Influences on the Mission of a Business

Transcription

1 Influences on the Mission of a Business The strategic position of a firm represents the manners by which it decides to reach its goals and objectives. While an organisation s mission statement reveals the reason(s) why it does business, it is directly influenced by its strategical choices. Important considerations such as the business environment need to be taken into account when analysing strategical choices of decision-makers. Also, as business vision shows the direction a business decides to follow for various reasons i.e. included or not its mission statement, -strategy is the route it uses to reach its goal(s). The type of vehicle depends on the organisational structure of the business and should be in accordance with its environment as well. We will discuss in the course the different ways a company s mission could be influenced by its strategic choices. Questions at the end will help you to better visualise these interactions. I. The Strategic Position of a Business In the process of defining a business strategy, analysts highlight the strategic position of its operations. That is, the nature of its ability to be competitive and to provide its customers with valuable goods and services. A vital element of a firm s strategy is the bond it establishes with its customers by continually attracting and satisfying their needs. These implications need to be at the heart of the elements influencing the strategical planning of operatons.

2 1. Strategic Positioning: major concerns Common forces influencing the strategic planning of a firm are set implicitly by the markets. A traditional approach would define strategy around a specific market orientation that has an existing customer base. It implies that markets distinguish among competing companies which one provides with the highest value for customers the best one becomes a reference for the industry on which it operates. This strategy is a product differentiation method to gain competitive advantage. While businesses are empowered by new communication and transportation means, customers are seen as being a form of asset that could be optimised to fit the demanding global consumption model prevalent in most regions of the world. In fact, most modern economies are based on financial and economic systems requiring continual growth rates to stay sustainable. In order to achieve these goals, businesses constituting the economy emulate interactive and continual exchanges with its customers. In turn, it creates a strong link known among strategists as customer bonding shared interests based on business ethics and trust. In order to create this bonding effect with people, businesses act by diversifying and encouraging investments toward the continual improvement of their existing products either by creating new products or by updating and enhancing the existing supply. This way, businesses are more attractive and keep building their customer base with low levels of customer retractions. Also, while the process is consuming in resources (e.g. workforce, time, money), it allows a firm to gain market shares by attracting competitors less loyal customers; they will see an opportunity to receive a higher return from their purchases in terms of perceived value. Strategic concerns are recognised and assessed depending on the data gathered by directors and shareholders. Consequently, they require a special attention during the phases during which directors and managers organise the company s way of doing business. In fact, major issues need to be treated early in the conceptual process as it may dramatically influence even the most favourable outcomes.

3 2. Strategic Positioning: environmental scanning Understanding the operating environment of a firm is critical to adopt meaningful strategies. In fact, the environmental scanning of a firm s operations is required as it permits decision-makers to better understand the general economic environment. Environmental scanning is the gathering and analysis of data concerning events, trends, and interactions in a firm s surrounding environment i.e. information that is determining for strategic planning. It takes into consideration three essential set of variables: Macroeconomic factors elements revealing the general well-being of a country or region. They include the factors that are not dependent upon the control of a firm such as growth rates, inflation rates, interest rates, currency exchange risks and so on. Entrepreneurs often use the PESTEL analysis tool to assess the degree of influence of the macroeconomic variables of its environment. The acronym PESTEL stands for Political, Economic, Social, Environmental and Legal. Microeconomic factors segment of economics focusing on the analysis of individuals and small businesses with low implicating effects on its environment. It primarily focuses on the behavioural aspects of their operating processes and their resource allocating preferences. Analysts often use Michael Porter s 5 force model to assess the micro environment of a particular business as depicted below:

4 Mesoenvironment factors a level defined between macroeconomics and microeconomics. Mesoenvironment subjects relate to the strategic impact of a firm on its immediate and specific operating environment. In other words, it is the broad framework of a firm, which comprises elements of its structural organisation e.g. operating standards, direction or culture. Most businesses use this approach to increase their strategic impact on markets. Recently, thanks to the technological development of communication means, Social Medias offer new opportunities to intensify customer bonding e.g. many firms and business owners already have their Facebook/Twitter accounts with people following their businesses online as well. It is easier for individuals to recognise their values in their favourite companies; it is a way for individuals to distinguish themselves by publicly sharing their preferences for this company s products or that firm s services. Also, there are 3 main categories of environmental scanning practiced by businesses: Ad-hoc scanning based on short-term periods of time (often during times of crisis).

5 Regular scanning analysis based on a regular basis (e.g. at the beginning of each monthly quarter). Continuous scanning permanent collection and analysis of data based on a wide variety of environmental aspects. II. Strategic Implications on Mission The development of an organisation s strategic position is often accomplished in parallel to its mission. In fact, both components are closely linked to each other and we might wonder which one should come first. A strategy without a mission would be like travelling down a road at night in the dark: it is perilous. Conversely, a mission deprived of a strategy would be like travelling toward a goal without a roadmap: it can be pointless. The following sections will help you get a better understanding on the influences of strategy on mission and vice versa. 1. The Delta Model: strategic influence on mission The Delta Model is a modern strategic configuration that places customers at the heart of management s preoccupations. It analyses all the possibilities at disposal of an organisation to strengthen customer bonding; the delta model also provides with tools to link mission and strategy through the harmonisation of processes. In fact, by defining priorities (i.e. customers), the Delta Model indirectly ensure the concordance between mission and strategic planning.

6 Dean Wilde and ArnoldoHax invented the delta model in order to respond to a rapidly changing way of doing business due notably to the rise of new technologies commutation means (such as the internet.) In fact, recent technology changes have dramatically influenced markets the Delta model provides with comprehensive tools to profit from the different business approaches created by the boom of technologies and new Social Medias. 2. Opportunities and threats: strategic influence on mission Most businesses frequently use the SWOT analysis tool in order to define the company s Strengths, Weaknesses, Opportunities and Threats. This permits directors to better plan strategies by clearly delimiting the firm s distinctive characteristics. Strengths and weaknesses are internal factors of the company. They show its competitive advantages and its weaknesses compared to other competitors. On the other hand, opportunities and threats outline the business external environment. Opportunities are instances that are relevant and favourable to a business s expansion - if it takes action, it can benefit stockholders. Depending on the characteristics of a business, some opportunities may be more interesting than others i.e. opportunities with the highest returns and lowest risks. Decision-makers need to identify the areas of the firm that have the most capacity to develop a competitive advantage and act accordingly with the resources available in the business i.e. financial and organisational constraints. Threats correspond to external influences or barriers to entry that could be a major obstacle for the business s development e.g. a mining company might not be able to reach its objectives because of new laws restricting its industry through limits and quotas.

7 3. Customer segmentation: strategic influence on mission Many businesses operate solely on specific market segments; that is, they do not target all their customers in the same manner. Instead of spreading their operations and resources, these firms target a smaller and a more relevant customer base for their business models. In return, it improves the efficiency and effectiveness of the efforts made by the business targeted marketing, product elaboration, and distribution channels. Successful planning will create a mirror effect on customers who would be reflecting the investments made by the firm. Mission is directly influenced by these considerations and participates in the synergy created between stockholders and the business itself. To function, mission and strategy need to be consistent and complementary. For instance, a business might specifically mention its targeted customer base in its mission statement; also, it can act strategically in parallel to reflect it in the way it does business. In conclusion, a business strategies and missions are intimately connected at the core of the organisation. For this reason, changes on one of these variables inevitably influence the other in important ways. Therefore, when planning strategy, directors need to keep in mind the business mission. And conversely, when defining corporate mission, decision-makers need to associate it with a concordant strategy. Failure to do so will create contradictory currents within the organisation that might be counter-productive and threatening for its profitability over the long run.

8 Multiple Choice Questions 1. What is the strategic position in business terms? a. The link a company creates to reach customers; b. The competitive nature of a business; c. The planning of a business; d. a.& c. 2. What is customer bonding? a. The intensive culture of the business interaction with customers; b. The establishment of rules for consumers; c. It is a strategy that limits the targeted audience; d. No definition fits the term. 3. What is the main aim of product differentiation strategies? a. To maintain the current customer base; b. To attract more customers; c. To gain a competitive advantage over other firms; d. a.& b. 4. How do businesses achieve customer bonding? a. By creating new products; b. By building networks enhancing existing products; c. By sharing information and values; d. All of the above.

9 5. What is environmental scanning? a. The planning of strategic goals; b.the gathering of data and the analysis of a firm s surrounding environment; c.the gathering of data and the analysis of a firm s competition; d. a.& c. 6. What does environmental scanning take into consideration? a. Macroeconomic influences; b. Microeconomic influences; c. Mesoenvironment influences; d. All the above. 7. According to Porter, what are the majors factors affecting a business microenvironment? a. Bargaining Power of Suppliers and Threats of Substitutes; b. Bargaining Power of Suppliers, Industry Rivalry, Threats of New Entrants and Threats of Substitutes; c. Industry Rivalry, Threats of New Entrants and Bargaining Power of Buyers; d. a. & c. 8. What is the definition of Mesoenvironment? a. The strategic impact of a firm on its specific operating environment; b. The strategic impact of microeconomic variables; c. The strategic impact of macroeconomic variables; d. b.& c. 9. What are the 3 main ways companies scan their environment? a. Ad-hoc, regular and continuous scanning; b. Ad-hoc, short-term and long term scanning;

10 c. Regular, short-term and medium term scanning; d. None. 10. What is the Delta Model? a. A strategy aimed at segmenting market strategies; b. An old concept in favour of product differentiating strategies; c. A recent strategic configuration placing customers at the centre; d. All correct. Answers 1: b ; 2: a ; 3: c ; 4: d ; 5: b ; 6: d ; 7: d ; 8: a ; 9: a ; 10: c.