Chapter 7: Business Strategy Review
Chapter 7: Business Strategy Review
Introduction
Business strategies are not static; they must evolve to keep pace with changes in the
competitive landscape, market dynamics, customer needs, and technological
advancements. A business strategy review is the process of systematically evaluating
the effectiveness of a company’s current strategy, identifying areas for improvement,
and making necessary adjustments to enhance overall performance and outcomes. In a
dynamic business environment, where factors such as consumer preferences, global
economic conditions, and technological trends shift rapidly, it is critical for organizations
to regularly review and refine their strategies to stay competitive and aligned with
long-term goals.
This chapter will explore the methods and frameworks for conducting a thorough
business strategy review. It will focus on evaluating strategic effectiveness, identifying
gaps and opportunities for improvement, and the process of implementing changes.
Additionally, the chapter will emphasize the importance of continuous strategic review
and real-time responsiveness to emerging challenges and opportunities in today’s
volatile business landscape.
7.1 Understanding the Business Strategy Review
Process
7.1.1 Definition and Purpose
Definition: A business strategy review is a structured process of assessing the
alignment, performance, and relevance of an organization’s strategy against its
objectives and external conditions. It involves examining key performance indicators
(KPIs), market conditions, industry trends, and internal capabilities to determine whether
the current strategy is effective or requires refinement.
The purpose of conducting a strategy review is multifaceted:
● Measure Strategic Effectiveness: Determine whether the strategy is achieving
its intended outcomes, such as increased market share, profitability, customer
satisfaction, or innovation.
● Identify Gaps and Weaknesses: Recognize areas where the strategy may be
falling short, such as inefficient resource allocation, failure to capitalize on
opportunities, or weaknesses in competitive positioning.
1
● Adapt to Change: Ensure the strategy remains responsive to external changes,
such as new competitors, shifting regulations, economic fluctuations, or
technological advancements.
● Enhance Strategic Alignment: Confirm that the strategy aligns with the
company’s mission, vision, and long-term goals, ensuring that all efforts are
focused on achieving the desired outcomes.
According to Kaplan and Norton (2008), a strategy review helps organizations remain
agile by aligning their objectives and actions with real-time market dynamics, internal
performance metrics, and long-term strategic vision.
7.1.2 When to Conduct a Business Strategy Review
While continuous monitoring of strategy is essential, there are specific triggers that
necessitate a formal review process:
● Scheduled Reviews: Many organizations implement annual or semi-annual
strategy reviews to assess progress toward long-term goals and make necessary
adjustments based on changes in the business environment.
● Major Changes in External Environment: Disruptions such as economic
downturns, regulatory shifts, new competitive entrants, or technological
innovations often require a rapid reassessment of the strategy.
● Internal Shifts: Significant changes within the organization, such as leadership
transitions, mergers, acquisitions, or changes in financial performance, also
warrant a strategy review to ensure alignment with new realities.
● Failure to Meet KPIs: If the company consistently fails to meet key performance
indicators (KPIs), it is a clear signal that the current strategy needs reevaluation.
7.2 Methods for Evaluating Strategic Effectiveness
To thoroughly evaluate the effectiveness of a business strategy, organizations must
employ a range of methods and frameworks that assess both qualitative and
quantitative performance. A holistic evaluation combines financial performance metrics
with market and internal analyses.
7.2.1 Key Performance Indicators (KPIs)
Definition: KPIs are quantifiable measures used to evaluate the success of an
organization in achieving specific strategic objectives. These metrics allow businesses
to track performance against targets and make data-driven decisions regarding strategy
adjustments.
Common KPIs include:
2
● Revenue Growth: Measures the increase in company income over time and
reflects overall business expansion.
● Profit Margins: Gross profit margin, operating margin, and net profit margin
assess the company’s profitability at various stages of its operations.
● Market Share: Indicates the percentage of total market sales captured by the
company, reflecting its competitive position within the industry.
● Customer Retention and Satisfaction: These metrics provide insights into the
company’s ability to maintain a loyal customer base and meet customer
expectations.
Example: A retail company may track KPIs such as year-over-year revenue growth, net
profit margin, and customer satisfaction scores to assess how well its strategy of
expanding into new markets is performing. If KPIs show a decline in customer
satisfaction despite revenue growth, this could indicate a need for refinement in
customer service or product quality to ensure sustainable success (David, 2011).
7.2.2 Balanced Scorecard
The Balanced Scorecard is a performance measurement framework that incorporates
financial and non-financial metrics across four key perspectives: financial, customer,
internal business processes, and learning and growth. This comprehensive approach
helps organizations evaluate their strategy beyond simple financial results, providing a
holistic view of business performance (Kaplan & Norton, 1996).
Perspective Key Questions Example Metrics
Financial How do we look to shareholders? Return on equity, profit
margins, cash flow
Customer How do customers perceive us? Customer satisfaction,
retention rate, market share
Internal
Processes
What must we excel at internally to
satisfy our customers and
stakeholders?
Process efficiency, product
quality, cycle time
Learning and
Growth
How can we continue to improve and
create value?
Employee training,
innovation rates, cultural
alignment
Example: A manufacturing company using the Balanced Scorecard may find that while
financial performance is strong, internal process inefficiencies are leading to slower
production times, impacting customer satisfaction. This insight prompts a review of
operational strategies to optimize processes and improve overall performance.
3
7.2.3 SWOT Analysis in Strategy Review
SWOT Analysis is a widely used tool for assessing a company’s Strengths,
Weaknesses, Opportunities, and Threats. In the context of a strategy review, a
SWOT analysis helps organizations identify internal capabilities and external factors
that are impacting their current strategy (Gurel & Tat, 2017).
● Strengths: What internal capabilities are enabling the company to succeed?
● Weaknesses: Where is the company underperforming, and what internal
limitations are holding back progress?
● Opportunities: What external opportunities exist in the market or industry that
the company can leverage?
● Threats: What external risks or challenges are emerging that could hinder the
company’s success?
Example: A tech company may conduct a SWOT analysis as part of its strategy review
and identify a strength in its R&D capabilities but a weakness in its marketing outreach.
An opportunity may lie in an emerging technology trend, while a threat could be new
competitors entering the market. This analysis enables the company to adjust its
strategy by investing more in marketing while continuing to innovate in its core areas of
expertise.
7.2.4 Competitor Benchmarking
Competitor Benchmarking involves comparing a company’s performance against key
competitors or industry leaders to identify gaps, areas of improvement, and best
practices. Benchmarking helps businesses understand where they stand in the
marketplace and how their strategy fares against others (Camp, 1989).
Key Steps in Competitor Benchmarking:
1. Identify Competitors: Select direct competitors in the same industry or market
who offer similar products or services.
2. Select Metrics: Choose performance metrics to compare, such as market share,
profitability, customer engagement, or innovation rates.
3. Collect Data: Use industry reports, public financial statements, and market
research to gather data on competitors.
4. Analyze Performance: Compare the company’s performance to that of its
competitors to identify strengths, weaknesses, and potential areas for
improvement.
4
Example: A beverage company may benchmark its product innovation cycle against
competitors like Coca-Cola and PepsiCo. If competitors are launching new products
faster, the company may need to refine its R&D processes to remain competitive.
7.3 Identifying Areas for Improvement
The strategy review process often reveals gaps or areas where the current strategy is
not performing optimally. Identifying these areas for improvement is crucial for refining
the strategy and enhancing outcomes.
7.3.1 Common Areas for Strategic Improvement
● Misalignment with Market Trends: If a strategy is not aligned with current
market trends, such as shifting customer preferences or new technological
developments, it can quickly become outdated.
Example: Retailers who did not adapt to the e-commerce boom early faced
challenges when consumer preferences shifted toward online shopping. Strategic
improvement may involve enhancing the company’s digital presence and
improving logistics for online order fulfillment (Grewal et al., 2010).
● Resource Misallocation: A strategy may allocate too many resources to
underperforming areas or fail to invest sufficiently in growth opportunities.
Example: A company might over-invest in legacy product lines that are in decline
while under-investing in new, high-growth areas. A strategy review may prompt a
reallocation of resources to focus on future growth (Grant, 2016).
● Inadequate Customer Engagement: If customer satisfaction or retention is
declining, the strategy may need adjustment to focus more on customer
experience and engagement.
Example: A financial services company may find that its customer service model
is leading to dissatisfaction, prompting a shift in strategy to enhance customer
support through digital channels and more personalized services.
7.3.2 Scenario Planning and Sensitivity Analysis
Scenario Planning and Sensitivity Analysis are tools used to test how different
external variables (e.g., economic shifts, regulatory changes, market disruptions) impact
the effectiveness of a strategy. These tools allow organizations to model different
strategic scenarios and assess their robustness in various situations.
5
● Scenario Planning: Involves constructing different future scenarios (e.g.,
optimistic, pessimistic, and neutral) and evaluating how well the current strategy
would perform under each.
Example: An energy company may develop scenarios based on fluctuating oil
prices, regulatory changes in renewable energy, and shifts in consumer demand
for clean energy. These scenarios will help the company prepare for potential
future conditions and refine its strategy accordingly (Schoemaker, 1995).
● Sensitivity Analysis: Examines how sensitive the success of the strategy is to
changes in critical variables. This can highlight areas where the strategy is
vulnerable to small shifts in market conditions.
Example: A manufacturing company may use sensitivity analysis to assess how
a 10% increase in raw material costs could impact profitability and whether the
current pricing strategy can absorb such cost increases.
7.4 Implementing Changes to Enhance Strategic
Outcomes
Once areas for improvement have been identified, the next step is implementing
changes that refine the strategy and improve performance. Successful implementation
requires careful planning, communication, and monitoring.
7.4.1 Change Management in Strategy Refinement
Implementing strategic changes often involves significant organizational shifts, requiring
effective change management to ensure smooth transitions and buy-in from all levels of
the organization (Kotter, 1996).
Key elements of effective change management include:
● Clear Communication: Ensuring that the rationale for strategic changes is
clearly communicated to all stakeholders, from executives to employees, helps
build understanding and support.
● Leadership Commitment: Leadership must visibly support the changes and
demonstrate commitment to the refined strategy.
● Training and Development: Employees may need new skills or training to
execute the refined strategy effectively, especially if the changes involve new
technologies or processes.
Example: When IBM shifted from a hardware-focused business model to a services
and software-based model, the company had to manage significant internal change.
6
This included retraining employees, rebranding, and shifting investments. The success
of this strategic shift was largely due to strong change management and leadership
(Gerstner, 2002).
7.4.2 Monitoring and Continuous Improvement
After changes are implemented, it is essential to monitor their impact and make further
adjustments as needed. Continuous improvement involves regularly reviewing
performance, identifying new challenges, and fine-tuning the strategy to ensure it
remains effective in a changing environment.
● Regular Performance Reviews: Track KPIs and other performance metrics
post-implementation to assess whether the refined strategy is delivering the
expected outcomes.
● Feedback Loops: Collect feedback from customers, employees, and other
stakeholders to gauge the effectiveness of the strategy and identify any areas
that need further improvement.
● Agile Adjustments: In today’s fast-paced business environment, organizations
must remain agile, ready to make incremental adjustments to their strategy as
new information becomes available (Drucker, 2008).
7.5 Continuous Strategic Review in a Dynamic
Environment
In a rapidly evolving business environment, the need for continuous strategic review
cannot be overstated. Businesses that regularly review and refine their strategies are
better positioned to respond to market changes, capitalize on emerging opportunities,
and mitigate risks.
7.5.1 The Importance of Agility
Agility refers to the ability of an organization to quickly adapt to changes in the market,
technology, or industry landscape. An agile strategic review process enables
businesses to remain competitive by making real-time adjustments to their strategy
(Doz & Kosonen, 2010).
● Real-Time Data Integration: Companies must incorporate real-time data into
their strategy reviews to stay ahead of changes in consumer behavior, competitor
actions, or industry trends.
7
Example: Retailers like Amazon use real-time data on consumer purchasing
habits to adjust inventory levels, pricing strategies, and marketing campaigns,
ensuring that they remain competitive in an ever-changing market.
7.5.2 Embedding Continuous Review in Company Culture
To foster continuous strategic review, companies must embed a culture of ongoing
evaluation and improvement across all levels of the organization.
● Empowering Employees: Encouraging employees to provide feedback on
strategic initiatives helps ensure that potential issues or improvements are
identified quickly.
● Leadership Commitment: Executives must prioritize strategy reviews as a
regular part of business operations, ensuring that reviews are not seen as a
one-time event but an ongoing process.
Conclusion
A business strategy review is an essential process that enables organizations to
evaluate their current strategies, identify areas for improvement, and make necessary
adjustments to stay aligned with their long-term goals. By using tools such as KPIs, the
Balanced Scorecard, SWOT analysis, and competitor benchmarking, companies can
gain a comprehensive understanding of their strategic performance. Implementing
changes based on these insights, while managing change effectively, ensures that the
strategy remains relevant and effective in a dynamic environment. Continuous strategic
review is not just a best practice; it is a necessity in today’s fast-paced and
ever-changing business landscape.
References
● Camp, R. C. (1989). Benchmarking: The search for industry best practices that
lead to superior performance. ASQC Quality Press.
● David, F. R. (2011). Strategic management: Concepts and cases. Pearson.
● Doz, Y., & Kosonen, M. (2010). Embedding strategic agility: A leadership agenda
for accelerating business model renewal. Long Range Planning, 43(2–3),
370-382.
● Drucker, P. F. (2008). Management: Tasks, responsibilities, practices.
HarperCollins.
8
● Gerstner, L. V. (2002). Who says elephants can’t dance? Inside IBM’s historic
turnaround. HarperCollins.
● Grant, R. M. (2016). Contemporary strategy analysis (9th ed.). Wiley.
● Grewal, D., Levy, M., & Kumar, V. (2010). Customer experience management in
retailing: An organizing framework. Journal of Retailing, 85(1), 1-14.
● Gurel, E., & Tat, M. (2017). SWOT analysis: A theoretical review. The Journal of
International Social Research, 10(51), 994-1006.
● Kaplan, R. S., & Norton, D. P. (1996). The balanced scorecard: Translating
strategy into action. Harvard Business Review Press.
● Kaplan, R. S., & Norton, D. P. (2008). The execution premium: Linking strategy to
operations for competitive advantage. Harvard Business Review Press.
● Kotter, J. P. (1996). Leading change. Harvard Business Review Press.
● Schoemaker, P. J. (1995). Scenario planning: A tool for strategic thinking. Sloan
Management Review, 36(2), 25-40.
9
