“Entrepreneurs don’t have clearly articulated strategies. As they grow, they need to develop them”

28 Aug

In order to have a competitive advantage company should have assets, knowledge and to identify its specific core competences. By applying corporate strategy company should be able to outperform others on a financial basis – it means having competitive advantage and thus being able to perform better than others.  Even though core competence of the company is usually slowly changing over time if ever changing, for example, Kodak disability to change its core competence[1], corporate strategy should not remain the same for long.

There is no specific time that should be considered as validity period for any strategy but it should not be longer than period required for business to change. For example, it could be that one day phone market is not what it was only a year ago, a living example is announcement of iPhone first generation smartphone and significant industry changes that came afterwards including decline of Nokia[2] and emergence of new ‘giants’ like Apple, Samsung and HTC.[3] Another example of business changes that are currently happening is cloud gaming which is going to be the future of how people play games and engage with the content providers. Many companies, for example, Microsoft and Google have announced moving into cloud gaming and pushing content – games and TV programmes, to their existing (still expensive) devices[4] while other companies, like, OnLive, NVIDIA and Gaikai, are providing gaming as a service (GaaS). The main idea behind GaaS is that you are able to play games without buying them or having a game console – you can play almost any game on your tablet, computer or even TV set hooked to broadband or DSL/vDSL connection. GaaS requires having simple and cheap subscription plan about 6-9 EUR/month.

By these two illustrative examples it is clear that if you have a clearly articulated and in very detail characterised strategy for next 10 years, most likely, you will be out of the business however it does not meant that you should avoid having strategy. In theory there are different kinds of strategies, for example, intended strategy that could be shaped to deliberated strategy and unrealized strategy. Deliberated strategy could be shaped by emergent strategy thus making up realized strategy. It would not be correct to say that company should stick to intended strategy – it would lead to having Nokia cases, if we only rely on emergent strategy – most likely we will fail and will not have disruptive innovation but plenty of ‘me too’ products. Only by having synergy between intended strategy that should be futuristic oriented and emergent strategy it is possible to have innovation.

Growth is one of the key drivers for business. Every company will try to grow in some way in order to bring in more profit – at least it is what I believe. Strategy is a key element in order to make a path for growth and achieve competitive advantage.

As business environment is not static and new competitors or offers from existing ones are emerging on a daily basis corporate strategy cannot be fixed – it should be solid but with ability to shape it according to unforeseen business challenges. For example, last year largest mobile network operator in Latvia Latvijas Mobilas Telefons SIA came up with a tariff plan Briviba (Freedom) which meant that everyone paying 6.99 LVL/month can have unlimited calls, 50 MB data plan and SMS within Latvia, it took only 5 days for competitive mobile network operator Tele 2 to come up with similar plan and media campaign giving 500 MB data plan for a price of 5.99 LVL/month. LMT did not respond with anything to this competitive offer that obviously was much better. Corporate strategy that should have a possibility to be adjusted and there is no sense for a clearly articulated strategies as business environment changes. It means that corporate strategy must have a goal that company re-evaluates from time to time but is still able to respond to changing business environment.

Conclusions

Corporate strategy should change according to market changes regardless of static core competence. There are many strategies that could be applied however each extreme is not beneficial for the company. Good corporate strategy should be future oriented and fine-tuned according to market changes. Growth is one of the corporate strategy objectives, as each company will have a goal of having profitable business. Companies should be able to respond to business changes swiftly without losing their corporate strategy goals. Corporate strategy should have a clearly articulated goal that is re-evaluated from time to time but there is no sense of having clearly articulated strategy as such as business challenges cannot be foreseen.


[1] Is Your Core Competence Still Relevant? Ram Charan, Forbes, March 19, 2013, available on the Internet http://www.forbes.com/sites/ramcharan/2013/03/19/is-your-core-competence-still-relevant/ (last visited June 23, 2013)

[2] Nokia Loses Lead in Home Market, John D. Stoll, May 28, 2013, available on the Internet http://online.wsj.com/article/SB10001424127887323855804578511044026083394.html,  (last visited June 29, 2013)

[3] Slow but steady: How the iPhone is changing the phone industry, Dan Moren, Macworld, available on the Internet http://www.macworld.com/article/2030154/slow-but-steady-how-the-iphone-is-changing-the-phone-industry.html, (last visited June 29, 2013)

[4] Console battle powers up as Microsoft adds Time Warner TV to Xbox, Tim Bradshaw, Financial Times, June 28, 2013, available on the Internet http://www.ft.com/intl/cms/s/0/f087c6f0-e001-11e2-9de6-00144feab7de.html#axzz2XbhGC5sQ, (last visited June 29, 2013)

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