How to build a good business strategy
Defining the right corporate strategy is crucial for any self-respecting company. But how to actually do it?
Let's look together at some useful tips to minimise the margin of error and build a winning roadmap.
The objective? To have a strategy that makes the most of business activities and process management.
Definition
Creating a corporate strategy involves defining long-term objectives and developing the means to achieve them, taking into account the resources available to the company.
The resources allocated can be: tangible, intangible, human and financial.
The theoretical foundations from which strategic business theory developed date back to military strategic thinking. Sun Tzu's Art of War, a centuries-old treatise on military strategy, clearly proves this. In fact, the advice in the 13 chapters is not only applicable to the military sphere, but also to many other aspects, including economics and business management. Thus today, there are many companies that draw inspiration from the strategies elaborated by General Sun Tzu to define corporate strategy.
If you know the enemy and yourself, your victory is certain. If you know yourself but not the enemy, your chances of winning and losing are equal. If you know neither the enemy nor yourself, you will succumb in every battle
© Sun Tzu, “L’arte della guerra”
Steps for an effective business strategy
Jeron De Flander, one of the world's most influential thinkers on business strategy, has developed some principles to follow for an effective business strategy.
Try to differentiate yourself
Unlike in sports, where there can only be one winner, the world of business is not a zero-sum game. It is therefore not necessary to aim to be the best: in a given industry, several companies can coexist without stepping on each other's toes. It is therefore preferable to implement a strategy to differentiate your business.
Analysing the sector carefully
The profitability you seek depends on your organisation and its positioning in the relevant sector. Knowing the environment in which you operate is therefore crucial for defining your strategy and enhancing the value of your company.
If there is little competitive pressure, your company is in a strong position and has good bargaining power with customers and suppliers.
Aim to generate value
Economic performance must be a consequence of value creation.
Growth is not a strategy, but a consequence.
It is therefore very important to clearly specify how you intend to generate value, and for whose benefit. Prospects are obtained through segmentation based on various criteria such as age, interests, geographical distribution, etc.
Make choices...
The question to ask yourself is: 'how do I want to respond to the need of a given target clientele'? The objective is to propose a value proposition that provides a convincing answer and links the demand side with the supply side.
☝ Be wary of your intuition! Although a great quality for a manager, intuition alone can lead to making wrong decisions. When making choices, it is important to consider objective and measurable criteria.
... and renunciation
Learning to say no is equally important. Carrying out too many projects, for example, could be wasteful and counterproductive.
The essence of strategy is to choose what not to do
© Michael Porter
Saying no is crucial in many cases: in the case of promises you are not sure you will keep, of detrimental compromises, of deviation from the initial plan, etc.
Be responsive to change
Building a good strategic roadmap is an important basis, but not sufficient. Competitors evolve, as does technology, and customer needs and behaviour can change rapidly. Strategy must therefore be able to adapt to changing contexts. Management must try to anticipate future trends and scenarios in order not to be unprepared.
☝During the March and April 2020 lockdown, for example, small traders who were already practising delivery were able to adapt more easily to a radically changing scenario.
Look at the data with an analytical approach
Finally, data analysis must be aimed at realising hypotheses to fuel strategic thinking. The more accurate the reflection, the more likely it is to improve the future path of the company.
As the digital transformation proceeds, more and more companies have realised how important software can be to harness the full potential of data. Thus, the information at hand allows the company's strategy to be increasingly refined.
Ferrero: an excellent corporate strategy
When talking about successful corporate strategy in Italy, the Ferrero group is one of the first names to come to mind. Indeed, it is one of the Italian companies whose growth over the years seems unstoppable. For this reason, its business model is appreciated and analysed all over the world.
Last year, the chairman set an extremely ambitious goal: to exceed the €20 billion turnover threshold by 2030.
Here, by points, are the main elements of Ferrero's strategy:
- Penetrate markets outside the EU space. Currently, revenues from Europe account for about 2/3 of total revenues. Among the most promising markets are China and the United States, as well as India, Mexico and Turkey;
- Pursuing a targeted acquisition policy. In 2019, for example, the Piedmont-based company took over the confectionery business of the Kellogg's brand in the United States, along with its production plants. Thus Ferrero has now become the third largest chocolate group in the world after Mars and Mondelez.
- Carrying out a ' green revolution' to improve its brand image: in the coming years, the confectionery giant is committed to sourcing exclusively from sustainable cultivation and to gradually abandoning the use of plastic.
- Associating each product line with a specific target. Whereas at one time Ferrero products were mainly aimed at children, today the company is able to reach a heterogeneous public. The products of the Ferrero line (Pocket Coffee, Ferrero Rocher, Raffaello, etc.) for example, aim at an adult target.
- a medium-high positioning. The Ferrero group has never made price leverage one of its strong points, preferring instead to focus on the use of raw materials of higher quality than the average competitor.
- a cutting-edge ' research and development' department. Nutella Biscuits, one of the latest products launched on the market, would have taken as much as 10 years of research!
- a skilful use of marketing. Whereas in the past, promotion was by means of advertisements in newspapers and television, today Ferrero is one of the Italian companies making the best use of digital tools. Each product line has its own Facebook and Instagram page, and the content is incisive and engaging.
Here is a successful post published by Pocket Coffee's Instagram page on the occasion of Valentine's Day, which generated a large number of interactions with the public:
Business strategy: a matter of organisation
In order to build a successful strategy, and to achieve all set goals in the long run, meticulous planning is essential. The ultimate goal is to obtain and maintain a competitive advantage that will last.
How about you? What do you think should be the characteristics to achieve success? And what do you think are the other Italian companies with an impeccable strategy?
Article translated from Italian