Corporate strategy is developed to ensure the achievement of general (strategic) goals for the future development of the enterprise. It includes the structuring of strategic actions that ensure the achievement of the enterprise's goals, according to management levels and functional areas of its activity.
The strategy represents a set of management decisions and actions to allocate enterprise resources and achieve long-term competitive advantages in target markets. In the process of developing a strategy, the following are clarified: a market position that will ensure the achievement of the overall development goals of the enterprise, the necessary strategies for achieving and maintaining this position, taking into account the provision of competitive advantages and the planned efficiency of business activities.
Strategy Chain- identification and systematic display of the main strategic problems of enterprise development and corresponding programs of specific actions to achieve the desired result in the long term.
The significance of such problems varies depending on the opportunities and threats of the external environment, as well as the strengths and weaknesses of the enterprise in comparison with its competitors. Therefore, to determine a strategy, it is very important to identify critical problems, the solution of which determines the achievement of the enterprise’s development goals in the short and long term.
The process of forming an enterprise development strategy is carried out in stages: the formation of a basic (also called general) enterprise strategy, the formation of a competition strategy (strategies), the formation of functional and operational (current) strategies.
The formation of a general development strategy involves solving two main tasks: choosing alternatives regarding the overall development of the enterprise (growth of its capital), as well as making a decision on integration and (or) diversification of activities. When making a decision on diversification, the main business units (structural divisions) of the enterprise responsible for the development of a particular business are determined, and a decision is made on how to distribute resources between them.
The formation of a competition strategy involves determining the development of the main directions of business activity (specific business) of the enterprise. These strategies, called business strategy, define specific actions (strategies) to occupy and maintain a certain position of the enterprise in the target market (markets) by creating and strengthening its competitive advantages, exploiting new opportunities and protecting against threats determined by the external environment. A key element of a business strategy is the development of strengths in the activities of the enterprise and possible compensation (reduction) of its weaknesses. A diversified enterprise (corporation) develops business strategies for each business unit (division).
Functional strategies are developed for each functional area of the enterprise. They are aimed at developing and strengthening the strengths of the enterprise in relation to competitors and reducing its weaknesses. Examples of such strategies are: R&D strategy, marketing strategy, innovation, financial, production, personnel strategy and others.
Strategy development is carried out in the following sequence:
Development of a general enterprise development strategy (selection of a basic alternative) and decision-making on integration and (or) diversification of the enterprise.
Selecting the geographic region in which implementation is expected.
Definition of one of the basic competition strategies: cost leadership, differentiation or market niche in relation to a specific type of product (service).
Determining the market share (market position) that is expected to be occupied in a particular business.
Definition of the product-market relationship (market penetration, market development, product development, or diversification) that should be the basis of the marketing concept.
Determination of the product (product range), pricing policy and price.
Choosing a strategy for occupying and retaining the market during the development of an enterprise: competition or market expansion.
Determine the qualifications and practical experience needed to beat the competition.
Determining the need and possibility of cooperation to achieve the enterprise’s market position and implement the chosen strategy.
Corporate strategy is the way a company creates value by shaping and coordinating its actions in different markets.
This definition has three important aspects.
First, there is an emphasis on value creation as the ultimate goal of corporate strategy. Whether this value is distributed among shareholders or whether other interested parties participate in the division is a decision made by those who manage the corporation. corporate strategy management diversification
The second focuses on the corporation's capabilities in multiple markets (configuration), including its products, geographic and vertical divisions.
The third focuses on how the firm manages its activities and businesses that are within the corporate hierarchy (coordination). It recognizes the importance of both execution and formulation of corporate strategy.
Corporate strategy contributes to understanding business strategy and provides information for analysis. It focuses on the relationships between a firm and its parts, primarily on whether the performance of its business units is improved or worsened by the fact that they are part of the corporation.
Corporate strategy is the overall management plan for a company. It applies to the entire company, covering all areas of activity in which it is engaged. It consists of the actions taken to establish its position in various industries and the approaches used to manage the affairs of the company. This strategy is created by senior managers. They have primary responsibility for analyzing communications and recommendations coming from lower management levels. Managers of key production facilities can also take part in developing the company's strategy, especially if it concerns the production they lead. The strategy involves actions to achieve diversification of the company.
A diversified company is a company that operates in different sectors of production, trade or services.
Diversification is carried out in order to reduce the risk of concentration of capital in one area of activity, especially in conditions of fluctuations in market conditions, including seasonal ones, reduction in market capacity due to structural changes in production, increased competition in the market under the influence of the emergence of strong competitors or the desire to expand their activities when there is a limited market for existing production. Diversification can be accomplished by creating new businesses in industries new to the company or by purchasing businesses that are already operating there.
In diversified companies, decisions on management methods and new directions of development are made by corporate management, directors of enterprises, heads of large functional divisions within the corporation as a whole or by industry specialization (production, marketing and sales, finance, human resources, etc.), managers at factories, regional sales representatives and middle managers.
In general, corporate strategy answers two key questions for any diversified company:
- - what business areas will the company’s portfolio include, that is, where will it direct its resources (investments, time, people);
- - what role will the corporate center play in business management and what degree of independence will each of these businesses have separately.
Consider the role of corporate strategy:
Successful companies are companies that focus their efforts on strategic areas. To satisfy customer needs, an enterprise must follow an overall organizational strategy. A good strategy helps you maintain and strengthen your position in the target market for a long time, consistently satisfying consumer needs better than competitors.
A company's strategy is a way to navigate its market segment, including relative to competitors. This is a plan of measures drawn up by an organization to gain sustainable superiority over its competitors.
The strategy answers the following questions:
- - What are the sources of sustainable competitiveness of the company
- - How the company positions itself relative to competitors to ensure sustainable competitive advantage
- - What are the main strategic priorities of the company
When starting to develop a strategy, it is necessary to clearly determine at what level the planning will be carried out - the list and sequence of actions for developing the strategy depend on this. In a diversified company, the following four types of organizational strategy are developed:
- - Corporate strategy is a strategy for the company and its areas of activity as a whole.
- - Business strategy - a strategy for each individual area of the company's activities.
- - Functional strategy - a strategy for each functional part or area of activity.
- - Operational strategy - strategy for the main structural units (factories, regional sales representatives and departments within functional areas of activity).
The role of corporate strategy is to guide the enterprise to success in the marketplace by outperforming its competitors in meeting customer needs. Strategy formulation is the main task of the owner and CEO of the company; The translation of this strategy into concrete results rests with middle managers and project managers. First of all, when forming a corporate strategy, it is necessary to formulate the strategic goal of the business system (vision). Vision is an ideal, this is how the company’s shareholders, management staff and other affiliates see the future of the company. It should be noted that the vision does not depend on the position in which the enterprise is located and almost does not operate with numbers. It should not contain any exact instructions or deadlines. A vision is simply a vector for further development.
Many experts in the field of strategic planning note that vision becomes an effective strategic management tool only if:
- - the enterprise has a precise goal-setting system (setting and distributing goals and objectives);
- - the desired image of the future of the company is communicated in writing to every decision-making employee;
- - employee initiative is encouraged;
- - there is a clear distribution of powers and responsibilities.
Without these conditions, the vision can turn into an empty, ineffective fantasy. A vision is a concept of a long-term goal that is the basis of a firm's activities. It fixes the overall strategic goal of the company and the main direction of development leading to its achievement, and also defines the boundaries of activity, which makes it possible to reduce the development of strategy to an optimization task.
Developing a corporate strategy involves four types of actions:
Actions to achieve diversification; steps to improve performance in those industries where the enterprise already operates; investment policy; finding ways to obtain a synergistic effect among related business units and turning it into a competitive advantage.
Let's consider each type of action in more detail.
Developing a corporate strategy is the most difficult task of strategic management. It is necessary to determine the combination and scale of activities, draw up a so-called portfolio of businesses, select markets, determine main priorities, formulate a key ideology, select and place managers in key positions
Developing an enterprise strategy means determining the general directions of enterprise development to achieve long-term corporate goals. The strategy is developed for a long period of time and is future-oriented with a step-by-step implementation process. It determines the direction of the organization's activities. This may be growth, stabilization or contraction; selection of specific markets and products for the direction of financial and labor resources, focus on a certain type of competitive advantage, and more.
Strategy development consists not only of developing planned actions within the designated directions of movement towards achieving the goals of the enterprise, but of responding to unforeseen circumstances that arise in both the internal and external environment.
There are six stages of strategy development:
- 1) Definition of missions and goals;
- 2) Strategic analysis;
- 3) Strategic orientation and strategic choice;
- 4) Preparation for implementation;
- 5) Strategy implementation;
- 6) Strategic control.
The first three stages relate to strategy development, the next three stages relate to strategy implementation.
The first stage is divided into two:
- 1) Formation of the organization’s mission;
- 2) Determining the development goals of the enterprise.
The role of the organization's mission is that it orients in a single direction the interests and expectations of those people who perceive the enterprise from the inside, and those who perceive it from the outside. The mission allows you to orient or even subordinate the interests of people “internal” in relation to the organization to the interests of “external” people.
Mission is the main strategic goal of the company, which expresses the meaning of existence, its purpose, which distinguishes this organization from similar ones.
Approaches to understanding the mission:
- - General goal;
- - Reason for existence;
- - Credo of leadership;
- - Philosophy of the company;
- - Vision of the future;
- - The role that the organization plays in society;
- - Identification of personnel with the organization.
Criteria for formulating a mission according to P. Drucker:
- - What is business?
- - Who are the clients;
- - What is valuable to the consumer?
- - What will the business be? What to strive for?
Criteria for formulating a mission according to F. Kotler:
- - History of the company;
- - Behavior style;
- - State of the environment;
- - Resources;
- - Distinctive features.
An integrated approach to the selection of criteria for formulating a mission:
- 1) Type of activity;
- 2) Target consumer segment;
- 3) Purpose of the activity;
- 4) Competitive advantages;
- 5) Perspective of activity.
A good mission focuses on a limited number of goals, supports the company's core values, and defines the main areas of competition. The mission will not be successful if the company sets itself too many tasks, since most likely it will be impossible to achieve them all due to the fact that little time and attention will be devoted to each of the tasks. Most likely, in this case, the company will not achieve any of its goals.
As a rule, the mission is developed by the top management of the organization. The mission of an enterprise is presented in the form of separate statements, which are a kind of code of the organization and determine its economic, social and managerial “philosophy”, economic criteria for profitability, production activities and quality of goods. Styles of behavior within the organization, selection and placement of personnel, as well as image.
In a simplified form, mission building can be viewed as a “technological systems view from a business engineering perspective.”
The mission development stencil is a matrix of analysis of the relationships between market conditions (must), enterprise capabilities (can), enterprise aspirations (want) and environmental restrictions (can), which is presented in Table 1.
Table 1
Enterprise mission development stencil
Basically, an organization's mission has a number of elements. Its approximate structure is shown in the figure.
Figure 1 Characteristics of the main elements of the enterprise mission
Let's take a closer look at each of the elements shown in the figure. The first element of the enterprise mission includes:
- - Basic directions in the product/service system (the “I want” axis);
- - Basic directions in the buyer/market system (the “need” axis);
- - Basic directions of technological efforts (the “I can” axis).
The second element of the enterprise mission is growth and profitability. They are extremely significant for the organization. Economic growth is important because it can ensure that an organization maintains its position in the market. Profitability, in turn, as a component of the organization's mission is often seen as ensuring its sustainable development.
The third element is the level and structure of entrepreneurship. The level of entrepreneurship is understood as a particular state of economic and production activity. Which is considered a priority for the enterprise in the period of time under consideration.
The fourth element is social responsibility, that is, the commitment of the firm's senior management to act in a manner that protects and improves the welfare of society as a whole, while being consistent with its own interests.
The second subdivision of the first stage is determining the goals of the enterprise. A goal is the desired state of an enterprise (or its individual subsystems) or the result of its activities, achievable within a certain time interval. That is, goals represent the commitment of enterprise management to achieve specified results at a certain time. Peter Drucker identifies eight key spaces within which an enterprise defines its goals:
- 1) Market position;
- 2) Innovation;
- 3) Productivity;
- 4) Resources;
- 5) Yield (profitability);
- 6) Management aspects;
- 7) Personnel: performance of labor functions and attitude to work;
- 8) Social responsibility.
Once the goals are defined, they need to be examined for quality, i.e., how well they satisfy certain rules and criteria. To do this, you can use the SMART criteria, which were formulated by Peter Drucker:
Specific - specific;
Measurable - measurable, i.e. amenable to qualitative and quantitative assessment both in the process of their formulation and in the process of implementation;
Ambitions - ambitious;
Realistic - realistic;
Timed - feasible at a certain point in time.
The next stage is strategic analysis. Before moving directly to strategic analysis, it is necessary to give the following definition: the organization’s environment is the presence of conditions and factors that affect the functioning of the company and require the concept of management decisions on adaptation. Figure 3 shows the structure of the organization's environment.
The external environment is those elements of the economic system that affect the organization, its functioning and are outside the organization. Including microenvironment and macroenvironment.
The microenvironment is those elements of the external environment with which the organization interacts regularly and on an ongoing basis.
The macro environment is those external environmental factors that influence the organization indirectly.
Figure 2 External environment of the company
Having defined the above concepts, we move directly to strategic analysis. Strategic analysis is a multi-level study of the external environment and strategic potential, as well as their interaction, based on the results of which strategic orientation is determined and strategic choice is made. Table 2 presents the content of the strategic analysis.
Table 2
Strategic Analysis
The purpose of macroenvironmental analysis is to identify critical external environmental factors of indirect influence that influence strategy development. The analysis is carried out in four stages:
- 1) Scanning the external environment to identify existing and emerging changes;
- 2) Monitoring of individual trends in the external environment;
- 3) Design - determining the directions of change in environmental factors;
- 4) Assessing the implications for the organization of possible influence on strategy.
Macroenvironmental analysis includes economic, sociopolitical, and technological forecasts to determine the long-term capabilities of an enterprise in the face of predicted environmental disturbances. Let's consider PEST analysis. An example is presented in Table 3. Identification of macroenvironmental factors - PEST - analysis.
Table 3
PEST analysis
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P - Political/Legal:
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E - Economic:
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T - Technological:
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The purpose of PEST analysis is not only to compile a list of environmental factors, but also to use a diagram to identify changes or trends in the development of environmental factors; focusing on trends that have the greatest impact on the organization and taking into account ongoing changes when developing organizational strategies.
Another method of studying the macroenvironment is to construct a matrix of opportunities and threats in the external environment. This matrix is presented in Table 4.
Table 4
Matrix of opportunities and threats
A - strong significant opportunities/threats;
B - moderate opportunities/threats;
C - minor opportunities/threats.
The matrix is built separately for opportunities and separately for threats. The construction of this matrix is carried out in several stages:
- 1) Identifying opportunities and threats;
- 2) Determining the degree of their influence on the organization;
- 3) Assessment of the likelihood of an opportunity/threat;
- 4) Determining the place of each opportunity/threat in the matrix;
- 5) Definition of group A;
- 6) Proposing measures to realize opportunities and eliminate threats.
Analysis of the macro environment is usually associated with analysis of the market environment. This analysis is done to identify the opportunities and threats that an organization may face in the industry. For this purpose, M. Porter proposed a model of five forces, arguing that the higher the pressure of these forces, the less opportunity existing companies have to increase prices and profits. The weakening of forces creates favorable conditions and opportunities for the enterprise. By changing its strategy, a company can influence these forces to its advantage. Let's look at these five forces in more detail.
- 1) The threat of intense rivalry between competitors in the industry. The following factors are analyzed for it:
- - Number of competitors;
- - Market share of the largest competitors;
- - Strengths/weaknesses of competitors;
- - Reaction of competitors to competition (score from 1 to 5)
- 2) The threat of increasing market power of buyers:
- - Number of buyers;
- - Geographical location of buyers;
- - Demographic characteristics;
- - The buyer’s attitude towards the product;
- - Volume of purchases;
- - Buyer sensitivity to price;
- - Bargaining power of the buyer;
- - Cost of switching to another seller;
- - Buyer awareness
- 3) Threat of increasing market power of suppliers:
- - Cost of the goods supplied;
- - Level of specialization of the supplier;
- - Cost of switching to another supplier;
- - The importance of the other supplier's sales volume;
- - Quality assurance;
- - Delivery schedule
- 4) Threat of new competitors:
- - The height of the barrier to entry (initial capital investments, features of production location, the higher the barrier to entry, the fewer competitors) and the barrier to exit (debt to creditors, personnel, low residual value of fixed assets)
- - Reaction of companies already operating on the market;
- - Economies of scale and experience;
- - State policy
- 5) The threat of the emergence of new goods or services - substitutes:
- - Availability of substitute goods;
- - The emergence of technologies that make it possible to produce substitute goods;
- - Price/quality ratio of a substitute product.
- - Analysis of market structure (market positions) is based on such a concept as market share. Market share is the percentage of sales of a product of a given enterprise from the total sales of this product on the market for a certain period.
Analysis of the market structure poses the following tasks:
- - determining the sales volume of individual goods and product groups;
- - characteristics of the place of individual goods in the total volume of goods sold;
- - assessment and analysis of structural changes in trade turnover;
- - analysis and modeling of socio-economic and regional differences in the commodity structure of trade turnover.
In order to determine market share, it is necessary to find the ratio of your market volume to the total market volume of the industry. According to Western estimates, there is a direct relationship between market share and profitability. On average, a 10% increase in market share leads to a 5% increase in return on invested capital. The results of the market structure analysis are presented in the form of a table, an example of which is presented in Table 5.
Table 5
Market structure analysis
From the data presented in Table 5, it can be seen that the strongest position in the market is held by firm A, which dominates the widest market segment and occupies second position in the second most important segment. Company B focuses on a high-quality market share, and company B, in its strategic focus, makes the transition to a high-quality market share. Firm D is forced out of all market segments (or deliberately leaves the market). This analysis quite accurately shows the competitive position of the company in the market and can serve as an objective characteristic for developing strategic directions for development
Microenvironment analysis stages:
- 1) General analysis of the industry;
- 2) Analysis of end consumers;
- 3) Analysis of a specific situation;
- 4) Analysis of other significant factors.
Based on the analysis of the microenvironment, it is necessary to draw a conclusion about the degree of attractiveness of the industry and, if it is attractive, then it is necessary to choose an aggressive strategy, expand sales and begin to introduce innovations. (Kurlykova)
To develop an effective strategy, it is important to conduct a strategic capabilities analysis that identifies the strengths that the enterprise can rely on in the competition and the weaknesses that may complicate problems associated with external threats.
A comprehensive environmental analysis allows for the joint use of the external and internal environment.
K. Andrews proposed SWOT analysis as a research method, presented in Table 6.
Table 6
SWOT analysis
The next stage in developing corporate strategy is strategic orientation and strategic choice.
A benchmark is the qualitative side of assessing the performance of a company, the goal that the organization strives to achieve. Strategy, in turn, is a means to achieve a goal. A. Sloan considers the following questions:
- 1) If the assortment does not meet market demands, then the product should be discontinued;
- 2) If the key factors for success in the market do not change, then the strategy must be changed;
- 3) If there is a loss of profitability in certain market segments, then it is necessary to move resources to profitable segments;
- 4) A key feature of strategic orientation is a cool-headed look at the historical successes of the market and a willingness to change areas of interest.
Thus, in order to protect itself in subsequent time periods, each company must imagine the future environment in complexity and dynamics and develop response options, i.e. strategic orientation.
Strategic Orientation Process:
- 1) Clarification of the previously formulated mission;
- 2) Formulation of functional guidelines;
- 3) Development of response algorithms.
Strategic orientation is a set of functional guidelines and a system for responding to changes to form a strategy for the sustainable development of an enterprise, determined in accordance with strategic goals and the results of an analysis of the external and internal environment.
Strategic choice - made after the strategic orientation has been determined. At this stage, all possible alternative options for the development of the enterprise are assessed.
Stages of strategic choice:
- 1) Formation of strategic alternatives;
- 2) Assessment of strategic alternatives;
- 3) Selecting a strategic alternative.
The strategic planning process itself includes four stages:
Developing common goals;
Determination of specific, detailed goals and objectives in a relatively short period of time (2, 5, 10 years);
Determining ways and means to achieve them;
Monitoring the achievement of certain goals by comparing planned indicators with actual ones.
It should be noted that the strategic planning process is a tool that helps in making management decisions. Its task is to ensure sufficient innovation and change in the organization. Four main types of management activities can be distinguished within the framework of the strategic planning process (Fig. 1.2.). These include:
Allocation of resources – limited organizational resources (funds, scarce management talent and technological expertise);
Adaptation to the external environment - covers all actions of a strategic nature that improve the organization’s relationship with its environment;
Internal coordination - involves coordinating strategic activities to reflect the strengths and weaknesses of the organization in order to achieve effective integration of internal operations.
Organizational strategic forecasting is an activity that involves the systematic development of managers' thinking.
Rice. 1.2 – Model of the strategic planning process
Experts distinguish three levels of strategic planning:
1. General strategy;
2. Strategic economic plans;
3. Functional strategy.
The listed levels of strategic planning form the so-called “pyramid of strategies” (Fig. 1.3)
At the senior management level, a general (corporate) strategy is developed that takes into account the company's ability to take a certain position in the market in the near future. At the same time, its own role, the types of activities carried out, the expected increase in effect and profitability are taken into account. Taking into account the general strategy, economic strategic plans are developed, focused on specific structural units. Economic strategic plans display expected profits, market share, product range and its renewal, and possible advantages over competitors.
A functional strategy takes into account specific functions: purchasing, production, optimal and rational use of resources, etc. Thus, all levels of strategic planning are interconnected and aimed at implementing the chosen strategy.
Therefore, strategic planning is a rather expensive process that requires the involvement of qualified specialists who have not only high analytical abilities, but also real experience in developing strategies in various situations. Therefore, the creation of a strategy cannot be delegated to anyone and is one of the most important areas of his personal responsibility. The choice of strategy should also be given serious attention by the company's shareholders.
Rice. 1.3. – Pyramid of strategies
Typically, management experts recommend developing a strategy for each business unit first before developing a strategy for the corporation as a whole. However, as experience shows, this approach is very expensive both in terms of time and budget. Therefore, experts recommend the following sequence:
1. Develop brief strategic concepts for each business unit.
2. Development of the first version of the corporate strategy (formation of a business portfolio, determination of the principles and structure of portfolio management)
3. Development of detailed business unit strategies for the most important business areas.
4. Clarification of the corporate strategy taking into account the developed strategies of business units.
5. Development of a detailed plan for implementing the strategy.
The development of preliminary strategic concepts will allow us to form an optimal business portfolio and determine corporate-level priorities in the shortest possible time. As a result, detailed strategies will be developed only for priority business units, which will significantly reduce costs and improve the quality of decisions made.
The value of a diversified corporation is formed by the values of the business units in its portfolio, as well as the corporate center (Fig. 1.4).
Rice. 1.4 The value of a diversified corporation
Value Creation Process
Formation of a business portfolio and determination of priorities;
Formation of organizational structure.
When forming a business portfolio, it is necessary to concentrate on value creators and on those areas that correspond to the core business and can become sources of value growth as a result of restructuring (Fig. 3). Businesses that are successful and profitable, but do not correspond to the core business of the corporation, are self-sufficient and can easily exist separately, should be removed from the portfolio. At the same time, we are not talking about selling, much less liquidating, a business - it simply does not add value to the corporation, and the corporate center and other types of business do not strengthen its position.
The development of management principles involves solving the following tasks:
Division of powers and responsibilities of the center and business units;
Determination of key competencies required for the corporation (general\specialized)
Centralized functions and resources;
Methods of control (financial, strategic or operational);
Key processes and organizational structure;
Leadership;
System of performance indicators.
An effective corporate strategy should:
Represent a system of interacting parts, so that the success of one direction can stimulate the success of others;
Allow effective capitalization of new opportunities emerging in the market;
Provide benefits from participation in the corporate center business that exceed its costs.
The most important point is a clear understanding of how the corporation as a whole creates value (through a strong brand, low cost of capital, synergies between business units, scale of operations, privileged relationships or access to unique resources, etc.).
The cost of a business unit depends on a number of factors, which can vary significantly depending on the industry. Therefore, when developing a growth strategy, it is necessary to clearly understand which factors are most significant and how they can be controlled (Fig. 1.5).
Strategy development should be based on information from various sources, reflecting in particular:
Vision and expectations of the company's shareholders;
Global trends in the industry (what has happened in similar industries in other countries over the past 10-20 years and what are the trends in the development of the industry in the world);
Main trends in the domestic market;
Industry expertise (knowledge of industry specialists, including international experts);
Vision and expectations of company managers.
To develop a strategy, you need to take the following steps:
Clearly formulate the vision of the company’s owners in the future and determine the main direction of its development (main strategic goal, mission);
Set business goals and benchmarks;
Determine the type of enterprise and methods of property management;
Analyze the strengths and weaknesses of the corporation, identify key success factors and possible threats (cause-and-effect analysis, SWOT method);
Develop requirements and criteria for assessing the main types of activities;
Identify the main problems in the corporate management system and in the external environment;
Establish general requirements for management subsystems (investment development, organizational development, quality management, planning and cost control, management and accounting, management information support);
Establish the purpose and general requirements for the use of objects owned by the corporation.
Rice. 1.5. Key factors for business success
Deep development and detailing of the basic elements of the strategy allows us to diagnose the corporation's management system and develop recommendations for improving individual subsystems.
It is important to understand the very concept of the approach to creating a strategy: this is a vision of the future and a direction for achieving a set goal - a look from the future to the company's current resources, and not an extrapolation of the current state and internal limitations for the next period. We are not dealing with logic, but with interests.
A sign of a lack of a strategic approach is the organization's concentration on internal resources. Thus, all possible threats are ignored. The company receives resources from outside, produces a final product that is aimed at external consumers and competes in the market. The company is forced to be externally oriented.
So, the most important process in the activities of companies is the analysis of the external environment, from which one should begin considering their model of strategic development.
Let's consider the main stages of the formation and implementation of a corporate strategy in a joint-stock company (Fig. 1.6.).
Stage I is a set of conditions that arise regardless of the activities of a particular joint stock company, but at the same time have a significant impact on its functioning. Analysis of the external environment gives the joint stock company time to forecast, draw up a plan of opportunities and a plan of unforeseen circumstances, to prevent threats.
In order to formulate a clear and understandable picture of the development of the situation, the results obtained must be correctly compared, bringing together several stages of analysis: analysis of the macroenvironment, which can be conditionally divided into sectors: political environment (regulatory acts of local authorities and the state; level of development of legal regulation economy; attitude to antimonopoly legislation, etc.), economic environment (inflation rate; tax rate; international balance of payments; employment level, etc.), social environment (social values; relationships, traditions, etc. ), technological environment (changes in production technology, structural materials; the use of computer technology for the design of new goods and services, in management, etc.); international factors (the management of firms that operate in the international market must constantly assess and monitor changes in this broad environment), analysis of the market environment, which includes numerous characteristics that directly affect the efficiency of organizations, namely: the size and potential of the market; client behavior; segmentation; suppliers; distributors; pricing trends; elasticity of demand; .
benchmarking and analysis of the competitive environment of the corresponding type of economic activity, as a rule, includes an assessment of the following main factors: superior features of the analyzed type of economic activity; current strategy; goals for the future; key success factors; attractiveness of the area.
Having received sufficient information about the external environment, it is possible to synthesize it by creating scenarios - a realistic description of how trends may manifest themselves in a particular area in the future. As a rule, several scenarios are created, according to which one or another enterprise strategy is then tested. Scenarios make it possible to determine the most important environmental factors that need to be taken into account by the enterprise, some of which will be under the direct control of the enterprise. When there is
Rice. 1.6 Algorithm for formation and implementation
corporate strategy of the company
In the event of factors beyond the control of the enterprise, the developed strategy should help the enterprise make the most of its competitive advantages and at the same time minimize possible losses.
The process of developing and implementing a corporate strategy is quite complex and multi-stage. It requires knowledge not only of the theoretical foundations of constructing a scientifically based strategy, but also knowledge of methods for developing specific practical actions, vision of optimal strategic alternatives, development and decision-making, the ability to predict their results and timely adjust the developed strategy.
For example, the process of developing a business unit strategy takes on average about 2–3 months. Its main stages are presented in Fig. 1.7
Rice. 1.7 Business unit strategy development process
An important stage is formulating a vision. An accurate understanding of the expectations of key stakeholders will help company managers to correctly prioritize and scope the necessary research. This stage also allows you to significantly reduce the risk of being misunderstood during the presentation of the strategy to shareholders.
Strategic Analysis includes an assessment of industry trends, an assessment of the competitive environment in the company's position, and an assessment of the company's ability to implement its strategic intentions. Strategic analysis is the most critical stage in developing a strategy; it takes up to 70% of the time. At this stage, the attractiveness of target segments should be assessed, and possible sources of sustainable competitive advantages should be identified. Based on the results of the strategic analysis, the company's management prepares a report. The facts, assumptions and forecasts stated in the report should form a general understanding of the future, which, after discussion and adjustments, should be accepted by the group members as the basis for further steps.
At the next stage, strategic alternatives are formulated that answer the questions:
1. Where to compete?
2. How to compete?
3. When to compete?
Reply to first the question characterizes the positioning of the company (product, consumer, distribution channels, territories, position in the value chain). Answers to second question characterize the sources of sustainable competitive advantages that will ensure the company's leadership in the competition (unique assets, competencies, privileged relationships). Reply to third question: the choice of alternatives involves different time frames for the implementation of strategic initiatives.
Alternatives are evaluated based on a number of criteria, including compliance with strategic goals, financial goals, organizational constraints, financial constraints, etc.
As a result, the most acceptable alternative is selected, on the basis of which the company’s management develops a detailed business plan for implementing the strategy.
For the strategy to work, you must:
1. Develop a clear system of target indicators that guides the company towards achieving the goals outlined in the strategy.
2. Create a management motivation system that encourages management to achieve goals.
3. Make appropriate changes in the organizational structure.
4. Provide the company’s management with the required resources in accordance with the approved strategy.
Stage II. Along with the analysis of the external environment, it is important to conduct an in-depth study of the real state of the joint-stock company. The internal environment includes changing (strengths and weaknesses) parties that are located within the joint-stock company and that are subject to control by management. Analysis of the internal state of the company is carried out on the basis of a comprehensive study of its different functional areas. For management research, it is recommended to include seven functional areas: marketing, finance, production, personnel, scientific and technical potential, organization, corporate culture. The study of the micro- and macroenvironment of joint-stock companies, the study of its opportunities, threats, strengths and weaknesses is necessary for managers to determine the mission and goals of the company, and the formation of a strategy aimed at strengthening competitive advantages.
Stage III the formation and implementation of corporate strategy is the strategic vision of the corporation, i.e. its corporate plan determines the current status of the company, goals, and ways to achieve them.
There are three important steps required for management to develop a strategic vision: setting a mission, defining goals, and communicating those goals to management and staff.
The mission of a joint stock company represents the decision of the owners about the purpose of the corporation, the meaning of its existence - in the areas and areas of activity, the goods and services produced, and sales markets. The mission must be closely linked to the expectations of the so-called contact groups. Any corporation has certain obligations to these groups, the principles of interaction with which represent the basis of the organization's philosophy.
The mission (the main idea) and the entrepreneurial philosophy are necessary to establish the strategic goals of the corporation, as well as to gain the trust of consumers and other contact groups, to avoid conflicts of their interests. Mission is a vision of what a joint stock company should be in the future, a system of goals (long-term and short-term goals), desired results that correspond to the understanding of the goal. It is clear that the global prerequisite for the successful development of a management strategy at any level is the correct definition of goals. Defining corporate goals is a way of clarifying the strategic and political direction of the organization, agreeing on additional operational goals and objectives. It is an integrative process that links corporate planning and business operations. The stages of implementing goals in a corporation are depicted in Figure 1.5.
Higher-level goals focus on the long term and allow managers to evaluate the impact of today's decisions on long-term performance. Lower-level goals, focused on the short and medium term, are the starting point of strategic planning, motivation and control systems.
After collecting data for analysis and obtaining information to model the future, the company can develop a realistic strategy - stage
IV. Here it is important to realize that each joint stock company creates its own unique strategy, which does not tolerate stereotypes and standard solutions.
Rice. 1.5. – Stages of implementation of goals
Strategy creation is carried out at the highest level of management. At the same time, the manager needs to evaluate alternative ways of operating the corporation and choose the best options to achieve its goals. Strategic management assumes that a corporation determines its key positions for the future depending on the priority of its goals. A joint stock company faces four main strategic development options: limited growth, growth, contraction, and a combination of these strategies.
Having chosen a particular strategic option, management must turn to a specific strategy. Strategy is a single, integrated and clear plan developed in such a way as to ensure the achievement of the goals of the corporation. Hence, corporate strategy is the definition of the company's values, which are reflected in financial and other goals. It is based on the identification, creation or acquisition of key resources and production capabilities and leads to decisions about in which areas the corporation intends to compete and how different lines of business will be interconnected.
To do this, managers must have a clear, universally acceptable concept for organizing the future of the corporation. At the same time, strategic choice is influenced by various factors: organizational structure; corporate culture; the process of formation, adoption and implementation of management decisions; context (history of the development of the corporation, its specifics) (See Fig. 1.6).
It should be noted that, depending on the type of relationships between industry areas, it is customary to distinguish several main types of corporate strategy: interconnected diversification, unrelated diversification and vertical integration strategy.
Diversification strategies consist of the company's penetration into other economic activities in order to eliminate the excessive dependence of one product range on market conditions. When implementing a strategy of interconnected diversification, the corporation is looking for new types of activities that complement existing ones in technological and commercial terms, in order to achieve a synergy effect.
When implementing a strategy of unrelated diversification, the corporation goes beyond the traditional production or commercial chain and looks for new types of activities that differ from existing ones both in the field of technology and sales markets. This type of diversification is carried out mainly to obtain quick or stable financial results.
1. Development of short strategic concepts for each business unit.
2. Development of the first version of the corporate strategy (formation of a business portfolio, determination of the principles and structure of portfolio management).
3. Development of detailed business unit strategies for the most important business areas.
4. Clarification of the corporate strategy taking into account the developed strategies of business units.
5. Development of a detailed plan for implementing the strategy.
The development of previous strategic concepts will allow us to form an optimal business portfolio and determine the corporation’s priorities for the near future. As a result, detailed strategies will be developed only for priority business units, which will significantly reduce costs and improve the quality of decisions made.
Rice. 1.6. – Factors determining the strategic choice of a corporation
Development of a corporate strategy includes 2 main tasks:
Formation of a business portfolio and determination of priorities;
Formation of an organizational structure that ensures corporate governance.
When forming a business portfolio, it is necessary to concentrate on those areas that correspond to the core business and can become sources of growth in the value of the corporation. A business that is profitable, but does not correspond to the core business of the corporation, is self-sufficient and can exist separately, should be removed from the portfolio. At the same time, we are not talking about selling, much less liquidating, a business: it simply does not add value to the corporation, and the corporate center and other types of business do not strengthen its position.
Once a core overall strategy has been selected, it must be implemented by integrating it with other organizational functions. An important mechanism of strategy is the development of plans and guidelines: tactics, policies, procedures and rules - V stage.
The strategic plan operates over the next several years and regulates the implementation of the corporation's strategic objectives. During this period, the joint stock company will invest funds and review current plans in order to achieve strategic goals or make changes to its strategic plan. Strategy evaluation is carried out by comparing performance results with goals. The evaluation process is used as a feedback mechanism to adjust the strategy.
The successful implementation of the strategic plan depends largely on the competence of the people who can help the company achieve its goals.
Once a strategic plan has been developed, the manager is faced with the task of implementing it with a positive effect. If strategy development is primarily an entrepreneurial activity, then its implementation is an internal administrative activity.
However, in order to implement the strategy, it is necessary to use a tool called a system of interdependent performance indicators, and based on this system, develop mechanisms for the operational management of the corporation. A system of interdependent performance indicators is understood as a system of financial and non-financial indicators that affect the quantitative or qualitative change in results relative to the strategic goal (or expected result).
The structure of the system of interdependent performance indicators depends on the specifics of the corporation and on the tasks of the structural divisions.
The main tasks of implementing the corporate strategy are presented in Figure 1.7.
Effective implementation of the strategy is ensured by a corporate culture, which is based on basic ethical standards and operating principles. These values in different corporations can be different and largely depend on whose interests lie at the heart of the corporation’s activities: the company itself as a whole or its individual members.
A high level of corporate culture is an important strategic factor that mobilizes all structural units of the corporation and its individual employees to achieve the goals set within the mission.
The most significant characteristics of corporate culture include: employee awareness of his place in the corporation; type of general activity; code of Conduct; type of control; communication culture; communication system; business etiquette; company traditions.
The decisive factor in the development of corporate culture is the company’s philosophy or, in other words, the principles by which the corporation is governed.
Strategy implementation involves choosing the right combination of structures and monitoring the implementation of corporate strategy. At the same time, control must be exercised at all levels of management: corporate, divisional, functional and individual.
Rice. 1.7. – Key tasks of implementing the strategy of the joint-stock company
Assessment and control of strategy implementation is carried out through strategic management - VII stage. This process provides stable feedback between the achievement of the corporation’s goals and the goals of the organizations included in the corporation
Management must establish an effective internal control system in order to successfully manage the corporation's operations and develop a strategic plan. At the same time, there is no unified internal control system, because each corporation has a different culture, systems, management style, structure and types of economic activities. The creation and practical use of an internal control system is aimed at supporting the strategic goal of the corporation’s economic activity
The internal control system must implement four stages:
Establishing performance assessment standards that are developed simultaneously with the strategy;
Creation of a measuring system;
Comparison of actual performance with established goals;
In order to ensure the quality and effectiveness of the control system, it is necessary to check and monitor the system through ongoing or periodic assessments.
Creating a corporation strategy ensures the effective distribution and use of all resources: material, financial, labor, land and technology and, on this basis, a stable position in the market in a competitive environment. In this regard, first of all, there is a necessary transition from a reactive form of management (making management decisions as a reaction to current problems) to management based on analysis and forecasts.
When forming a corporation's strategy, it is also necessary to take into account the problems that arise in the planning process at both the corporate and divisional levels. These include questions about the availability of information, relations of power and property.
Without a clear understanding of these problems, it is impossible to optimally determine the corporation's strategy, which should be systematic, that is, take into account the capital structure and depend on the type of corporate association.
A necessary condition for the development and implementation of a corporate development strategy for a joint-stock company is the creation of an appropriate mechanism for coordinating the interests of participants in corporate relations when determining the strategic and current goals of joint-stock companies.
Organizing a productive strategic dialogue between company leaders (members of the board of directors and top managers) is an important condition for increasing the efficiency of corporate governance. Executive and non-executive senior officials must work together to resolve many difficult issues; choose a position that will form the basis of the corporate strategy (formative, adaptive, preserving the right to participate in the game), determine the main source of the company’s competitive advantage (structural superiority, high-quality execution of daily operations, deep understanding of cause-and-effect relationships), justify the most important method of applying business -concepts (high rates, real and financial options, win-win moves, insurance), identify the level of uncertainty at which the company will operate (confident forecast, set of scenarios, limited uncertainty, complete unpredictability), etc. Having formulated and approved the general course, the company's leaders begin its consistent implementation.
McKinsey consulting company experts Ken Berryman and Tom Stephenson, those specializing in the application of information technology in strategic management indicate; Effective interaction between the board of directors and top managers is impossible without timely provision to both parties of detailed data about the successes or failures of the company in implementing its chosen strategy. This information is not always contained in quarterly financial reports or other traditional materials. All managers of a joint stock company should regularly receive a special selection of objective, interconnected reports that can create a clear and colorful picture of the situation in which the company finds itself. In order for an enterprise IT system to generate such reports, it must successfully solve four important tasks.
Firstly, achieving internal unity of the indicators used. They must be calculated in such a way that their formation can be easily traced from primary data characterizing financial and economic transactions. Senior managers and board members need to be able to get to the root of a company's problems or the seeds of opportunity.
Secondly, ensuring maximum relevance of information. Traditional reports with figures for the past month are now an anachronism: in American corporations it is believed that managers should receive information no more than two weeks old (and best of all, a week old). Reducing the time it takes to provide data creates the conditions for making more flexible and almost instantaneous strategic decisions.
Thirdly, individualization of reports in accordance with the needs and authority of specific users. Board members choosing a global market strategy and executives choosing a core regional market to implement that strategy need different food for thought. Committees are created within the board of directors aimed at solving specific problems (the most common are audit, nomination and remuneration committees), so each of them requires special, specialized information. In other words, the IT system operating in the corporation must ensure the preparation of reports in various versions, aimed at a strictly defined target audience.
Fourthly, use in all reports a basic set of performance indicators covering the most important components of the corporate business portfolio. To fully implement these indicators, it is necessary to standardize and automate not only the collection of data and the generation of reports, but also the sending of urgent messages to managers about the achievement of certain threshold values by key indicators, indicating drastic changes in the situation, both positive and negative. According to K. Berryman and G. Stephenson, the IT complexes of a very significant number of American companies do not yet include either general corporate sets of indicators or “signaling” systems based on them.
The role of information technology in strategic management is not limited to the creation of the reporting described above. Another important area should be noted: intracorporate communications (Intranet systems) are developing quite quickly, providing senior officials with instant access to the latest data on the company’s activities and allowing them to hold full-fledged Web meetings of management bodies, the participants of which are located in different cities and countries. Only a few giants - for example, Hewlett-Packard and Intel - create such systems in-house. Most corporations turn to the services of specialized organizations, and one of the leaders in the production of software with these functions is the American technology company BoardVantage Inc. As the CEO of large trading company Albertsons Inc. notes, which implemented the system in early 2003, “our board of directors is much more active and meticulous than before.”
Undoubtedly, ensuring the implementation of such complex tasks requires very serious costs from a joint-stock company. However, improving the strategic communication of leaders will pay off handsomely, embodied in the rapid adoption of forward-looking decisions, i.e. in improving long-term business performance.
See more details. Asaul, A. N. Investment and economic strategy of the enterprise / A.N. Asaul, V.P. Grakhov // Current problems of the investment and construction process: thematic. Sat. tr. - St. Petersburg. : Stroyizdat St. Petersburg, 2003 - Issue. 2
Knysh, M.I. Strategic management of corporations / M. I. Knysh, V. V. Puchkov, Yu. P. Tyutikov - St. Petersburg. Cult. Inform Press, 2002 -240
A strategy is a generalized model of actions necessary to achieve set goals. Goals are the key results that an enterprise strives for in its activities. By setting certain goals, management formulates the main guidelines on which all activities of the enterprise and its team should be focused.
To work effectively, managers set specific, measurable, relevant, stimulating, visible goals for the organization for a certain period of time. Developing effective goals strengthens incentives, sets clear guidelines for activity, and creates a clear picture of expected results.
Typical goals include achieving the share of a given enterprise in sales markets, growing business volume, its profitability, profitability and other characteristics.
However, there is no single strategy. Business theory and practice have developed many strategic approaches to doing business. This diversity is due to the specific conditions in which business is carried out, a combination of external and internal factors, trends in the relevant industry, the nature of the business goals and a number of other factors.
All types of strategies found in the business world can be grouped into three groups:
· offensive or breakthrough strategy;
· defensive or survival strategy;
· strategy for reducing and changing types of business.
Each of them has many options depending on the specific operating conditions of the company. There may also be multi-purpose strategies that combine elements of each of the groups.
It is clear that an offensive strategy, or a breakthrough strategy, which pursues the goal of gaining a certain market share, and often taking a leading position in a new market or in a new industry, is more attractive. An offensive strategy is usually based on the implementation of a specific innovation and involves an entrepreneurial approach. There are many variants of this strategy in world business practice.
It is also important that a strategy can never be thought out and calculated to the end, and its adjustment as external and internal conditions change is a necessary procedure.
From the above it follows that there is no universal strategy development method suitable for all occasions, but experience suggests several possible directions for development.
12. Strategy implementation management. Budget method: essence and implementation procedure.
In the process of implementing the strategy, each level of management solves its own specific tasks and carries out the functions assigned to it. Top management has a decisive role. Its activities at the strategy implementation stage can be presented in the form of five successive stages:
1) in-depth study of the state of the environment, goals and developed strategies.
2) development of a set of solutions for the efficient use of the resources available to the enterprise.
3) senior management makes decisions to make changes to the current organizational structure.
4) the necessary changes are carried out at the enterprise, without which it is impossible to begin implementing the strategy.
5) adjustment of the strategic plan if new circumstances urgently require it.
Carrying out the necessary work helps to create the conditions necessary for the implementation of the chosen strategy at the enterprise.
Budgeting optimizes the processes of making management decisions, allows you to objectively assess their possible consequences, and also increases the efficiency of managing financial and material resources. The essence of budgeting is planning all aspects of activity.
Budgets are developed for the enterprise as a whole, for all its structural divisions, for each individual type of activity.
With proper budgeting, the following goals are achieved:
· coordination of the activities of individual divisions of the enterprise and coordination of their interests;
· multifaceted planning of operations, which allows solving declared problems;
· operational control of the activities of the enterprise and all its divisions.
The introduction of a budgeting system at an enterprise allows you to clearly plan economic and financial activities, which minimizes risks, increases its profitability and reduces costs.
Management by objectives. Contents and basic procedures.
Management by Objectives is a systematic and organized approach that allows managers to focus on Objectives and achieve superior business results.
A goal is a foresight in thinking of the result of a business activity. Permanent Employee Goals answer the question: What can be improved in existing business processes? Temporary Employee Goals answer the question: How to achieve Permanent Goals? or “What processes need to be created? To achieve Standing Goals?
Management by objectives is a method of management activity that involves anticipating the results of activities and planning ways to achieve them (Tasks, Projects).
To implement the strategy, an organizational plan is created at the enterprise, which includes: choosing an organizational structure; forming a team to implement the strategy; communicating tasks and functions to staff; familiarization with the strategy implementation schedule; preparing a budget to implement the strategy.
It is also important to provide resources and resolve issues of motivation for all participants.
Related information.
