STRATEGY

Strategic Planning

Options in choosing an appropriate strategy are important and necessary. The strategy has two directions: maintain the existing strategy or define an entirely new strategy.

The Boston Consulting Group Matrix (BCG Matrix)

This model presents a “growth-share matrix”, where each SBU (Strategic Business Unit) is represented by its size and share up to 1.0. If that share increases beyond 1, the company achieves economies of scale, lower costs per unit of product, and thereby a competitive advantage over other companies.

Boston Consulting Group Growth-Share Matrix

Analyzing each individual business unit avoids a strategy that refers only to the company (as a whole) and resorts to a detailed analysis of each SBU (Strategic Business Unit).

Business environment analysis is the process of monitoring and analyzing the company’s environment and the company itself with the aim of identifying existing and future opportunities and threats that the company faces in the market, as well as internal strengths and weaknesses of the company.

Internal and External Analysis of the Company

Market Analysis

A market analysis should encompass those countries, from a business interest perspective, which are already “established” or are new potential markets. Through a selective process, those markets that do not suit the company for its appearance should be analyzed more closely. We divide the environment analysis into three essential segments:

• macro-environment analysis
• industry analysis
• internal analysis of the company

In today’s turbulent environment, the basic prerequisite for achieving profit and growth is understanding the nature of the market and monitoring and understanding trends and events in the environment, as well as understanding the overall competitive situation.

Questions every company must answer when entering new markets:

• How stable is the market I intend to operate in?
• What political “currents” currently prevail?
• What is the government’s position on business ethics?
• Does the government have a cultural and religious view of business?
• Is the government of the country in which I intend to operate involved in international agreements?

Questions related to the economic aspects of doing business in a new market:

• What is the interest rate policy in the country I intend to operate in?
• What is the inflation rate and unemployment rate?
• What is the growth of the public sector compared to the private sector?
• What is the “general” strategy of the state itself – how and in what way does the country intend to develop
• What are the main areas of business – tourism? construction? services? agriculture and forestry?
• What is the price of labor?

SWOT Analysis

To facilitate the shaping of a quality and appropriate strategy, whether it’s a manufacturing company, a charitable organization, or an individual, it is necessary to conduct an analysis of strengths, weaknesses, opportunities, and threats.

SWOT analysis incorporates elements of internal and external analysis, with the primary objectives of:

• obtaining information about the environment in which the company operates
• identifying the strategic position of the company
• gaining a picture of the strength of the company itself in order to adapt better to market trends

Regarding the usefulness of using SWOT analysis and its impact on overall marketing strategy, it is based on facts:

• utilize strengths and opportunities (what is favorable for the company)
• minimize weaknesses and threats (what represents danger to the company))

The main advantages that result from the application of SWOT analysis, which makes it attractive for use by companies, are the following:

• vrlo jednostavna analiza, fleksibilna i relativno niski troškovi,
• a very simple analysis, flexible and relatively low cost
• the only analysis that combines external and internal influences on the company
• integration and collaboration of different information sources, and it encourages
• cooperation between managers in companies use at different levels in the organization
• SWOT analysis can also be conducted for a detailed analysis of competitors

Porter’s “5 Forces”

Porter’s “5 Forces” is a microeconomic analysis with the main objectives of:

• understanding industry structures and their interrelationships
• determining the attractiveness of an individual industry by defining external threats and opportunities

Each of the mentioned “forces” shows us our current position in the industry, as well as opportunities to enter into “market niches”, where we could potentially achieve the desired competitive advantage. Based on the results of this analysis, management decides how to exploit certain movements in the industry.

Management Functions

Louis V. Gerstner Jr., in his book “Who Says Elephants Can’t Dance,” explains how global or regional companies can survive in unstable market environments and achieve significant market shares. The elephant he describes should not be slow, sluggish, or inflexible; instead, it must quickly respond to upcoming challenges. The goal and function of management is to “teach the elephant to dance.”

Based on the obtained information, the function of management is to decide how to utilize certain movements in the industry. After identifying the negative impacts on the company, it is possible to neutralize them.

In short, it can be said that the function of management in small, medium, or large enterprises requires the development of marketing skills on the one hand, and thinking about changes in the organizational structure and marketing system of the company on the other. Within this context, the most significant aspects of the behavior and business philosophy of a market-oriented company are defined:

• Implementation of market segmentation research and strategy,
• Superior and clear organization of marketing activities, and
• Proactive strategic behavior in the market.

Cost-Benefit Analysis

A cost-benefit analysis is a financial instrument that quantifies all the financial and economic costs and losses on one hand, and all the expected revenues and benefits of an endeavor on the other.

A cost-benefit analysis should be the basis for calculating the justification of each project as well as the primary instrument for making a quality comparison of several different projects.

Using this method, a return on investment can be calculated based on the costs, resources, and risks that the investment includes. The aim of the cost-benefit analysis is to support the making of correct decisions to ensure the effective allocation of resources for project implementation.

The philosophy of cost-benefit analysis is best defined by the so-called Pareto Improvement. The Pareto Rule, Pareto’s Law, Pareto’s Principle, or the 80/20 Rule states that 80% of the achieved result is achieved in 20% of the total time during the project. The most work is needed to achieve the remaining 20%. Vilfredo Pareto, in his research on the distribution of national wealth, found that in Italy, about 20% of families own about 80% of the capital. This principle is often randomly used in solving various problems.

The Importance of Strategy for a Company

Small and medium-sized enterprises are a necessary complement to large enterprises. Their strength lies in their interconnection, dynamism, flexibility, research potentials, and the ability to innovate and make changes before the competition. The strength of a company (capital and size) is no longer in the foreground. Size and strength are sought in people, their knowledge, skill, and creativity.

Over time, small and medium-sized enterprises have become the generators of the economies of countries, but only in developed countries. In a turbulent market economy, the innovative entrepreneur, with their creativity and ability to respond to events in the country of business and beyond, manages to be the one who continually grows.