The criterion for the selection of strategies must be treated as something that involves both the Management and the strategic group, and the strategies must seek to meet the short-term (in this case, tactics) and long-term objectives to reach the vision.
This article allows to know more about what the steps should be to be successful in the selection of strategies, focused on 4 steps: be clear about the concept of strategy, what organizational levels the strategy application process implies, develop strategic thinking within the group of strategists and finally the assessment of the strategy. The point is to give the reader the ability to perform a better analysis when selecting the strategy.
Much has been heard about the different types of strategy that organizations should use, such as the generic strategies of Michael Porter (leadership in cost, in differentiation, and focus) or the strategies for internationalization of George Yip, but make a decision The choice of strategy involves several points, which will be detailed in this essay, so that the decision is the most appropriate; First you have to be very clear about the concept of strategy, then define at which of the levels of the company it will be applied, the third step that must be taken into account is how strategic thinking should be within the group that will apply it and finally the evaluation of the strategy.
Steps for the selection of the strategy in organizations
These are the four steps that companies must follow to select the most appropriate strategy.
Step 1. The concept of strategy
The first step, being very clear about the concept of strategy, has become a widely used term in business environments, and has been touched by many authors, the best definition for the author of this essay is the following:
"Strategy is an action plan for the company to move towards an attractive business position and develop a sustainable competitive advantage" (Thompson and Strickland)
Organizations must develop the most important competitive advantage, which is knowledge or intellectual capital that occurs based on experiences, innovation, and motivation; but it does not consist in only having it, the success of this advantage will be as long as it is sustainable over time.
Step 2. Strategy level
Secondly, it is necessary to define at what level of the organization the strategy is going to be applied and who it is going to involve, when talking about levels it is necessary to detail what they are, following the concepts of Thompson and Strickland there are 3 levels:
- An operational level that is given by the responsibility of the supervisors, for example in a textile plant, the supervisor must develop a strategy to reduce the number of losses in the looms to less than 0.05%; A functional level, oriented more to the heads The key is in a proper management of a functional activity or some important process within the organization, for example marketing strategies, development of new products; yFinally the business level where the responsibility is of the executive, administrator, it is applied in organizations where there is a line of business and success will lie in developing a more powerful competitive position in the long term, for example developing strategies to increase sales in a year by 10% (covers practically to all the areas that make up the operating cycle of the company).
It is good to clarify that these three levels of strategy application are exclusive for companies with a single business; For a diversified company, an additional level would have to be added, which is the corporate level, where the strategy is extended within the entire company, for example, that the company enters new businesses in attractive industries.
It is necessary to add that the connection between the levels is bidirectional and that more than one level may participate in the application of strategies.
Identification of the strategy according to the organization level - Source: adapted from the book Strategic Administration, Thompson Strickland
Step 3. Thought of the strategist
The third vital step for the proper selection of strategies is how the strategist should think, he will have to “have a clear understanding of the particular nature of each element in the given situation, and the ability to restructure these elements in the most appropriate way seeking a goal. which will allow us to reach the vision of the organization. " (Ohmae, p.13) For which it is essential to develop effective strategic leadership, based on the development of a plan, a purpose and a strategic mission. The leader must be able to make honest decisions and develop corrective feedback about the value of crucial decisions for the organization.
The strategist has to be intelligent (understands the processes, has clear and precise ideas), has to be analytical (able to obtain answers and solutions), curious (has to see beyond the surface of the problem) and an effective communicator (the communication within the group has to be assertive). It is concluded that strategic thinking is a human ability that requires a mental effort, to envision and forecast situations that lead us to the fulfillment of long-term objectives and allow us to face conflicts from an advantageous situation.
Step 4. Assessment of the strategy
Finally, the last step, to evaluate and compare formulated strategies, the evaluation of the strategy must be developed. For which the use of the framework for the valuation and selection of strategies, proposed by Jonhson and Scholes, is proposed.
Framework for the valuation and selection of strategies - Source: Adapted from the Johnson and Scholes model
The evaluation process begins with the strategic analysis, which consists of identifying the current context of the organization, what is its current situation and how it will be able to face the selected strategies, then the strategic options are located in which the development possibilities are identified and how to filter the possibilities to delimit the field of study, that is, to what extent the strategy will cover.
The next phase is the assessment of the opportunity, that is, defining if the strategy is useful in the current situation, how it is operating and how it wants to operate, what is sought is that the selected strategies are rational, for which it can be applied business tools such as Porter's value chain or its competitive diamond, be clear about the primary and secondary activities within the organization.
Subsequently, the strategies must be weighed from a list of strategic variables, which solidify the strategy, for example leadership and management indicators within the members of the strategic group. Another factor to reduce the risk of failure is the development of scenarios, after the implementation of the strategy, which would allow greater certainty of the results.
Finally, it is time to analyze the last two points of the graph, acceptability and feasibility, in this phase a quantitative development is made. Acceptability involves an analysis of expected results that includes points such as a profitability analysis, the development of cash flow (cash flow), a cost-benefit analysis (the sacrifice of applying a strategy that resulted as a result) could be used as a tool. and finally analyze what value it has for the shareholder (as Jack Welch would say, organizations must seek to make their shareholders rich). Regarding the tools to achieve greater certainty in the choice, they can be used to reduce risk and acceptability for the appropriate strategy, we have simulation models, decision matrices and sensitivity analysis.
The feasibility analysis seeks to know if the organization has the necessary resources and competencies for the implementation of the strategy, in addition, a financial feasibility analysis is necessary.What is the relationship between capital inflows and outflows? profitability? Does sales cover the organization's costs? and it is also necessary to estimate a return on investment.
Conclusions
You do not have to stay in competitive advantages per se. They need to be sustainable over time, for which organizations must have some barriers that make it difficult for their strategy to be imitable, intellectual capital being the best resource to achieve it.
To define the level at which the strategy is to be developed, it is necessary for the organization's employees to know their functions and obligations and how involved they are in the development of the strategy, ergo they have to work together to achieve that the objectives are comply.
Strategic thinking must be instilled among all participants of the strategic plan, it is necessary to strengthen ideas and develop solutions to solve problems that arise and thus achieve long-term objectives.
The selection of strategies implies a quantitative and qualitative analysis to see which is the most profitable for the organization, it is necessary to make estimates about its future consequence to achieve better decision making.
Final message
The selection of a strategy will be successful as long as it achieves a competitive position within the sector in which the organization operates. It is necessary to break with the status quo, to achieve the vision through the application of a strategy that develops competitive advantages.
Bibliography
- PORTER, Michael E. Competitive Advantage. México, Patria Cultural, SA 1994. OHMAE, Kenichi. The Mind of the Strategist. México, Mc Graw Hill, 1989.THOMPSON, Arthur A. & STRICKLAND III, AJ Mexico, Mc Graw Hill, 1999.
