Why long-term and medium-term strategies are crucial for survival.
A need to remain resilient, yet focussed
In today’s business environment, enterprises, small and big, online or offline, must be able to cope with the pressures of technological adoption, employees’ demands, regulatory compliance, responsiveness to social media and global competition.
If your organisation (whether a SME, startup or non-profit) wishes to remain viable ten to fifteen years from today, you may think that the best way to reach there is to manage all these pressures well.
But that is only partially true. In fact, managing all of these well will not guarantee success, even though necessary, and may even be essential.
If an enterprise wishes to remain viable for the next ten years and longer, it is vital that it puts one very important thing in place – a STRATEGY that can serve as an anchor for the organisation’s activities for that duration.
So, whether you are an internet startup, SME or MNC, the approach to growing your market, spending shareholder’s money, and remaining viable and profitable is the same.
You will need an effective strategy that can help you prioritise your activities, expenditure, and remain focussed on your mission.
Growth is the new normal
This may sound like a cliche but many local offline businesses are dragging their feet to prepare themselves for the “new normal”, that is, continuous growth – instead of simply defending market share.
We know that as the world becomes better integrated, the ease of competitors entering our local domain is becoming the norm.
This is highly evident in the retail trade where franchises are popping up everywhere almost on a daily basis.
Franchises are successful internationally because they have a proven product that crosses cultural barriers, international branding that is built on a deep understanding of consumer psychology, effective capital risk distribution strategy and an enhanced business system.
Social media can only help if these critical parts of the business are working well – otherwise online influencers will be its downfall.
If local businesses do not find a strategy to match up with this level of competition, they will inevitably question their own survival.
Therefore, a growth strategy is the first step that forces the enterprise to re-valuate its business proposition, re-strategise and re-assigned its capital and resources.
What is an effective business growth strategy?
A business growth strategy (for offline or online business) may be summed up as identifying market need(s) which are supported by evidence of growth, and deciding on how to mobilize company’s resources to meet the identified need(s) base on the environment it operates within.
In reality, when developing such a strategy, one must have some knowledge of the future. The better one’s knowledge of the future is, the better one’s strategy will be (this is why accurately researched information is crucial for accurate analyses) .
A business can adopt a two-tiered strategy to mobilise resources for growth. These are: long-term strategies and medium-term strategies.
A two-tiered strategy will enable your enterprise to prioritise its objectives, challenges, solutions, expenditure and resources into the future more efficiently.
Long-term strategy will remain valid for between 5 years and longer; and medium-term strategy may remain valid between 3 and 5 years.
These two time-frames depend on the industry that one operates in. Certain industries, such as IT and telecommunications, require changes to their shorter-term strategies at even shorter intervals. In the case of commodities, a long-term strategy can extend as long as 15 years.
Long-term strategy (Tier 1):
Long-term strategy, which is the concern of shareholders and senior management, is necessary for:
1. Future survival
2. Gaining market leadership position(s)
3. Mobilization of resources and capital to achieve the desired return on investment
The key activities of a long-term strategy are:
1. Choosing a new growth market
2. Identifying and defining a market segment within the market in which you can dominate over that period
3. Create a strong competitive stance (positioning and branding) in the segment
Long-term strategy for MNCs used to be referred to as corporate strategy but in effect, it is long-term marketing strategy because it stems from understanding the overall market place and its segments.
Medium-term strategy (Tier 2):
In larger corporations with many divisions (business units) serving different markets, medium-term strategy is usually the responsibility of each business unit, which is accountable for the product/brand in a particular market segment. Medium-term strategy is necessary for:
1. Defending market share
3. Meeting monthly and yearly cash flow projections
Shareholders’ returns is the reason why a business exists. Without a long-term and medium-term strategic plan, consistent profit and cash flow will be hard to achieve.
Both long-term and medium-term strategies must be reviewed annually for the enterprise to remain relevant to market needs and profitability (see Annual Strategic Review).
Whether you are a startup, a small family business or an established business looking for growth opportunity, contact us for a chat. You will find us down-to-earth.