If you think of an organization as a car driving on an expressway, then strategy is the road map. It helps guide an organization along the road from the present to the future. Think for a moment of what would happen if you took a trip to an unfamiliar place without a map. You might find yourself turning in circles without realizing it. The same problem can occur with an organization that does not have a strategy; the organization can find that it has not made any progress in improving the success of the company. In another sense, if the company does not conduct thorough research before creating its strategy, the company is likely to create a faulty road map. When the map is incomplete or incorrect, organizations can make wrong turns and get lost.
SWOT Analysis and TOWS Matrix
SWOT is an acronym that used to describe particular strengths (S), weaknesses (W), opportunities (O), and threats (T) that are strategic factors for a company. Conducting a SWOT analysis results in identifying a corporation’s distinctive competencies and reveals opportunities that the firm is not taking advantage of due to resource constraints.
Distinctive competencies are the particular capabilities and resources of a firm and the superior way they are utilized by the company. Over the years, SWOT analysis has proven to be the single most enduring analytical technique used in strategic management. SWOT analysis generates a number of possible alternative strategies.
A TOWS Matrix seeks to match external opportunities and threats with internal strengths and weaknesses. A TOWS Matrix is very useful for a company to generate a series of alternative strategies that might otherwise not be considered with SWOT. The TOWS Matrix is a logical extension of the SWOT analysis, and helps keep strategic managers flexible in terms of possible options.
Competitive tactics are specific operating plans detailing how a strategy will be implemented to gain a market advantage over competitors. These tactics are a link between formulation and implementation of strategy. Some of the available tactics are timing (when) and market location (where). Timing tactics can be generally classified as first movers (pioneer) or late movers.
Offensive market location tactics include frontal assault, flanking maneuver, bypass attack, encirclement, and guerrilla warfare. Defensive market location tactics include raising structural barriers, increasing expected retaliation, and reduced inducement for an attack.
Corporate strategy is critical to a company’s survival and success. It is primarily about the choice of direction for the company as a whole and deals with three key issues:
- Directional Strategy: The overall orientation toward growth, stability, or retrenchment.
- Portfolio Strategy: The industries and markets in which the firm competes through its products and business units.
- Parenting Strategy: The manner in which management coordinates activities, transfers resources, and cultivates capabilities among product lines and business units.
Risk, Choice, and Policy
The attractiveness of a particular strategic alternative is partially a function of the amount of risk in implementing the strategy. Risk is essentially composed of two parts: the probability that the strategy will be effective, and how much resources or assets are needed for the strategy that won’t be available for other uses. Strategic choice is the evaluation of alternative strategies and selection of the best alternative.
After the best strategy is selected, policies are developed to provide guidance for decision making and actions throughout the organization. They are the guidelines for implementing a selected strategy. They tend have a long life and can even outlast the particular strategy that generated the policy.
Be smart and be encouraged,