What is strategy?
“ Strategy is a set of decisions about long-term goals and the means, ways, and paths to achieving those goals .” Distinguish between Strategy and Tactics. This is a concept of military origin. In the military, strategy is different from tactics. Tactics refers to waging a battle, while strategy refers to how to link battles together. That is, it is necessary to coordinate the battles to reach the ultimate military goal.
So how a strategy will help businesses build a position in the market? A strategic business must have four elements: target strategy , scope strategic , competitive advantage and operational strategies and core competencies. These four elements require a consistency and fit together.
What are strategic goals?
A strategy should begin with defining the expected outcomes for which the business strategy is designed to deliver them. Strategic goals will serve as a guide for a business’s activities for a number of years.
It is necessary to distinguish between strategic goals and the mission and vision of the enterprise. In fact, many businesses tend to confuse goals with the mission of the business. Mission indicates the purpose or reason for existence of the business, so it is often highly generalized. In contrast, goals should be specific, quantifiable, and have a clear deadline.
The choice of strategic goals has a great influence on the business. A business that chooses high profit as a strategic goal will focus on serving high-margin customer groups or market segments with products with high added value or superior cost performance. dominant. Conversely, choosing a growth target can lead a business to diversify its product lines to attract customers in many different market segments.
To implement strategic goals, businesses can usually use the Balanced Scorecard (BSC) Method and the KPI system.
Common strategic goals
Target strategies typically two groups: financial objectives (revenue growth, profitability) and non-financial objectives.
Although the majority of CEOs of businesses in the world (30%) still prioritize growth. However, in the long term, the most important goal that the business strategy aims at is high and sustainable profits. Target strategy is usually measured by rate of return on investment (ROI), but can also be measured by the rate of return on equity (ROE) or rate of return on assets (ROA). Enterprises can also include other goals (non-financial such as product/service quality, customer value, capacity development, human resources, etc.)
Which target to choose depends on the industry and development stage of each business. However, businesses must be very careful in choosing growth targets, stock value or annual accounting profits as goals because it can lead the business in the direction of unsustainable development.
What is the scope of competition?
An effective business strategy does not focus on satisfying every need in all market segments. Because if you do so, you will have to disperse resources and efforts. Therefore, businesses need to set limits on customers, products, geographies or value chains in the industry in order to focus and best satisfy customer needs – that is the scope of a good strategy. competitive scope. The scope of competition does not necessarily describe exactly what the business does, but it is important to define and convey to employees what the business will not do.
For example, a well-defined bank does not provide credit to customers dealing in commodities with strong fluctuations in prices such as iron and steel, fertilizers. This is necessary so that middle managers don’t spend too much time on projects that will later be rejected because they don’t fit the strategy .
Common strategic scope?
Businesses can choose to focus on meeting one or a few needs of many customers such as:
– Focus on many needs of a small number of customers. For example, the case of An Phuoc provides many different products (shirts, casual pants, ties, suitcases, shoes…) to business and office customers with high income.
– Businesses can also choose to focus on many needs of many customers in a narrow market area as in the case of opening a convenience store that sells essential, high-quality products to a residential community. have a good and high income in an area.
The selection of the strategic scope must be based on the principle that the market has a real need and the business really understands and can meet the needs. Businesses also need to avoid confrontation with strong competitors or are responding well to customer needs.
Customer Value and Competitive Advantage
Instead of simply defining competitive advantage as low-cost or differentiated, a business must identify what its target customers really value and develop a customer value schema that represents The combination of factors that target customers are willing to spend money to buy products and services of the business such as price, quality, design, speed, safety, reliability ….
The uniqueness or difference of the product or service is the way in which the elements are combined to best meet the target customers. Thus, competitive advantage is a combination of values, but in which there must be one or two outstanding values to help customers recognize your products among competitors’ products.
Remember, defining and building customer value and competitive advantage is at the heart of the strategy.
Strategic Operation System
After determining the competitive advantage suitable for the target customers, the strategy should answer the question: how can the business achieve competitive advantage? In other words, businesses must determine how to deliver differentiated value to customers.
To deliver the desired customer value, management must design a system of business activities geared towards creating superior customer value. One of the most effective tools for designing operational systems is the Value Chain developed by M. Porter. Depending on the characteristics of each industry, the value chain of an enterprise will be different, but it will still include the main group of activities (such as supply, operation, marketing, sales…) and the group of supporting activities (such as supply, operation, marketing, sales, etc.) such as human resource management, research and development, management infrastructure, IT, etc.).
An important point in the design of this operating system is to ensure the compatibility between activities and the same direction to create added value In the operating system, the enterprise must determine what is the core competence. directly contribute to the creation of an identified sustainable competitive advantage.
Core competency is the ability to carry out activities with superiority to competitors in quality or performance, it is usually the ability to link and coordinate a group of activities or key functions of an organization. enterprise and rarely within a specific function.
This capacity can allow businesses to compete effectively and diversify products to. For example, Honda’s core competency is the ability to design and manufacture engines with outstanding durability and fuel economy, a core competency of a construction company could be construction management ( thereby ensuring progress, quality and cost). The elements of the strategy clearly do not exist independently, separately, but on the contrary, they must ensure alignment, consistency and compatibility with each other.
Build a strategy – do it yourself or hire a consultant
If the business can have enough market information and have good enough people, building a strategy yourself is a good choice. However, because this only happens once every 3-5 years, and if the business needs to build on a thorough analysis, or the business does not have enough market information, hiring a strategic consultant is an option. not bad. The actual cost of hiring a consultant is insignificant compared to the benefits that a good strategy brings.
Strategy implementation – BSC-KPI . model
What is BSC?
“BSC or Balanced Score Card – also known as the scorecard balanced by the system planning and strategic management, many enterprises use to guide business activities according to the vision and strategy of the organization , improve the efficiency of internal and external communication, monitor the performance of the business against the set goals.”
How do businesses use BSC?
The Balanced Scorecard gives managers and senior officials in organizations a more balanced view of the business or organization’s operations as a whole. The Balanced Scorecard is a strategic planning and management system that organizations use to:
- Communicate what they are trying to accomplish
- Organizing everyone’s daily work is planned by strategy
- Prioritize projects, products and services
- Measure and monitor progress towards strategic goals
The balanced scorecard helps connect elements of the strategic picture, including:
- Mission (your purpose), vision (what you want)
- Core values (what you believe in)
- Scope of competition, competitive advantage and strategic resources
- Strategic goals (continuous improvement activities),
- Key Performance Indicators – KPI
- Breakthrough initiatives (projects that help you achieve your goals).
Aspects of BSC
To develop goals, measure KPIs, set goals and related initiatives (actions), the Balanced Scorecard (BSC) system proposes to evaluate the company according to the following three aspects:
- Finance : This aspect looks at the financial performance of the company and the use of financial resources.
- Customers : this aspect evaluates the image of the business in the eyes of customers (that the business wishes to build).
- Internal Processes : this aspect looks at the performance of the business through the lenses of the quality and effectiveness of the company’s products or services or other key business processes
- Growth learning : this aspect looks at the organization’s performance through human resources, infrastructure, technology, culture and other core competencies related to performance breakthrough.
The strategic goals of the business are presented through a strategy map.
From the aspects of the BSC, businesses concretize into a set of KPIs to measure business performance.
Strategy implementation tool – digiiTeamW software – KPI, OKR
To implement the strategy and BSC-KPI, businesses need an effective support tool.
digiiTeamW – KPI, OKR software is a software that helps businesses deploy a KPI or OKR performance and goal management system. digiiTeamW supports businesses to set up, monitor, evaluate and report KPIs according to strategic maps or OKRs. The reporting system and dashboard help executives monitor the implementation of the strategy.