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Strategy: Resources of a Business.
Jerry Johnson and Kevan Scholes' definition states that "Strategy is the direction and scope of an organization over the long-term: which achieves advantage for the organization through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfill stakeholder expectations ".
So, what are these "resources" that a business needs to put in placeto 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 organization 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 & organization - 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. |
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