To succeed in business it is essential to have a basic grasp of business strategy techniques. As the owner of your business you will be responsible for all aspects of running the business and entirely responsible for the strategic management of it. You will decide the strategy for your business and plan how that strategy is to be put into effect.In its most basic form, strategic management has three clear components:Before taking any decision on strategy you need to assess where you are now and where you want to be (analysis). Then decide what options are available to you and evaluate those options in order to select an appropriate strategy (choice). Once you have decided on your strategy you need to translate that strategy into action (implementation).
Strategic Analysis
There are two distinct areas in relation to any business that require analysis:
- the environment
- the resources of the business.
Analysing The Environment Using A Peste Analysis
There are many factors in the environment that could impact upon your business, and a PESTE analysis is designed to provide a focused framework for your research.
P – Political
E – Economic
S – Social
T – Technological
E – Environmental
Political
Political forces on a business may at first seem inconsequential, although more and more legislation is being enacted which has a direct impact on all businesses. You may need to consider, for example, health and safety legislation governing conditions in the workplace and consumer protection legislation covering labelling and packaging.
Ensure that you identify and comply with all relevant legislation. Failure to do so can be extremely costly in terms of fines or other penalties. (See
Chapter 2.)
Economic
Economic forces include the effects of inflation, interest rates and exchange rates. With the development of the Single European Market, even if you do not export any goods or services you may face increasing competition from firms within Europe. This means that exchange rate movements can still be relevant, especially while the UK remains outside the Single European Currency.
Careful consideration must also be given to economic trends within the UK. For example, will rising interest rates affect the spending habits of your customers? Can increased costs be passed on or is your market price-sensitive?
Social
Social forces include the consideration of changing demographic trends in your customer base and the changing social climate in different parts of the country. Greater emphasis is now being placed on links between the business community and educational establishments to provide a greater understanding of business techniques to students. This could be a source of potential business opportunities.
Technological
Technological forces have been one of the most important aspects affecting businesses over the last decade. The development of information technology has affected the ways in which business is conducted, including the use of faxes and e-mail and not overlooking the opportunities created by the Internet.
Rapid advances in technology have presented all businesses with tremendous opportunities. The use of the latest available technology must be considered whatever your business.
Environmental
The final factor, environmental, is often dismissed as unnecessary by people on the basis that the whole point of this analysis is to look at the environment. I do not agree. The impact of a business on the environment must be considered quite separately. Some of the issues may overlap with the concerns relating to legislation but
many – for example, the use of genetic engineering – are important enough to warrant an independent heading.
Completing An Audit Of Resources
In the case of a new business you may have no existing resources to audit, but even at this stage you can think about the sort of resources that you may require as the business progresses. There are three key headings under which your resources will fall:
Physical Resources
Your physical resources might fall under different sub-headings, for example, plant and machinery, tools and equipment, and vehicles. The assessment of your business’s physical resources must not be just a straight list of what you physically have in this respect. You need to go one stage further and determine the exact nature of each resource in terms of age, condition, capability, location and, most importantly, how long it will last and when it will require replacement. This will enable you to make long-term plans for future capital investment.