Strategic Business Planning and Competitive Advantage

Posted on Dec 10, 2024 in Economy

The Business Environment

General Environment: The overall framework or set of factors and circumstances which apply equally to all firms in a given society or geographical area.

Environment-Specific: It refers only to those factors that influence a group of companies that have common characteristics and concur in the same sector of activity.

General Environmental Factors

Set of factors that define the framework within which firms operate and establish the circumstances in which they are to develop. Highlights:

  1. Economic Factors: Have a more temporary nature. The level of U.S. economic activity, unemployment, inflation, interest rates, etc.
  2. Socio-cultural Factors: They include the educational, cultural patterns, fashion trends, social differences, etc. These factors affect the demand for businesses that are forced to react to adapt to changes if they want to ensure their survival.
  3. Political-Legal Factors: Means measures taken by governments in their economic policies and the laws establishing the legal framework within which companies operate. Governments determine fiscal policy and develop standards governing the various markets. The state intervenes through policies to promote business activity and regulating certain sectors.
  4. Technological Factors: Changes and technological advances affect both the products offered by companies and their production processes. The emergence of technical improvements requires companies to incorporate if they want to maintain their market position.

The company must act in a changing environment that requires constant adaptation. Companies know the importance of anticipating change. Companies often resist them and regret it when they find that their structures and strategies are outdated and inadequate.

Specific Environmental Factors

Are the sector of activity in which the company operates, are those that most directly affect. They are:

  • Vendors and suppliers of raw materials and other resources to the productive activity of the company.
  • Customers or consumers buying the products of the company.
  • The competitors or companies that produce the same type of goods and services, and therefore participate in the same market and target the same customers.
  • The brokers or dealers, facilitating access to consumer products through the channels and points of distribution and sales.

Any change in any of these factors directly affects the company, which will be bound to react. The emergence of a new competitor, the launch of a replacement, are events that occur in specific environments and directly affect their market position and its results. Businesses should be alert to the market to identify opportunities and anticipate the risks that arise.

The Company’s Competitive Strategy

The complexity of the environment resulting from economic globalization forces companies to design strategic planning.

The Strategic Plan

Is to determine the strategy of the company:

  1. Determine where we are from a diagnosis of the situation.
    • External analysis and internal analysis (in this analysis are useful tools like the SWOT matrix or Porter’s model)
  2. Where we are going.
    • The vision or image we have of the future we want for the company.
    • The mission or purpose of the company.
    • The objectives and mission goals to materialize.
  3. Set how where we want to go.
    • We must choose the strategy.
  4. How to come, when and with what resources.
    • Plans and budgets for programs that include the objectives and responsibilities.
  5. How we control the process of implementation.
    • The control that detects whether the objectives are being achieved and the causes of deviations.

The Choice of Strategy

Companies design their strategy to take different types of decisions:

  • Strategic: Long term and aim to put the company into a competitive advantage.
  • Tactics: Are medium term and specify the strategies.
  • Operative: Short term and have the objective of conducting the business of the company and midline.

The company’s competitive strategy pursued by the quest to achieve to get some kind of competitive advantage.

There are three types of strategies:

  1. Cost Leadership: A company produces lower costs than its competitors while maintaining an acceptable quality.
  2. Product Differentiation.
  3. Segmentation or Niche Markets: The company introduced its product characteristics, differentiating it from other products sold in the sector in addressing specific parts of the application and specialize in them.

Strategic Analysis: SWOT Method

To design their strategy companies need to analyze their situation. It uses the SWOT method.

SWOT analysis (Strengths, Weaknesses, Threats, Opportunities) is a method to analyze the strengths and weaknesses of the company, its advantages and disadvantages of the design environment for competitive strategy.

The method performs a SWOT analysis of the business.

It comprises two types of analysis:

External Analysis

Environmental characteristics that may pose threats to businesses.

Detect and analyze threats and opportunities.

The threats are changes in the environment that may place the company at a competitive disadvantage.

Opportunities are environmental changes that can improve the competitive position of the company.

Internal Analysis

Allows to detect the strengths and weaknesses of the company. Strengths are positive aspects of the company in the sector.

Examines the quantity and quality of company resources.

Some commonly used indicators are:

  • The managerial ability, business and management: strong or weak.
  • Financial resources, satisfactory or poor.
  • The facilities and technology resources: efficient or obsolete.
  • The cost advantage over other competitors: positive or negative.
  • The image on consumer products company: good, better or nonexistent.
  • The technological knowledge and R+D+I (Research + Development + Innovation): good, poor, nil.
  • The retail distribution network, good and trustworthy, or poor.
  • Training and motivation of workers: high or low.
SWOT Matrix
  • Pick: strengths and weaknesses = internal analysis.
  • Detects: opportunities and threats = external analysis.