Strategy Development in the business world (Understanding Strategic Business Landscapes Ba Hons Business & Management)
1.0 Introduction to strategy
Strategy is an every changing concept and has evolved greatly over the last 50 years and been part of key business literature since the late 1960’s. There are numerous definitions of strategy in a business context. Chandler (1962) states that strategy is the determination of long term goals and objectives, with specified courses of action and allocation of resources necessary for those goals to be attained.
Similar definitions have been forwarded by many academics such as McNichols (1977) who says strategy comprises of a series of decisions reflecting the determination of basic business objectives and the utilisation of skills and resources to attain these goals. Ackoff (1974) believed strategy is mainly concerned with long term objectives and ways of pursuing them which would subsequently have an effect on the organisation as a whole. Simplified it seems that strategy is seen as a long term plan on how to achieve the business objectives and aims.
Strategy is an essential aspect of any successful business. Strategies help provide direction for a company, establish priorities, reduce uncertainty and aid in both the allocation of resources and the design of jobs.
1.1 Mindsuk ltd
Mindsuk ltd are a small startup company situated in the UK whose focus is on providing mental health training to small businesses and larger companies. They will primarily offer 3 different services to accommodate different business needs. The three services provided consist of a 2 day full Mental Health First Aid course (MHFA), a “lite” version of the MHFA course which is delivered over a 3 hour period and Mental Health workshops.
The MHFA courses offered at the moment are targeted towards everyone aged 16 and upwards. All MHFA courses are delivered by a quality assured instructor accredited by the royal society for public health. Courses are delivered in different styles to suite different learning requirements consisting of group activities, presentations and discussions.
The centre for Mental Health (2016) says that 1 in 6 workers will be affected by mental ill health at any one time, 91 million days are lost each year due to mental ill health and the cost to the economy is an estimated £26 Billion. This could be the selling point to organisations. See appendix 1 for a breakdown on the estimated costs.
Two members of staff currently work; both are the owners of the company. Operational days for delivery of the courses are Monday to Friday between 9am and 8pm. These two members of staff are in charge of running the business, managing finances and delivering the courses. The full time course is currently priced at £250 per head as an introductory offer; the full price is valued at £300 per head. The maximum number of people on any one full time course is 20. The 2 day course requires both members of staff to be present; the running of the courses can be done on the premises of the paying client or externally in which Mindsuk ltd would hire a venue to deliver the course.
In the near future Mindsuk ltd is looking at incorporating a Youth MHFA course. According to MHFA (2017) one in ten young people experience a mental health issue at any one time and for youngsters aged 5-19 suicide is the second most common cause of death. Furthermore MHFA (2017) states 20,000 young people contacted Childline with suicidal thoughts. Clearly the need for mental health first aid training is there. Appendix 2 offers further insight into young people’s fight with mental health.
2.0 Current Strategic Planning - Mindsuk ltd
The use of a cost leadership strategy is currently being used to increase market share by providing lower prices than the competition. The Mental Health training market is somewhat new and the concept of mental health training was introduced to the UK in 2007 according to MHFA (2017). The market is still developing and is quickly gaining exposure due to the increase in mental health related illness (mind, 2016).
An emergent strategy is currently been used due to the short time the market for MHFA courses has been around. An emergent strategy is bottom up approach to strategy which was introduced by Henry Mintzberg (1985). Emergent strategies incorporate unforeseen outcomes into their current strategy due to the ever changing business environment. This allows companies to change with the environment and become flexible. Henry Mintzberg introduced this theory as he did not agree with a strategy brought about by Michael Porter (1980) known as the deliberate strategy. In contrast this was a top down approach in which it was argued that a strategy should be rigid and external assessments should be done in order to identify potential opportunities and threats prior to the development of a strategy. Mintzberg’s approach seems more realistic due to how turbulent the currently developing MHFA market.
The use of the current cost leadership strategy is also currently being used. Mindsuk ltd is a new company attempting to penetrate the market with lower prices to help establish their brand. The use of multiple strategies is an option for MMindsuk ltd; product differentiation may be an option in the future.
2.1 Mission statement
Today’s thoughts on mission statements are based largely on guidelines put forward in the mid-1970s by Peter Drucker (1974, p. 56). According to Drucker (1974) only a clear definition of the mission and purpose of the business makes possible clear and realistic business objectives. Drucker also believed that a mission statement is the foundation to creating a clear business strategy. Building on Drucker’s work, Campbell, A., & Yeung, S. (1991) believed there were four key elements to creating a mission statement, these consisted of purpose, strategy, behavior standards and values, however most strategists today believe there are now 9 components to a mission statement.
The 9 components of a mission statement are Customers, products/services, markets, technology, and concern for survival, philosophy, and self-concept, concern for public image and concern for employees.
MindUK ltd's mission statement can be seen below:
“We want to reduce the stigma & change perceptions surrounding mental health, through training; to educate, raise awareness and to help people, People? Which people? Everybody & Anybody! Yes… that means you & the person next to you”.
“We believe that together, we at MindUK ltd and you out there have the ability to make a difference… no matter how big or small”. (MindUK ltd, 2017)
David et al., (2014) suggested that carefully developed mission statements would create immediate rewards for a company and on that note a more comprehensive mission statement would give customers and management a clear understanding of a company’s purpose and reason for being and with that in mind MindUK ltd’s mission statement needs developing as it includes only 3 of the nine components; the components included are customers, product and markets.
A vision is essential to the leadership of an organization and acts as way of building cohesion within a company to achieve the common goals. (Kouzes and Posner, 2009), furthermore the vision statement provides customers and staff a description of what a business aims to become which can act as a motivational tool. (Candemir and Zalluhoglu, 2013)
MindUK ltd's vision is to become the pioneers of mental health training and expand beyond Yorkshire to become a nationwide organization. They aim to become the market leaders who are setting the precedent for others to follow. To do this MindUK ltd aim to bring in 2-3 members of staff within 12 months, this will enable them to run multiple courses on a weekly basis. They want to see the stigma surrounding mental health abolished which will create an easier environment for people to discuss and be treating for ill mental health.
2.3 Goals, Aims, Objectives
Effective goals, aims and objectives should be specific, measurable, achievable, realistic and time bound (SMART). A goal, aim or objective must satisfy the five characteristics in order to validate its relevance (Steffens, 2015).
Kaplan and Norton (1996) state that balanced scorecards improve performance by translating strategy into tangible objectives that are linked in a causal chain of leading indicators covering the different scorecard perspectives. The scorecard perspectives are as follows; Learning and growth, internal processes, customers and financial, these perspectives were developed by Kaplan and Norton (1992).
3.0 Three stage approach
The use of the strategy-formulation analytical framework (Three stage approach) is a popular tool to help develop new strategies. The three stages consist of; the input stage, the matching stage and the decision stage.
The information collected from the input stage will provide insight into the internal and external aspects of a business and its environment using tools such as an external factor evaluation (EFE) Matrix, Competitive profile Matrix (CPM) and an internal factor evaluation (IFE) matrix. Zack (1999) states that knowledge about environmental varieties and inner capabilities help to determine business opportunities.
The matching stage utilizes the collected data from stage 1 to allow the formulation of strategies to begin. There is an abundance of tools such as the Strengths, weaknesses, opportunities and threats (SWOT) matrix, the Strategic position and action evaluation (SPACE) Matrix, the Boston consulting group (BCG) matrix, internal-external (IE) matrix and the grand strategy matrix.
The decision stage utilizes the Quantitative strategic planning matrix (QSPM) to pick the most suitable strategy to utilise.
The use of the three stage model allows companies to collect raw data rather than acting on gut feeling, Sohrabi and Mirali (2014) believe strategy formulation as a reaction to turbulence in the environment can be advantageous, whereas Zack (1999) expresses concerns with that idea stating strategies formulated with this uncertainty cannot sustain a competitive advantage as the information gathered can be imitated by competitors.
4.0 External Assessment - External Factor Evaluation matrix (EFE)
The external assessment as mentioned previously is part of the input stage, the EFE and CPM will be utilized in order to assess MindsUk ltd opportunities and threats along with assessing the features of local competitors
The EFE and IFE matrices are used to analyse a company’s external and internal environment to score a company’s strategic efficiency and subsequently build a SWOT analyse (Capps and Glissmeyer, 2012). Some academics argue the tools lack validity due to the turbulence in the business environment (Yazdani et al, 2012). MindsUK ltd EFE is as follows:
A score of 2.61 is above the average (2.5) meaning MindsUk ltd currently has an effective way at managing their external factors. From the table above it is clear that the most important opportunity is the technological advancements, this can potentially provide MindsUk ltd product differentiation opportunities such as delivering the course online to provide convenience to those across the nation. Looking at table 1 it is clear the external factor which poses the largest threat is the lack of social and corporate awareness surrounding mental health courses. The threat raises questions surrounding MindsUk ltd current marketing strategy and the effectiveness of the campaigns.
4.1 CPM Matrix
The CPM is a traditional tool for analyzing an organization and its rivals in terms of external and internal factors (Bygrave and Zacharkis, 2010). It is argued by Chang & Huang (2006) that the major limitation of the CPM is that the ratings provided are subjective meaning results may change from one evaluator to another.
The largest value represented in the CPM matrix thus the main competitor is Mind Works consultancy whereas the weakest is showing as therapy & Training. (All the reviewed companies operate within the UK)
Mind Works (n.d) had a very clear public website which was user friendly and easy to navigate. Additionally the website boasted the most features and provided ways in which customer could become members which offered tangibility to the service they provide. The major strength Mind Works had over the MindsUk ltd and other competitors is the partnership they have with a major charity which in turn would help boost marketing potential and public awareness of their brand. Pricing for the full MHFA 2 day course is valued at £300 per head by the governing body and Mind Works price as advised. Mind Works boast a larger service catalogue; amongst the MHFA courses they also offer a consultancy service for individuals and companies.
Sleigh (n.d) scored considerably low, this was due to the lack of service attributes and lack of brand awareness. Sleigh provided an extremely user friendly website with relevant information which was easy to find, however the company only provides the one MHFA course, however the prices offered were less than the two competitors at £275 per head.
Therapy & Training (n.d) generated the lowest score. The key factors to influence their score were their website and public perception/brand awareness. The public website was unresponsive and confusing, there is an unofficial rule for websites known as the three-click rule which states if a user cannot navigate to the require information within three clicks they will leave the website. Wellspring priced their courses at the advised £300 per head.
5.0 Internal Assessment - IFE Matrix
The second part of the input stage is to evaluate the internal environment using the IFE matrix. We are able to analyse the strengths and weaknesses of an organization.
The IFE matrix is used to provide an overview of the key internal strengths and weaknesses MindsUK ltd face.
MindsUK ltd's major strength as seen below was their pricing structure. As previously mentioned MindsUK ltd entered the market with a penetration pricing strategy in order to attain customers more efficiently, however with a below average score of 2.27 the IFE matrix has identified inefficiency with the way MindsUK ltd deal with their internal factors.
5.1 In Depth SWOT Analysis
The in depth SWOT analysis represents the second stage, also known as the matching stage. If used correctly, SWOT can provide a good basis for successful strategy formulation (Chang, 2005). External and internal factors are taken into consideration to identify potential strategies.
The strategies produced through the SWOT analysis should all be implemented at some point as they are areas for development which could achieve a competitive advantage of sorts. It is argued that the SWOT does not prioritize strategies and can often produce an abundance of information which can cause uncertainty regarding the decision making process. (Ebonzo Menga et al, 2015)
6.0 Strategy Formulation
According to Meyer and Thu Tran (2006) there are for types of strategy known as; Integration, intensive, diversification and defensive. MindsUk Ltd is a new company operating in an unsaturated market, according to Anon (2017), Market penetration falls under the category of intensive strategies and is an appropriate strategy when markets are not saturated, when market share of competitors is low and when the rate of customers is increasing significantly. The guidelines for market penetration have been identified through the use of the EFE and IFE matrix; furthermore Anon (2017) stated Market development strategies can be followed when new channels of distribution are available and when new and unsaturated markets exists, which again apply to MindsUk Ltd and their current position.
According to a study conducted by the higher education academy, employers preferred distance learning as a way of delivering career-related study (Higher Education Academy, 2012). The integration of a distance learning or online learning option would provide MindsUk Ltd the opportunity to develop the current market and gain a first mover advantage.
Porter’s five generic strategies
The above figure is a visual representation of Porters generic strategies (1980). Porter’s generic model, which highlights cost leadership, differentiation and focus (cost focus & differentiation focus) has dominated business competitive strategy for the last 30 years (Pretorius, 2008).
Utilizing the generic strategies it is known the MHFA course market is currently emerging which provides a low scope with a small range of products. Due to the small target market, it is MindsUk Ltd should pursue a combination of a cost focus strategy and a differentiation focus strategy.
7.0 Strategy Analysis and Choice - QSPM
The QSPM represents the final part of the three stage approach; this is known as the decision stage. This matrix is designed to determine the attractiveness of feasible alternative strategies by examining underlying key external and internal factors (EFE & IFE).
Enright (2001) believed the process of identifying internal and external factors makes it less likely that key factors will be overlooked or weighted inappropriately, thus minimizing potential errors in determining the best of a number of strategies being considered, in contrast Henderson & Nutt (1980) believed the internal and external factors required judgmental decisions and assumptions in order to be weighted and rated, this therefore could cause bias and inaccurate figures and all factors should be based on market trends, facts and data.
The weight for each SWOT factor is taken from the previous IFE and EFE matrices
And halved. If the factors impact the alternative strategy; an attractiveness
Score (AS) is assigned ranging from: 1 = not attractive, 2 = somewhat attractive,
3 =Reasonably attractive, and 4 = highly attractive. The strategy with the higher overall score is therefore the more attractive option.
The three stage approach has provided MindsUk ltd with an analysis of the external and internal environment by utilizing numerous tools. The data collected was then used to develop an in depth SWOT which established numerous potential strategies and those strategies were then analyzed to define the most attractive available.
The most attractive strategy available to MindsUk ltd was product differentiation; this can be justified by looking at local competitors and the services they provide. The courses provided by MindsUk ltd and their major competitor (as defined by the CPM) Mind Works Training & Consultancy are essentially the same, delivery is the same and pricing is the same (excluding promotional pricing). Providing alternative methods of enrolling and taking part on the course will provide a clear advantage and will also provide a first mover advantage which in turn should help develop the overall brand. The overall increase of mental health related illness is another reason for providing alternative ways to get support.
Due to the above reasons, along with taking into account the internal and external factors, differentiation of the service provided is the best strategy.
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