Designing strategy in times of market uncertainty

The instability and unpredictability of the market environment do not exempt companies from having a comprehensive strategy defining the organization's long-term strategic objectives and the appropriate operational activities. However, it seems necessary to redefine the classic approach to creating and implementing a strategy document. A strategy developed in conditions of uncertainty must provide the enterprise with greater flexibility and the possibility to adapt more easily to rapidly changing market environment conditions.

Data-based strategy

In classical terms, a strategy is a structured action plan that defines objectives and organizes the directions of the company's development in the long term. CIVITTA adds to this definition one more key element – data. The strategy, which is not based on objective and in-depth market analyses and customer research, does not guarantee the rationality and relevance of its assumptions.

The development of a strategy embedded in the data requires close cooperation between key stakeholders on the company side and external experts. Each party has a key role to play in this process.

External advisors can provide the market knowledge, help to understand the target group and organize strategy design within an agile project. Stakeholders on the side of the company define the expectations for the strategy, support its creation with their industry experience and verify its assumptions in the context of the resources available in the company.

Strategy in the times of uncertainty

Market conditions that deviate from standard or normal, such as conditions of increased uncertainty, call for a constructive review of the approach to strategy design. First and foremost, the challenge is to anchor the strategy in the context of current market data and to address customer needs (which are also highly volatile in times of uncertainty), as well as to arm the strategy with tools to react quickly to changing conditions.

In order to ensure appropriate flexibility and possibility of quick adaptation of the strategy to changing market conditions, it is worth to use proven solutions and business models that increase transparency, structure the information contained in the document and facilitate the verification of completeness and internal consistency of the strategy.

As it will be difficult to clearly define what the market development scenario will be, it is necessary to define the starting point (state before uncertainty) and identify possible alternative scenarios. When defining possible developments, it is worth looking for analogies from related markets or geographical areas, especially if a given market lacks examples from the past showing the impact of unforeseen events on the direction and dynamics of changes.

EXAMPLE:

Examples from European countries can provide information on how long-term the effect of the economic crisis can be in terms of the structure of household spending.

In the vast majority of European countries, in the years preceding the 2008-2009 crisis, there was a clear trend of decreasing share of food expenditure in total household spending, and since 2008 this trend has been stopped or reversed. The diagram below illustrates how many years it took in European countries to reach a permanently (more than 2 years) lower share of food spending than in 2007. In 13 out of 30 countries included in Eurostat data, the share of expenditure on food products did not reach a level lower than that of 2007 by 2018. In another 10 countries, it took more than 7 years to get back to this level.

In conditions of market uncertainty, competition analysis also requires increased attention when designing a company strategy. With limited access to information, it is essential that competitors' intentions and strategies are assessed reliably and, in the next step, that their response patterns are defined. Moving from traditional strategy preparation to creating strategy in conditions of uncertainty, it is necessary to include variant scenarios of developments and competitors' reactions to dynamically changing market conditions. A broader context will also include analyses of the predictions related to access to raw materials necessary for the production of the held product categories. The analysis of consumer behaviour should also be addressed by analogy. Even if we are dealing with product categories defined as basic in the light of meeting the main human needs, far-reaching changes caused by the crisis situation should also be expected here.

CIVITTA applies diverse approaches to building a strategy for growth, among others the data-driven approach described in this article.

If your company is currently facing a need to develop a strategy, contact us.

 

Author:

Magda Szczypka

Project Manager

[email protected]

Magda Szczypka

ՏԱՐԱԾԵԼ ՀՈԴՎԱԾԸ