In our introduction to the
topic of business strategy, we used Johnson & Scholes' definition
stating that "Strategy is the direction and scope of an organisation over the long-term: which achieves advantage for the organisation through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfil stakeholder expectations".
So, what are these "resources" that a business needs
to put in place to pursue its chosen strategy?
Business resources can usefully be grouped under several categories:
Financial Resources
Financial resources concern the ability of the business to "finance"
its chosen strategy. For example, a strategy that requires significant investment
in new products, distribution channels, production capacity and working capital
will place great strain on the business finances. Such a strategy needs to
be very carefully managed from a finance point-of-view. An audit of financial
resources would include assessment of the following factors:
Existing finance funds
- Cash balances
- Bank overdraft
- Bank and other loans
- Shareholders' capital
- Working capital (e.g. stocks, debtors) already
invested in the business
- Creditors (suppliers, government)
Ability to raise new funds
- Strength and reputation of the management
team and the overall business
- Strength of relationships with existing investors
and lenders
- Attractiveness of the market in which the
business operates (i.e. is it a market that is attracting investment generally?)
- Listing on a quoted Stock Exchange? If not,
is this a realistic possibility?
Human Resources
The heart of the issue with Human Resources is the skills-base
of the business. What skills does the business already possess? Are they sufficient
to meet the needs of the chosen strategy? Could the skills-base be flexed
/ stretched to meet the new requirements? An audit of human resources would
include assessment of the following factors:
Existing staffing resources
- Numbers of staff by function,
location, grade, experience, qualification, remuneration
- Existing rate of staff loss ("natural
wastage")
- Overall standard of training and specific
training standards in key roles
- Assessment of key "intangibles"
- e.g. morale, business culture
Changes required to resources
- What changes to the organisation
of the business are included in the strategy (e.g. change of location,
new locations, new products)?
- What incremental human resources are required?
- How should they be sourced? (alternatives
include employment, outsourcing, joint ventures etc.)
Physical Resources
The category of physical resources covers wide range of operational
resources concerned with the physical capability to deliver a strategy. These
include:
Production facilities
- Location of existing production facilities;
capacity; investment and maintenance requirements
- Current production processes - quality; method
& organisation
- Extent to which production requirements
of the strategy can be delivered by existing facilities
Marketing facilities
- Marketing management process
- Distribution channels
Information technology
- IT systems
- Integration with customers and suppliers
Intangible Resources
It is easy to ignore the intangible resources of a business
when assessing how to deliver a strategy - but they can be crucial. Intangibles
include:
Goodwill
The difference between the value of the tangible
assets of the business and the actual value of the business (what someone
would be prepared to pay for it)
Reputation
Does the business have a track record of
delivering on its strategic objectives? If so, this could help gather
the necessary support from employees and suppliers
Brands
Strong brands are often the key factor in
whether a growth strategy is a success or failure
Intellectual Property
Key commercial rights protected
by patents and trademarks may be an important factor in the strategy.
