Strategic planning is a vital task for any company, since it is through it that the organization will seek sustainable and competitive growth. It is not about, therefore, of a trivial activity or one that can be performed without care, a good legal advice is an important ally to increase the chances of success of the planning
A traditional view on strategic planning is the one found in the book "Competitive Strategy", by Michael Porter, that presents three different strategies that are commonly used by entrepreneurs
- Cost strategythe goal is to gain a competitive advantage by offering products or services at lower prices than other competitors in the same market. For this strategy to work, the company will seek to reduce its costs (with labor, raw material…), greater efficiency in their production processes and gains in economies of scale, for example
- Differentiation strategythrough this strategy, the company seeks to offer a unique product or service, unmistakable, with high added value. Marcas de luxo ou empresas com tecnologias exclusivas e/ou inovadoras são exemplos de organizações que utilizam a estratégia de diferenciação
- Focus strategythe focus strategy, finally, it is one that is intended to meet a specific need in the market, in the most efficient way possible. In the focus strategy, there is a small number of customers served, por meio de um portfólio de produtos/serviços muito mais restrito (por vezes, the company offers a single product or service, making the company a critical supplier for that market
Each of the strategies brings distinct risks and opportunities, that can be better managed through contractual arrangements, preventive action and integration between the business strategy and the legal strategy of the company
Let's look at some examples
Cost strategy
When a company adopts a cost strategy, you need to reduce your expenses to the maximum, in order to maintain its competitive advantage over other competitors with the same strategy
One of the great risks, so, it ends up being the use of suppliers that do not comply with labor legislation, subjecting workers to degrading conditions. It is unfortunately a quite common situation, and that must be properly managed through a procedure ofdue diligenceof suppliers – activity increasingly relevant in light of the importance of the ESG agenda, it is no longer acceptable for the company to simply claim that it "was unaware" of the practices of its contractors or suppliers
Another risk that a company adopting a cost strategy is subject to is the adjustment of the price of its inputs, that often requires passing the increase on to consumers (with the loss of competitive advantage). To prevent situations like these, it is important that supply contracts contain clear clauses for price adjustments (using indices compatible with the peculiarities of the business), as well as rules regarding the transfer of exceptional adjustments or the possibility of termination without penalties in case of excessive cost increases for one or both parties
Differentiation strategy
The differentiation strategy often requires large investments – be it indesign, be it in Research, Development and Innovation (R&D), be it in talent acquisition and retention
For companies that adopt this strategy, the legal support will be related to various activities, such as: intellectual property protection (trademarks, patents, softwares), registration with the INPI up to possible legal actions to prevent the improper use of distinguishing elements; confidentiality and non-disclosure agreements; plans ofpartnershipandstock optionsto retain key employees for the success of the differentiation strategy
Furthermore, it is natural for the company to require large amounts of capital to develop its products or services. At this point, it may be necessary to draft complex contracts with investors, how the legal advisory will assist in choosing the investment modality among the alternatives available in the legislation (such as angel investment, convertible mutual, partnership company, etc) and will monitor all steps of the execution of the investment contract, from the initial negotiations (which may be regulated by a Memorandum of Understanding) to the drafting and conclusion of the contract (with the release of funds and conversion of the investment into equity participation, for example
Focus strategy
By the focus strategy, the entrepreneur ends up attracting risks related to the smaller market niche they will serve – what can put you at a disadvantage in the face of the risk of new entrants (that is, concorrentes que podem surgir no futuro) e produtos/serviços substitutos
Here, in addition to the fundamental protections related to intellectual property, it is important that contracts with clients contain exclusivity clauses with an appropriate duration, well-defined scope of incidence and sufficient penalties to protect the entrepreneur's investment
It is also relevant that the contracts contain non-competition clauses, to prevent the company's clients from developing the solution being contracted internally; as well as non-solicitation clauses, in order to prevent customers from hiring employees, partners or service providers of the organization, usually a strategy to internalize that activity
Based on the examples above, it is clear that legal advice is an important ally of strategic planning, as long as there is a careful and appropriate look at what paths the organization intends to take – and what are the real legal needs of that business
Sergio Luiz Beggiato Junior is a lawyer at the Rücker Curi law firm – Advocacy and Legal Consulting
