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UNIT 3 STRATEGY AND STRATEGIC PLANNING

Task 1. Find the translation to the following words and expressions from the text and the video below:

Task 1. Read the text and do the tasks below

Task 1.1 Find all the collocations (verbs which go together) with the words ‘plan, strategy, objective, goal’

Task 1.2 Underline the adjectives to characterize the nouns ‘strategy’, ‘goal’ and ‘ objective’

Task 1.3 Answer the questions on the contexts of the text

1.     Why is the development of company strategy always a frightening question and process?

2.     Which part of the company is responsible for strategy definition and development?

3.     What has recently changed in the definition of a company strategy?

4.     How can a company identify its core competitive advantage? Why is it important? 

5.     Why is the definition of company strategy is a crucial point?

Task 1.4 Put the 9 stages of the company strategy development in order (there may be some correct answers). There is one odd stage not mentioned in the text.

1.     External environment analysis

2.     Adjusting a plan

3.     Translating the objectives into certain tasks

4.     Measuring the performance against the goals set

5.     Defining the mission and purpose

6.     Adopting competitor’s strategies

7.     Defining the main a competitive edge

8.     Company performance analysis

9.     Defining the general strategy

10.  Working out a corporate plan

Task 1.5   Define which level (top management, business unit, performers/ departments) of a company is responsible for the stages of strategy development mentioned above?

Every business leader wants their organization to succeed. Increasing a profit and a number of satisfied stakeholders are worthy objectives which are not feasible without an effective business strategy. All executives know that strategy is important. But almost all also

find it scary, because it forces them to confront a future they can only guess at. However, a good strategy ensures that businesses achieve what they have set out to do[K1] . As every business has distinct goals, they adopt different strategies to achieve them.

Business strategy is the strategic initiatives a company pursues to (ttps://online.hbs.edu/blog/post/how-do-businesses-create-value), gain a competitive edge on the market and actions undertaken by a business for achieving the larger vision. Strategy is needed to be developed or redeveloped before any goods or services are produced or delivered.

The top management of a company have certain unique responsibilities concerning strategic decisions which affect the future of the organization. For example, top managers must decide which markets to enter and which to pull out of; how expansion is to be financed, whether new products will be developed within the organization or acquired by buying other companies, whether the company should go down- or upmarket and how to take into account the changes in demand and supply, whether to occupy a niche or sell mass-produced consumer goods in order to fight fierce competition effectively or enter a saturated market. These and other such decisions shape any company’s future.

Before doing any kind of strategic planning, the very first step for the management is to decide what the mission and purpose of their business are and what it should be in the future. In other words, they must know why the business exists and what its main purpose is. Deciding on the mission and the purpose is the foundation of any planning exercise.

Here is an example which will make this point clear. Most people have heard of Marks and Spencer, one of the biggest and most successful retailers in the world. Michael Marks, as the owner of penny bazaars, and his cashier Tom Spencer became public company after opening 9 market stores. At that point, they could have rested on their laurels. However, around that time, they developed a clear idea of M&S mission and purpose. Their later success was founded on this idea. Their company was in business to provide goods of excellent quality, at reasonable prices, to customers from the working and middle classes. This became the overall objective of M&S company. Providing value for money was their mission and their purpose.

By the way, providing value to all people has become the main trend of the 21st century and an integral part of a company’s strategy. According to Harvard Business School, an effective strategy is built around creating value for customers, employees and other stakeholders. Many promising business initiatives do not come to fruition because the company failed to build its strategy around value creation. A marketing guru Michael Porter also argued that growth, diversification and other strategies alone do not guarantee a company long-term success. Instead, success comes from having a sustainable competitive advantage, which derives from the value a company creates, in excess of its production costs. Thus, if a company is eager not to just stay afloat on the market, but be in the driving seat, it must deliver value and reflect the idea in its mission statement.

But before deciding on strategies, the planners have to look at the company’s present performance, and at any external factors which might affect its future. To do this, it carries out an analysis with the help of tried and tested tools, for instance, SWOT analysis which refers to strengths, weaknesses, opportunities and threats. First, the organization examines its current performance, assessing its strength and weaknesses. It looks at performance indicators like market share, sales revenue, output, productivity, etc. And also examines its resources – financial, human, products and facilities. For example, a chain of supermarkets may be well-

located – it’s a company’s strength, while the sales revenue per employee may be low – and it’s a company’s weakness. Next, the company looks at external factors, from the point of view of opportunities and threats. It is trying to assess technological, social, economic, political and other trends in the market where it is competing. It also examines the activities of competitors. There may be an opportunity in an increase of the demand for a particular product which a company may include in its product range, but an increasing competition in the field or some new legislation may threaten a company.

Having completed the SWOT analysis the company can now evaluate its objectives and perhaps work out new ones. They will ask themselves questions about growth rate, new markets to break into etc. The remaining task is to develop appropriate strategies to achieve the objectives. The organization decides what actions it will take and how it will provide the resources to support those actions. One strategy may be to build a new factory to increase production capacity. But in order to finance the mentioned strategy, a company may work out a plan to issue shares onto a stock exchange.  

Once company goals have been carried out, objectives and targets may be set at lower levels.[K2]  So, the next step is connected with operational tactics which refer to how the company will achieve the defined objectives efficiently and effectively. It could be producing a new model of car in the medium-price range or increasing a company’s market share by 10% in the next 5 years, etc. As soon as a company has established its medium-term objectives and articulated them to functions, it can draw up a corporate plan. Its purpose is to indicate the strategies the management will use to achieve its goals. At this stage efficient resource allocation among the company departments and delegating the tasks to certain employees who are going to make the objectives come true should be defined and fulfilled.

Having completed all the previous phases, management have another function (not less crucial) - measurement, which refers to how every activity of the business will be kept on track and measured against milestones that have been set. It is important as changing consumer expectations and market conditions affect every company. Thus, business strategy constantly evolves as the time passes. For this reason, business leaders should continuously monitor a company progress and adjust the plan throughout its execution.

Developing a strategy and preparing a comprehensive plan for how the company will invest in existing and new assets and capabilities in order to achieve a target is indeed a difficult and time-consuming process. The objective of the whole process is to eliminate risks to minimum by assessing everything and increase the opportunities of positive outcomes. By the end of the process, everyone feels a lot less scared and is prepared to act and work.

Task 2. Read the description of Porter’s three generic strategies that can give a company a competitive advantage and complete the table:

1. Cost Leadership Strategy (a cheaper product)

This type of strategy meant for organizations that has goal to achieve the overall lowest cost structure in an industry. This can be fulfilled through applying efficient business system in an organization. An efficient business system creates cost efficiencies and economic of scales to allow a firm to become the lowest-cost producer. Normally, economists believed that an increase in accumulated experience of a firm in producing or distributing a product or service could decrease the cost of producing or distributing a product or service. However, lowest-cost structure cannot be achieved by cutting the cost alone in one area of business; it demands a reduction in costs on all the departments. Cost leadership not only helps a firm to take down the competitors but also increase market share along with better profit margins.

Furthermore, this strategy is believed to work best in the certain circumstances. Firstly, the cost leadership strategy can be applied when the price competition among rival sellers is especially strong. Secondly, the strategy is suitable for standardized product or readily available from other sellers in the industry. Thirdly, it works best when organization could have few ways to achieve product differentiation, so that buyers get very sensitive to price differences. Unfortunately, this strategy has weakness since it concerns cost reduction rather than quality of the product that leads to decline in the popularity. It is also supported by the fact that nowadays customers are really critical about the quality of the product that makes more customers choose quality rather than cost conscious. In addition, this strategy will become ineffective with an increase in overall cost of a firm’s production inputs. Automatically, an organization will find it hard to hold a cost advantage over a longer time in business environment that keeps changing rapidly.

2. Differentiation Strategy (a better product than those of competitors)

Nowadays  (ttps://www.mbaknol.com/international-business/concept-of-business-environment/) is really competitive, marketers cannot achieve its goals unless they hold some  (ttps://www.mbaknol.com/strategic-management/five-approaches-to-differentiation-strategy/). In recent years, much attention has been committed by the marketers to  (ttps://www.mbaknol.com/strategic-management/core-competencies-competitive-base-for-organizational-success/); uniqueness could be a strength that makes an organization looks better from its competitors in the eyes of customers. Therefore, uniqueness can be used in  (ttps://www.mbaknol.com/international-business/sources-of-attaining-competitive-advantage-by-a-business-firm/). Obviously, the distinctive competencies also bring incremental value to the market offering when compared to the other offerings to the customers. In consequence, an organization must use different sources of differentiation at different times to build an importance image to its customers. For example, better features and quality, efficient distribution, research and development, a better image of a product or service, and also the most important improved customer services. Marketers have realized how customer services could create the business’ image and also build strong relationships with customers.  (ttps://www.mbaknol.com/strategic-management/five-approaches-to-differentiation-strategy/) work best in some markets circumstances where there are many ways to differentiate the company’s offerings from that of rivals and many buyers perceive these differences as having value. In addition, it is also match with the market where buyer needs and uses of the item or service are diverse, few rival firms are following a similar differentiation approach, and technological chance is fast-paced, and competition revolves around evolving product features.

Although the differentiation strategy looks perfect, but it also gives some challenges to the organization to complete it. Firstly, it is a difficult task to identify the sources of differentiation that are important for the customers and difficult for the competitors to copy. This task is time consuming and not suitable to the business environment that rapidly changes. Secondly, many of people still prefer to buy low-priced products or services over the products that have desirable features since people have mindset why they should purchase the more expensive one if that the products do not give any incremental value for the customers in a firm’s market offering.

3. Focus Strategy (focus on a narrow market segment).

Focus strategy is based upon the choice of a narrow  (ttps://www.mbaknol.com/strategic-management/analysis-of-competitive-position-using-porters-five-forces-model/). By attempting this strategy, it means the organization tries to focus on a particular market segment and to achieve its objective by becoming the market leader in a niche market. The segment may be a group of customers that differentiated by ages and sex. It is believed that an organization can be more efficient and effective by focusing its efforts to a narrow target rather than broad target. Accordingly, this strategy has objective to employ either cost leadership strategy or differentiation strategy to a part of market. A cost focus strategy aims to lowering the prices of the product or service by controlling costs in a narrow target market. For example, a firm is able to be the low-cost producer in only one product line. Meanwhile, a differentiation focus strategy means striving to tailor made products to the specific needs of the market segment. Thus, such a strategy could utilize some element of differences of firm’s market offering to a narrow market segment. For example, a firm may employ its distinctive competencies to focus on one or a few target markets. Focus strategy will be useful enough to apply on the following circumstances. Firstly, it works best when it has no other rival is attempting to specialize in the same target segment, added with the fact that is quite hard for multi-segment competitors to meet the specialized needs of the target market niche. This strategy also fits when a firm does not have sufficient resources or capabilities to go after a bigger piece of the total market so focus strategy will work well on this situation when it concerns on one market segment.

Although the focus strategy looks popular among the organization over the past decade, there are some risks that need to be considered if an organization commits to this strategy. Firstly, by focusing only to narrow target, the organization doesn’t entitle to enjoy the benefits of the economy of scale that generally occurs in the wide target. Other risks come from the fact that the success of focus strategy over last few years has been attracting many rivals who may think to join the industry that resulting in an increase in the strength of competition.

It is believed that an organization not only needs to have entire knowledge about the events and happenings in the industry but also requires choosing among the above-mentioned three generic strategies in order to ensure a better marketing performance. Different strategies suggested by Porter’s generic model call for different organizational systems and capabilities. For example, organizations with adequate resources and good controlling systems may prefer to engage cost leadership and a firm with strong Research and Development facilities may get better results through differentiation strategy. Whereas a small firm with poor resources and inadequate R&D facilities may be better off by serving niche markets, therefore, will be more comfortable with focus strategy.

Video

Watch the video and do the tasks

(ttps://vk.com/away.php?utf=1&to=https%3A%2F%2Fwww.youtube.com%2Fwatch%3Fv%3D0yHwUp87xcI)  

Task 1.   

Task 1.1 Are the statements below True, False or the information was Not Mentioned in the video?

1.     The Aldi company delivers its products slightly cheaper than the competitors.

2.     Hermes generates their high profit by charging lower prices than competitors.

3.     Apple is the example of “high costs/ high price” strategy.

4.     If you can’t lower your costs, but want to raise prices, you are to provide highly valuable products or services.

Task 1.2 Answer the questions

1. Which 2 factors is company strategy connected with?

2. How are those terms linked to each other: expenditure, profit, revenue?

3. Name the strategies connected with profit increase.

4. Which strategy is more common nowadays?
5. What may help you to design a better product or service and thus provide more value? And how will it influence the price?
6. Why is it necessary to consider segmentation while creating a strategy?
7 What is differentiation? How can you differentiate yourself from competitors?
8. What else is necessary to remain successful after you have created a good strategy?

Task 2. Match the terms to their definitions:

Task 3. Complete the sentences with the words and phrases from task 1 and 2

1.     Do you think that this new strategy will enable us to cope with  ____________ efficiently to outperform our rivals.

2.     We don’t feel ____________ now that we have lost to our competitors this year. We are not the market leaders any more, unfortunately.

3.     If we decide to enter the Eastern market, we will have to increase _______________. We should be ready for the increased demand for our goods.

4.     The market of smartphones is extremely _____________ nowadays. Since so many people already have smartphones, companies have to be really genius to sell their goods in sufficient numbers.

5. I want to become known as an expert in business strategy. This is my __________. But I don’t have any idea how to realise it.

6.     PEST and TOWS are also ________________ to analyse. But I prefer SWOT-analysis.

7.     Louis Vuitton may ______________ for its goods as they do not only provide quality but also a sense of luxury and uniqueness.

8.     Now when we have defined the strategy, we may set certain short-term ________ to departments.

9.     Our rivals may only ________ by producing consumer goods and charging low prices. They don’t have any well-established strategy.

10.  We cannot ______ all ____. It is impossible as we can’t predict how the demand for the product will change and how our competitors will react to our new marketing campaign.

Task 4.

Task 4.1. Complete the table

Task 4.2. Complete the following sentences with the correct form of the words from the

table

Task 5

Task 5.1. Match to make expressions:

Task 5.2. Complete the sentences with the words and phrases above:

1. The new Kindle launch comes at a time when competitors Barnes and Noble's Nook, Sony and others are _______ the market which Amazon dominates.

2. Many of our further objectives _________ from the initial strategy this year.

3. We will not increase the revenue as we want if we __________ our services _____ .

4. Do you think we are able to _______ a new product ourselves ______? Or shall we buy ideas from outside?

5. According to the latest sales data, the revenue has doubled ___________ the figures of the same period last year.

6. Now when we have developed a general strategy of entering a new market, we may _______ with specific tasks.

7. It's important to get a competitive edge and _________ with a more professional website and responsive design.

8. It is vital to ______ that suits your long-term needs and stick to it.

9. In order to have a helicopter view over the situation, we always recommend to ___________ of the competitive environment.

10. It is therefore important to ______ any information coming from the major international competitors selling the same goods.

Task 5.3. Paraphrase the sentence so that it has the same meaning as the first. Use the words given:

1. One of our tasks now is to distribute resources among all the departments efficiently.

ALLOCATION

One of our tasks now is efficient ___________________ among all the departments.

2. Our key competitors have rearranged their supply agreement and now their product delivery is incredibly cheap.

PRICE

Our key competitors have rearranged their supply agreement and now they deliver the products _________

3. We have come to the next stage of our strategy.

ENTER

We _______ the next stage of our strategy.

4. If you really want to stay ahead of the competition, create a new competitive advantage.

EAGER

If you _______ stay ahead of the competition, create a new competitive advantage.

5. Undertaken by our rivals actions have had an immense effect on our sales – we have lost to

them greatly.

INCREDIBLY

Undertaken by our rivals actions ______ – we have lost to them greatly.

Task 6. Unjumble the sentences:

1. enter / new / competitive / the / gained / we / and / a / advantage / a / market / innovated / product / to

2. to / the / we / the / were / service / quality / we / able / raise / when / enhanced / price

3. consumer / on / didn’t / occupy / a / we / and / decided / producing / goods / to / want / niche / narrow

4. the / profits / refining / company / superior / rival / by / generated / process / has / production?

5. throughout / adjusted / any / be / its / business / should / execution / strategy?

Task 7. Translate the sentences into English, paying special attention to the words of Focus Vocabulary

1.     Получение превосходной прибыли и увеличение количества удовлетворенных заинтересованных сторон — это цели, которые невыполнимы без эффективной бизнес-стратегии, часто с применением стратегии расширения.

2.     Наши конкуренты продают потребительские товары массового производства по невероятно низким ценам, а мы решили занять нишу, чтобы эффективно бороться с жесткой конкуренцией и выйти на очень насыщенный рынок.

3.     Устойчивое конкурентное преимущество может возникнуть, когда продукты компании имеют дополнительную ценность, а цена товара значительно превышает его производственные затраты.

4.     Если компания жаждет не просто оставаться на плаву на рынке, а быть у руля, ей придется сосредоточиться на создании ценности для потребителя, что должно быть неотъемлемой частью стратегии компании.

5.     Менеджер должен учитывать текущую деятельность компании и любые внешние факторы. Для этого он проводит анализ с помощью проверенных инструментов, например, SWOT-анализ, который касается сильных и слабых сторон самой компании и возможностей и угроз, находящихся во внешней среде.

6.     Как только компания определила свои долгосрочные цели и трансформировала их в задачи для отделов, она может составить корпоративный план. На этом этапе, в том числе, должно быть определено и реализовано эффективное распределение ресурсов между подразделениями компании.

7.     Все задачи по реализации стратегии, поставленные руководством компании, измеряются в соответствии с установленными контрольными показателями. Это важно, поскольку рыночные условия постоянно меняются. Таким образом, бизнес-стратегия постоянно меняется с течением времени, и бизнес-лидерам нужно будет корректировать план на протяжении всего его выполнения.

8.     Целью разработки стратегии и подготовки комплексного плана того, как компания будет инвестировать в существующие и новые активы и возможности является минимизация рисков и увеличение возможности положительного результата.

9.     Чтобы оставаться впереди конкурентов и получать сверхприбыль, компания должна знать, как дифференцировать себя от конкурентов. Для этого нужно постоянно наблюдать за другими компаниями, их стратегиями и предпринимаемыми действиями.

10.  У покупателей всегда будет желание покупать ваш товар, даже если вы взимаете высокие цены, если ваша компания имеет четкое конкурентное преимущество над другими продуктами того же класса. Это позволит вам достичь процветания и всегда оставаться впереди конкурентов.

Task 8. Choose a company, study its strategy and make a presentation reporting on the company strategy. 

Consider:

company mission

competitive advantages

Price policy (above/ below/ equal to rivals, think what can let the company have it)

differentiation from rivals

general description

define the strengths and weaknesses of the strategy/ provide recommendations

Task 9. Watch a video about Starbucks and Dunkin’s business strategies and complete the table. Analyse the risks both companies may face in strategy implementation and prepare a short presentation (5-6 slides).

(ttps://www.youtube.com/watch?v=Ulin7GV76Gc)

(ttps://www.youtube.com/watch?v=F9ExKR3sUng)

DISCUSSION POINT

Discuss the following questions in pairs or groups:

1.What makes a company successful?

2.Which industries and companies of which sectors do you think feel the major importance of developing a good strategy?

3.How important is competition in shaping business strategy?

4.Do you think it is a good idea to copy a competitor’s strategy for your own company?

5.How do companies decide whether to compete on price or quality?

6.What are some strategies for staying competitive in a rapidly changing market?

7. How can companies create a sustainable competitive advantage?