A company establishes its strategic position by intentionally choosing a viable strategy for achieving its business mission. The purpose of the strategic position is to guide the company in the establishment of medium and long-term policies and strategies, in keeping with the stated mission.
Strategic position is, therefore, a decision adopted by company executives when aligning the strengths of a business to the current and long-term needs of the market. It aids the company in selecting and shaping strategies.
The formulation of a strategic position is part of a broader strategic planning process, when executives collaborate in expressing the business’s future vision, objectives, goals and strategies. Knowing the nature of a strategic position, it is possible to lead the company more efficaciously, efficiently and effectively.
The establishment of the strategic position is determined by three factors:
- the company’s mission
- the relationship between opportunities and threats
- the relationship between strengths and weaknesses
Companies generally choose one of four possible strategic positions: survival, maintenance, growth and development.
When threats and weaknesses predominate, the best option is to adopt a strategic position of survival.
When threats and strengths predominate, the best option is to adopt a strategic position of maintenance.
When opportunities and weaknesses predominate, the best option is to adopt a strategic position of growth.
Finally, when there is a predominance of opportunities and strengths, the best option is to adopt a strategic position of development.
A question that invariably arises in my classes and lectures on the topic, as soon as I finish presenting the model is, “How do I assess the predominance of strengths, weaknesses, opportunities or threats?”
The first thing I usually say is that it is not a simple mathematical sum of factors.
One option is to establish a weighted sum for each of the factors using, for example, a prioritization matrix to assess the predominance of the factors mentioned above.
Another option that I find simpler is to use the GUT matrix. Have you heard of GUT?
The GUT matrix is a methodology that helps us prioritize factors for the solution of a given problem. GUT analysis is widely used in situations where guidance is needed to make complex decisions, and which require the analysis of various situations. You classify each problem or factor according to Gravity, Urgency and Trend, hence the acronym.
In due course I will talk more about the GUT matrix.
Regarding strategic position, there is yet another slightly different approach that presents three possible strategic positions, instead of the aforementioned four. One is to shape the future, becoming a leader in the segment, influencing the direction of the entire sector. Another is to adapt, reacting to changes in the segment without trying to effect or guide them. The third is what could be called “reserving the right to compete.” This is for cautious companies that want to stay in business without committing themselves in the short term to any particular path.
This focus will be the subject of another issue of MANAGEMENT TIPS.