Although all businesses share common fundamental principles, they can also differ in many ways, such as the following:
- private companies have objectives such as making a profit or increasing their market share;
- public-sector organisations may exist to provide a service;
- a not-for-profit organisation, such as a club, exists to provide facilities and entertainment for its members.
Likewise, there are differences between organisations in terms of their strategies.
SMALL BUSINESSES
These are likely to have a limited range in terms both of their markets, and their range of products or services. This will tend to limit their strategic issues, with a major consideration being that of competitiveness and of trying to expand. Obviously small businesses have fewer resources than their larger counterparts. Perhaps somewhat surprisingly this means that, if anything, the importance of applying the basic elements of strategic management effectively is even more important. The small business organisation simply cannot afford to make strategic mistakes. Despite this, however, the smaller business is likely to have fewer specialist managers and particularly will often lack skills and expertise in some of the areas required for effective strategic management. So, for exa ple, the smaller business will often find it difficult to prepare accurate forecasts or to conduct specialist marketing research. Because of this, the smaller business will often need to turn to outside help and consultancies for some of their strategic management skills. Planning in the smaller business is often less formal than in its larger counterparts, but is often easier to communicate throughout the organisation. Often strategic management will be done by one person, the owner/manager.
A smaller business is limited in the ways it can compete: for example, it would not normally be able to compete on cost leadership. Because of this, the small business is likely to concentrate on using the advantages which accrue from its small size such as personal service, flexibility, etc.
The small business is likely to find it more difficult to raise finance and so growth is sometimes difficult to achieve. For the same reason, the smaller business may find it difficult to pursue growth through new product development. Finally, in the small business the character, skills and vision of its owners are likely to be much more significant in business success or failure than in larger organisations.
MULTINATIONAL COMPANIES
By their nature these are complex organisations and, unlike small businesses, their strategies will be linked to the control of a range of businesses or divisions spread across a number of different countries, thus adding complications due to financial and language differences, as well as differences of culture. Strategic management in these circumstances will be the concern of a large number of managers, whose day-to-day decisions must be within the overall strategy of the company. The control of a wide range of business centres which are widely spread geographically
means that the necessary control systems, whether centralised or decentralised, must be very sophisticated. The often widespread geographical coverage of such organisations also heightens the importance of the cultural and political elements of the environment which therefore become especially important in the planning process. Crucial to such organisations are the issues of centralisation versus decentralisation in structure and planning systems, together with the related issue of global versus local strategies.
Finally, the allocation of resources between different parts of the business is extremely important, but also potentially complex. Great care must be taken in such organisations to balance the business portfolio.
MANUFACTURING AND SERVICE ORGANISATIONS
These differ in important ways, reflecting their differing objectives.
- In the case of the manufacturer, it is the quality of the product which creates the company's competitiveness and, therefore, its strategy will be closely linked to the product.
- In the case of service provision, the competitiveness of one organisation with respect to its rivals will depend on less obvious aspects, such as the public's perception of the company, based on publicity and image-marketing strategies as, for instance, in getting the strength of a particular insurance company around you.
- Thus those at the sharp end of the service provider will be more likely to be in control of company strategy, whereas it is those at senior levels in manufacturing companies who will have the greater influence.
Service products have a number of characteristics which give rise to special considerations for strategic management in service organisations. Service products are essentially intangible, which means they cannot be touched or stored; and they are "inseparable", in that the service provider is inevitably present when the service is consumed. These characteristics mean that the following are key issues in the strategic management of service providers:
- The difficulty of differentiating service products to gain a strategic competitive advantage.
- The importance of synchronizing demand and supply.
- The importance of supplier reputation and hence word-of-mouth in customer choice.
- With service products we need to consider an extended marketing mix, with the three additional elements of "process", "physical evidence" and "people".
VOLUNTARY AND NOT-FOR-PROFIT ORGANISATIONS
This class includes charities, foundations, clubs, learned societies, trade associations, professional bodies, etc. Although they do not exist to make a profit, many of these organisations end the year with a surplus of income over expenditure from their trading activities. They will also have income from membership fees, donations and bequests. Where they differ financially from commercial organisations is that they apply their income and surpluses to furthering the purpose of the club, society or charity and not to paying dividends to shareholders.
- Because of their dependence on funding from sponsors rather than clients, it is easy for the efforts of not-for-profit organisations to be concentrated on lobbying for resources, which makes it difficult for them to have a clear strategic plan.
- In the case of voluntary organisations, their basis for existence is deeply rooted in particular shared values and these have an important influence on the development of strategy.
INNOVATORY ORGANISATIONS
Companies such as Hewlett-Packard have a strategy which encourages employees to develop new ideas in order to keep their business at the cutting edge of the computer sector in which they operate. Hewlett-Packard's way of doing this is to set aside work time each day specifically for the purpose of allowing their employees to pursue such activities. This is not a new concept in business, since the General Electric Company (GEC) were concerned with the same strategy 30 years previously. GEC used the ability of the company to meet customer needs at minimum costs for developing, manufacturing and marketing new products. The company – or an integrated segment of it – exploited new scientific and technical knowledge, in manufacturing and marketing as well as engineering, to lead competition in aggressively applying such knowledge in the creation and marketing of new products. To do this they took account, not only of innovation, but also of the ability to capitalise on new ideas at the right time and at a cost, and the quality required, that would appeal to the customer and make the new product successful.
PROFESSIONAL SERVICE ORGANISATIONS
Services such as medical, accountancy and the law still see traditionally-based values as an important part of their enterprises. Often these organisations take the form of partnerships, which consist of two or more persons carrying on a business together. This form of organisation appeals to professional people, since they can retain a large amount of individual freedom of action and maintain their personal relationship with clients, whilst gaining the advantages of larger amounts of capital and of expertise than would be available to individuals. In terms of strategic management in such an arrangement, the main difficulties arise where differences of opinion have to be resolved in order to pursue an agreed policy. In view of recent changes for medical partnerships, with the advent of budget holders and the development of large medical centres, professional service organisations in future are likely to find themselves becoming more competitive and having to adopt strategies similar to those of profit-making organisations.
PUBLIC-SECTOR ORGANISATIONS
It is important to recognise that the public sector comprises a very diverse set of business organisations. In fact, it has a number of sub-sectors, including regulatory bodies, local authorities, social and health services, education providers, some trading companies, advice services, police and defence, and many others. Each of these sub-sectors to some extent has its own special characteristics with regard to strategic management. However, recognising this, it is possible to point to some of the distinct factors affecting strategic management in the public-sector organisation. Perhaps the most significant is the influence of political considerations in the development of and constraints on strategic plans. Compared to the private sector public-sector organisations are very much more accountable for their decisions to outside parties and, indeed, to the public in general. Decisions by managers in such organisations will often be taken in the context of such political/regulatory requirements: for example, a requirement to buy from domestic suppliers. Many public- sector bodies operate within laws and regulations designed to prevent corruption and favouritism, which entail very formal and bureaucratic structures and procedures which can be resistant to change.
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