On the strategic planning of enterprises
Strategy has guidance (strategy plays a guiding role in enterprise management activities), overall (strategy has a comprehensive plan for the long-term development trajectory of the enterprise), long-term (strategy usually cannot be changed overnight, with long-term stability), competitiveness (competition is the unavoidable reality of the market economy, and it is precisely because of competition that the strategy has established the dominant position in operation and management), Systematic (based on long-term development, the corporate strategy establishes the long-term goal, and needs to set up the stage goal around the long-term goal and the business strategy for the realization of each stage goal, so as to constitute an interlocking strategic goal system), risk (strategic decision-making directly determines the future of the enterprise) characteristics. Author: Yao Jun Reprinted, please indicate the source and author!
Keywords: strategy, planning, blue ocean, new business, comparison
The author believes that strategic planning should be considered from two aspects: the reordering of the original business and the new business of the enterprise, and the comparison of the new business to be carried out. Below, the author explains these two aspects separately:
1. Reordering the original business of the enterprise
Now, whether it is a state-owned enterprise, a private enterprise or a foreign-funded enterprise, many enterprises have a relatively large scale, are operating more than one kind of business, in this way, enterprises are faced with the problem of the allocation of resources such as manpower, material resources, material resources, information, etc., the problem that enterprises must solve is: how to choose one of the most important businesses (the main business of the enterprise) to focus on the development of a variety of businesses, and then consider some relatively minor businesses, or even divest some of the more problematic businesses (the so-called "problematic" business of the Boston Consulting Group)? Essentially, it's a strategic question.
According to the author's experience, the general process of reordering the original business of an enterprise is as follows: The external environment is comprehensively analyzed, in which the internal environment mainly refers to the existing core business areas, and the external environment is mainly analyzed through PEST analysis and industry analysis, the advantages and disadvantages of the internal resources of the enterprise are analyzed from the two dimensions of the overall ability of the enterprise and the individual business capabilities, the new model of competitive business integration is discussed through SWOT analysis, the basic strategic positioning of each business is determined by the Boston matrix, the business is prioritized, the above results are considered, the expectations of stakeholders are considered, the development mission and vision of the enterprise are clarified, and the strategic development direction of the enterprise is formulatedOn the basis of determining the strategic direction, formulate the overall strategy of the enterprise.
Second, the new business to be carried out by the selected enterprises
At present, in enterprise strategy and planning, some enterprises are no longer satisfied with the refined development of a single business, but want to develop other businesses, "do not put eggs in one basket", and do more diversified development. In the process of comparing and selecting new businesses to be launched, the author suggests that business decision-makers may wish to take some time to think about whether there is a potential business opportunity and whether this business opportunity has not yet been industrialized, that is, whether enterprises can choose a "blue ocean" strategy that suits them, while considering the many existing industries. Doing so is not a waste of valuable corporate resources, but it has value. Because, in the field that has not yet formed an industry, once it opens up or guides the needs of potential consumers, and thus manufactures high-quality products or provides high-quality services, enterprises will obtain huge economic benefits, which will be unattainable in the highly competitive "blue ocean" field.
Due to the special status of strategy, enterprises must pay full attention to and deliberate when planning strategies. Enterprises can use a variety of internal resources to plan strategies, and enterprises can also use some external resources, such as working with professional market research firms or management consulting firms, to borrow their industry experience, case experience and consulting experience to their own service.
Nowadays, the term "strategy" has become a popular word in the business world, and many, many enterprises have an overall corporate strategy and a strategy for each functional department. However, "strategy" did not originate in the commercial sphere, but in the military sphere. Clausewitz, a well-known German military strategist, believed that "strategy is the application of battle to achieve the purpose of war"; the great leader Mao Zedong said when talking about strategy: "I am accustomed to using 10 against 100, but I always use 10 against 10 and come a hundred times, so that I will win!" As for the importance of strategy, "The Art of War" wrote: "Soldiers, the major affairs of the country, the place of death and life, and the way of survival, must not be overlooked." Since strategy is so important to military and commercial organizations, how should enterprises plan their strategies? To understand this issue, we must first understand the contents, types, and characteristics of strategies.
In fact, to put it simply, strategy is about solving the three most basic and important problems – where, how, and when. "Where" is a question of positioning, i.e., identifying one's own product, market and customer portfolio, "how" is dealing with the five types of players in the market – customers, competitors, suppliers, distributors, and other stakeholders, and "when" refers to the proper chronology of strategic initiatives. As for "where", for example, Toyota, the boss of the automobile industry, wanted to enter the North American market with huge market capacity very early, but because the three major American automobile giants General Motors, Ford, and Chrysler were in an absolute hegemonic position in the North American market at that time, so the corporate strategy and planning, Toyota adopted a winding strategy: from the 60s of the 20th century, Toyota first entered Belgium, Finland, Sweden and other countries in Europe, and began to enter Germany, France, and other countries in the early 70s. Britain, in the early 80s, finally entered the United States, and the powerful three American automobile giants to start a head-to-head confrontation, in the process of entering the American market, Toyota in the choice of market location, can be described as ingenious; about "how", for example, Tiffany () company is known for its noble taste in jewelry, Mercedes-Benz company is known for the excellent quality of its cars, Intel company is known for its fast speed to market chips, and many companies in China's clothing industry have strong competitiveness because of their low cost; Later, after Acer mastered some PC parts R&D, production, management and other related skills, it began to produce its own brand of PC, and achieved good market sales.
Traditional strategies, such as Porter's three basic strategies - low-cost leading strategy, differentiation strategy, concentration strategy (also called "focus strategy"), functional strategy, brand strategy, and alliance strategy with other companies (competitors, including other companies outside the industry), etc., there are many companies that adopt these strategies, such as Foxconn Group's low-cost strategy, Rolls-Royce Motor Cars positioning high-end elites differentiation strategy, Microsoft focus on the software industry concentration war
The form of corporate strategy does not include, Ning Gaoning: corporate strategy under the new global changesInscription: On December 18, 2022, the "7th National Development Forum - China's New Journey and National Development" was grandly held by the Peking National Development Institute, and co-sponsored by the National High-end Think Tank Research Center of China National Petroleum Corporation. At the management sub-forum, Ning Gaoning, member of the Standing Committee of the National Committee of the Chinese People's Political Consultative Conference, former chairman and secretary of the party group of Sinochem Group, and distinguished professor of practice of Peking University Development Institute, delivered a keynote speech. This article is based on the content of the speech.
When discussing the great changes unseen in a century, many suggestions for enterprises mention "cross-cyclical" and "counter-cyclical", but there are not many suggestions based on the company's own situation. In fact, every company is in the current cyclical whirlpool, how can it cross the cycle and counter-cyclical?
If today the company has 75 percent of its liabilities, its assets have depreciated, and its operations are declining, how can it cross cycles and counter-cycles and cope with the great changes? Its top priority at present is obviously how to solve the problem of survival or how to maintain its operation. For companies that are in a slightly better position, the first task is how to maintain the few remaining earnings and how to improve them.
Towards the end of each year, each company has to make a budget for the coming year. Enterprises make budgets based on the forecast of the coming year, including the forecast of the economic situation, industry situation, competitive environment, and product market in the coming year. Judging by the past few years, don't be too optimistic about the market outlook.
The Central Economic Work Conference at the end of 2022 sent a very clear and strong signal to boost the economy, and there is great hope for a better economic recovery in 2023. Some experts on the Internet are even optimistic that they can achieve a growth rate of 8% in 2023, which is a great encouragement for enterprises. However, from the perspective of the enterprise, it is necessary to continue to fully respond to the cycle of the economic cycle and the new changes in the world, and not to be too optimistic.
Recognize the economic cycle
Going through each economic cycle cycle is a learning process for China's economy and enterprises. Companies in other countries around the world have experienced economic cycles such as the oil crisis, the debt crisis, the Southeast Asian financial crisis, the dot-com bubble, the subprime mortgage crisis, and the current epidemic since the 70s of the last century.
Over the past 40 years or so, China's economy has grown almost in a straight line, and companies have gone through small cycles, and even if there are fluctuations, the economy tends to recover quickly. As a result, Chinese companies have not faced high requirements for strategic adjustment in the past, and have basically been able to ride out the cycle with their original growth models.
But this time it doesn't look that simple. This is no longer a simple economic cyclical cycle for Chinese enterprises, but a huge change in industrial upgrading and competitive environment. How to grasp the cycle well and do a good job in its own operation? It is difficult for an enterprise to maintain such an ideal state.
In the case of Sinochem, where I work, the prices of commodities and oil change every day, every shipment, every refinery, and even every contract, and every change affects the nerves of the company. But this is the general environment and trend of the oil industry. In the face of such an environment, enterprises must do a good job in every detail of operation, do a good job in the research and development and sales of new chemical materials, and continue to improve the operating efficiency of enterprises, which is indeed not easy for enterprises.
I recently researched a shipping and logistics company, which is developing very well, mainly investing in ships and operating freight. Now many shipping companies are like this, their own business is doing well, but because of market fluctuations, the value of investment also fluctuates. It is very difficult to grasp these trends and at the same time continue to do a good job.
Therefore, in the face of new changes, it is hoped that Chinese enterprises can grasp the general trend and the cycle of economic cycles, and cooperate well with all aspects of business operation.
Understanding global change
Today, when we talk about new changes, what changes are enterprises facing?
First of all, there are changes in the macro and general environment, including the rise of China, the contrast between China and the West, the suppression of China by the United States, geopolitics, and the slowdown of the Western economy...... I feel that the world has become more politicized, ideological, regionalized, and racialized. It's very clear when we run a business that there are a lot of conflicts in different regions, different faiths, different ethnicities, including conflicts that we didn't think would happen in the past. In terms of religion, there is also a marked increase in conflicts between Christian, Protestant, Muslim, and Confucian cultures, which are manifested in the inter-employee, investment, and trade policies.
For the company itself, the situation has changed in many respects compared to five years ago or more. In the context of trade wars, tariffs, trade policies, and trade barriers, it has become the norm for Chinese companies to be sanctioned and included in a certain list, and it has become the norm for products to be banned today and released tomorrow, and the reasons are unknown, of course, the main thing is that the United States is controlling. In such a situation, the company's previous desire to grow and develop globally will be reduced, because external risks will become too high, and the spirit of international cooperation will deteriorate. It is difficult for large-scale joint ventures to succeed today because they are subject to too many uncertainties, including political, economic, corporate, regional and trade policies. Enterprises also face a lot of geopolitical scrutiny, for example, COFCO's overseas companies are also constantly subject to policy, trade, and industrial scrutiny overseas.
In the area of technical cooperation, technical cooperation with foreign countries was limited many years ago, and now the constraints in this area have reached its peak. Some projects involving cross-border technology transfer and cooperation, even if the industrial chain itself is controllable, and the strategic form of the enterprise does not include it, it is very difficult to achieve the cross-regional cross-regional main chain and main link of the industrial chain.
At the same time, the cultural gap between employees in different countries is increasing, and the distrust and insecurity among employees of different nationalities within the company are increasing. Chinese companies also face a lot of international financing, and many countries stipulate that their companies cannot participate in the financing of Chinese projects, or continue to increase the financing interest.
There is also a global trend, that is, ESG (and environmental, social and corporate governance) enterprise evaluation system, which not only requires enterprises to assume their own business responsibilities, but also puts forward high requirements for the social responsibility, environmental responsibility and governance responsibility of Chinese enterprises overseas. In the past, we would give priority to the interests of shareholders, enterprises and employees, but now the return on shareholders' funds, business efficiency and employee income should give way to social responsibility, social fairness and environmental governance. This trend is also a great test for Chinese companies.
Shift to innovation
Many experts and scholars believe that the world economic pattern is changing, which means that enterprises should reconsider their corporate development strategies in the face of major changes and new changes. Chinese enterprises are basically still in the development stage, and there is still a lot of distance from the relatively mature stage of development in European and American enterprises, which means that there are not many development paths for Chinese enterprises to choose, because we can only continue to go up, but the enterprises in front do not want us to imitate and catch up.
In the past, we could first expand the scale of the enterprise, expand the market share, and increase the sales;
In the past, we could relatively simply rely on cost advantages and labor dividends to participate in international competition;
In the past, we took the path of product internationalization and investment internationalization, and used international cooperation to promote the development of domestic enterprises;
In the past, we used their advanced technology and market advantages to promote the development of domestic enterprises and industries through mergers and acquisitions of outstanding foreign enterprises;
In the past, we had a high-debt development model, when the interest cost was relatively low, and the national policy was more supportive of the strategic form of the enterprise, and the leveraged M&A and expansion of the enterprise through the high-debt model;
In the past, we have enhanced the strength of domestic enterprises by introducing, digesting and absorbing international advanced technology......
But these past development models are not sustainable in the new changing landscape. In the past, the international joint venture model between companies is now greatly reduced, and many joint venture projects that were originally being negotiated have been suspended because there is a lot of uncertainty about the future.
In short, the development model that we used to use in the past is now hampered. This prompts Chinese enterprises to return to the essence of enterprise development strategy - innovation, differentiation, high efficiency and low cost. This is also the only development model that enterprises can choose.
After the merger of Sinochem and Sinochem, my company adheres to the development tenet of "science first", pursues leading research and development, and the 26 research institutes (institutes) of the entire enterprise are now fully connected with the industry and enter the state of full innovation. No investment without innovation, no investment in research and development, no investment in new products, not only engaged in large-scale development, but also innovation as the only driving force for development.
Chinese enterprises are forced to adapt to these new changes, from the past curve overtaking, unconventional development, the introduction of capital, the introduction of technology, back to explore the true development essence of enterprises.
I believe that the first mission of the enterprise is to innovate and explore the future world, to take innovation and exploration as the core and belief of the enterprise, and at the same time improve efficiency, reduce the cost a little lower, make the product better, and improve the management, because improving efficiency is also innovation, which is low-cost innovation. I have attended many seminars and heard about the practices of many companies, and I feel that a large number of state-owned enterprises now have a deeper understanding of innovation, R&D, and high-quality development.
Achieve a fundamental shift
What are the fundamental changes that enterprises are facing under the new changes?
In the past, we engaged in R&D and innovation, and often a new product was made without much progress for decades, while the market share of the enterprise was slowly decreasing. This is because in the past, we only used innovation as an auxiliary tool to the old path and the old product.
Now the innovation and research and development of enterprises has become the way to survive, and old products must also be innovated, upgraded and breakthroughs. Now innovation is the starting point of an enterprise and the beginning of every business. Every investment, plan or budget must consider how much of it is not available in the past, how high the cost of innovation is, how high the proportion of new product sales is, and the extent to which innovative products can play a leading role in technology, process or environmental protection. Without these requirements, such investment, planning and budgeting cannot be done.
In the past, innovation was often done to motivate research departments and researchers, but in reality it did not work at all or at all. To innovate now is to change the entire enterprise rather than a certain department, and to change the development ideas and business models of the enterprise from top to bottom.
Now, innovation and R&D have become the main business of the enterprise. For this reason, many companies can even have large laboratories and only need small production workshops. In addition, whether a company has a culture of innovation is crucial to whether the company can complete the innovation. The innovation of many enterprises is stifled by themselves, because enterprises have short-term performance, short-term culture, and short-term evaluation requirements, and many enterprises have to pursue short-term benefits.
Looking at the main body of innovation, that is, who will innovate? This is easy to say, but difficult to do. There are several levels to the main body of innovation. An enterprise can innovate without researchers, the workshop must innovate, the headquarters must innovate, and the entire enterprise must innovate.
The innovation path of managing enterprises is also very complex, from resource allocation, personnel allocation to improving efficiency, all require enterprises to adhere to a scientific approach, including requiring enterprises not to demand too much short-term performance. In fact, this is very difficult for enterprises, especially state-owned enterprises have to report and distribute dividends every month, profits can only grow, and innovation has to take more risks, and this contradiction has not been solved for ten or twenty years, but some practices are improving, such as R & D costs added back.
To sum up, the Central Economic Work Conference put forward the overall goal of economic development in 2023 and the development mode around high-quality development and innovative development, including opening-up, reform, global development and the development of many industries, which put forward good ideas for enterprise management. For enterprises, they should not only consider the one-year plan and strategy, but also stand in front of the general trend to understand the economic cycle, long-term challenges and innovation opportunities faced by the enterprise, allocate resources according to the cycle, and adjust the investment direction and development model. From the perspective of business philosophy, enterprises must adhere to the supremacy of science, innovation and development, and must return to the essence of enterprise development strategy - innovation differentiation, high efficiency, low cost, and must unswervingly turn to high-quality development. This is critical for businesses.