Research studies indicate that as much as 70% of a firm’s profitability is determined by industry / market factors, with the remaining 30% determined by the firm’s positioning.
The effective manager needs to understand and be able to use the latest strategy tools for analyzing industries, and be able to create strategies for sustainable advantage, and understand industry transformations.
Strategic management must include a broad set of strategic management issues, including:
- Ø Industry analysis and the forces that determine industry attractiveness;
- Ø Competitive positioning and the factors determining relative firm performance;
- Ø Industry transformation and strategic sustainability;
- Ø International strategy
Effective Managers must have the ability to develop, evaluate, and implement value-creating strategies for their business. They need to be exposed to the details that forces them to grapple with the real world tradeoffs, not just blackboard theories, and encourages them to work through strategic options.
I write about two of the factors I consider central to successful growth and I used to build JPIndustries (JPI) in to A Fortune 500 Corporation at a time of economic recession, high interest rates and an exodus of manufacturing operations from the mid west: synergy and homogeneity.
You are probably saying to yourselves that synergy was a concept of the 1960’s which was not notably and successfully employed by the conglomerates which coined it, and that homogeneity reminds you more of processing milk than of conducting business.
But these words, synergy and homogeneity are Creek. And I of Greek origin. I believe that understood and applied correctly, the concepts expressed by these words have clear practical meanings and direct application to business growth.
Synergy comes from the Greek synergia, meaning “working together”. From the same root we have synergism, which means cooperative action of separate agencies such that the total effect is greater than the sum of the effects taken independently. This is the basis for the famous 2+2=5 definition of synergy promoted as the strategy of the conglomerates of the 1960’s.
I would propose to you that in the 1960’s the term synergy was poorly understood and in many cases poorly applied. That is the fault not of the concept, but of its utilization. And I would further propose that, correctly understood and applied the concept of synergy works.
Continue reading AN OPERATING CORPORATE GROWTH STRATEGY: Building a Fortune 500 Manufacturing Business (7th article in the series on M&A)
In determining why you want to buy a company, you should ask yourself and develop answers for each of the following questions:
1) Do you want to run the business yourself or do you want others to help you?
2) How long you plan to keep the business;
3) Whether you plan to buy other businesses over time
4) If buying additional companies over time, do you plan to buy related or unrelated companies? Continue reading The Successful Business Acquisition Process – Step #2 – Acquisition Criteria and Your Initial Acquisition Plan