2.14 Strategic Fit
Strategic fit is a very broad term with several loose definitions. It can be used as a way of looking at many aspects of your business, all under the broad label of strategic fit.
For instance, you can determine if a particular project is a good strategic fit for your company. Does this specific project align with the overall corporate strategy? Does it align with the resources you have available? Does it align with the opportunity that is present in the market?
Strategic fit can refer to how the activities a business undertakes fit together with the strategy of the company to match a need in the market, producing a competitive advantage for the company. For instance, if your company offers lower-cost software to small businesses because your small size allows you to create customized solutions for your clients, you have achieved strategic fit for a specific segment of the market.
Mergers and Acquisitions
Many people will talk about strategic fit in terms of mergers and acquisitions. If the merger or acquisition doesn’t further your strategic aims, then don’t do it. The strategic value of the firm must fit your company strategy, the culture must fit your culture, and their employees must be a good strategic fit for your company. It is difficult to achieve strategic fit with mergers and acquisitions.
Determine Overall Objectives and Market Needs
In order to determine strategic fit, it is necessary to establish the organization’s overall objectives, and identify the need in the market. All projects, mergers, acquisitions, and processes should align both with the company strategy and with the market need.
Company and Strategy Alignment
Match your company to your strategy and match your strategy to your company. Fundamentally, your strategy and your company should align almost perfectly. If you have decided that a certain strategy is the best way for your business to move forward, you may have to adapt how you do business to fit that strategy. On the other hand, when creating a strategy, it is often wise to build the strategy around the business and success that you already have.
Example - Premium Watches
For instance, let’s pretend that you sell classy watches. Your strategy is to offer a premium product to high-class customers.
Supply Chain
Your supply chain needs to have strategic fit. You must get quality materials in order to build premium watches, so you need to find both adequate suppliers and high-quality manufacturing companies to create the watches.
Distribution
Your choice of distribution should also match your strategy. You’ve decided that you are going to pursue an exclusivity strategy, in which you only sell your watches from certain, sophisticated stores. Selling your fancy watch in a gas station or in a big-box store works against your strategy.
Price, Branding, and Advertising
Along with location, your price and your branding should fit with your strategy. You have to charge a high price to cover your costs, but you will probably increase this price even further to give the impression of majestic quality. Everything a customer sees about your product should speak of its quality and prestige. Strategic advertising will promote your brand and create a clear picture in the mind of your consumer as to what your company is.
Human Resource Management
Your decisions in human resource management should also align with your strategy. If you want to sell classy watches, your sales reps need to be class, well-dressed individuals. You are unlikely to hire cheap employees who want a quick, temporary job.
Organizational Resources
Organizational resources play a big role in whether or not you can achieve strategic fit with a given strategy. Making those premium watches may require hiring experts in the watch industry to continually develop better watches and inspire confidence from the customers. Research and Development or Technology may have to be improved to achieve strategic fit within your organization.
Leadership and Customer Support
Other support functions also need to work with your company strategy. Your business leadership has to make strategic sense, and your customer support must work together with the rest of your branding to give the correct impression to customers.
Potentially, you could look at every aspect of your business and determine whether it fits strategically with the rest of your company or not. In general, you should focus your efforts to achieve strategic fit on the most impactful areas (these will change depending on your strategy) which are most important to your company.