Planning, strategy are building blocks of any business

STRATEGY is a highly misused word – not only in business but also in our everyday lives. It is not uncommon to hear people talk about strategically executing a task when what they really mean is that they have an effective and efficient plan to get something done.

So what is the difference between strategy and planning? Simplistically put, strategy looks at the bigger picture and often refers to the long term. Why are you getting into this business in the first place, what is the reason for its existence? It is the answers to these questions that will inform the vision and mission of your business.

Planning, on the other hand, involves outlining the detailed actions that will allow you to execute a particular task.

In Exploring Corporate Strategy, Gerry Johnson and Kevan Scholes define strategy as: “The direction and scope of an organisation over the long term which achieves advantage for the organisation through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfil stakeholder expectations.”

If your business involves the delivery of goods, your business strategy might include resolving issues such as: ■ Where is the gap in the market? ■ Who do we want to deliver to, businesses or individuals or both?

■ Do we want to supply goods provincially, nationally or even internationally?

■ Do we want to develop strategic partnerships with other companies that offer services that complement our own? An example of this is to form an alliance with a company already delivering cargo to your target destinations, enabling you to loadshare and significantly cut costs.

By contrast, planning in the load-sharing example involves more than broad brush strokes stating that you will form an alliance. You will need to map out daily routes to deliver packages, decide who will deliver them and work out how long it will take to deliver each package.

The task for this week’s episode of The Big Break Legacy tested the contestants’ understanding of the basics of business. To prove their understanding, they had to develop a strategy and then work out a plan to allow the strategy to come to fruition and create a viable business.

Your planning should give you direction on short-term decisions… to ensure that your product or service sells like hot cakes.

Any successful business person will testify to the fact that a business can only survive if it satisfies a need in the market. Also remember that a market is not just a group of people with a common need – the essential added extra that is necessary to create a market is that the group of people with the need also have the ability to satisfy that need through purchasing power.

Many people want, indeed quite possibly feel a burning need, to drive expensive German cars, but not everyone can afford them. And the people who market these luxury vehicles seek out their target market at up-market events such as polo games, horse races and golf tournaments. This is because they know, from research done over the years, that affluent people tend to follow these sporting codes. It makes sense to advertise or promote your luxury brand in a place where you find a larger concentration of potential consumers.

The way we tested the contestants’ knowledge of the basics of business was by having them set up a pop-up store in Johannesburg’s banking hub. This would have to be a temporary structure that offers a product or service to the banking community.

Right away, the contestants had to decide what it is that bankers yearn for and are currently not offered around the banking precinct? Remember that a successful business need not be a completely new idea. You may find that, even though the service or product already exists, you can still compete by improving on service quality. That competitive edge is then your unique selling proposition (USP) and, once you’ve identified that, you can develop and implement a successful marketing plan.

Bankers would have us believe that it’s a myth that they are some of the most highly paid people in South Africa. Maybe, maybe not – but let’s assume that they are. We now understand that we have to look for a product or service that is likely to satisfy the needs of a sophisticated (and rich) clientele. It might be cigars, it might be imported whisky – but fundamentally we’re talking luxury goods here. Another thing we know or can assume about our target market is that bankers work in very stressful environments – imagine a dealer who moves upwards of R100 billion daily.

Perhaps an energy drink or a stress reliever would be a good product to sell. But the district is full of pharmacists and other shops that already offer these products, so how does one make a product unique and tailor it to the market’s needs?

And what about laws on certain products, including tobacco, pharmaceuticals and alcohol – would they affect decisions around location, timing and delivery? Answers to such questions will guide the marketing strategy and planning.

All of these issues form part of an environmental analysis – and conducting an environmental analysis is a fundamental part of the process of developing a business strategy. It’s not enough just to identify a need or a gap in the market – the would-be entrepreneur also needs to understand the environment where the business will operate. What does the law say about the proposed product or service? Is there an available technology that will reduce costs and improve profit margins, hence making the business more competitive in an environment that is already saturated with the same product or services?

Once you’ve scanned the environment, done the Swot analysis (looking at the business’s strengths, weaknesses, opportunities and threats) and decided on the product or service that addresses a need within your target market and the approach you will follow to carve a niche for your business, you will have the skeleton for your business strategy. What follows now is planning or deciding on the things that need to be done to bring your idea to life.

However, part of your planning will also include deciding on practical issues – for instance, if you settle on supplying Vitamin Water to stressed-out currency and equity dealers in a pop-up store, where will you physically position your pop-up store? Factors to consider include such things as positioning and timing – where are you likely to find the highest traffic of bankers?

If the need you have identified is the fact that bankers do not have a great deal of time between meals and tea breaks and you have decided that convenience is what will set your business apart, price might be less of a factor. Bankers, as we have established earlier, tend to be wealthy, and so it’s possible they may be willing to pay more for the same service if it takes up less of their precious personal time – thus location becomes part of your USP.

You will also need to decide where you will source your product. How much are you going to sell your product or service for? Do not confuse income with profit, and the “market price” for your goods or services has to cover the cost of getting the goods, marketing, finance costs, storage fees, transport costs and so on.

Your planning should give you direction on short-term decisions around marketing, promotions, pricing and logistical decisions among others, to ensure your product or service sells like hot cakes. Ezra Ndwandwe is the chief executive of Dual Point Media and creator of SABC 2 business competition show The Big Break Legacy.