Applying Business Strategy in Trucking

 

Business Strategy is the premier tool for management to drive a company forward in this competitive world. Many new trucking business owners mistakenly ignore the need of formulating a solid business strategy. They consider their years of driving experience as a replacement for having to worry about business strategy. Of course driving experience is an asset, but it is not a guaranteed pass to be successful in the trucking business. Today, strategic planning has become more important to trucking companies because technology and competition have made the business environment less stable and less predictable. In order to survive and prosper, trucking companies need to take the time to identify the niches in which they are most likely to succeed, and to identify the resource demands that must be met. One other misconception about business strategy is that some people think strategic planning is something meant only for big businesses. It is equally applicable to small businesses. Strategic planning is matching the strengths of the business to available opportunities. This is done effectively by collecting, screening, and analyzing information about the business environment. The business owners need to have a clear understanding of their business – its strengths and weaknesses. They need to develop a clear mission, goals, and objectives. Acquiring this understanding often involves more work than expected.

 

Throughout the year, trucking business owners keep themselves occupied in managing the day to day business operations. The operational activities include but are not limited to:

• Finding good, profitable loads or freight contracts
• Ensuring return trips
• Billing/Invoicing freight brokers
• Managing cash flows (accounts receivable/payables)
• Driver recruitment and retention
• Payroll and incentives for staff
• Equipment service and maintenance
• Paper work, record keeping, permit renewals
• Safety and Compliance issues
• Technology infrastructure (computers, software)
• Business Continuity (preventing and avoiding interruptions)

 

The list can go on and on. With this many activities occupying the truck business owner’s mind, it is obvious that there is not enough time to think about strategy. But, what is Strategy? Strategy is the direction and scope of an organization over the long-term; which achieves advantages for the organization through its configuration of resources within a challenging environment, to meet the needs of markets and to achieve higher profits for the organization. In general, the company strategy answers the following questions:

 

1. Where is the business trying to get to in the long-term (Direction)
2. Which markets should a business compete in and what kinds of activities are involved in such markets? (Markets; Scope)
3. How can the business perform better than the competition in those markets? (Advantage)?
4. What resources (skills, assets, finance, relationships, technical competence, and facilities) are required in order to be able to compete? (Resources)?
5. What external, environmental factors affect the businesses’ ability to compete? (Environment)?
6. What are the values and expectations of those who have influence in and around the business? (Culture)?

 

Strategy is a plan, a “how,” a means of getting from here to there. Strategy is a pattern in actions over time; for example, a trucking company that regularly markets very specialized and expensive freight transportation is using a “high end” strategy. Strategy is position; that is, it reflects decisions to offer particular products or services in particular markets. Strategy is perspective, that is the vision and direction a transportation company needs to take in order to establish its existence and to compete with other similar transportation companies. The starting point for a new business is to create an effective business plan.

 

A business plan is a written document that describes a business, its objectives, its strategies, the market it is in and its financial forecasts. It has many functions, from securing external funding to measuring success within the business. Many people think that the only reason to develop a business plan is to convince potential lenders or investors to provide financial backing. This view is a little short-sighted. A well-developed plan provides a blueprint and step-by-step instructions on how to translate a business idea into a profitably marketed service. There are a number of key considerations that play an important role in shaping the contents of the business plan. These considerations include whether this is the first plan for a new business or business opportunity, or a plan that updates or supersedes an already existing plan. Obviously, the business’ position in its life cycle will have a significant impact on the type of planning that’s needed. An ongoing business might require a plan that relates primarily to a new market segment that it wants to enter. For example, in trucking it is easy to start with general freight, but, with experience a new business plan can be generated to cover some specialized freights like liquids, flat beds, hazmat or dangerous goods.

 

The first half of the business plan is geared towards helping develop and support the business strategy. It covers the market, the industry, customers and competitors. It evaluates the strengths and weaknesses of each competing firm and looks for opportunities in the marketplace. All of these steps are largely aimed at helping to create a strategy for the business. The second half of the business plan is largely to execute the business strategy. The company services, marketing and operations should all closely tie in with the strategy. In today’s crowded marketplace, every business is probably going to have serious competition no matter how creative the business concept is. That is why the business plan needs to realistically identify where they will do things in similar manner as their competitors, where they will do things differently, where they have real strengths and where they have real weaknesses. Trying to run a major aspect of the business significantly better than competitors may be a very difficult challenge. Hence, it is often better to focus in planning on being different than the competition and competing with them less directly. This may lead the business owners to answer some strategic questions. The questions include: Is there a particular market niche to focus on? Is there a unique strategy to be adopted? Can the services be positioned differently? Are there any alternative sales or marketing vehicles?

 

There is no harm in seeking professional help to develop a solid and executable business plan. The internet is a great tool with tons of information resources to guide you to develop this plan. The Government of Canada also helps new business owners in formulating business strategy. It has provided a web tool to create a business plan. The website link is: http://www.canadabusiness.ca/eng/page/2865. The real value of creating a business plan is not in having the finished product in hand; rather, the value lies in the process of researching and thinking about your business in a systematic way. The act of planning helps you to think things through thoroughly, study and research if you are not sure of the facts, and look at your ideas critically. It takes time now, but avoids costly, perhaps disastrous, mistakes later.