Strategic Risk

Fundamentals of Market Investing by Adam J. McKee

Strategic risk emerges when the progress of a business does not go according to the business plan.  A company’s methods of doing business become less effective over time, and it struggles to reach its defined goals.  If, for example, Wal-Mart strategically positions itself as a low-cost provider and Target decides to undercut Wal-Mart’s prices, this becomes a strategic risk.  Currently, Walmart is trying to take on Amazon in the online retail space; investors have mixed opinions as to whether this can be done successfully.

Walmart has a commanding lead when it comes to older shoppers that do not shop online, but innovations such as self-checkout are likely to alienate some customers that want customer service from people and dislike machines.  We can see from the Walmart example that even the largest of companies face strategic risk, and if they cannot change with the times, they will decline.  The tragic tale of Sears underscores the importance of strategic planning in staying relevant in the business world.

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