A strategic plan is like a road map for your organization. We can develop this through strategic positioning analysis. When we try to define our strategic position, we are essentially trying to analyze the business context and developing a strategy. We are taking an account of the environment in which the business functions. We also consider our internal skills and capabilities. Thereafter, we plan out the direction for the business.
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Strategic positioning
The first step towards developing a strategy is to define your goals. Once we are clear about our goals, then we can assess our current situation. The mismatch between our current situation and the Colts will give us what we need to improve upon. We need to have a strategic fit between our aspirations and our capabilities. This process of aligning ourselves with our future aspirations is called strategic positioning. At the core, it’s all about the choices we make. These choices or decisions lay out a road map for our future actions.
In order to understand Strategic position, we first need to assess three important factors:
- organizational capabilities
- organizational culture
- External environment
We define organizational capabilities in terms of our resources and our competencies. People used to focus more on the interplay between the organization and its environment. One of the developments in the world of strategy happened in the 1990s. It was when the resources-based view or RBV was developed. The need to assess organizational internal aspects was formalized. On the other hand, the organizational culture is about the cultural aspects and the values of a firm. When we’re talking about the culture, it is not just about the employees. It is also about all the stakeholders of the organization. The third important aspect is the external environment. It is important to consider what is going on outside the firm.
Organizational capabilities
The strategic positioning analysis suggests that our strategic position should be consistent with our capabilities. Firstly, we should note that the competencies or capabilities are dynamic. The organization and the external environment evolve over time. Consequently, we develop new competencies. Will discuss the importance of alignment of our competencies with our position. Secondly, we need to look at our core competencies. Core competency is strategic. The idea was introduced by CK Prahlad and Gary Hamel in 1990. For example, the core competency of Zara is its capability to use “just in time” in fashion. This helps them in providing fast fashion to their customers.
Steps to develop core competencies
- What expertise could help us dominate the business? Which competency will provide us an advantages position in future or in new markets?
- What kind of resources do we need to develop these kind of competencies?
- How will we procure or acquired these resources? How do we ensure these resources are Inimitable?
Let us understand that with an example. Consider that you are the CEO of a large automobile manufacturer. Presently all your competitors are focusing on the development of electric vehicles. Based upon your market research, you realize that there could be untapped potential for low-capacity commercial electric vehicles. The ability to manufacture these vehicles. Especially, before any other firm in the market would give you a competitive advantage. However, in order to develop these competencies, you would need certain resources. Firstly, you would figure out, what kind of resources you need for manufacturing these specific vehicles. Secondly, you would hire talent that has the potential to develop organizational capabilities. early you would put an effort into R&D to develop new technologies. Over a period of time, you would have developed a core competency in the production of small electric commercial vehicles.
Organizational culture
On one hand, the strategy is about the development of organizational goals. On the other hand, culture is about the expression of those goals into organizational values and belief systems. Culture is the observable aspect of an organization that resides in its people. When we talk about strategic positioning analysis, we need to consider the cultural underpinnings of a firm. That is because the culture of the firm would dictate what kind of strategy would work best.
Aspects that shape the organizational culture
- Value system of the organization
- Number of organizational levels.
- Orientation type : task, people or functional
External environment
The external environment plays a key role in the functioning of an organization. In other words, organizations cannot exist without its environment. The external environment consists of two levels:
- Micro
- Macro
Let’s play your micro influences are those influences that take place at a smaller level. The immediate vicinity of an organization would include other companies in its industry. The micro-level would also include the buyers and the suppliers. Secondly, the macro-influencers of a firm. These are related to the larger geopolitical aspects. At the macro level, we have political, economic, technological, and social factors.
Tools to analyze the external environment:
We don’t need any specific tool to analyze the external environment of a firm. However. Some of the tools can go a long way in helping us in strategic positioning analysis.
- Porter’s 5 Forces Analysis: Porters 5 forces is an extremely popular tool to analyze a firm’s strategic situation. It can give us an overview of the micro as well as the macro factors in the external environment.
- PESTLE analysis: The PESTLE analysis is another powerful tool to get a hang of the external factors.