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A Complete Guide to Directional Strategy

Directional strategy is the game plan a company decides on and implements to grow business, increase profits, and accomplish goals and objectives. Small businesses to large corporations can create their own types of directional strategies that work for the focus and scope of each individual business.

What is directional strategy?

“Directional Strategy is the driving force behind all business decisions; it’s the only way to accomplish a strategic end state…”

– Sydney Finkelstein, Professor at Tuck School of Business at Dartmouth.

Directional strategy is the game plan, mission, or directive a company decides on and implements to grow business, increase profits, and accomplish goals and objectives. Directional strategy is the foundation for any business seeking growth and profitability.

Directional strategy refers to the management of the business. Under a directional strategy, the business is better equipped to achieve its goals and objectives. Directional strategy relies on the critical thinking and analytical skills of the leader, to determine how the firm should survive and prosper.

In today’s marketplace, business is very complicated. With the market place being so complex, it makes business a little more complicated because there are more options and more questions companies need to answer.

Directional strategy seeks to address new emerging challenges and opportunities in order to improve the current landscape.

Business goals are critical in the success of any business, yet they need to be specific in order for them to be achieved. A clear understanding of the business goals is necessary in order to create a directional strategy.

Directional strategy dictates how the business will operate and coordinate activities to achieve those goals.

How to Create Your Directional Strategy

“Strategy is an evolutionary process that requires choices and actions in the face of uncertainty. It is not a finished outcome; it is an ongoing decision-making process.” –Peter Drucker

To be able to create a complete directional strategy:

  • Define the underlying purpose of the strategy. This will focus its tactics.
  • Assess and analyze the environment in which the strategy will take place. This will help the business to be a winner.
  • Conduct a thorough analysis of the strategy to identify the strengths and weaknesses of the strategy. As a result of the analysis, re-evaluate the strategy.
  • As a result of the analysis, re-evaluate the strategy. Determine the required resources and the level of leadership needed to implement the strategy.
  • Empower the key factors needed to ensure the implementation of the strategy are included in the process.
  • Keep testing and appraising the strategy through feedback and involve the stakeholders in the testing and appraising process.
  • Be prepared to change the strategy as a result of the feedback.
  • Develop the tactical and operational plans in order to achieve the goals and objectives of the strategy.

What is the Purpose of a Directional Strategy?

“We have no enemies, none of us. We have competitors. There’s a difference.”

–John Rockefeller

The purpose of directional strategy is to give direction or guidelines for the company to grow. Directional strategy is different than operational strategy because, it focuses on how the company grew or will grow instead of the steps taken and decisions made.

Some of the areas where directional strategy is used including:

  • Product launches
  • New equipment
  • New hires
  • Hiring new employees
  • Mergers and acquisition
  • Strategic partnerships
  • Changing company culture
  • Expansion
  • International market
  • Pricing
  • Costing models
  • Segmentation
  • Customer service
  • Marketing
  • Segmentation
  • Product and service
  • Company identification
  • Customers

Types of Directional Strategy

There are various types of directional strategies that you can create and use. Understanding the product and service in which you offer can help your company in determining your directional strategy.

Directional strategies are most often used in retail businesses. Directional strategies can be executed with a product line, a marketing plan, or even your company culture.

Types of directional strategies include:

Channel or geographic strategies

Applying a business or marketing concept in a new geographic region

Product line strategies

Business products or services that work well together and can be used together or with other products or services

Growth strategies

Expansion of a company through acquisitions, mergers, and new product/services

Diversification strategies

New businesses, new areas, or new things

Product line diversification

Product diversification

Process improvement strategies

Methodologies, systems or organizational changes that are implemented in order to increase customer satisfaction

Regional strategies

Expansion or growth into new geographic regions

Operational strategies

This strategy refers to the implementation of the strategies that are used in order to achieve their goals and objectives. The operational strategies are the steps that are broken down in order to accomplish the goals and objectives. The operational strategy is designed to improve the company’s current efficiency and performance. Operational strategies are smaller actions that branch off of the directional strategy. The product, service, or goal of the company is dictated by the directional strategy.

Direction strategies are also known as growth strategies. Growth strategies will help a company to consistently grow and meet financial expectations.

Directional strategies can include short term goals, long-term goals, new product strategies, strategies to protect products and services, diversification strategies, geographic strategies, and market-based strategies.

Examples of Directional Strategies

Directional strategies include New Product Line, New Product Launch, Sales Channel, New Product Launch, New Product Line, and Quality Terms.

Formulating and Implementing Directional Strategies

When new products or services are developed, or there is a new way of doing business, a direction strategy is needed. These new products or services need to be developed and created technically, but also, they have to be positioned correctly in the market place.

Directional strategies are important in positioning a product correctly in the marketplace. The benefit for a company is that it will be unique enough to be invested in and stand out from the rest of the competition.

The objectives of the directional strategy are the driving forces to achieve business goals, which in turn fuel the growth of a company. Directional strategies need to be specific and need to include well thought-out decisions based on the goals and objectives of the business.

Directional strategies are fluid and need to be flexible in order to develop and change in response to the marketplace. The strategy that is documented in the beginning will not work in the current market, it needs to be adaptable to changes.

Directional strategies are important in achieving the long term goals of the business. These goals and objectives are broken down into smaller operational and tactical strategies.

Factors Involved In Creating Directional Strategies

The purpose of directional strategies are frequently used to develop the short-term goals and objectives.

Developing directional strategies are highly dependent upon the objectives identified in the strategic plan. The direction is identified based upon the current identifying factors and industry analysis. Directional strategies are used to develop new products or services. Monitoring of the performance of new products or services is important in order for the company to get a return on their investment.

Directional strategies may involve the reassessment of the products or services that are offered. Evaluate how the product or service has performed in the past and determine if it is working as expected.

Directional strategies is a way to identify new products and services for development. The goal is to determine the current and future needs of the customer. Customer needs may change or evolve over time, and the strategy has to be able to accommodate these changes.

The new product or service introduced must have the ability to add value.

The horizontal/vertical relationship of your product, service, and competitors are broken down and analyzed in order to develop direction strategies. This factor helps to determine the positioning of your product or service in the market place.

Determine how the product or service adds value to the customers. Is it similar to the competitors product or service? If the product or service is identical to your competitors, you must change the product or service or identify the customers in which the new product or service will be most beneficial to.

Determine what makes your product or service different than the competitors’ product or service. Look at your competitors and determine what their reaction will be if your company introduces a new product or service.

Competitive Intelligence helps companies find out what the competition is doing and where their weaknesses are. The strength of the competition will help the decision maker determine the type of product and service to offer.

Determine the customers that will be the best fit for the new product or service. The company should know the current and future needs of the customers. If the company offers the product to the wrong target customer, the product will not sell.

Identify the competitors that are offering similar products or services to your new product or service. Determine the type of customer base and market that your new product or service will be able to serve.

Determine if the current product or service is sustainable and adding value. If this is the case, then no remuneration is needed. However, if the company concludes that the invested efforts will not produce, it may need to alter or end the product or service.

New product and service lines are designed to meet new and future market demands. In order for an organization to stay vital and competitive, it needs to develop a viable new line or service. The tangible products and services offered are recorded in the company’s core competencies. The organization needs to be proactive in identifying and responding to changes in customer needs and wants.

The new product or service line has a high level of uncertainty and requires a high investment in terms of time, effort, money, and resources. The product or service line is designed and developed and if the risk is greater than the return, then the new product or service line will not happen. The response will depend on how well the organization can translate the uncertainty into manageable risks.

The use of technologies within the product or service line can create uncertainties about the viability of the investment. The new product or services have high risk and the level of risk depends on the level of your ability to incorporate technology into the new product or service line.

Player strategies are important in analyzing risks and competitors. New product or service lines can be perceived as market entries by competitors. The new product or service line will be a threat to the competitor.

The market share that a company already holds may be at risk. The perception of the new product or service line may be a threat to the current products and services.

There are many factors involved in determining the quality of the strategies. The company needs to use a variety of market and company information. The data and resources are then analyzed to determine the product or service line. The data is compared and contrasted to other data to ensure the best decision.

Determine the performance of the new product or service line in the past and determine if product or service is a success. The data is compared in order to understand how the strategy is working. The goal of the new product or service line is to increase sales and profits and to achieve the company’s goals and objectives.

Whether or not the company is improving its industry or not, a comparison is important to ensure the company is doing the best job.

Establish the customer and market needs for the new product or service line. The needs are assessed based upon a customer demand, competition, and technology developments.

The customer may purchase the product or service because of a need or a want. The customer may have a need to meet a specific product need. Another customer’s need may be for the product or service to be pleasing.

Customer needs help to determine the best product or service for the customer.

Set the performance goals or expectations for the new product or service line. The goals should include the level of success of the overall product. The success factor is based upon achieving the performance goals.

The performance goals are based on the development and development estimates as described in earlier steps.

Clearly understand the product or service line risks. The risks can be determined from an examination of the new product or service line that has been used in the past. Software risk assessment is the collection and analysis of data to determine the ability to meet the project’s objectives. This process is used to reduce and rectify problems that occur during development.

The development cycle is broken into five phases: Initiation, Analyses, Design, Development, and Transition and Support. The project is examined in each step and analyzed based upon risks. The risks are assessed based upon responses.

Create a time-bound plan for resolving the risks that exist during production. The project review of the development process provides information about the risk involved with the process.

The plan provides the information to resolve risks to the level of acceptable risk.

The development of growth strategies is to ensure that the company is able to meet the current and future business needs. The definition of business growth strategies is (1) a set of strategies that establishes a direction and then guides the company into its success.

The growth strategies are dependent upon the delivery of strategies. The success of the new product or service line depends upon the existing product or service line.

The strategic plan is based on the research and analysis that identifies the new product or service that will be successful. The strategic plan is and will continue to be important for the company. The strategic plan is the fundamental style of the new product or service line.

The existing customer product or service lines are important to the new product or service line because they provide sufficient income.

The main factor of a successful strategic plan is to determine the customer perception of the product. The perception of the product will be defined by the company based on the marketing plan. The marketing plan targets the current and future customer base.

The introduction of the product or service line will create competition between the product or service and the customer’s current product or service line. The competitor can develop a better product or service that can win over the customer.

The strategic plan takes into consideration the company’s current market share. The company should look at the competitors because they may have a better product or service than the company’s product.

The strategic plan looks at the future product or service demand. There is a risk of the customer not accepting the new product or service line because the customer demands a different product or service line.

The strategic plan includes a plan to help reduce the risk of the product not meeting the customer demand.

The strategic plan looks at industry trends to determine the new product or service demand. The strategic plan determines if the strategic plan is the best in the future.

The strategic plan determines the customer perception of the product or service line and determines how it compares to other product or service lines

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