Strategy

Citation

Butler, C. (2009), "Strategy", Leadership & Organization Development Journal, Vol. 30 No. 7, pp. 687-688. https://doi.org/10.1108/01437730910991691

Professor Kollat's framework for evaluating business and corporate strategies includes examining strategic perspectives and conducting a strategic audit. He recommends examining mission, vision, values, objectives, strategy, growth initiatives, strategic initiatives, organizational design, financial strategy and financial structure. He recommends that growth initiatives should close a strategic gap as well as achieving earnings growth. Growth initiatives should be ranked and the strategic agenda should reflect this ranking. A company's financial strategy should include best‐and worst‐case scenarios building and assess its options and financial strength if the company finds itself in the worst‐case scenario. The strategic perspective includes examining time frames, risk, environment, lifecycle and history.

Evaluating corporate strategies and business plans should examine the history of growth in earnings per share, the market shares and market trends of each of the operating divisions, corporate values and whether or not the company is a good corporate citizen. The evaluation should analyse trends in economic added value, identify “white space” opportunities. It should investigate whether the current leadership style is appropriate for the future. The company's financial strategy should assess whether the enterprise is too dependent on a few particular sales regions or operating divisions.

The author advises that corporate growth initiatives should include plans for divestiture. “Street” expectations in cash flow, balance sheets and income statements should be examined. Shareholders expectations in these three criteria should be satisfied. The author provides an excellent description of the key criteria for evaluation together with strategy‐formulating figures, which are ready to use for both students and strategy practitioners. There are 50 figures outlining key strategy formulation, execution and evaluation tasks. The author includes the GE/McKinsey Model for portfolio analysis and the BCG Growth‐Share Matrix for shareholder value analysis in the analysis. The author includes detailed strategic checklists, which recommend tactics to improve competitive advantage.

The key performance indicator of profitability is examined in detail in the book. A firm's profitability and average profitability relative to competitors needs to be examined within the perspective of changing the leadership for the future. The problem of whether the company can improve profitability in the long term is coupled with the need to evaluate current and future leadership. Strategic options being evaluated by strategists should include selling the operating division within the corporate group if profitability cannot be envisaged.

The book highlights the business portfolios of leading multinational companies such as Coca‐Cola, United Technologies, Cisco, Caterpillar, Wal‐Mart and PepsiCo. Professor Kollat asks and examines the key question regarding innovation. Why was the iPhone invented by Apple rather than Nokia or Motorola? In strategy selection making a profit is a requirement. Success can determine a policy of continuing with current products. However, innovation in strategy and products is vital. A lack of systematic planned innovation will result in innovation being subordinated to other activities. A key weakness in many companies which are weak in innovation includes implanting reward systems which revolve around sales rather than major innovative leaps.

Strategic Gap Analysis examines the differences between the level of performance specified in the corporate objectives and the levels attainable through the continuation and improvement of business in the current portfolio. Strategic operating income gap is crucial in this analysis as it identifies the financial gap in the operating income objectives and the sum of the operating income projections for each of the existing business units. The strategic operating income gap should be transformed into a sales gap. Discretionary financial resources, i.e. resources that are readily available, should be used to close strategic gaps. The author explains both the relationship and the differences between the business as a single entity and the business operating divisions operating as part of a corporate group. The strengths and weaknesses of operating a multinational corporation are explained and summarised in figures which act as a strategy‐building guide for both students of strategy and managers involved in formulating, executing and evaluating strategy.