BACK TO BASICS

Ten things you need to know about

business 8 Clear and consistent
Strategy should be based on Michael Porter’s principles for
sustainable competitive advantage: focus either on being the lowest-

strengths
5 Scenario planning cost producer or aim to have the most highly differentiated position.

A strong business knows what it expects the future to look like, but Example: for decades BMW has not just sold ‘cars’ in the UK — it
has the modesty to know that it cannot be sure. So commitment has sold ‘the ultimate driving machine’.
to scenario planning and preparing for best-case and worst-case Advantage: consistency is critical, as with Michael O’Leary’s brilliant
scenarios makes a huge amount of sense. leadership of Ryanair — everyone working at Ryanair knows how to
Example: after 2020, a business such as as Jet2.com might be wise impress the boss: find a way to cut costs.
to prepare for recovery taking longer than expected. Disadvantage: a market position as clear as Ryanair’s does put
Advantage: a well-considered scenario plan would prepare the some customers off. Ryanair is the Marmite of air travel (but it’s also
business for the financial effects of the worst-case scenario, allowing Europe’s biggest airline).
Ian Marcousé provides a framework of ten concepts for your revision. For this volume the focus
the finance director to draw up plans.
is on the components of SWOT analysis: strengths, weaknesses, opportunities and threats Disadvantage: some argue against scenario planning, saying that
nobody knows what the future will be like, so scenario planning may 9 The right structure
1 Distinctive capabilities 3 Strong culture lull a business into a false sense of confidence.
Tall or flat, there is no ‘right’ organisational structure — except that
it must be right for the circumstances of the business.
At the heart of successful organisations is a store of knowledge that If the culture is strong and positive, change can be handled by staff,
Example: the early days of Facebook and Google saw very flat
is greater than the sum of its parts. No individual knows as much who see the need to refocus the business on the new reality.
about air safety as Airbus staff collectively. This is the company’s
distinctive capability.
Example: when January 2020 saw an increased demand for vegan 6 Boardroom diversity structures: ideal for dynamic, rapidly growing firms wanting great
new ideas from motivated staff.
food, Pret a Manger staff reacted quickly by developing additional
The perfect group of directors would accurately reflect the diverse Advantage: when the structure is right, the organisation naturally
Example: Toyota launched its revolutionary Prius hybrid vehicle plant-based sandwich options.
customer base of a business. does what’s needed, e.g. act cautiously when a huge business such
in 1997. Since then, no company has gathered such a deep Advantage: a strong culture adapts to cope with new realities.
Example: if customers are typically 60% women and 60% white, it as Jaguar Land Rover is thinking of a new product launch.
understanding of the technology as Toyota.
Disadvantage: sometimes culture may be strong, but based on would help decision-making if the directors reflect the black, Asian Disadvantage: sometimes the right structure may be wrong for
Advantage: when the engineering staff together know ‘everything’ negativity. Some UK police forces have been accused of a racist and minority ethnic (BAME) and female communities. new circumstances. The sudden arrival of COVID-19 saw some tall-
about a technology, it makes it easy to bring in new staff, who soon mindset. If culture is rooted in this way, it breeds inflexibility, not the
Advantage: only in 2020 did Tesco introduce plasters in skin-colour hierarchy organisations react far too slowly.
learn from the expertise around them. desired flexibility.
shades other than pink — surely that would have happened long ago
Disadvantage: when staff know they have world-leading expertise
if there had been a truly diverse Tesco boardroom.
about a technology they can be blind to the potential of newer,
different technologies. Knowledge is great, but can inhibit vision. Disadvantage: company directors need to do more than simply 10 Decisiveness
4 Sustainable strength understand specific communities, so it might be inappropriate to set
quotas. Choosing a course of action quickly and decisively — perhaps
A successful business such as Mercedes or BMW is built on long-term, catching rivals unawares.

2 Strength in depth deeply ingrained strengths

Example: when it became clear that diesel engines were a mistake
Example: as COVID-19 hit Paris, luxury cosmetics-maker LVMH
switched production from Dior and Givenchy to making hand-
A top business is not rooted in charismatic leaders who say brilliant
things. It’s rooted in many, many experts at all levels of the
and electric cars were the future, both BMW and Mercedes could
switch quickly to a new, strong model line-up.
7 Financial strength sanitiser for Paris hospitals. Within 3 days the sanitiser was being
delivered (free) to healthcare services.
organisation who are encouraged to apply their intelligence, expertise Advantage: this could only happen due to engineering and design Solid finances are essential to provide flexibility in case something Advantage: when a decision is clearly right, it’s important to make it
and creativity. staff of real talent and commitment. changes and more capital is needed to get things back on track. happen quickly. This can be very hard in bureaucratic organisations.
Example: the success of Burberry in China will depend on local Disadvantage: occasionally companies hang on for too long to Example: when the coronavirus crisis hit sales at Next plc in March Disadvantage: sometimes a dominant boss may make a hasty
experts in the Chinese market, not on bosses in London. past profit-earners. Sometimes it’s vital to make a bold switch to 2020, strong finances meant there was no need to panic — the decision that would have been prevented by a slower, more collective
Advantage: there’s a cliché that ‘you’re only as good as your something new. business had time to plan its response. approach.
weakest link’. Strength in depth means that even the weakest link is Advantage: if liquidity is strong and gearing is moderate, there’s
still quite impressive. BusinessReviewExtras time to rethink strategy.
Disadvantage: young staff may worry about promotion Download this poster at Disadvantage: occasionally a business may over-insulate itself from Ian Marcousé is a former chief examiner for A-level business
opportunities if all the staff around and above them seem impressive. www.hoddereducation.co.uk/businessreviewextras external shocks, perhaps with overly large cash holdings, e.g. Apple. and now teaches at University College London.

16 Business Review September 2020 www.hoddereducation.co.uk/businessreview 17