1.3 The Future of the Firm

Since strategy touches so many different aspects of a company, it can be difficult to know where to begin. In order to create a starting point and build a foundation for strategy, a firm should continually ask itself the following three questions:

1. Where are we currently?

2. What are our goals?

3. How will we reach our goals?

Where are we currently?

Before managers can refine a company's strategy and decide on any future course of action, they must first understand the organization's current status. Unfortunately, understanding the status of a firm can be a challenging and difficult process that many organizations overlook. In deciding where the firm is currently at, it is helpful to get feedback from shareholders, customers, partners, and employees. Frank and honest feedback from stakeholders can help the firm improve processes, improve customer service, lower cost, and improve overall productivity.

Organizations can also use strategic key indicators to help the organization understand its current profitability, revenue, market share, and sustainability. Later in the course, we will discuss and examine financial statements in an effort to better understand the financial health of organizations. We will also learn about and discuss common financial ratios and how to compare financial ratios with other firms to help understand the competitiveness of the firm.

What Are Our Goals?

Determining the future path of the organization is one of the most important decisions that any organization can make. When done correctly, deciding the goals and objectives of the organization can bring alignment and purpose to the firm. Furthermore, when organizations both define and communicate a common purpose for shareholders, it allows employees, partners, vendors and others to work together and influence one another towards organizational goals.

Organizations can choose from a variety of paths and directions. Obviously, some of these paths will result in sustainability, profitability, and success. Some paths will lead to decreased market share, lower profitability, and possibly closure. In choosing a path, firms must decide which product or service to sell, which industry to pursue, and which markets to enter.

How Will We Reach Our Goals?

After management has decided where they want to take the organization, they must then identify and implement the steps and actions that will help the organization to achieve both it's long-term and short-term goals. Almost every company wants to grow market share, lower cost, and increase profitability - but the steps to accomplish those goals vary by the industry and individual company. While many business goals are worthy endeavors, many organizations fall short in identifying and understanding the steps required to reach their objectives. Even in situations where management is able to accurately identify necessary steps, firms often fail to reach their desired goals due to a lack of understanding of the goals and resistance by employees. Furthermore, leadership within the organization may not put forth the required work, time, money and other resources needed to reach the goals.

Because of the fast-paced global environment of business today, even if management does gain companywide acceptance of goals and invests the necessary resources required to reach those goals, factors in the external environment – such as an increase in competition, economic risk, disruptive technologies and political disruptions – may still prevent the firm from reaching where it wants to go. In order to respond to the challenges of today, organizations must be flexible, adaptive and responsive to both the internal and external environment.