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Developing a Long-Term Strategy
See also Measuring Your Success
To do well in MikesBikes-Advanced you must develop a long-term strategy. As in real life, if you bounce around with your decisions you will incur extra costs without additional benefits. In the section on the Strategic Management Process, we outline the process of developing and implementing strategy.
In the 1980’s, Michael Porter (of the Harvard Business School) did considerable work in defining three types of strategies that "fit" a business unit into its environment. These are called differentiated, cost and focus strategies. These are especially pertinent in the MikesBikes-Advanced scenario. For further information see Michael Porter's Ideas on Strategy.
Recently, there has been more emphasis on "stretch" strategies that require organizations to leverage their resources and competencies so that they can get into new businesses. The main proponents of this view have been Hamel and Prahalad. MikesBikes-Advanced is not so suitable for considering these strategies since the firms are constrained to stay within Erehwon’s bike industry.
Often business strategy is made out to be a complex issue. Sometimes this is appropriate, but more often than not it is possible to simplify it particularly at the top level. There can be increasing detail as one moves down into lower levels. Simplicity is important since the simpler it is, the more people can understand and implement it.
Traditionally, financial reports and projections have been the basis for many strategies. While these are important, financial measures are basically historical and measure the past - they tell you what happened. In recent years the importance of reporting non-financial performance measures alongside financial ones has been recognized. Monitoring the change in various non-financial measures will show how well your strategy is being implemented and point to future financial performance. The Balanced Scorecard is one way of presenting a mix of such measures.