BUSINESS DECISION MAKING

Business Decision Making

Business Decision Making

Introduction

A business strategy describes how a particular business intends to succeed in its chosen market place against its competitors. It therefore represents the best attempt that the management can make at de?ning and securing the future of that business. A business strategy should provide clear answers to the questions:

1.What is the scope of the business (or offering) to which this strategy applies?

2.What are the current and future needs of customers and potential customers of this business?

3.What are the distinctive capabilities or unique competence that will give us competitive advantage in meeting these needs now and in the future?

4.What in broad terms needs to be done to secure the future of our business?

These questions should have been addressed during the process of strategy formulation. The processes and techniques and processes described in Part III may have contributed to answering them. In this chapter, we are concerned with some of the practical issues that arise when thinking and analysis leads into action and commitment. We are concerned also with what makes the difference between good and indifferent business strategies. This paper will be discussing the various types of business strategies that will help the business to prosper and avoid any set back.

Discussion

This paper is most relevant to entrepreneurs or management teams that have a clear vision and mission for their business and are in the process of developing the primary strategies to be followed. It is closely linked to other papers in this series, most notably developing a Strategic Business Plan which offers a framework for a strategic plan and Getting New Business Ideas. The development of a suite of strategies is an iterative process and involves circular thinking on the basis that optimal strategies will evolve gradually and be very interdependent. Accordingly, the best way to utilize this paper is to review it in its entirety and then use it as a checklist and basis for brainstorming and systematic analysis. A venture is most prone to failure during its first three or so years of operation - the so-called 'valley of death'. A key to getting through these early years is to avoid the obvious mistakes. Generally speaking, businesses fail for significant and substantial reasons which are often very evident to outsiders. Insiders often fail to see them because of their closeness, determination and so on.

Finance

Markets/Sales

Management

Offerings

Operations

Underestimating start-up costs (for operations & capital expenditure).

Misjudging the size or growth of the overall market.

Lack of relevant sectorial experience.

Inability to supply profitably to required price.

Under-investment in equipment etc.

Insufficient funds or access to top-up finance.

Overoptimistic estimates of market penetration & shares.

Insufficient functional breadth.

Problems with maintaining quality standards.

Excessive overheads (relative to scale of operations).

Wrong mix of funds (e.g. too much debt and gearing too high).

Delays in securing or developing distribution channels.

Unresolved differences of opinion.

Restricted range of offerings.

High operational costs and/or low productivity.

Over reliance on trade credit (receivables).

Underestimating the strength of competitors.

Unreal expectations.

Lack of innovation ...