UNIT4

Strategy Analysis: Process

Strategic analysis refers to the process of conducting research on a company and its operating
environment to formulate a strategy. The definition of strategic analysis may differ from an academic
or business perspective, but the process involves several common factors:

(a) Identifying and evaluating data relevant to the company’s strategy

(b) Defining the internal and external environments to be analyzed

(c) Using several analytic methods such as Porter’s five forces analysis, SWOT analysis, and value chain
analysis

Strategic Analysis Process

The following info graphic demonstrates the strategic analysis process:

1. Perform an environmental analysis of current strategies

Starting from the beginning, a company needs to complete an environmental analysis of its current
strategies. Internal environment considerations include issues such as operational inefficiencies,
employee morale, and constraints from financial issues. External environment considerations include
political trends, economic shifts, and changes in consumer tastes.
2. Determine the effectiveness of existing strategies

A key purpose of a strategic analysis is to determine the effectiveness of the current strategy amid the
prevailing business environment. Strategists must ask themselves questions such as: Is our strategy
failing or succeeding? Will we meet our stated goals? Does our strategy align with our vision,
mission, and values?

3. Formulate Plans

If the answer to the questions posed in the assessment stage is “No” or “Unsure,” we undergo a
planning stage where the company proposes strategic alternatives. Strategists may propose ways to
keep costs low and operations leaner. Potential strategic alternatives include changes in capital
structure, changes in supply chain management, or any other alternative to a business process.

4. Recommend and implement the most viable strategy

Lastly, after assessing strategies and proposing alternatives, we reach the recommendation. After
assessing all possible strategic alternatives, we choose to implement the most viable and
quantitatively profitable strategy. After producing a recommendation, we iteratively repeat the entire
process. Strategies must be implemented, assessed, and re-assessed. They must change because
business environments are not static.
Levels of Strategy

1. Corporate-Level (Portfolio)

At the highest level, corporate strategy involves high-level strategic decisions that will help a
company sustain a competitive advantage and remain profitable in the foreseeable future. Corporate-
level decisions are all-encompassing of a company.

2. Business-Level

At the median level of strategy are business-level decisions. The business-level strategy focuses on
market positions to help the company gain a competitive advantage in its own industry or other
industries.

3. Functional-Level

At the lowest level are functional-level decisions. They focus on activities within and between
different functions aimed at improving the efficiency of the overall business. The strategies are
focused on particular functions and groups.

Analyzing Strategic Alternative

Every business enterprise can be expected to trace a business path in which, at some point (usually
not a predictable one), essential elements of what appeared a well-functioning business plan cease to
produce the desired results. At this point managers of the business are called upon to re-examine
fundamentally all aspects of their business in order to re-orient the business along a new path.
 These instances of breakdown in a business model often stress so many aspects of a business’s
operating model that it can be difficult or impossible for existing management to adequately assess
what the actual problems are, and to formulate corrective measures. Even management teams which
are fully qualified for this type of challenge have nevertheless found the perspective of an external,
disinterested professional advisor essential to the formulation of plans for change.

The firm has continuing experience over its history with just such assignments, typically referred to
as strategic alternatives analysis. In this type of engagement, the firm is retained by the Board of
Directors or owner to engage in a rapid assessment of a company’s competitive position, financial
performance, management skill and depth, and business segment viability, in order to formulate a
range of strategic alternatives designed to permit the comprehensive change that such stress points
require.

We have handled strategic alternatives analysis assignments such as the following:

 Assessment of a new business initiative by a distribution company to become an independent

designer/ manufacturer of the products in whose distribution it specialized, with resulting spiraling
expenses, personnel crises, and alienation of its customer base.
 A highly successful packaging manufacturer, forced to allocate production of its industry-leading
products among fractious competing customers, and in danger of losing major accounts as a result, was
unable to find financing for additional production capacity in its home market, and needed a solution in
place before a new buying cycle in its industry began.
 A successful and respected technology services firm, second in its domestic market, found its growth
stalled when its partnership, divided by internal disagreements, could not agree as to the path to pursue
to raise needed additional capital to continue the firm’s expansion.
 A dynamically growing, technologically innovative business services firm offering a unique suite of
solutions to expand the reach of vital government services to the general public found its business
stalled when its lack of marketing sophistication smothered initiatives to enhance the growth required
to fund growth expansion.

Evaluating and Choosing Among

Strategic Alternative
The most successful strategies are those that consistently add value and are supported throughout the
organization. The strategy needs to be consistent with the organization’s mission and compatible
with both the internal and external environment. Value adding activities consists of those operations
that are consistent with the organization’s value chain. For example improvements in competitive
advantage have an acceptable risk factor, are flexible enough to cope with turbulence and are able to
be measured.

The strategy needs to have the support of the organization and its members to ensure its success.
Gaining support for a strategy is often dependent on the level of resource availability and support
from key managers. In order to gain this support it is important that the strategies are explicit and
communicated throughout the organization. Once this has been achieved it is important to provide
motivation for its success. Strategies that are extreme at either level of the continuum are not likely to
be supported. Another important issue is that of ensuring that employee belief systems are
compatible with strategies.

Yet many business owners stumble when it comes to culling a single business strategy from a short
list of attractive strategic options. In reality, there are probably multiple strategies capable of
 delivering similar outcomes for your business. Since indecision isn’t an option, you’ll need to step up
to the plate and choose the best business strategy alternative for your company. Here’s how to do it . .
.

 Competitive Awareness. The first step in selecting a business strategy is to evaluate the strategies
currently employed by rivals in the marketplace. There may be a valid reason why the rest of the
industry has adopted a specific business strategy. Then again, it might also be an opportunity to gain a
competitive advantage by taking a slightly different approach.
 Ease of execution. Do your current resources and labor assets lend themselves to a smooth
implementation process? Business strategies sometimes look good on paper but quickly lose their luster
because the business owner underestimated the execution requirements.
 Long-term outlook. A business strategy that delivers short-term results may not be the best option.
Rather than focusing exclusively on short-term outcomes, you may want to choose a strategy that
positions your business for sustained, long- term growth.
 Employee buy-in. Employee buy-in is an important consideration in business strategy selection. In order
for your strategy to succeed, it will need to implemented and executed by your workforce. When the
workforce feels personally invested in the strategy selection process, they become incentivized to see it
through to completion.
 Strategy blending. It’s perfectly acceptable to combine the strengths of several viable business
strategies into a single, blended business strategy. Although conflicts sometimes preclude blending,
many business owners ultimately create a hybrid strategy comprised of elements culled from the most
promising business strategy alternatives.

Strategic Alternatives – Risk vs. Return

Every strategy that is implemented by a business would include both risks and rewards. We can then
evaluate strategic alternatives through comparing them.

Every strategic implementation in a business always encounters uncertainties along the way. It is
often thought that the greater the risk, the higher the return. However, this is not always the case. We
can try to maximise return by minimizing the risk. This is how it should be in business. When too
much risk is involved, it also signifies ignorance of many contributing factors, which is
counterproductive. The bottom-line is to always approach each strategy with care and calculation.
We must also establish the viability of the strategy that needs to be implemented. Strategies that
face too much impediments in must be excluded, with focus on objectives that need to be achieved
for the success of the business.

According to Wilson & Gilligan (1998), objectives that were achieved signify that the company
made the right decisions and thus, was able to overcome the risks involved. Wilson & Gilligan
(1998) also stated that good decisions are arrived by considering what the future may hold in store.
Wilson& Gilligan provide an outline the four views of the future:

Ignorance – IT is where an organization sees the future as blank. When this happens, it is best to
avoid making decisions until more information is at hand.

Assumed certainty – IT is where an organization has a known and viable outcome in the future,
based on the important information it had utilise to make at an accurate decision;

Risk – IT is where the future outcomes are not very clear but are still workable based on assumed
probabilities to work with;
 Uncertainty – IT is where outcomes cannot be ascertained. (SIT, 2010)

Based on the above, the returns can be dependent on these four views. Returns relate to profit, market
share and consumer awareness. When choosing and implementing a strategy, we must weigh the
risks, based on the information at hand in order to make the right decisions that would result to better
returns for the business. Otherwise, we must choose another strategy that can encourage certainties
that are more positive.

Tools & Techniques of strategic

Analysis
There are many definitions, tools, and techniques that can be applied to strategy analysis. If you do
an internet search you will find all sorts of options available. The challenge is selecting the best
approach, tools, and techniques to use given the business problem or opportunity.

Another part of the challenge is understanding what strategy analysis means since there can be many
definitions. This can make it confusing. It is best to simply say that strategy analysis is an approach
to facilitating, researching, analyzing, and mapping an organization’s abilities to achieve a future
envisioned state based on present reality and often with consideration of the organization’s processes,
technologies, business development and people capabilities. Part of that whole process is the ability
to bridge gaps that exist between the strategic, tactical, and operational aspects of the organization.
This requires a look at the present state, the future state, risk and financials and the creation of change
requirements to achieve the desired outcomes.

Even though the definition of strategy analysis varies, there is common thinking on the key planning
requirements.

 Preparation for planning through the identification and review of information relevant for strategy analysis
 Performing high-level environmental scan looking at the internal and external business environment
with consideration for mission, vision, stakeholders, structure, existing plans, people profiles, and
question responses.
 Applying a choice of different tools and techniques to analyze the present state of a business
environment and mapping out its future.

Some of the more common analysis tools and techniques include:

1. VMOST: This stands for Vision, Mission, Objectives, Strategy, and Tactical.
Success in an organization happens with top-down or bottom-up alignment. I was recently reminded
of is when working with a client who stated that their tactical is not connected to the strategy.
VMOST analysis is meant to help make that connection.

2. SWOT: The standard analysis tool, defined as Strengths, Weaknesses, Opportunities, and Threats.

Strengths and weaknesses are internal to the organization, opportunities and threats are external.
SWOT requires you to be candid and provide an honest assessment of the state of things. It forces
you to create a dialogue with stakeholders to get different viewpoints. Eventually, you focus in on the
key issues.
3. PEST: This is a great tool to use in tandem with SWOT. The acronym stands for Political, Economic, Social and
Technology.

PEST reveals opportunities and threats better than SWOT, the direction of business change, projects
that will fail beyond your control, and country, region and market issues through helping you create
an objective view.

4. SOAR: This stands for Strengths, Opportunities, Aspirations, and Results. This is a great tool if you have a
strategic plan completed, and you need to focus on a specific impact zone.

I used SOAR to help a business that needed to focus on their business development requirements due
to an external market change. The organization needed to discuss how they would recapture lost sales
by $1 million per month to ensure they maintained their profitably. Given that they had already done
everything they could to cut costs and operate a lean business, the SOAR was critical in helping
define the focus for the next 12 to 24 months.

5. Boston Matrix (product and service portfolio): This tool requires you to analyze your business product
or service and determine if it is a cash cow, sick dog, questionable, or a flying star.

I have applied this tool to product and service reviews with to help make product decisions with
consideration for market share and market growth. But it has no predictive value, does not consider
the environment, and you need to be careful with your assumptions. It does force discussions on your
present offering and whether it makes sense to maintain or enhance those offerings. For example,
maybe you are holding onto a business product that you love but is really a sick dog and maybe there
is a cash cow in your business that you are not optimizing. A decision has to be made.

6. Porter’s Five Forces: This tool helps you understand where your business power lies in terms of present
competitiveness and future positioning strength. It forces you to analyze the bargaining power of
suppliers and customers, the threats to new entrants and substitutes, and competitive rivalry in your
marketplace. Using this tool helps you understand the balance of power and to identify areas of
potential profitability. According to Porter, this model should be used at the line of business level.
7. Maturity Models: There are many maturity models that can be applied to a business. From the
evolution model, the technology model, to the team model. The idea is that every business or
department goes through a maturity cycle. The standard cycle is chaotic, reactive, proactive, service, and
value. If you were looking at processes in a department, you would look to see where that process is on
the continuum. Then you would determine where you need to be and what it would take to get to that
point of maturity. This is a simple explanation. When using a maturity model, it is important that you
have a clear problem definition and solution context.
8. Root Cause Analysis: This is important, as there are times in the strategy analysis process you need to
dig deeper into a problem. This is where RCA is used. The key is that you need to identify and specify the
problem correctly, analyze the root cause using a systematic approach, verify the causes, and determine
the corrective actions. Implementation of the corrective action is extremely important.

There are many definitions, tools, and techniques that could be addressed. The ones mentioned here
are only the tip of the iceberg for strategy analysis and become a foundational part of the strategy
analysis toolkit. In a short blog, there is no way to mention them all. But you could create a tool
checklist that you could use in your next planning and
analysis engagement to help you and your team define the present, future, risk and change state that
you need to succeed.
Strategic Choice
Strategic choice is a systemic theory of strategy. This theory is built on a notion of interaction in
which organizations adapt to their environment in a self-regulating, negative-feedback (cybernetic)
manner so as to achieve their goals. The dynamics, or pattern of movement over time, are those of
movement to states of stable equilibrium. Prediction is not seen as problematic. The analysis is
primarily at the macro level of the organization in which cause and effect are related to each other in
a linear manner. Micro-diversity receives little attention and interaction is assumed to be uniform and
harmonious.

Importance of Strategic Choices

Whether a business succeeds or fails depends in large measure on the strategic choices made by the
owner. Spending large amounts of time and money introducing a product that turns out to have a
very limited market is an example of a bad strategic choice. Anticipating a change in consumer tastes
and introducing a service to take advantage of that change before competitors do is an example of a
good strategic choice. The development of business strategy takes into account that all companies
must cope with limited resources to some extent. The most successful companies can allocate scarce
resources to the projects that have the greatest positive impact on revenue growth or improvements in
productivity and efficiency that can increase profit margins.

Strategic Choice Process

(I) Focusing on strategic alternatives: It involves identification of all alternatives. The strategist
examines what the organization wants to achieve (desired performance) and what it has really
achieved (actual performance). The gap between the two positions constitutes the background for
various alternatives and diagnosis. This is gap analysis. The gap between what is desired and what is
achieved widens as the time passes if no strategy is adopted
(II) Evaluating strategic alternatives: The next step is to assess the pros and cons of various
 alternatives and their suitability. The tools which may be used are portfolio analysis, GE business
screen and corporate Parenting.

(iii) Considering decision factors:

(a) Objective factors:-

 Environmental factor
 Volatility of environment
 Input supply from environment
 Powerful stakeholders
 Organizational factors
 Organization’s mission
 Strategic intent
 Business definition
 Strengths and weaknesses

(b) Subjective factors:-

 Strategies adopted in the previous period

 Personal preferences of decision- makers
 Management’s attitude toward risk
 Pressure from stakeholder
 Pressure from corporate culture
 Needs and desires of key managers.

BCG Matrix
BCG matrix (or growth-share matrix) is a corporate planning tool, which is used to portray firm’s
brand portfolio or SBUs on a quadrant along relative market share axis (horizontal axis) and speed of
market growth (vertical axis) axis.

Growth-share matrix is a business tool, which uses relative market share and industry growth rate
factors to evaluate the potential of business brand portfolio and suggest further investment strategies.
 Understanding the tool
BCG matrix is a framework created by Boston Consulting Group to evaluate the strategic position of
the business brand portfolio and its potential. It classifies business portfolio into four categories
based on industry attractiveness (growth rate of that industry) and competitive position (relative
market share). These two dimensions reveal likely profitability of the business portfolio in terms of
cash needed to support that unit and cash generated by it. The general purpose of the analysis is to
help understand, which brands the firm should invest in and which ones should be divested.

BCG matrix is divided into 4 cells: stars, question marks, dogs and cash cows.

Relative market share. One of the dimensions used to evaluate business portfolio is relative market
share. Higher corporate’s market share results in higher cash returns. This is because a firm that
produces more, benefits from higher economies of scale and experience curve, which results in
higher profits. Nonetheless, it is worth to note that some firms may experience the same benefits with
lower production outputs and lower market share.

Market growth rate. High market growth rate means higher earnings and sometimes profits but it
also consumes lots of cash, which is used as investment to stimulate further growth. Therefore,
business units that operate in rapid growth industries are cash users and are worth investing in only
when they are expected to grow or maintain market share in the future.

There are four quadrants into which firms brands are classified:

1. Dogs. Dogs hold low market share compared to competitors and operate in a slowly growing market. In
general, they are not worth investing in because they generate low or negative cash returns. But this is
 not always the truth. Some dogs may be profitable for long period of time, they may provide synergies
for other brands or SBUs or simple act as a defense
to counter competitors moves. Therefore, it is always important to perform deeper analysis of each
brand or SBU to make sure they are not worth investing in or have to be divested.

Strategic choices: Retrenchment, divestiture, liquidation

2. Cash cows. Cash cows are the most profitable brands and should be “milked” to provide as much cash as
possible. The cash gained from “cows” should be invested into stars to support their further growth.
According to growth-share matrix, corporates should not invest into cash cows to induce growth but
only to support them so they can maintain their current market share. Again, this is not always the truth.
Cash cows are usually large corporations or SBUs that are capable of innovating new products or
processes, which may become new stars. If there would be no support for cash cows, they would not be
capable of such innovations.

Strategic choices: Product development, diversification, divestiture, retrenchment

3. Stars. Stars operate in high growth industries and maintain high market share. Stars are both cash
generators and cash users. They are the primary units in which the company should invest its money,
because stars are expected to become cash cows and generate positive cash flows. Yet, not all stars
become cash flows. This is especially true in rapidly changing industries, where new innovative products
can soon be outcompeted by new technological advancements, so a star instead of becoming a cash
cow, becomes a dog.

Strategic choices: Vertical integration, horizontal integration, market penetration, market

development, product development

4. Question Marks. Question marks are the brands that require much closer consideration. They hold low
market share in fast growing markets consuming large amount of cash and incurring losses. It has
potential to gain market share and become a star, which would later become cash cow. Question marks
do not always succeed and even after large amount of investments they struggle to gain market share
and eventually become dogs. Therefore, they require very close consideration to decide if they are
worth investing in or not.

Strategic choices: Market penetration, market development, product development, divestiture

Benefits of the matrix

 Easy to perform
 Helps to understand the strategic positions of business portfolio
 It’s a good starting point for further more thorough analysis.

Following are the main limitations of the analysis

 Business can only be classified to four quadrants. It can be confusing to classify an SBU that falls right in the
middle.
 It does not define what ‘market’ is. Businesses can be classified as cash cows, while they are actually dogs, or
vice versa.
 Does not include other external factors that may change the situation completely.
 Market share and industry growth are not the only factors of profitability. Besides, high market share
does not necessarily mean high profits.
 It denies that synergies between different units exist. Dogs can be as important as cash cows to
businesses if it helps to achieve competitive advantage for the rest of the company.

Using the tool

Although BCG analysis has lost its importance due to many limitations, it can still be a useful tool if
performed by following these steps:
Step 1. Choose the unit. BCG matrix can be used to analyze SBUs, separate brands, products or a
firm as a unit itself. Which unit will be chosen will have an impact on the whole analysis. Therefore,
it is essential to define the unit for which you’ll do the analysis.

Step 2. Define the market. Defining the market is one of the most important things to do in this
analysis. This is because incorrectly defined market may lead to poor classification. For example, if
we would do the analysis for the Daimler’s Mercedes-Benz car brand in the passenger vehicle market
it would end up as a dog (it holds less than 20% relative market share), but it would be a cash cow in
the luxury car market. It is important to clearly define the market to better understand firm’s portfolio
position.

Step 3. Calculate relative market share. Relative market share can be calculated in terms of
revenues or market share. It is calculated by dividing your own brand’s market share (revenues) by
the market share (or revenues) of your largest competitor in that industry. For example, if your
competitor’s market share in refrigerator’s industry was 25% and your firm’s brand market share was
10% in the same year, your relative market share would be only 0.4.

Step 4. Find out market growth rate. The industry growth rate can be found in industry reports,
which are usually available online for free. It can also be calculated by looking at average revenue
growth of the leading industry firms. Market growth rate is measured in percentage terms. The
midpoint of the y-axis is usually set at 10% growth rate, but this can vary. Some industries grow for
years but at average rate of 1 or 2% per year. Therefore, when doing the analysis you should find out
what growth rate is seen as significant (midpoint) to separate cash cows from stars and question
marks from dogs.

Step 5. Draw the circles on a matrix. After calculating all the measures, you should be able to plot
your brands on the matrix. You should do this by drawing a circle for each brand. The size of the
circle should correspond to the proportion of business revenue generated by that brand.

Ansoff Grid
Ansoff’s product/market growth matrix suggests that a business’ attempts to grow depend on whether
it markets new or existing products in new or existing markets.
 The output from the Ansoff product/market matrix is a series of suggested growth strategies which
set the direction for the business strategy. These are described below:

Market Penetration
Market penetration is the name given to a growth strategy where the business focuses on selling
existing products into existing markets.

Market penetration seeks to achieve four main objectives:

 Maintain or increase the market share of current products – this can be achieved by a combination of
competitive pricing strategies, advertising, sales promotion and perhaps more resources dedicated to
personal selling
 Secure dominance of growth markets
 Restructure a mature market by driving out competitors; this would require a much more aggressive
promotional campaign, supported by a pricing strategy designed to make the market unattractive for
competitors
 Increase usage by existing customers – for example by introducing loyalty schemes

A market penetration marketing strategy is very much about “business as usual”. The business is
focusing on markets and products it knows well. It is likely to have good information on competitors
and on customer needs. It is unlikely, therefore, that this strategy will require much investment in
new market research.

Market Development
Market development is the name given to a growth strategy where the business seeks to sell its
existing products into new markets.

There are many possible ways of approaching this strategy, including:

 New geographical markets; for example exporting the product to a new country
 New product dimensions or packaging: for example
 New distribution channels (e.g. moving from selling via retail to selling using e-commerce and mail order)
 Different pricing policies to attract different customers or create new market segments
 Market development is a more risky strategy than market penetration because of the targeting of new
markets.

Product Development
Product development is the name given to a growth strategy where a business aims to introduce new
products into existing markets. This strategy may require the development of new competencies and
requires the business to develop modified products which can appeal to existing markets.

A strategy of product development is particularly suitable for a business where the product needs to
be differentiated in order to remain competitive. A successful product development strategy places
the marketing emphasis on:

 Research & development and innovation

 Detailed insights into customer needs (and how they change)
 Being first to market

Diversification
Diversification is the name given to the growth strategy where a business markets new products in new
markets.
This is an inherently more risk strategy because the business is moving into markets in which it has
little or no experience.

For a business to adopt a diversification strategy, therefore, it must have a clear idea about what it
expects to gain from the strategy and an honest assessment of the risks. However, for the right
balance between risk and reward, a marketing strategy of diversification can be highly rewarding.

GE Nine Cell Planning

The GE McKinsey matrix is a product portfolio analysis matrix. When you have a complex product
portfolio, then it is difficult for you to take decisions. This is because each product will have its own
demands and requirements. But you yourself have limited resources in the company. Thus, what you
as a business manager have to look at is to ensure that the firm grows at the optimum rate. For this,
you will have to support some products by investing money in them, hold some products by letting
them be as they are, and prune other products which are not working as well as you thought. This
decision making, on products, is done by the GE Mckinsey matrix.
The GE Mckinsey matrix has two main variables which are plotted on the X and Y axis of the
matrix. These variables are the “Market attractiveness” and the “Business unit strength”. Once each
product is given a value for its market attractiveness as well as the business unit’s strength, than it is
plotted in its right place in the graph. The GE Mckinsey matrix is also known as the nine box matrix,
because in the graph, there are nine boxes where the product can be plotted. Once the product is in its
place, you can decide the strategy for the product. There are 3 main strategies in the GE McKinsey
matrix which are grow, hold and harvest.

Grow – If the business unit is strong against a strong attractiveness, you grow the business. This
means, that you are ready to invest a higher percentage of your resources in these businesses. These
business units have high market attractiveness and high business unit strength. They are most likely
to be successful if backed up with more resources. The quadrants marked in green are the places
where you can grow your business.

Hold – If the business unit strength or attractiveness is average, than you hold the business as it is. It
might be that the market is dropping in value, or that there is much high competition which the
business unit will be hard put to catch up. In both the cases, the business unit might not give
optimum returns even if resources are invested. Thus, in this case, you wait and hold the business
unit to see if the market environment changes or if the business unit gains importance in the market
as compared to other players.

Harvest – If the business unit or market has become unattractive, than you either sell or liquidate the
business or you can hold it for any residual value that it has. This strategy is used in the GE
McKinsey matrix when the business unit strength is weak and the market has lost its attractiveness.
The best measure in this case is to harvest the weak businesses and reinvest the money earned into
business units which are in growth.
Challenges for the GE McKinsey Matrix
Like any other strategy, the GE McKinsey matrix has its own challenges. Some of them are mentioned
below.

(1) Determining market attractiveness is a tough task especially looking at the fast paced market
environment. During the dotcom bust, the online market was least attractive. But look where the
online market is now.

(2) Similarly, determining the strength of the business unit and weighing it against the attractiveness
is difficult. Thus, if the variables are not matched properly, you might grow a business which is
supposed to be held back and waste unnecessary resources on this business. This might happen if the
top management does not know the core competency of the business units.

(3) Companies will be limited by resources even if the business unit falls in the growth criteria.
Thus, out of 50 products, if 25 fall in growth criteria, what does the management do when it has
limited resources? Taking decisions again becomes difficult

McKinney’s 7s Framework
McKinsey 7s model is a tool that analyzes firm’s organizational design by looking at 7 key internal
elements: strategy, structure, systems, shared values, style, staff and skills, in order to identify if they
are effectively aligned and allow organization to achieve its objectives.
 McKinsey 7s model was developed in 1980s by McKinsey consultants Tom Peters, Robert
Waterman and Julien Philips with a help from Richard Pascale and Anthony G. Athos. Since the
introduction, the model has been widely used by academics and practitioners and remains one of the
most popular strategic planning tools. It sought to present an emphasis on human resources (Soft S),
rather than the traditional mass production tangibles of capital, infrastructure and equipment, as a key
to higher organizational performance.

The goal of the model was to show how 7 elements of the company: Structure, Strategy, Skills, Staff,
Style, Systems, and Shared values, can be aligned together to achieve effectiveness in a company.
The key point of the model is that all the seven areas are interconnected and a change in one area
requires change in the rest of a firm for it to function effectively.

Below you can find the McKinsey model, which represents the connections between seven areas and
divides them into ‘Soft Ss’ and ‘Hard Ss’. The shape of the model emphasizes interconnectedness of
the elements.

The model can be applied to many situations and is a valuable tool when organizational design is at
question. The most common uses of the framework are:

 To facilitate organizational change.

 To help implement new strategy.
 To identify how each area may change in a future.
 To facilitate the merger of organizations.

7s factors
In McKinsey model, the seven areas of organization are divided into the ‘soft’ and ‘hard’ areas.
Strategy, structure and systems are hard elements that are much easier to identify and manage when
compared to soft elements. On the other hand, soft areas, although harder to manage, are the
foundation of the organization and are more likely to create the sustained competitive advantage.
 HARD S SOFT S

Strategy Style

Structure Staff

Systems Skills

1. Strategy is a plan developed by a firm to achieve sustained competitive advantage and successfully
compete in the market. What does a well-aligned strategy mean in 7s McKinsey model? In general, a
sound strategy is the one that’s clearly articulated, is long-term, helps to achieve competitive advantage
and is reinforced by strong vision, mission and values. But it’s hard to tell if such strategy is well-aligned
with other elements when analyzed alone. So the key in 7s model is not to look at your company to find
the great strategy, structure, systems and etc. but to look if its aligned with other elements. For
example, short-term strategy is usually a poor choice for a company but if its aligned with other 6
elements, then it may provide strong results.
2. Structure represents the way business divisions and units are organized and includes the information of
who is accountable to whom. In other words, structure is the organizational chart of the firm. It is also
one of the most visible and easy to change elements of the framework.
3. Systems are the processes and procedures of the company, which reveal business’ daily activities and
how decisions are made. Systems are the area of the firm that determines how business is done and it
should be the main focus for managers during organizational change.
4. Skills are the abilities that firm’s employees perform very well. They also include capabilities and
competences. During organizational change, the question often arises of what skills the company will
really need to reinforce its new strategy or new structure.
5. Staff element is concerned with what type and how many employees an organization will need and how
they will be recruited, trained, motivated and rewarded.
6. Style represents the way the company is managed by top-level managers, how they interact, what actions do
they take
and their symbolic value. In other words, it is the management style of company’s leaders.
7. Shared Values are at the core of McKinsey 7s model. They are the norms and standards that guide
employee behavior and company actions and thus, are the foundation of every organization.

Strategy implementation- Resource

Allocation
Resource allocation is a process and strategy involving a company deciding where scarce resources
should be used in the production of goods or services. A resource can be considered any factor of
production, which is something used to produce goods or services. Resources include such things as
labor, real estate, machinery, tools and equipment, technology, and natural resources, as well as
financial resources, such as money.

How to Allocate Resources?

 Successful strategic management involves ensuring that all company resources perform effectively.
By learning how to manage competing priorities, successful business professionals enable employees
to balance job tasks, schedule work efficiently and ensure that work flows smoothly from one
process to the next. Today’s dynamic, global environment poses challenges for company executives
and project managers. By establishing a comprehensive strategic plan for allocating workers and
supplies, you avoid costly mistakes that lead to overruns and delays.

1. Coordinate project and operational effectively by establishing a comprehensive program management

strategy. Evaluate project proposals on a monthly or quarterly basis to decide which ones gets
sponsorship. Consolidate multiple similar efforts under one program leader; this tends to enable the use
of key resources more effectively and allow you to make critical deadlines.
2. Employ software tools, such project management software such as Microsoft Project, dotProject.net or
Basecamp, to identify project tasks, allocate resources effectively, avoid overallocation and prevent
employee burnout. Approve budgets, finish dates and the amount of flexibility in the deadlines if you
are a company executive to help project managers make decisions aligned with the company’s strategic
goals.
3. Delay tasks until staff have time available to work on them or split up tasks and hire additional workers
to prevent staff from working more than 40 hours in a typical week and becoming burned out.
4. Outsource routine tasks to companies that specialize in a particular function, such as payroll processing,
customer service or technical support.
5. Train employees so they have the required skills and job tasks get completed on time to ensure timely
delivery of products and services. Train less experienced workers to complete job tasks if you experience
unexpected demand or attrition. Obtain specialized training from authorized providers to ensure that
your company runs a safe workplace that complies with local, state and federal regulations.
6. Manage suppliers by analyzing work flow of resource materials from one process to the next. Gather
input from experts before considering alternative solutions to backlogs. Take prompt action to rectify
problems if a supplier provides poor quality materials or delivers them late. Require that the supplier
improves the quality of raw materials and provides them on time.

Method of Resource Allocation

In an economist’s perfect world, which doesn’t exist, of course, resources are optimally allocated
when they are used to produce goods and services that match consumers’ needs and wants at the
lowest possible cost of production. Efficiency of production means fewer resources are expended in
producing goods and services, which allows resources to be used for other economic activities, such
as further production, savings, and investment. This basically boils down to creating what customers
want as cheaply and efficiently as possible.

Projects and Procedural issues in Strategy

implementation
Following the procedures laid down for implementation constitutes an important component
of strategy implementation in the Indian context :

 Licensing Procedure
 Foreign Collaboration Procedure
 FERA Requirements
 MRTP Requirements
 Capital Issue Control Requirements
 Import and Export Requirements
 Incentives and Facilities Benefits
Organization structure and systems in
Strategy implementation
Strategies do not take place against a characterless background but must take account of
the features of the organization in which they will be implemented. Organizational structures
determine what actions are feasible and most optimal. The importance of organizational
structures in the implementation of a strategy is hard to overemphasize. Good strategy
involves taking account of where a company finds itself in terms of the external market and
its internal organizational structure. Strategy and implementation must cohere.

Centralization
Some organizations have a more centralized structure already in place before a strategy
has been implemented. When this is the case, it makes implementing certain strategies
more feasible. Change is always difficult to implement as a part of strategy; the fewer
people involved in decision-making, the easier it is to gain consensus. More dramatic
strategies are aided by a centralized organizational structure. Dramatic strategies can mean
changing the basic ways an organization does business.
Innate Advantages
The best strategies often seek to take advantage of the innate advantages that an
organization already possesses. Most organizations have certain departments that are
particularly effective and certain tasks that it is already adept at doing. Strategies of this sort
seek to rearrange organizational structures so as to better benefit from innate advantages.
These strategies involve taking steps such as expanding parts of the organization that are
successful and shrinking those that are not.

Consensus
Organizational structures are often important in gaining consensus for a strategy. If all the
parts of an organization aren’t onboard with a given strategy, it will stand less of a chance of
succeeding. The structure of an organization will have much to do with gaining consensus
because it will determine who has to be appeased in management and how power is
aligned. Different personal interests will often conflict and need to be addressed.

Overcoming Disadvantages
An organization that has been failing to compete effectively will often need to go through an
organizational restructuring to change its focus. It will need to change its organizational
structures to move away from tasks that it is not suited for. This sort of structural shift can
be traumatic for an organization and requires great resources of will. Often an organization
must have reached a crisis before this type of strategy can occur.

Leadership and Corporate

Culture
Executives have the power to shape corporate culture and motivate ethical conduct. Most leaders
consider themselves ethical. Some, however, question whether ethics is a relevant component of
leadership.

The analysis will also examine various leadership styles, the impact they have on corporate culture,
how they affect ethical-decision making, and draw from examples to support this investigation. The
findings of this research will conclude that leaders, who engage in business practices without ethical
rules and regulations, will eventually discover that ethical misconduct behavior can easily become an
inevitable component in their future.

Importance of Ethical Leadership

The most successful leaders use their power to shape corporate culture and motivate ethical conduct.
Because they are in the business of making a profit, they design strategies to achieve desired
outcomes. Deepak Chopra (2012) reminds us that life is riddled with challenges, obstacles, and
situations that leave many individuals asking the question, “Why is this happening?” No matter
what advantages an individual may possess – money, intelligence, charismatic personality, a positive
disposition, or influential social connections – none of these elements offer a magic key to
effective leadership (Chopra, 2012). Managing directors are continually faced with difficult
challenges. How they manage these trying situations can make the difference between the prospect of
success and the threat of failure (Chopra, 2012). For example, when leaders cultivate an environment
of fraud and deceit, they are fertilizing the ground for failure and destruction. In order for an
executive to be considered an effective leader, they must have the ability to:

(a) Guide a corporation to profits for the sake of the stakeholders,

(b) Achieve organizational goals in an ethical manner

(c) Motivate their employees to adhere to behavior that is in alignment with the organization’s code of
conduct.

Consistency also plays an important role for successful executives. The most effective leaders
incorporate policies that inspire high performance levels and motivate organizational behavior that
goes beyond just observing regulations. When leaders establish trust with subordinates, they earn the
loyalty of their staff. In return, employees trust their leaders to protect them from harm in return for
their services, dedication, and loyalty.

By making choices to work in partnership with their employees, leaders can help them achieve
greater levels of success than perhaps even they realized were capable of achieving. Employees who
respect their supervisors, feel supported and appreciated by them, are more likely to become
motivated and go beyond just achieving organizational goals.

Leaders and Stakeholders

Stakeholders provide leaders another reason to cultivate an ethical culture. As a leader, it is their
responsibility to make sure the company is guided towards the path of success and profit for the
benefit of the stakeholders that support them. Executives, therefore, must incorporate effective
strategies and hire the appropriate talent to reach desired outcomes as part of their responsibility to
the employees, consumers, suppliers, and society as a whole. Ferrell et al. (2013) posit that because
stakeholders have the ability to affect corporate policies it is imperative that leaders find methods to
use their power to influence positive outcomes. There are five power strategies leaders utilize to
achieve their goals:
(a) Reward power

(b) Coercive power

(c) Legitimate power

(d) Expert power,

(e) Referent power

Studies suggest these five power bases can be implemented to achieve both ethical and unethical
outcomes (Ferrell, Fraedrich, & Ferrell, 2013). For example, a leader that incorporates legitimate
power believes they have the right to exert their influence and that others are obligated to accept it.
This kind of power is typical in hierarchical environments where leaders are assigned titles and
specific positions of authority. In this type of culture, stakeholders readily acquiesce to leaders who
command legitimate power. In some instances, however, leaders use this power to engage in
behavior that is opposite of their belief systems.

These individuals use strict protocol and the chain of command to their advantage. This is typically
one way leaders can influence individuals to engage in misconduct. In this setting, it is easier to
establish a climate of deceit because subordinates are hesitant to disobey orders for fear of the
punishment or termination. The leaders at the well-oiled Enron machine, for example, employed all
five power strategies to maintain their grand illusion.
The Decision-Making Process
The decision-making process also plays an integral role in how leaders influence corporate culture
and motivate ethical conduct. Hanh (2012) posits that because leaders can get into difficult situations,
they must have the ability to handle strong emotions in the workplace in order to maintain effective
relationships.

To achieve this they must keep communication open and become cognizant to avoid the creation of a
negative or repressive work culture. The most successful leaders incorporate practices that help
manage strong emotions and become educated on how to utilize these strategies in good times before
strong emotions arise.

This strategy offers leaders the ability to respond in a more skillful fashion and incorporate effective
methods during a crisis (Hanh, 2012). For example, Hanh’s Plum Village organization has developed
a culture that incorporates three positive influences of power to guide their code of conduct. They are
love, understanding, and letting go. The leaders at Plum Village posit that these three influences of
power help in the decision-making process because they are used as effective tools that focus on the
release of suffering. Their strategies of operation are designed in a way that does not incorporate
punishment or destruction. In addition, they conduct their business practices in a manner that protects
the environment and all living things.

The most successful do so by setting an example and participating in a leadership style that reflects
ethical behavior. They must also include strategies to incorporate supportive speech and engage in
actions that bring content and cheerfulness to themselves, their organization, and the community at
large. The findings of this research conclude that leaders who engage in ethical misconduct and
cultivate a culture of deceit will achieve disastrous results like Enron unless they embrace effective
leadership skills that have the power to shape a corporate culture that supports and motivates ethical
conduct.

Values, Ethics and Social

Responsibility
Values
Important and lasting beliefs or ideals shared by the members of a culture about what is good or bad
and desirable or undesirable. Values have major influence on a person’s behavior and attitude and
serve as broad guidelines in all situations. Some common business values are fairness, innovation
and community involvement.

Values are enduring, passionate, and distinctive core beliefs and they’re an essential part of
developing your strategy. They are based on enduring tenets—guiding principles—to adhere to no
matter what mountain you climb. Your core values are part of your strategic foundation. They are the
beliefs that guide the conduct, activities and goals of your organization. They establish why you do
what you do and what you stand for. Values are deeply held convictions, priorities, and underlying
assumptions that influence the attitudes and behaviors of your organization. Strong values account
for why some organizations gain a reputation for such strategic traits as leadership, product
innovation, and total customer satisfaction. These never change.

An organization’s values can dominate the kind of strategic moves it considers or rejects. When
values and beliefs are deeply ingrained and widely shared by directors, managers and staff, they
become a way of life within the organization, and they mold organizational strategy.

Ethics
Ethics in business and management (including strategic management) deals with moral issues
(beliefs, norms, values, etc.) arising from activities performed by managers and employees of the
corporation.

Business ethics is a term with quite a multifaceted meaning. Most of them however, boil down to the
general and the basic conclusion that economics should serve man, not vice versa. So, managers
should not be guided in their actions solely by profit or personal gain.

Business ethics is both part of the prescriptive (normative) ethics establishing standards of conduct,
recommending certain behaviours, as well as descriptive ethics, describing the moral attitudes and
behaviours of entrepreneurs.

Business Ethics and Ethical Business Practices

Business ethics deals with moral issues (beliefs, norms, values, etc.) found in the business. It should
be noted that business ethics is a term with quite a multifaceted meaning. A variety of content, which
is attributed to business ethics depends on the context of its occurrence. Each approach, however,
boils down to the general and the basic conclusion that economics should serve man, not vice versa.
Entrepreneurs cannot be guided in their actions solely by profit. Ethics, as having theoretical
knowledge of fundamental importance for our actions, it is rational and reasoned knowledge of the
 values and duties of human action, arising from the fact of being human. Business ethics is
concerned of limits to human economic activities.

Ethical issues in Business

Business ethics is both part of the prescriptive (normative) ethics establishing standards of conduct,
recommending certain behaviours, as well as descriptive ethics, describing the moral attitudes and
behaviours of entrepreneurs. In principle, the practical goal of business ethics is to solve ethics
problems in business.

Ethical factor in area of business communication

 Proper marketing techniques, telling truth about products and services,
 Informing customers, employees and partners about company’s mission statement and goals,
 Respecting religious and social values of employees, customers and partners,
 Negligence in informing shareholders about company’s situation, managerial ethics
 Insider trading, hiding information about mergers, acquisitions, investments, etc.

Ethical factors concerning production processes

 Eliminating unsafe working conditions,

 Avoiding processes and technologies that jeopardize the safety of the employees and public,
 Producing product safe for customers,
 Waste product utilization and recycling,
 Profiting from products bad for health (drugs, cigarettes, alcohol) and people (gambling),

Social Responsibility
Social responsibility is a form of management that considers ethical issues in all aspects of the
business. Strategic decisions of a company have both social and economic consequences. Social
responsibility of a company is a main element of the strategy formulation process. There is a
misconception that corporate social responsibility is less relevant to small businesses; however, there
is growing recognition of the importance of social responsibility for smaller firms.

Integrating social responsibility in strategic management requires sound knowledge of the types of
social responsibilities a company deals with. Economic responsibilities are the most basic type of
social responsibilities. The company is expected to provide goods to the society at reasonable prices,
create jobs and pay due taxes.

Legal responsibilities reflect the obligation to comply with the laws that regulate business activities;
ethical responsibilities mirror the company’s notion of the right business behavior. Some actions
might not be illegal but can be unethical. Making and selling cigarettes is a case in point.

Finally, discretionary responsibilities are those that are voluntarily adopted by the business. For
example, companies that adopt the good citizenship approach, actively support charities, public
service advertising campaigns and other public interest issues

Operational and Derived

Functional plans to Implement
Strategy
Management strategies provide business owners with frameworks that help them reach their ultimate
goals. Management experts have developed these strategies to be applied at different structural levels
within a business. Operational-level strategies are applied to business operations as a whole, while
functional-level strategies are implemented for each department.

Advantages of Operational Strategy

A major advantage of operational strategy is its focus on competition. Business that lag behind their
competitors can implement company-wide operational strategies to close the gap. Companies that
have a competitive advantage can apply operational strategies to maintain or increase their
advantage. These operational strategies then can be broken
down and implemented at the departmental level. The success of operational strategies are also easy
to measure, such as increased profits, reduced costs and higher market share in the industry.

Drawbacks of Operational Strategy

The operational strategy approach also carries some noticeable disadvantages. An operational
strategy can often demonstrate a lack of flexibility. A shift in industry technology, new government
regulations, or an upstart competitor can derail a business that adheres too closely to a rigid
operational strategy. Also, the nature of operational strategy calls for all company assets to be
assessed in terms of their contribution to the company’s profits. While placing a monetary value on
computers, equipment, and intellectual property is a necessary step, employees may resent being
treated like a cog in a machine.

Advantages of Functional Level Strategy

While operational-level strategies cover the company as a whole, functional-level strategies involve
individual departments, functions, or roles within the company. These functional strategies serve as
components to the overall operational strategy. The functional strategies focus on specific business
tasks and use the skills of the employees within each department to their peak efficiency. For
instance, if the company has an operational strategy of reducing costs, the functional strategy for the
accounting department will be to find where those costs can be cut, while the functional strategy for
the manufacturing floor will be to find ways to increase efficiency in the manufacturing process.

Drawbacks of Functional Level Strategy

Although a functional-level strategy can give department leaders some autonomy, problems occur
when each department becomes an island. When department’s heads place too much emphasis on
implementing their departmental functional strategies, the overall result can be a company-wide loss
of productivity. These losses can occur when individual departments fail to communicate with each
other. Communication breakdowns can create conflict between departments. When these breakdowns
occur, company leaders must step in and resolve the issues, leading to a loss in productivity while the
issues are discussed

Integration of functional plans

Some of the functional activities or plans may be enterprise specific, such as production and
marketing plans. Other functional plans may apply to the whole-farm, such as income tax
management. The farmer will need to decide whether the functional plan encompasses the
whole-farm or only parts of the operation.

The information compiled in the functional plans has several uses. One, the information can
be used in developing budgets. For example, the production plan should provide details
about the type, quantity, and timing for inputs. This information can then be used in the
development of enterprise budgets and the whole- farm cash flow budget. Two, the
information can be used in assessing whether there are adequate resources to operate the
business. For example, the labor management plan should provide an indication as to
whether there will be sufficient workers available throughout the year. Three, the plans
should indicate how resources will be managed. Examples would include the labor
management plan and the capital budget. They should reveal how employees will be
directed or when capital assets will be acquired.

Collectively, the functional plans could be considered an overall strategy or plan describing
how, when, and where the objectives and goals will be accomplished for each function as
well as for the entire business. Plans for production, marketing, and financing are the
minimum that need to be developed. Depending on the business, additional plans can be
integrated into the strategic plan. For example, an estate plan
describing the type of ownership arrangements, on- and off-farm investment actions,
retirement plans, intended intergenerational transfers, and other legal issues will likely be an
important functional plan.

The purpose of planning is to help make decisions. Strategic planning is the process of
allocating resources and initiating actions to accomplish predetermined objectives and
goals. A strategic plan is the framework that results in the combining and coordinating of the
functional plans. The challenging part is coordinating the various aspects of the different
functions and some functions are easier than others. These functional steps include
concrete, specific actions, and the time frame for when they are to be performed.

The following sections suggest ideas farmers may want to consider as they prepare functional
plans.

Production Plan

A production plan is an opportunity to specify the production practices for crops (such as
no-till, minimum- till, organic, or conventional) and/or for livestock (such as cow-calf, feeder,
dairy, or layers). Attention to labor requirements and crop or grazing rotation requirements
could be critical for the enterprise. Even if it does not appear to be critical at this point, it
could become critical as the whole farm plan is put together. For example, raising sugar
beets requires a three year rotation whereas winter wheat requires the crop be planted in
the fall. Therefore, winter wheat may not be able to follow sugar beets every year,
especially during late harvest seasons for sugar beets.

Marketing Plan

In the marketing category, the owners can identify the consumer of the output of the
enterprise. This allows the owners to adjust their production practices to better match the
market. The availability of markets is an important factor for some commodities because a
farmer could have a product that cannot be sold. Assessing the availability of markets could
be important, depending on the commodity, and can be tested as price variation as part of
step 8. Also, the owners can specify whether they plan to forward contract, hedge in the
market, or assume the risk of marketing. These are only a few suggested questions; there
may be other factors that the owners feel are important — depending on the enterprise or
commodity.

Financing Plan

The operation needs cash to operate. The farmer may have the cash; but more likely, the
farmer will need to borrow some. A financing plan addresses who to borrow from (lending
institutions, suppliers, relatives), when to borrow, when to pay back (fall, winter, spring,
monthly), how long the repayment period should extend (e.g., 6 months, 1 year, 5 years, 30
years), and which aspects of the farm will be financed with borrowed capital (operating,
equipment purchases, land purchases).

Capital Budgeting Plan

Capital assets are the theme of this functional plan. Some questions might include what
assets will be acquired; when will they be acquired; whether they will be purchased or
leased; and if purchased, what will be the likely source of cash for completing the purchase.
Likewise, a capital budgeting plan may address when assets will be disposed of, and
whether they will be sold to a co-owner of the business.

Labor Management Plan

A labor management plan may address family workers, employees or both. Issues might
include defining tasks and jobs; assigning responsibilities and tasks; devising a
communication system; designing a
procedure for performance evaluations; determining the form and amount of compensation;
assesssing need for additional laborers; and recruiting, training, and supervising
employees.

Risk Management Plan

This functional area primarily addresses how risk exposure will be managed. Most farmers
do not want to eliminate risk exposure because that also eliminates most opportunities for
earning a profit. But farmers will want to manage their risk exposure through diversification,
insurance, enrolling in government farm programs, or entering into contractual
arrangements.

Research and Development Plan

Many business managers recognize the value of testing new ideas and incorporating into
their business those ideas that appear to offer the best opportunity. Managers also
recognize there is a cost and risk associated with testing and adopting new ideas.
Accordingly, business managers may want to consider developing a vision or plan for
identifying and assessing new ideas. A research and development plan most likely would
include

1) Identifying innovations to test,

2) Estimating the resources these efforts will require,

3) Establishing a preliminary time for conducting the research or test, and

4) Defining an outcome or level of performance necessary to justify continuing to test and

possibly adopt the innovation.

Conservation and Environmental Management Plan

Businesses must comply local, state and federal resource management laws. In addition,
there are often opportunities for businesses to participate in incentive programs. Managers
need to develop a plan for how they will maintain an awareness of relevant legal
requirements, how they will fulfill those requirements, and they may take advantage of
available programs or incentives to assist in meeting the legal requirements.

Recordkeeping

Agricultural producers are increasingly being expected to document their production

practices, Accordingly, a recordkeeping system that tracks production practices need to be
part of the overall business management strategy. Questions producers need to ask
themselves is what is the status of their recordkeeping system and what changes need to
be made to assure they have documented the information being required by buyers,
regulators, insurers, etc.

Income and Self-Employment Tax Management Plan

Tax management could identify tactics to follow to assure that a reasonable level of income
and self- employment tax is paid by the owners. The goal should not be to eliminate these
taxes, but to maximize after-tax income.

Plan to Transfer Ownership of Assets and Business

Acquiring a business also means that someday ownership will be relinquished. For most
family businesses, one person’s sale or disposal is another person’s opportunity to acquire.
Therefore, this functional plan will likely address when does someone else become a co-
owner of the business, when will ownership of assets transfer to someone else, does an
artificial entity hold ownership of assets so only ownership of the business needs to change
over time. This is a complex area that often has ramifications throughout the business and
family. Professional counsel is highly recommended in the development of this plan.

Conclusion
Individuals with formalized plans for production, marketing, and financing may find that
modifying these plans is all that is required. One focus might be to reconcile existing
practices with current goals and objectives. For individuals who are formalizing their
production, marketing, and finance plans for the first time, new questions may appear as the
owner’s record their plans on paper.

These are only some of the functional plans that the owners may want to develop for their
farm business. Some businesses may find that they have other topics that deserve detailed
planning; perhaps a plan for leasing assets may be appropriate.