Has Business Strategy Changed Over Time?

Evolution of concepts of Business Strategy

Has Business Strategy Changed Over Time?

In 1960s, most of the business was conducted by the small firms with the focus of the managers on day to day running business and they are satisfied with little growth. That's why competition was minimal. On that particular period technology were on early stages. The Firms are focusing on long terms objective and working towards to achieving those goals. There were lots of potentials exist for business firms to tap. The managers prepare budgets and adopt control systems and procedure manuals for decisions that were to be made rapidly. These are made for maintain status quo. Budgeting is not done on the basis of environmental changes. Later variations included capital budgeting and management by objective systems.

In 1970s, the business firms started growing in size looked at environmental threats and opportunities and started assuming greater importance in strategic planning. That's why this stage is known as first generation planning. In this period Firms are analyzing that what are their Opportunities and what are the threats for Appraisal of a business. The strategy formulation is done primarily on the basis of matching of environment. In this period firm face constraint of resources for growth and diversification. The firms have developed consistent patterns for decision making to deal with the environment.

In 1980-90s, the firms started recognizing the dependency of the business firms on external environment. The firms facing stiff competition, that's why they have to emphasis on Competitive Advantage. In these period firms offering customers quality products at minimum cost Firms are producing goods in Bulk amount so that the cost of per unit of goods will minimize. Firms are started to analyze their business according to Porter's five forces – competitor, buyer, suppliers, substitute producer & Potential new entrants. The different segments in the market were given importance on customer satisfaction. The Strategists aimed to establish a profitable and sustainable position against the force that determines competitive advantage.

In 2000s, the move has initiated to engage activity in environment scanning and building competitive intelligence system. The unprecedented changes like global competition, technological break though, changing consumer taste, ever changing exchange rates e.tc.

In current era, joint venture, strategic business alliance, franchising, licensing, outsourcing e.tc, have gained popularity as alternative Forms of business. The free flow of across the globe have increased avenues for fresh investment as well as mergers and acquisitions. many firms have done away with long term plans. The firms are emphasizing on the issue management consciously monitoring the environment. Now strategists have started playing as a director in board of directors and as corporate planners.

Evaluation of Strategy 

Strategy Evaluation is as significant as strategy formulation because it throws light on the efficiency and effectiveness of the comprehensive plans in achieving the desired results. The managers can also assess the appropriateness of the current strategy in today's dynamic world with socio-economic, political and technological innovations. Strategic Evaluation is the final phase of strategic management. The significance of strategy evaluation lies in its capacity to co-ordinate the task performed by managers, groups, departments etc, through control of performance. Strategic Evaluation is significant because of various factors such as – developing inputs for new strategic planning, the urge for feedback, appraisal and reward, development of the strategic management process, judging the validity of strategic choice etc.

The following factors were considered by executives to be most important for the success of a company strategy.

1. Quality of top management
2. Development of future managers
3. Managerial interaction and drive to earn profits for the firms
4. Improved system of long range planning
5. Better judgment, creativity and imagination at top management
6. Improvement in service to customers
7. Assuring a competitive financial return to investor
8. Maximizing the value of shareholder's investment.

The process of Strategy Evaluation consists of following steps

1. Fixing benchmark of performance - While fixing the benchmark, strategists encounter questions such as - what benchmarks to set, how to set them and how to express them. In order to determine the benchmark performance to be set, it is essential to discover the special requirements for performing the main task. The performance indicator that best identify and express the special requirements might then be determined to be used for evaluation. The organization can use both quantitative and qualitative criteria for comprehensive assessment of performance. Quantitative criteria include determination of net profit, ROI, earning per share, cost of production, rate of employee turnover etc. Among the Qualitative factors are subjective evaluation of factors such as - skills and competencies, risk taking potential, flexibility etc.
2. Measurement of performance - The standard performance is a bench mark with which the actual performance is to be compared. The reporting and communication system help in measuring the performance. If appropriate means are available for measuring the performance and if the standards are set in the right manner, strategy evaluation becomes easier. But various factors such as manager’s contribution are difficult to measure. Similarly divisional performance is sometimes difficult to measure as compared to individual performance. Thus, variable objectives must be created against which measurement of performance can be done. The measurement must be done at right time else evaluation will not meet its purpose. For measuring the performance, financial statements like - balance sheet, profit and loss account must be prepared on an annual basis.
3. Analyzing Variance - While measuring the actual performance and comparing it with standard performance there may be variances which must be analysed. The strategists must mention the degree of tolerance limits between which the variance between actual and standard performance may be accepted. The positive deviation indicates a better performance but it is quite unusual exceeding the target always. The negative deviation is an issue of concern because it indicates a shortfall in performance. Thus in this case the strategists must discover the causes of deviation and must take corrective action to overcome it.
4. Taking Corrective Action - Once the deviation in performance is identified, it is essential to plan for a corrective action. If the performance is consistently less than the desired performance, the strategists must carry a detailed analysis of the factors responsible for such performance. If the strategists discover that the organizational potential does not match with the performance requirements, then the standards must be lowered. Another rare and drastic corrective action is reformulating the strategy which requires going back to the process of strategic management, reframing of plans according to new resource allocation trend and consequent means going to the beginning point of strategic management process.