisations such as businesses and government units use business strategy to articulate both to their personnel as well as clients how they intend to conduct their business or how each personnel should behave as they conduct their business. Big business corporations employ strategy. For instance, this fact is indicated in a 2008 document of the Coca-Cola Company. The importance of a business strategy document is highlighted by a statement on the 2008 document of the Coca-Cola Company. The Coca-Cola Company (2008, p. 2) document says, “Simple ideas backed by constructive action can change the world. As we set out to create a more sustainable world, we begin by imagining what it might look like. Then, in collaboration with our associates and partners around the world, we embark on joint efforts to make that vision a reality. Because nothing important was ever conceived without imagination or accomplished without effort.” Of course, while strategy involves imagination, it is not equal to imagination. It is, at the same time, imagination and a lot more. It involves an assessment of the situation and, as mentioned earlier, the identification of basic choices that must be made and the decisions taken on those choices to steer the enterprise given various types of anticipated scenarios in the future. The Cocal-Cola business strategy or strategy (the word “business” is written off because Coca-Cola seems to have adopted green corporate citizenship as one of the features of her business strategy), for instance, covers business behaviour in the workplace, marketplace, environment, and community. By implication, Coca-Cola has realized that public perception on the company can influence sales. Twitter and Facebook public opinion, for example, can affect sales in the long term. Thus, in the 2008 strategy Coca-Cola strategy document with the title, “Act, inspire, make a difference: 2007-2008 Sustainability Review”, the Coca-Cola Company articulated that its strategy in the workplace involves fostering an open and inclusive environment based on recognized workplace human rights. Its marketplace strategy covers providing product and services that meet the beverage needs of consumers (2008, p. 6). The Coca Cola Company’s business strategy given environmental issues is to conduct its business in ways that protect and preserve the environment. Finally, its business strategy for the community is to invest time, expertise, and resources to provide economic opportunities. In sum, the business strategy of the Coca-Cola Company is to project itself as a good corporate citizen as well as implement that good corporate citizenship and its operations. Times have changed. Business sales can be negatively and tremendously affected by corporate citizenship reputation rather than by actual taste of Coca-Cola beverages in the marketplace. Hartley (2006, p. 31-52) analyzed the cola wars from the 1950s to the early 2000s and narrated that the cola wars during the last 50 years have revolved on taste, branding like “the taste of the new generation”, advertising, and foothold in the international arena. Perhaps, one interpretation that we can make out of Hartley’s analysis is that while strategy can make one a market leader, the choice of a wrong strategy even if millions were spent for its design and articulation can also make one become the market laggard rather than the market leader. If a firm fails to produce a good business strategy then the firm can lose millions if not billions of money. Losing to competition despite spending so much for business strategy can lead one to conclude that indeed business strategy is not even worth the paper on which the business strategy was written. The business strategy is not even worth the paper on which the strategy was written because the strategy brought losses rather then profits to the company. The value of an incorrect strategy is negative for company value rather than positive. Firms know this and they usually respond not by doing away with strategy but in developing a better one. Like in combat, generals can lose via a bad strategy but losing in the combat because of bad strategy does not justify the position that the army must not have a strategy. On the contrary, a bad strategy highlights the need for businesses and the army at war to have a better strategy. Han (2008, p. 72) made it clear that McDonald’s, a leading burger and successful fast food chain in the world, has continued to use business strategy for its business operations. Han (2008, p. 72) even attributed to good business strategy the successful rise of MacDonald’s hamburger fast food to 30,000 franchising stores in 119 countries serving more than 47 million people daily. Han (2008, p. 72) noted that one component of the MacDonald’s business strategy is to base its business strategy on the business structure. In turn, Han said (2008, p. 72) pointed out that business structure can be influenced by geography or country or regional conditions. For instance, MacDonald’s divide its operations worldwide into five geography: the United States, Europe, Asia-Pacific/Middle East/Africa, Latin America, and Canada (Han 2008, p. 72). About 65% of MacDonald’s stores and 75% of its revenues are derived from the United States (Han 2008, p. 73). Thus, the fundamental MacDonald strategy is to maintain and protect its US market as it expands into new markets (Han 2008, p. 73). Not all consumers can like MacDonald’s product and a key MacDonald strategy is to focus on “consumer segments that need fast service, affordable price and good standard hygiene” (Han 2008, p. 73). Culture plays a role in the development of MacDonald strategy (Han 2008, p. 73). In China, for instance, MacDonald’s was unable to compete successfully with its rival Kentucky Fried Chicken who has been concentrating in fried chickens (Han 2008, p. 73). Chinese prefer chickens rather than burgers and MacDonald’s adapted to this condition by refocusing its product lines in the Chinese market to be more on the side of chicken meals in their menus for Chinese customers (Han 2008, p. 73). In France, MacDonalds adapted to the French setting by remodelling its restaurants to be along hardwood, wood-beam ceilings, comfortable armchairs, and product lines involving espresso, brioche, and more upscale sandwiches (Han 2008, p. 73). More importantly, however, in all countries, MacDonald’s business strategy is to focus on children because children constitute the largest consumers. Part of the MacDonald’s strategy for the children involve associating “happiness” in MacDonald’s products like “happy meals” and “happy land” (Han 2008, p. 74). MacDonald’s business strategy holds that by focusing on children, many stable businesses can be developed because children’s meals will have to be accompanied by parents’ meals or meals for the whole family (Han 2008, p. 74). On the other hand, Roberts-Lombard (2009, p. 070) pointed out that there are several strategies that a fast food chain can take. The exposition, of course, was not meant to describe in full the MacDonald’s business strategy but rather to articulate the strategy just enough to stress that business strategy continues to be employed by large business firms like Coca-Cola and MacDonald’s hamburger chain. Small firms also benefit from business strategy. For instance, Bell et al. (2004, p. 23) pointed out that even small firms are internationalizing operations. This is definitely a business strategy. Organizations can be small but firm size is not an obstacle to having a longer reach and a wider scope of operation. A firm can even choose to be small even as it undertakes long-reaching international operations. One important point raised by the Bell et al. material (2004, p. 23) is that there are linkages among business ownership, management structure, product, and production process that can determine strategy. This implies that business strategy is something that we cannot do without because a firm’s specific situation compels the firm to adopt a specific strategy or requires the firm to adopt a strategy set that can enable the firm to increase its chances for survival or likelihood of leading in an industry. Yet, at the same time, strategy errors can be costly and they provide the source of strategy documents that are less than the value of the paper on which the strategy documents were written. Cater and Schwab (2008, p. 31) also confirmed that strategies are useful for small family firms and can be instrumental in their business turnaround. The authors reported that they found evidence that small family firms employ “the standard strategies of top-management changes, infusion of external management expertise, and retrenchment” but these are moderated by eight characteristics associated with small firms that include “strong ties to the family firm, internal orientation, altruistic motives, and long-term goal orientation” (Cater and Schwab 2008, p. 31). We need not elaborate on these any further to conclude that even small family firms employ business strategy and that the use of business strategy is not limited to big firms. Business strategies do no not always work and several factors that influence the implementation of a business strategy (Li et al. 2008, p. 2). Some of the factors that influence the success of a business strategy include inadequate formulation, insufficient implementation, communication, commitment, consensus on the strategy, and the like. In short, there are strategies that are good and a number of others that are not. The strategies that are not good are those that are not worth the paper they were written on but the strategies that are good bring survival, wealth, and industry leadership for the firm. Morris (2006, p. 1) recommended that effective leadership is one of the “most powerful and competitive advantage an organization can have” and proposed that systematically building leadership capability should be part of any business strategy. Strategy can also be wrong and Rinefort et al. (1998, p. 335) focused on the hazards of inappropriate downsizing that can be a product of a wrong business strategy. Finally, Camdesus-Masanell (2009, p. 1) that a current trend among business is adopt business models rather than strategy and then tactics. Yet, at the same time, adoption of a business model rather than of a business model can be described as a strategy by itself. It can imply less use of specific data and can emphasize a lot of flexibility. However, another option is to use both. In conclusion, we can say that only faulty business strategies are not worth the paper they were written on but correct business strategies are worth the millions or billions they earn for their firms. References Bell, J., Crick, D., and Young, S., 2004. Small firm internationalization and business strategy. International Small Business Journal, 22 (1), 23-56. Casadesus-Masanell, R. and Ricart, J., 2009. From strategy to business models and to tactics. Working Paper 813. Madrid: IESE Business School, University of Navarra. Cater, J. and Schwab, A., 2008. Turnaround strategies in established small family firms. Family Business Review, 21 (1), 31-50. Coca-Cola Company, 2008. Act, inspire, make a difference: 2007-2008 Sustainability Review. The Coca-Cola Company. Han, J., 2008. The business strategy of McDonald’s. International Journal of Business and Management, 3 (11), 72-74. Hartley, R., 2006. Marketing mistakes and successes. 10th Ed. John Wiley & Sons. HMCS, 2006. HMCS business strategy. London: Her Majesty’s Courts Service. Li, Y., 2008. Making strategy work: A literature review on the factors influencing strategy implementation. Universita della Svizzera Italiana: Institute for Corporate Communication. Faculty of Communication Sciences. MacMillan, H. and Tampoe, M., 2001. Strategic management: Process, content, and implementation. Oxford University Press. Morris, B., 2006. Systematically building business capacity. Journal of Business Strategy. Available from: http://www.orgskills.com/articles/BusinessStrategy.pdf [accessed 20 February 2011]. Rinefort, F., Van Fleet, D., and Van Fleet, E., 1998. Downsizing: A strategy that may be hazardous to your organization’s health. International Journal of Management, 15 (3), 335-339. Roberts-Lombard, M., 2009. Customer retention strategies implemented by fast-food outlets in the Gauteng, Western Cape and Kwazulu-natal provinces of South Africa---A focus on something fishy, nando’s and steers. African Journal of Marketing Management, 1 (2), 070-080. Read More