Posts Tagged ‘strategy formulation’

Strategy formulation: economic signs mixed but, on balance, no green shoots

Jun 29th, 09 / 0 Comments

Strategic analysis should include an evaluation of the external business environment.  This post could be used as input for the Economy section of a PESTEL analysis.

Continuing the theme of conflicting evidence about the state of economic recovery, today again sees apparently contradictory signs:

The Guardian reports that UK mortgage lending has reached a 13 month high, which reflects growing consumer optimism – which is a key component of the economy independent of data, but net lending figures were at their lowest level in at least 16 years.  The increased house purchase activity supports other, albeit weak, signs of recovery in the housing market since the start of this year.

They also cover a reoprt from the Basle-based Bank of International Settlements which claims that “Overall, governments may not have acted quickly enough to remove problem assets from the balance sheets of key banks”, which further underlines the need for government action to curb the enthusiasm in the banking sector to return to unjustified remuneration for the very managers who allowed these toxic assets to cause so many banks to fail.

The FT reports that the International Energy Agency has reduced oil demand forecasts with global oil demand now forecsat to grow at 0.6% over the next 6 years.  In an extract from the report, the IEA say: ”The recent resurgence in economic activity could…simply reflect the rebuilding of depleted inventories across several industries, making it arguably premature to predict an imminent and strong economic rebound, not least because the elimination of spare capacity, the deleveraging of the private sector in several highly indebted countries and the rebalancing of global demand are still at an early stage.”

The balance of data and analysis suggests that the economic recovery still has a long way to go.  Business strategy, as we have said in previous posts, should assume further setbacks before the economy recovers and the focus should be on agile approaches to strategy that have contingencies rather than trying to formulate definite medium and long-term plans.

Formulation, Strategy, economy

Green shoots sprouting or dead cats bouncing?

Jun 24th, 09 / 0 Comments

Current headlines are giving mixed signals about the prospects for economic recovery. There are many stories this week that point to the emergence of green shoots following the 2008 global economic shock:

  • “OECD sees strongest outlook since 2007″
  • “Oracle executives signal that demand for the company’s software picked up noticeably in recent weeks”
  • “Monsanto earnings beat expectations”

Equally, there are many contradictory views also being aired at the same time:

  • “OECD chief warns about medium term risks”
  • “European Central Bank and other economists have been wary about forecasting any early return to growth”
  • “Japanese exports continue to tumble”

So, what to make of this when trying to develop short and medium term business plans or revise corporate strategies?  Unfortunately, as always, forecasting is inexact at best – the future, is of course, unknown. However, there may be some value in digging into the various stories to understand the timescales being referred to, and taking a view on the position of the pundit or analysts presenting the forecast.
For example, the apparently contradictory OECD headlines are both based on the same OECD report. inevitably, a document with a large scope will have some complexity which allows the contents to be spun in a particular direction, or provides different conclusions if you only consider particular aspects of it.
Much of the analysis and speculation concerns stock markets and share prices which are of limited interest for strategic thinking because they reflect sentiment rather than fact. Economic analysis attempts to consider facts but is limited by the quality of data and conflicting schools of thought.

However, an interesting study that compares the current recession to the Great Depression shows that this shock has been faster and more severe than the predecessor from the last century, and it is possible that there is more shrinkage to come before growth returns.

Our view is that when the future is uncertain it is best to use contingency and scenario planning combined with an emergent approach to strategy formulation and business planning. Scenario and contingency planning help you to be prepared and changing from a planned to an emergent approach to strategic management enables you to be prepared to adapt – fast.

Formulation, Strategy, economy

A Convenient Movie

Jan 3rd, 07 / 1 Comment

A recent visit to New York provided an opportunity, albeit ironic, to finally see Al Gore’s movie “An Inconvenient Truth”. Plenty of food for thought; in particular the prospect of making a positive difference through the combined effectof small individual actions. I’m not convinced that all carbon offset schemes are equally valuable – is there any objective comparative research that organisations can use to determine the best route towards carbon neutrality.

A useful summary of the issues is provided by the New York Times: http://www.nytimes.com/ref/science/earth/energy.html

Any business strategy has to consider external factors, and environmental opportunities and threats are going to become increasingly significant forces as evidenced by today’s news from the UK that the government is highlighting the opportunity for farmers from biofuels, while also considering taxing farmers for the methane “emissions” from cattle – already being dubbed “the fart tax”. http://tinyurl.com/yaewut

A silly story to illustrate a serious issue.

Effectiveness, Formulation, Organisation, Strategy