Strategy Development

Carey Fawcett's approach to Strategy Development combines a number of stages from an assessment of the existing business and its potential, through strategic and/or market positioning to a final strategy, which may encompass rationalization, new product development and mergers or acquisitions, as well as internal growth strategies. The process can be sub-divided into the following sections:
  • Assessment of Future Potential
  • Strategic and Market Positioning
  • Selection of Strategic Opportunities
  • Determination of Strategic Direction
The output from the Strategy Development Process will be clear statements of:
  • What you intend to achieve in terms of goals
  • How you will accomplish these goals or the strategies you will use
  • How you will measure progress and make on going adjustments to the strategies

Assessment of Future Potential

In order to provide the basis for rational decision making we assess the future financial potential of the existing business. This is a financial analysis and does not have to be very detailed but must take into consideration market sizes, shares, margins, and investment requirements. If the client already has such an analysis we can of course use it, possibly with some modifications to ensure that all the appropriate variables are taken into account. Based on this evaluation, we will jointly determine what the financial future is expected to look like, in the absence of significant changes on the part of the company.

Typically the continuation of the status quo will not provide an optimum solution for the company's future profitability. In other words, some expansion and new directions, as well as some rationalization of the existing business, will generally provide a number of ways in which the company's future can be improved.

Strategic and Market Positioning

Positioning implies focus. In other words amongst all the current and potential products and services, pieces of geography and market segments, we must make sense of this complexity and choose what to concentrate on. In order to do this, the existing business is analyzed and divided up into its component parts. Our proprietary process, which uses management input in a workshop environment, is essentially an audit of the existing businesses, not in financial terms but in terms of products made /or sold, markets served etc. and evaluates the relative merits of each part of the business. Many executives are tempted to try to oversimplify complex businesses in the hope of making them easier to manage, but, pretending that complexities do not exist, when in fact they do, simply results in poor decisions and hence poor performance. What is required, and what Carey Fawcett can help you develop, is a clear understanding of all the complexities, so that management can make rational choices about which aspects of the business to focus on.

Having helped analyze the company's product/service, geographic and market participation we can then jointly determine which of these provide the best potential opportunities for the company's future. This evaluation will be based on the company's strengths and weaknesses and those of its competition, as well as the future prospects for different markets and market segments.

The result of this process is a clear understanding of where your company stands today and what its options are for the future. This provides the fundamental basis for plotting its future strategic direction.

Selection of Strategic Opportunities

The analysis up to this point will have generated a number of possible opportunities for improvement in the company's financial future. From these must be selected the ones that the company will focus on, taking into account its financial, human and technological resources, as well as the risk reward ratios of the various options.
The opportunities selected can then be categorized as follows:
  1. Expansion of existing businesses
  2. Expansion into new markets
  3. Expansion into new products or services
  4. Rationalization of existing businesses
Opportunities in Category 1 can typically be handled by the existing organization, possibly with the addition of new personnel and technology. However, with regard to opportunities in Categories 2 and 3, these may be better addressed through acquisitions or mergers rather than simple expansion of the existing organization. The appropriate choice will depend upon the existence of businesses that meet the company's requirements as well as the costs involved. Similarly, depending on the value of the businesses to be rationalized, they may be handled internally through downsizing or sold as operating entities, depending upon the potential competitive impact of a sale and the costs associated with downsizing.

Strategic Direction

The process outlined results in a reorientation of the company to concetrate on particular products, services and markets and provides direction for internal growth, mergers, acquisitions and divestitures in a coherent whole. From this direction flow both tactical plans to ensure its accomplishment and sales, capital investment, research and earnings forecasts. Perhaps of more importance however, is that the logic that resulted in this direction, which was based upon certain forecasts and assumptions about the future, can be adjusted as these forecasts and assumptions change, so that the organization is dealing with incremental changes rather than a periodic total re-evaluation of the company's direction.

To ensure that these incremental changes do not disguise underlying problems, this type of strategic positioning and re-evaluation should be undertaken at intervals that reflect the time horizon of the business. For example, in mining or other resource industries, in which decisions have very long term impacts, the process should be undertaken about every ten years whereas, in consumer products and services, a two or three year cycle may be appropriate.