3.Identify the basic steps in the strategy-making process. Then explain the extent to which this process may be valuable to small firms as well as large firms.
3.Identify the basic steps in the strategy-making process. Then explain the extent to which this process may be valuable to small firms as well as large firms.
ANS:
There are three basic steps in the strategy-making process: (1) assessing the need for strategic change, (2) conducting a situational analysis, and (3) choosing strategic alternatives. This relatively straightforward approach may be applied to either large or small businesses. This strategy-making process is the method by which companies create strategies that produce sustainable competitive advantage. For years, it had been thought that strategy making was something that only large firms could do well. It was believed that small firms did not have the time, knowledge, or staff to do a good job of strategy making. However, two meta-analyses indicate that strategy making can improve the profits, sales growth, and return on investment of both big and small firms.
There is a 72 percent chance that big companies that engage in the strategy-making process will be more profitable than big companies that don’t. Strategy making not only improves profits, but also helps companies grow. Specifically, there is a 75 percent chance that big companies that engage in the strategy-making process will have greater sales and earnings growth than big companies that don’t. Thus, in practical terms, the strategy-making process can make a significant difference in a big company’s profits and growth.
However, strategy making can also improve the performance of small firms. There is a 61 percent chance that small firms that engage in the strategy-making process will have more sales growth than small firms that don’t. Likewise, there is a 62 percent chance that small firms that engage in the strategy-making process will have a larger return on investment than small companies that don’t. Thus, in practical terms, the strategy-making process can make a significant difference in a small company’s profits and growth, too.
In conclusion, while the probability of a payoff from strategy making is slightly greater for a larger firm (72-75%) than for a smaller firm, the probability of such a payoff for a smaller firm is indeed significant: 61-62%. Thus, in spite of the longstanding beliefs to the contrary, small-business owners should clearly embrace the strategy-making process.
PTS:1DIF:EasyREF:214-222TOP:AACSB Analytic
KEY:Strategy | Creation of Value
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