Quick guide to engines and driving forces in business strategy

There are four engines in business strategy: create value, deliver value, capture value and corporate value. Each engine has four driving forces under its control. Here is the scheme of engines and associated driving forces in business strategy:


Engine: Create value

This engine propels the production or operation function of a firm. Creating value is its ultimate purpose. This engine has four driving forces: 

1. Product its features and functions

2. Production capacity that includes capabilities, operational excellence, cost effectiveness, critical components and key activities

3. Resources supplies, utilities, support services along with human intervention bringing out the finished product

4. Technology includes innovation, research & development to keep the product updated and in-form.

Engine: Deliver value

This engine masters the marketing function of the firm. Delivering value is the key purpose. This one too has four driving forces:

1. Market needs assessment

2. Segmentation of the market in terms of assessment, demography, geography and purchasing power

3. Customer relationship using different ways in capturing, holding and nurturing customers to enshrine loyalty and ensure repeat purchasing patterns

4. Channels that cover sales, distribution, after-sales service.

Engine: Capture value

This engine is concerned with the finance function. Capturing value is the key purpose. It has four distinct driving forces:

1. Cost leadership where the final tally of cost of production and ex-sale cost is efficiently managed

2. Revenue stream that brings out the net profit, return on investment and return on equity

3. Pay-out to equity shareholders in the form of dividends

4. Efficient management of borrowed-funds to lessen interest burden.

Engine: Corporate value

This engine is concerned with the firm as a whole. Up-building corporate value is the guiding purpose. It has four driving forces:

1. Retention of profit to be ploughed back into business to enlarge size of operation

2. Capitalizing on the geographical expansion of the business

3. Enhancing growth of firm horizontally and vertically

4. Futuristic philosophy that entail survival even when faced with innovative disruption by competing firms.

Cheers!

 

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail:   cosmicgems@gmail.com

Blog:   Business Strategist