1) Introduction to strategies

• Definition of a strategy:

  • Strategy is a long term plan of action to achieve a goal
  • Business needs a strategy to achieve its vision and mission
• Steps in developing a strategy

  • Application of SWOT analysis/ environmental scanning of the business environments
  • Formulate strategies to meet objectives/ develop measurable strategic goals
  • Implement strategies using action plans, etc.
• The strategic management process

  Option 1:

  • Have clear vision, mission statement and measurable/ realistic objectives in place
  • Identify SWOT by conducting environmental scanning/ situational analysis
  • Formulate alternative strategies to respond to challenges

  Option 2:

  • Review vision statement
  • Analyse/ examine mission statement
  • Formulate strategy using a pattern such as an action plan
• SWOT Analysis

  Layout of a SWOT analysis:

  Strengths

  • What advantages does your organisation have and what do you do better than anyone else?
  • Do you have sufficient resources?
  • What is your core competency?

  Weaknesses

  • High cost infrastructure
  • High employee turnover
  • High debts level
• SWOT Analysis

  Layout of a SWOT analysis:

  Opportunities

  • Market growth for the business product
  • Changing customer habits
  • What good opportunities can you spot?

  Threats

  • Corporate tax may increase
  • Changing technology
  • Intense competition
• Porter's Five Forces (Industrial analysis)

  The 5 forces:

  • Power of suppliers
  • Power of buyers
  • Power of competitors
  • Threat of substitutes
  • Barriers of new entrants
• Power of suppliers - application:

  • Business must assess power of suppliers to influence prices
  • More powerful suppliers, the less control the business has over them
  • Small the number of suppliers, more powerful they may be as choice of suppliers may be limited
• Power of buyers - application:

  • Buyers buying in bulk can bargain prices in their favour
  • Business must assess how easy it is for buyers/ customers to drive prices down
  • If business is dealing with few powerful buyers, often able to dictate their terms to business
• Power of competitors - application:

  • Competitive rivalry refers to number of competitors and their ability to influence/ control market
  • Competitors have unique product/ service, then they will have greater power
  • Business with many competitors in same market has very little power in their market
• The threat of substitution - application:

  • Business's products can be easily substituted, weakens power of business in market
  • Substitute products may cause business to completely lose its market share
  • Unique products will not be threatened by substitute products
• Threat/ barriers of new entrants to the market - application:

  • New entrants are other businesses selling same/ similar products in existing market for first time
  • Power will depend on how easy it is for new businesses to enter market
  • If there are few suppliers of product/ service but many buyers, it may be easy to enter market
• Pestle analysis (Industrial analysis)

  The factors of PESTLE analysis

  • Political
  • Economic
  • Social
  • Technological
  • Legal
  • Environmental
• Political (Challenges and recommendation):

  Challenge

  • Some government policies may affect businesses
  • Trade agreements may prevent businesses from importing some medicine/ products

  Recommendation

  • Research recent government policies
  • Trade only with countries that have favourable trade agreements with government
• Economic (Challenges and recommendation):

  Challenge

  • Inflation/ interest rates may negatively impact on business
  • Loans may be expensive due to high interest rates

  Recommendation

  • Consider decreasing profit margins rather than increasing product prices
  • Borrow money from financial institutions when interest rates are favourable
• Social (Challenges and recommendation):

  Challenge

  • Customers may not be able to afford products due to low income levels/ high unemployment
  • Businesses may not be conversant with the language of their customers

  Recommendation

  • Sell substitute/ generic products at lower prices
  • Learn local languages/ hire employees who are well conversant with local language
• Technological (Challenges and recommendation):

  Challenge

  • Businesses may not keep up with/ be aware of the latest technology
  • Businesses may not be able to afford new technology

  Recommendation

  • Train existing/ appoint new employees to maintain/ use new equipment
  • Businesses must be geared for online trading/e-commerce
• Legal (Challenges and recommendation):

  Challenge

  • Certain Acts may have direct impact on a business, e.g. the CPA/ BCEA
  • Legalities of business contracts may limit business operations

  Recommendation

  • Comply with all relevant legislation that may impact on business
  • Budget for high legal establishment costs
• Environment (Challenges and recommendation):

  Challenge

  • Chemicals/ ingredients in business' products may be harmful to customers
  • Measures to dispose of business waste my be expensive

  Recommendation

  • Chemicals/ ingredients should be clearly indicated on labels/ packaging to inform customers about possible side effects/ correct use of products
  • Implement cost effective measure to dispose of medical waste