This is the final installment of this series on the Driving Force of Strategy. Let’s recap the past 7 segments on business strategy and what Kepner & Tregoe call the driving force behind the strategy. Here is what we’ve covered so far:
1. Overview of the concept of driving force
2. Market driven company strategies
3. Product driven company strategies
4. Technology as a firm’s driving force
5. Methods of Sale and Distribution as the driving forces
6. Production Capability as the driving force
7. Company Size and Growth as the driving force
This week we will complete the discussion of the Driving Forces of Strategy with Profit as the driving forces of a company’s strategy.
Profit or Return Defined
Profit or Return on Investment (ROI) is the financial result of a company’s efforts. In for-profit firms, these results can be measured in multiple ways, such as percent of sales, return on assets, or return on equity. In non-profits, measures of return may be in terms of cost/benefit ratios, quality of services, or the ability to control an internal function.
Profit as the Driving Force
The organization that is driven by profit (or return) will select products, services, and markets solely on the basis of their ability to provide the desired levels of profit. Profit is the Driving Force only if the changes to the products and markets are made to meet the profit requirements. Much like revenue-driven firms, changes in product, services, or markets that are constrained by issues other than profit are not profit-driven.
To be truly profit/return driven, the profit targets must be used to determine the future products, services, and markets and not just as a screening tool for Product Driven strategies. This type of Driving Force can lead an organization to provide a wide variety of unrelated products over time, or to change from one line of products to another based on the profit-generating capabilities of the replacement line.
Check here for initial post of this series, “What is Driving Your Company?”
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Originally posted 2013-12-23 05:45:05. Republished by Blog Post Promoter