Archive for the ‘Business Strategy’ Category
February 13th, 2012 | 
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Due to the global financial situation, some business owners may be thinking that they should diversify from their current income streams. This is opposed to selling out. When you diversify, you keep your current business running (perhaps in an altered state) and commence a new line of products or services. Is this a good idea?
Diversification can sound like a good idea but it does need to be thought through carefully. Really, diversifying into another business line should be treated like commencing a new undertaking from the start. However, you may have some existing infrastructure and personnel that will assist you. Nevertheless, I think it is a good idea to approach the idea as if you were commencing a new business with all the planning and thinking that this entails.
If your enterprise is not currently profitable, diversifying may not be the solution. Indeed, it could make the situation worse. Why isn’t your business currently profitable? Is this just a temporary thing or is this what you experience most of the time? If you are running an unprofitable or low profit business, before you launch into another enterprise, you had better find out why the current business is not making money so that you don’t take some of the problems into the new products or services that you are selling.
There is a view that public companies that conduct several business lines produce a poorer return on shareholders funds than companies that focus on one thing. I don’t have any data to back up this statement but I know of some respected business commentators that share that view. Why would this be? It is because the management of the company cannot give its full and proper attention to any one particular business line. Therefore it is mismanaged and under resourced.
The same problem can arise for a small business. The owner or manager is usually time poor and for any new offering to the market that is going to be developed, it must be given proper time and energy or everything may fail, including the existing operations.
So when is a good time to diversify? Consider these situations.
Seasonal sales. If your business has ups and downs in sales throughout the year it can be good to have an alternative source of income that can plug the holes during the down times.
Marginal benefits in expanding the existing operations. By analysing your market you may consider that your existing business has little practical ability to expand beyond its current level. This could be for various reasons. One reason might be that you consider that the extra effort and cost in increasing your market share will equate to, or be greater than, the extra benefits that you will get from that market share.
A great opportunity presents itself. Sometimes an exciting prospect presents itself. You may have just been lucky or you may have been searching for this opportunity. The availability of great opportunities will only be for a limited time. If you don’t seize the opportunity, then someone else will. If you have the time and resources, this can be a good reason to diversify.
The existing enterprise runs very successfully with little owner input. This is the ultimate goal for the owner of an enterprise. You get to the point where you do not need to work in the business, unless you choose to. This means you are running a well systematised operation and the thinking that you have put into your existing enterprise can be applied to a new one.
You have surplus capital. I once read that Warren Buffett (one of the world’s most respected investors) said that the most important decision that a company makes is what to do with its capital. Should it reinvest it or should it return it to its shareholders? Theoretically, a company should return its capital to its shareholders if it believes that it cannot obtain a return on the funds in excess of what the shareholders could obtain if they invested funds elsewhere. So, if you have surplus capital, should you invest it in another commercial undertaking or should you return it to the owners?
Diversifying can sound like a good idea, but make sure the conditions are right before you leap into it.
By: John Jeffreys
About the Author:
Wishing you easier business.
John Jeffreys
John Jeffreys wants you, the business owner or manager, to have an easier life. John Jeffreys helps you to achieve this by drawing on his 30 years business experience as a Chartered Accountant and partner in major accounting firms. For instant access to videos, audios and software products, visit http://www.businessease.com.au
Posted in Business Strategy | 
Tags: Business Strategy, Diversification, Financial Situation, Income Streams, Infrastructure, Making Money, Profit Business, Temporary Thing | 
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Over the years, I have met and worked with literally hundreds of business owners. At one time or another, many of them have written a business plan. But very few of them have a working business strategy. A business plan and a business strategy are two very different tools. A business plan normally is prepared for a financing partner, either a bank or an investor. The purpose of the plan is to let investors know about the business and its potential for success in order to encourage them to invest in the business.
A business strategy is quite different. Rather than a document for investors, this is a plan for the owner to follow. It begins with an evaluation of the business’ goals. Where does the business owner want the business to be in 5, 10 or 20 years, both in terms of fair market value and cash flow? What are the plans for exiting the business? Will it be sold to an outside party or to key employees, or will it be turned over to the owner’s children?
Next, we have to do a thorough evaluation of the current state of the business. This includes a valuation of the business and an evaluation of the business’ strengths and weaknesses. The more thorough the evaluation, the better the potential outcome, but even a cursory evaluation is helpful.
Most businesses have a tendency to identify strengths and weaknesses solely from input from top management. The approach needs to be broader than this to get a true assessment. A broader approach includes interviews with key personnel and surveys of all staff levels. A side benefit of the interviews and surveys is it provides significant insight into the opportunities of the business.
Also included in the evaluation should be benchmarking. Benchmarking identifies areas in which a business is above or below the industry averages. This analysis can immediately identify areas of opportunity.
Now we need to create a strategic plan to overcome the business’ weaknesses and to use its strengths to create the desired value and cash flow. The valuation is key to this process. Most businesses never have a valuation done until they are ready to sell or gift the business. This makes no sense. If we want to target a specific value in the future, wouldn’t we want to know the current value and the method of valuation that is used in our market? By doing a current valuation, we can develop a plan that will use the principals of value in the valuation to build the value of the business.
Once we have a conceptual strategic plan, we need to determine those tactics that are likely to achieve that plan. “Strategy” is most often defined as an elaborate and systematic plan of action intended to accomplish a specific goal or goals, while the “tactics” are the actionable steps that will carry out the strategy. Having a well thought-out strategy keeps the company focused and on target while implementing and tracking a list of actionable tactics ensures real results.
Tactics are the specific tools you will use to carry out your strategy. Your tactics will need to adjust to the conditions of the market. For example, your strategy may include multiple locations. Your initial tactic may be to acquire other businesses like yours in strategic locations. But you may find that there are not qualified or motivated sellers in your targeted locations. You may have to change tactics and build your own office in your desired location.
With tactics tentatively in place, it’s time to begin implementing your business strategy. This includes building your team, developing your reports, creating your systems and procedures and putting in place internal controls. When building your team, be sure to have clear agreements in place with each team member regarding their roles and responsibilities towards you and your business. Clear communication is essential to implementing a successful business strategy.
Be sure that the reporting is set up to give you the information you need to make sure everything is implemented and running smoothly. Good reporting relieves much of the stress of running a business because you know what is happening and why it is happening.
Good reporting is also part of good internal controls. You must have internal controls in place, not only to prevent fraud and theft, but also to ensure that the work is being done in the way you expect.
Creating workable and efficient systems and procedures allow you to run the business by managing systems rather than managing individuals. With proper systems in place, you can build your business as large as you want while maintaining efficiency and high levels of profitability.
By: Thomas Wheelwright
About the Author:
Tom Wheelwright is not only the founder and CEO of Provision, but he is the creative force behind Provision Wealth Strategists. In addition to his management responsibilities, Tom likes to coach clients on wealth, business, and tax strategies. Along with his frequent seminars on these strategies, Tom is an adjunct professor in the Masters of Tax program at Arizona State University. For more information please visit http://www.provisionwealth.com
Posted in Business Strategy |
Tags: Business Owner, Business Strengths, Current State, Staff Levels, Strategic Plan, Strengths And Weaknesses, Tendency, True Assessment |
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A Strategy is Different From a Plan
The word “strategy” is over-used and its meaning has become diluted. It is often used synonymously – and mistakenly – with the word “plan”. Let’s clear this up.
A plan is a Sargent-major. It tells you precisely what you should do. “Take three men, your rifles and grenades, and start climbing this hill from the southwest corner. Continue straight up the hill until you reach the top where you will plant this flag.” What happens if we’re outnumbered? What happens if we meet enemy machine guns en route? A plan can’t answer.
Strategy provides an overall objective but doesn’t tell you exactly how to accomplish it. Strategy is the wise counselor who stands by your side in the heat of battle and reminds you of your strengths. “We’ll win the war by Christmas using stealth and cunning”, goes the strategy. “By the way, plant this flag at the top of the hill by dawn.” What route should we use? “Doesn’t matter – but use stealth and cunning.” What happens if we’re outnumbered? “Use your stealth and cunning.” What about the machine guns? “Stealth and cunning.”
A plan dictates; strategy shapes. A plan is rigid; strategy is fluid. A plan is an order; strategy is a conversation.
In business, strategy provides the overall goal, the context in which the goal will be reached, and the unique approach that guarantees success for the firm. All plans then spring from the strategy.
Strategy is Unique and Wants to Win
Let me emphasize two things: first, strategy defines a unique approach that is unlike any other firm. Strategy is designed to achieve an objective in a way that nobody else can replicate.
Second, strategy is concerned with success and winning, whether on the battlefield or in the market. Success depends on uniqueness: winning requires an edge, some form of differentiation, a “secret sauce”.
Now that we know how “strategy” and “plan” are different, here’s a strict definition of strategy that we’ll use in the next article:
Strategy is a beacon that specifies a goal, a time frame for achieving that goal, the context in which the goal will be reached, and the company’s unique approach that guarantees its success.
Do you know what your firm’s strategy is?
Copyright
Posted in Business Strategy |
Tags: Battlefield, Dawn, Differentiation, Grenades, Heat Of Battle, Strict Definition, Top Of The Hill, Uniqueness |
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Businesses are the ones that keep you on the go whether it is a big business or a small one. All successful businesses start from being small, sometimes even sole proprietorship. These things happen because of hard work and a good business strategy. When you consider yourself as an entrepreneur, you should carefully take all the factors that may affect your business. It can be a positive reinforcement or negative. All these things can affect your dream of becoming successful but never let these things pull you down. Whatever your plans are, you should diligently plan your business wisely in order for you to succeed.
The people who work for you and your company are those should be given utmost attention. They are the ones who keep your business going and company industrious. Employees and staff deserve the right treatment, competitive salary and benefits. These are the things that keep them on the right track to do well on their jobs but do not tolerate them if they abuse your kindheartedness. One of the many important benefits your employees must have would be the sick leave. Companies usually deal out a particular number of days for their employees to have sick leave. Employees do sometimes experience being sick as well as the boss, it is just proper that they will be given the right to take some rest. However, there are those employees who do not let their sickness be a hindrance for their work. In that case, the company should give the employees a reward for not taking the leave.
Advertisements will keep the business going especially when you are posting it in a reputable website together with a god concept. Advertisements can be another type of business strategy and today, the “in” thing would be the internet. If you are still looking for the best step to do just to make your business on top of the list of the people, you will never go wrong with posting your ads in the different classified ad websites. They will not only make you known but they can open you to a lot of opportunities. You will let your business be popular not only in your own locality but worldwide. When you have the name and the people know it, clients will be the ones to find the way just to get to you and avail of your services.
Next would be the profit sharing. This is important and yet the most viable among all the business strategies. Whenever your company or business is doing great, always make it to a point that you give your employees and staff the bonus they deserve. Your employees are the ones who give you all the success. Without them, your business will not be productive as it is today. Some businesses use this strategy in order to improve the self-confidence of the employees in terms of work productivity as well as their loyalty to the company. Most companies do this in order for their employees and staff to know how important their roles are for the business.
Having a business strategy is very vital in your chosen venture. It will make your business go up or may sometimes bring it down. It is important that every time you make a decision for your company, you should think of your employees’ sake. You have to work as a team in order to achieve your goal and reach your dream. That is the secret for a successful business.
By: Amy Ou Yang
About the Author:
For more information on business please go to: [http://www.amyouyang.net]
Posted in Business Strategy |
Tags: Advertisements, Big Business, Business Partnership, Classified Ad, Good Business, Hindrance, Positive Reinforcement, Utmost Attention |
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Is your business a hobby? Did you look for something that you are passionate about and then go for it? Were you able to turn that hobby or passion into a real money-maker?
The truth is that about 90% of small businesses fail. There are multiple reasons for the disasters. An important and not so obvious truth about all these failures is that the failure starts in the planning process. The battle is won in the mind before the game even begins. So, how do you create a master plan that will give you a great chance of success? The beginning, of it all, is to understand strategy.
Business Strategy Rules to Live by
1- A business owner must gain proprietary intellectual property.
Selling a commodity is nearly impossible to make a profit on. And, small businesses can’t compete on price against large rivals with superior purchasing power. Since consumers are so price motivated, the small business must find a way to innovate. The innovations do not have to be large or “earth shattering”. Innovations can also be small. For example, you might discover faster ways to organize your materials than your competitors or see a way to do something cheaper and better. Holding onto these good ideas and protecting them will go a long way towards long-term profitability.
2- A business owner must understand short-term thinking.
If you study game theory or the prisoner’s dilemma, you learn that people always go for the short-term strategy. Some strategists point to long-term win-win scenarios, but these strategies rarely, if ever, play out as planned. Instead, people are always looking to get the best advantage possible. This results in short-term thinking. What a business owner must realize is that their employees, their suppliers, and their competitors will do what is best for the short-term. It’s sort of like Keynesian economics. Take care of the short-term and the long-run will work out. Of course, this type of economics also states that in the long-run we’re all dead.
We can always come up with reasons why long-term planning is best and even look to a few examples of it being applied correctly. However, the science of business proves short-term thinking works and that it is prevalent within companies and individual motives. In other words, put this into your planning process.
3- A business owner must understand deception.
There are many ways to interpret the word deception. It does not mean you have to lie, cheat, and steal. Instead, it might mean finding ways to hide your secrets from competitors. It might mean managing employees in ways that they do not know enough to compete with you. It could also mean that you use clever ways to gain proprietary intellectual advantage. One example of this would be to use spies. Large companies are adept at using spies. How many times have you seen a competitor hire an employee from another company for the sole purpose of learning what they know? This is common practice. Everybody is trying to do the same thing. The people doing it best win!
4- A business owner should only accept challenges they know they can win.
Many business owners are pretty cocky. They think they can compete with anybody and that they can do anything they want. This is not realistic. There are many battles to fight that will only result in you losing it. One of the most important things to learn is to only take on battles that you know you can win. How do you figure that out? Well, according to Sun Tzu, the master battle strategist, the most important thing is to know thyself and thy enemy. If you understand these two things, you will win in every battle. It sounds so simple and yet most business owners don’t really understand the competition or what their main strengths and weaknesses are. According to Sun Tzu, without this knowledge, you will lose very battle. If you gain some of this knowledge, you will win some battles and lose others.
5- A business owner must understand leadership.
A great leader will motivate the employees to do great things. For this to happen, there has to be a level of respect for the leader. The employees must be moral and follow strict rules. The enforcement of the rules should be done quickly. In addition, feats of bravery and strength should be rewarded quickly and openly. These are some of the basic tenets of great leaders.
According to Sun Tzu, the highest form of leadership is to first: Balk the enemy’s plans. And Second: Prevent the junction of the enemy’s forces; and third: Attack in the field and fourth: Attacking a besieged city. There is so much that can be said about each one of these leadership principles.
Planning the Strategy
It’s impossible to tell you exactly how to build your strategy. However, there are three most important points you must follow.
1- The most important thing is to get proprietary intellectual advantage.
2- The second most important thing is to understand your competitor and yourself.
3- The final point is to fight in battles you know that you can win.
If you follow these points, you will be on your way to a great business plan.
By: Kristy Snow
About the Author:
These three points will get you a long way in the planning process. However, there is much more to business strategy than this. For further information, please visit Business Strategy or you may also visit Types of Spies
Posted in Business Strategy |
Tags: Business Owner, Game Theory, Obvious Truth, Proprietary Intellectual Property, Rivals, Scenarios, Small Businesses, Term Strategy |
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Successful business owners know they must take into account their market and their competition in determining the right business strategy to implement in their business.
Ignoring these two factors and taking the stance of, if I build it they will come, will lead to business failure.
In a market where the business owner has little wiggle room when it comes to pricing their products and services it’s necessary to find another method to gain a competitive advantage, which equals happy customers and lots of them.
Recently at a local business meeting I “mentioned” the higher local prices to a business owner. This owner proceeded to explain to me that he didn’t want to compete on price alone but on Service. He wanted to be thought of as the “Nordstrom” in his industry.
Now I’m a long time dyed in the wool Nordstrom shopper, so when he said, “be the Nordstrom of his industry and compete on Service not price” – I got it.
I decided long ago it was cheaper in the long run for me to pay Nordstrom prices because if I bought and then decided I didn’t like the item for any reason I Never had any problems returning it, unlike other department stores who insisted on a No Return Policy. In addition Nordstrom’s customer service is excellent with their sales force willing and happy to help you whether you’re buying or returning. I am a loyal customer for this reason and since Nordstrom continues to grow and profit I can only assume that many feel the same as I.
Now this local business owner knows he can’t compete with larger stores who offer the same products at a lower price so he determined to be competitive by using Service as his competing business strategy. Once I understood the “Nordstrom” service mind set behind his products I became his willing happy customer.
This business owner did 2 important things with me: (a) by mentioning a well known company, Nordstrom, and aligning his store with their name, he made his store philosophy immediately recognizable, likable and sellable (b) next rather than be offended at my questioning he took the time and effort to explain what his business strategy was and why.
Today the small business owner competes with bigger stores who can buy in more volume and charge lower prices. You can also shop over the internet from the comfort of your own home and have it the next day. The Internet has become a bigger threat to the small business than the store down the road.
So then what does a small business owner do? Give up and close its doors? I suppose that’s one strategy but if instead you want to run a business and a profitable business with happy customers then “Service” might well be your competitive advantage. I believe most people want to shop in their local areas and they want to touch, feel and see what they buy. Running a business, big or small has always been about finding your competitive advantage and finding the business strategies that work for your business. Service will always be a deciding competitive advantage and like Nordstrom has proven, will bring you happy customers.
By: Jean Starling
About the Author:
Jean Starling holds an MBA in International Business and is an Author, Business Strategist and Executive Coach. Go to [http://www.leaderstakingthereins.com] to get your Free Leadership Home Study Course and learn how to be the leader that people want to follow. Contact Jean at mailto:jean@leaderstakingthereins.com