Why good strategy is important for businesses

Foresight strategy for business sustainability and expansion

June 05, 2021
Why good strategy is important for businesses
Maher Aljohani

Many businesses lose their competitive advantage as a result of failing to clearly plan ahead, anticipate market changes, and adjust their strategies accordingly. We all remember what happened to the cell phone king, Nokia.

Successful businesses should have thorough strategic management methods in place and set out clear goals that consider both internal and external factors.

However, simply predicting changes in the environment is just the first hurdle to overcome. Businesses that do not get caught out by market changes are those that also undertake a course of action and implement their plans.

When there is a clear overall business direction, as well as the will to turn ideas into action, brands can be well prepared to react positively to changes in the future.

What is also important for businesses to recognize is the need to consistently reassess their strategies, even throughout successful periods, in order to be ready to perform well against external pressure.

The environment can change how customers feel about a product or service. Because they are the driving force for any business, it is not surprising that businesses must plan in conjunction with the dynamic nature of customer behavior to create and maintain long-lasting relationships.

Companies must not make the mistake of assuming that they will be spared by disruptions in their environments, and businesses can learn from both the mistakes that have been made and the ways in which adopting effective strategies can enhance performance.

Take McDonald’s, for example. A successful company that already had generic strategies in place, McDonald’s responded to the predicted growth of the retail coffee market.

They adapted to this environmental shift by applying their secondary generic strategy, where, through broad differentiation, they created McCafe to respond to external demand for coffee-related products. In turn, these responses generated more success for the brand.

Dunkin’ Donuts made the smart strategic decision to drop the word “donuts” from their brand logo in response to increased demand for beverages rather than food.

As a result of the rise in competition within the coffee and breakfast space, Dunkin’ adapted their strategy to appeal to consumers by presenting themselves as more relevant and up-to-date with consumer demand.

This led shares of Dunkin’ brands to increase by more than 39 percent in the year after their announcement.

There was a time when Nokia was a top performer in the cell phone market, so what changed? Nokia assumed that their one billion customers would keep them ahead and afloat within the market; however, what happened next proved that no company is too big to fail.

Their failure to tailor their strategy to adapt to what was happening around them allowed other businesses to step in and take their place. They did not visualize that Steve Jobs would announce the first iPhone in 2007, the same year that Forbes Magazine featured Nokia on its cover, asking, “Can anyone catch the cell phone king?”

Evidently, Nokia felt comfortable and secure in their position in the market. Little did they know that the release of the iPhone was the death sentence for the Nokia brand. Perhaps Nokia believed that they did not do anything wrong as such, but the world changed too fast and they did not respond to the changes.

Another example of an unfortunate failure was that of AT&T, which wrongfully estimated that there would be a total of 900,000 mobile phone users in the United States of America by the year 2000, whereas the actual figure was 109 million; this miscalculation ultimately left them unable to enter the market.

A decade later, they had to acquire McCaw Cellular for $12.6 billion, a move that likely left them reflecting on their previous stumble within the industry. Although they may have attempted to step in the right direction by developing a relevant strategy, they underestimated the cellular technological revolution that was to come, and there was a big price to pay for this error in judgment.

Although change can seem like a daunting concept for many businesses, particularly those that are comfortable in their ways of doing things, it is worth beginning by becoming more open-minded to changing even the smallest details and embracing the potential good that may come as a result.

There will always be risks to planning ahead and taking steps toward making positive changes to an organization; however, if businesses do not get used to continuous change, they will not evolve or keep up with consumer needs.

As Steve Jobs famously said, “You can’t just ask customers what they want and then try to give that to them. By the time you get it built, they’ll want something new.”

A good strategy is vital for businesses to sustain the future. As stated by Robert Waterman, the successful director of McKinsey and Company during the 1970s, “A strategy is necessary because the future is unpredictable.”

— The writer is specialized at strategy and project management he can be reached on his twitter account @maher_aljohanii

June 05, 2021
19 hours ago

Looking to the future on our National Day

day ago

The Crown Prince’s keenness to develop citizens’ capabilities

4 days ago

The real investment in Saudi human being