5 - A Fundamental Approach to Strategy Development Barry...

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A Fundamental Approach to Strategy Development Barry Hedley Director, The Boston Consulting Group Limited, London The problem of developing sound business strategy is probably more difficult now than it has been at any time since the war. In the midst of conflicting pressures of inflation, recession, unemployment, business failures, and social and political upheaval, today’s businessman faces an environment which is both unfamiliar and uncertain. The lack of predictability concerning economic affairs can make it seem impossible to plan effec- tively for the future. Yet without sound strategy today, corporate survival itself may be called into question. What should be done ? In this, the first of two articles, the author suggests that the key to strategy develop- ment now is to focus more than ever before on ‘fundamentals’. For the individual busi- ness, market share appears to be paramount as is shown by the ‘experience curve effect’, a concept developed by the Boston Consult- ing Group in the course of its international work in advising companies on corporate strategy problems. Relative competitive position thus becomes the required simple but fundamental strategic goal. However, the quest for a superior market share must take place within the confines of an appro- priately defined strategic business segment. In a further article in the February 1977 issue of LRP the author willgo on to expand these conclusions concerning individual businesses, considering their implications for the sound development of strategy for the multi-business company. 1 N THE FACE OF CONTINUING ECONOMIC AND environmental uncertainty, an increasing num- ber of companies are rejecting traditional ap- proaches to long range planning. These approaches were frequently ‘extrapolative’ in nature, and in the absence of smooth economic trends it seems right that they should be discarded. Yet there is con- siderable confusion concerning what should take their place. 2 It is, however, possible to specify the require- ments which must be satisfied by any approach to strategy development which can hope to be success- ful in today’s changeable world. First, the approach must provide a means for identifying the underly- ing factors which are critical for long term success at the individual business level, and which are sufficiently fundamental that their effects can be expected to persist indefinitely in the face of con- tinual general environmental change. Secondly, the framework must offer a way of establishing the implications of these factors for the allocation of limited resources-and especially of cash-within a company which is comprised of a number of busi- nesses. This allocation must take place in such a way that the performance of the multi-business company overall can be optimized.
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This note was uploaded on 11/10/2010 for the course MAR 4803 taught by Professor Allen,j during the Spring '08 term at University of Central Florida.

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5 - A Fundamental Approach to Strategy Development Barry...

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