Strategy is about awareness and choice

What does a good corporate strategy require?

Question: What is corporate strategy? What are the requirements for a good corporate strategy? How to formulate corporate strategy? I hope you can answer with specific examples. Thanks! (asked by: Ye Yun)

Answer: An enterprise's strategy is first and foremost an arrangement of a development direction. In other words, a strategy is a navigation map that helps an enterprise go from where it is today to its desired future position. However, in an increasingly fast-changing market, even the best strategies cannot give companies a completely certain course. Therefore, a good strategy should actually be able to give companies a variety of choices, make clear trade-offs between these choices, and also be equipped with corresponding emergency measures.

Formulating corporate strategy is a systematic work. Generally speaking, companies need to solve three problems when formulating strategies: where to compete, how to compete and when to compete. Where to compete means that you need to focus on establishing your position in the product market; in which product market segment do you have an advantage over your competitors and are more attractive to your customers? How to compete is how you can effectively compete with your competitors. When to compete refers to the timing of your strategy. Usually a company's strategy consists of three stages, short-term, medium-term and long-term. The short-term strategy is very detailed and actionable; the long-term strategy gives the company a general direction and some rough strategic choices.

On the basis of understanding these three aspects, you need to understand how the environment has changed and how this change will affect your business; you need to carefully consider the trends of customer needs and technological changes in the market; understand Who are your competitors and what they are doing and planning to do; you need to understand what changes may occur in the entire value chain of your industry.

At the same time, you also need to have a deep understanding of your own organizational characteristics and core competencies, understand what core competencies are needed to successfully execute your strategy, and understand what competitive advantages can make you better than your competition The opponent is stronger. In addition, strategy formulation should also consider its impact on the company's return on investment and cash flow. Last but not least, you need to have a clear action plan that clearly assigns responsibilities.

Strategy is more about choice. Every business operates under a set of restrictions. Therefore, strategy actually means making choices under certain constraints; strategy also means making choices under a series of constraints. Once the strategy is formulated, it must be relatively stable, so that it can play a guiding role in the specific business of the enterprise.

A good strategy can often enable enterprises to make full use of market opportunities and establish their own irreplaceable and imitative market positions. The case of Southwest Airlines clearly illustrates this point. At a time when the U.S. airline industry was being deregulated, Southwest realized a completely game-changing opportunity. Carriers that offer a full suite of services are expensive, and Southwest Airlines has developed a new strategy to provide low-cost service by building a point-to-point network. It's a new business model, and American travelers love it. Today, there are plenty of low-cost carriers in the U.S. and Europe following Southwest's model, but it's hard to shake Southwest's market leader position.

Strategic planning is not only a planning process, but more importantly, awareness. A good strategist can grasp the non-linear changes of the business environment, and at the same time can consider problems in multiple dimensions, bring ideas to the strategy, and stick to the implementation of the strategy. These people are rare.

Strategic planning also needs to be closely integrated with business operations. Many Western companies have established strategic planning departments that specialize in strategic planning, but sometimes do not link well with business units. General Electric in the 1970s is an example. At that time, their strategic planning department made a large number of strategic reports for business departments, but the research process of these reports did not involve the business department. As a result, the entire strategic planning process was quite inefficient. of.

How to analyze and formulate an enterprise's industrial development strategy?

Question: How to analyze the company's industrial development strategy? How to determine the company's industrial development strategy? (Asked by: JIANHONG LI)

Answer: To conduct an industrial strategic analysis, you need to understand the basic situation of three aspects: industrial structure, competitive behavior and performance. First, industrial structure refers to the concentration of the industry, whether the industry is highly concentrated or decentralized; what are the main competitors in this industry, and what are their characteristics in terms of scale, capability, competitive advantage, products and services provided, and property rights ? Second, you need to understand what is the competitive behavior of the industry, are these competitors competing fiercely or cooperating with each other? Who are your competitors? In what ways do they have a competitive advantage over you? Third, you need to understand how the industry and the major players in the industry are doing financially. Are they making money? How are industry profits transferred and distributed?

Your industry strategy must follow three principles: cost reduction, product differentiation, and service differentiation. Based on analyzing your industry and comparing your competitive advantages with your competitors, you must decide what strategy you are going to pursue. The key is to understand the trends in the industry, including possible changes in the market, and what opportunities and threats such changes may bring to your company. Equally important, you need to really understand your competitive advantage and understand what your competitors have; you need to know where your business has advantages and how to turn those advantages into profits.

Proper industry analysis requires a deep understanding of the industry through extensive primary and secondary research. You need to spend a lot of time and energy to collect first-hand information to understand the real state of the industry; you need to fully understand what other competitors are doing in the market and compare them; at the same time, you need to understand the industry value chain. The trend of upstream and downstream enterprises. In conclusion, to do a good job in industry analysis, you must understand many data sources, conduct in-depth analysis and have deep insights into new opportunities and threats.

Is strategic planning necessary for SMEs?

Question: Many small and medium-sized enterprises are faced with the problem of survival. Is it necessary for such small and medium-sized enterprises to carry out strategic planning? If necessary, how to develop a strategic plan? (asked by: uiofer)

Answer: Every business needs a strategic plan. But not everyone understands strategic planning the same. It is often assumed that strategic planning must have long reports or must be long-term. This is true in some companies, but not every company's strategic planning needs to be like this. Especially in SMEs, they should do strategic planning, but their strategic planning does not have to be long-term or very detailed.

For SMEs, the real meaning of strategic planning lies in understanding and developing the company's strategy. To achieve this, companies need to take the time to understand their customers (such as their preferences), understand competitors, understand the value chain of the industry and how this value chain will change over time, industry regulations, etc. . In this way, companies must decide how to position themselves in the market and how to develop strategies for marketing, sales and distribution, and alliances. This requires careful analysis and evaluation.

However, not all of these have to be long-winded analysis reports, the key is that people have this awareness in their heads and are willing to think systematically, and turn this awareness and thinking into a characteristic of the enterprise. Small and medium-sized enterprises are inherently flexible, and they should be able to lead or adapt to rapid changes in the market. The procedures and results of strategic planning should be closely linked to reality.

In large enterprises, there is usually a dedicated strategic planning department. In SMEs, it is not necessarily required. The work of strategic planning can be undertaken by the company president with the support of the chief financial officer and others. Here, I need to emphasize again that the essence of strategic planning is an awareness rather than a specific report. This kind of awareness is not only possessed by large enterprises, but also small and medium-sized enterprises.

How to maintain a balance between short-term and long-term issues?

Question: Welch once said: "You can't manage in the short term, how can you manage in the long term? Everyone can handle the short term, and anyone can handle the long term, but there is a balance between the short term and the long term. Balance is the essence of management." Excuse me: What is "short-term affairs" and what is "long-term affairs"? How to understand "Maintaining a balance between short-term and long-term is the essence of management"? (asked by: nitue)

Answer: Short-term affairs tend to focus on addressing the challenges and opportunities presented by current changes. For example, if a competitor has recently taken an action, how should we respond? Or if a market opportunity appears, how should we grasp it. If you're a marketing manager, you deal with product pricing, promotions, brand management, and more every day. If you're a sales manager, you need to find ways to sell more products. If you're a CEO, you also have a lot of business to deal with right away, like hiring or firing executives, approving investment projects, attending industry conferences, and more. Such short-term matters require immediate action and, generally, results are seen sooner. Some short-term affairs do not have much impact on the business, while some short-term affairs are a solid step that constitutes the long-term affairs of the business.

Long-term affairs tend to refer to strategic affairs, which are aimed at the long-term development of the enterprise. The key to long-term affairs includes the company's vision, purpose, development strategy, etc. We say that an enterprise should cultivate its core competitiveness and determine its own sustainable competitive advantages, and the actions taken to obtain these advantages are long-term affairs.

The balance between long-term and short-term tasks is important, and those short-term tasks you do every day must be aligned with the company's long-term goals. To determine its own long-term strategy and cultivate its own core competitiveness, an enterprise needs to do something and refrain from doing something. We believe that the essence of maintaining balance is how to execute short-term tasks without deviating from long-term goals.

How to set up a reasonable board of directors?

Question: How to set up the board of directors of private enterprises more reasonably? (Asked by: dragonteam)

Answer: The board of directors of a private enterprise needs both executive directors and non-executive directors. The former belongs to the management of the company, while the latter does not. Executive Directors can recognize the challenges faced by the company from the perspective of company management. Non-executive directors generally have expertise in a specific area, such as financial and control knowledge, international perspective or previous experience running a related business. They can provide a broad perspective on the operation and management of the company, and can supervise and balance the management of the company.

In China, many private enterprises have the phenomenon of one word, and everything is the boss's final say. In fact, the stakes are very high, because one's decisions are always prone to bias. If the decision is correct, there is no problem; but if it is wrong, there will be no corresponding balance mechanism, which is very harmful. Therefore, a good board of directors can help manage risks and grasp the direction of the company's development.

Finally, I would like to mention that it is very beneficial for Chinese private companies to introduce some foreign non-executive directors to the board of directors. Introducing suitable candidates can increase the dimension of contact with the outside world, enrich knowledge and ways of doing things, and thus enhance the risk control capability of enterprises.

What are the functions of the executives of the group companies?

Question: I want to set up a group company, but I don't know the framework and functions of the group company, such as how the chairman, president, and executive president are positioned and divided. (asked by: lifj)

Answer: The chairman is generally the chairman of the board of directors. The board of directors is the group responsible for corporate governance, which means that the board reviews and approves major proposals from managers and helps managers steer the direction of corporate strategy development. There are two types of chairman: executive chairman and non-executive chairman. As the name suggests, the executive chairman is also involved in the day-to-day management of the company. The executive chairman and the CEO are often the same person; the non-executive directors are not involved in the day-to-day management of the company, and the daily management is left to the president.

The President has overall responsibility for the management of the company. He leads the business, organization and operations of the company. President and CEO are the same.

The board of directors oversees the president and management to maintain balance in the management of the company so that the company can better manage risk. The performance of the president depends on the performance of the company, so the remuneration of the president is often linked to the performance of the company.

Should four branches in the same city be merged?

Question: A securities company adopts the same assessment system for four branches in the same city, and encourages competition with each other. Their average performance is far better than that of the company's other foreign institutions. The running costs are repetitive and too high, and the sales force is scattered and strained. To this end, the company decided to merge four branches, but the fear of losing competition has led to a decline in market development capabilities in the region. How should the decision be made? (Asked by: Wang_Junqing)

Answer: The coordination and cooperation between the branches of the company is a very meaningful subject. Generally, branches should be allocated between regions and business areas to avoid duplication of investment and internal friction. Whether to merge or maintain the relative independence of the four institutions can only be decided after comparing the effect forecasts of the two schemes.

Merger means the loss of the conditions for mutual competition, so we first need to analyze whether the current performance is good because of competition, or other factors. However, I generally think that competition among peers may not necessarily have such an obvious role, because even without such internal competition, external competition exists, and it can be very intense. It is not because there are four similar institutions competing, the performance is good, so it is necessary to carry out resource integration.

What the company needs to take is the corresponding integration measures, such as restricting the behavior of branches to dig customers from each other, making certain allocations in business areas and service types; collecting a part of general resources and sharing them among branches, Reduce the operating costs of a single institution and more.

It is also worth thinking about what form the merger will take. This needs to be analyzed on a case-by-case basis, but after the merger, a new incentive system should be established to maintain market development capabilities.

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