business strategy

• Resources available

  All business resources are finite. Limited resources force a business to choose which strategies to proceed with, and which to drop or scale back
• Strengths of the business

  • If a business has proven capabilities in certain areas, it is often advisable to apply these strengths when developing future strategies. A long-term plan that takes a business away from a proven area of operation may require business skills and experience that it does not have
• Competitive environment

  • Competitors' actions are a major constraint on business strategy. Innovations by competitors may be difficult to copy or better
• Objectives


  • The objectives of the business also influence strategy. Increasing returns to shareholders in the short term might not be achieved by investing in extensive research and development with a payback period many years into the future
• Strategic Management

  The process of specifying the organization's mission, vision and objectives, developing policies and plans, often in terms of projects and programs, which are designed to achieve these objectives, and then allocating resources to implement the policies and plans, projects and programs
• Effective strategic management


  Understands the internal and external environment and from this develops a strategy that a business has the ability to achieve and that provides it with an advantage over rivals. Every business will be seeking to find a strategy that will provide it with a competitive advantage over its rivals
• Vision statement


  Answers the question, what do we want to become? Developing a vision statement is often considered the first step in strategic planning, preceding even development of a mission statement
• Mission Statement


  Enduring statements of purpose that distinguish one business from other similar firms. It identifies the scope of a firm's operations in product and market terms. It addresses the basic question that faces all strategists: What is our business? A clear mission statement describes the values and priorities of an organization. Developing a mission statement compels strategists to think about the nature and scope of present operations and to assess the potential attractiveness of future markets and activities. A mission statement broadly charts the future direction of an organization

  
• Strategic analysis


  Looking in detail at a business's current position, what is happening to it now and what might happen to it in the future. Then managers can make sure that their long-term plans or strategy for the business fit in with this external analysis. It tries to find answers to three key questions: 1) Where is the business now? 2) How might the business be affected by what is happening, or likely to happen? 3) How could the business respond to these likely changes?

  
• Strategic choice


  After potential strategies have been identified through strategic analysis, strategic choice is the next stage. Strategic choice analyses the benefits and limitations of different strategic options and decides between them. Successful strategic choices have to be challenging enough to gain competitive advantage. They must also be achievable and affordable within the resources available. There are techniques available to assist managers in making strategic choices, but judgement, experience and skill are also very important
• Strategic implementation


  Without successful strategic implementation, there can be no effective change within an organisation. Implementing a major strategic change is a very important cross-functional management task. It involves ensuring that all the following factors are in place: an appropriate organisational structure to deal with the change, adequate resources to make the change happen, well-motivated staff who want the change to happen successfully, leadership style and organisational culture that allow change to be implemented with wide-ranging support, control and review systems to monitor the firm's progress towards the desired final objectives
• SWOT analysis


  A situational tool used to assess the internal and external environment of a business. It looks at Strengths, Weaknesses, Opportunities and Threats
• Strengths


  • Characteristics of the business that may give it an advantage over others. Strengths are positive internal factors. Strengths should be built upon where possible
• Weaknesses


  • Characteristics of the business that may give it a disadvantage over others. Weaknesses are negative internal factors. Weaknesses should be reversed where possible
• Opportunities


  • Factors that the business may use to enrich its competitive advantage. Opportunities are positive external factors. Opportunities should be exploited where possible
• Threats


  • Current and emerging factors that may challenge the company's performance. Threats are external negative factors. Threats should be mitigated where possible
• PEST analysis or PESTEL analysis


  A framework of macro-environmental factors used in the environmental scanning component of strategic management. It describes Political, Economic, Social, and Technological factors. It is a useful strategic tool for understanding market growth or decline, business position, potential and direction for operations
• Blue ocean strategy


  The basis of this approach to developing business strategy is to stop competing and start creating. This means not focusing strategies on existing markets with several or many competitors. Instead, it means finding and developing uncontested markets. This involves being creative and original with strategies that other businesses have not yet adopted. These uncontested market spaces are newly created markets or market segments that have no close competitors
• Blue ocean strategy


  • The best blue ocean strategies combine high product differentiation and low cost. Competition, in these situations, becomes irrelevant. The goal of these strategies is not to beat the competition, but to make the competition irrelevant. To help identify a blue ocean, the Four Actions Framework asks four important questions: Raise - What factors could be raised above the industry's standard? Reduce - What factors were a result of competing against other businesses, and which of these can be reduced? Eliminate - Which factors that the business has used to compete against rivals could be eliminated altogether? Create - Which factors should be created that the industry has never offered before?
• Red ocean


  An existing market with many competitors, while a blue ocean is a market yet to be discovered with no competitors
• Porter's five forces analysis

  A framework that analyses an industry as being influenced by five forces: the threat of established rivals, the threat of new entrants, the bargaining power of suppliers, the bargaining power of customers, and the threat of substitute products
• Core Competency


  Those things that define what is special about an organization, what sets it apart from other organizations. Competencies are those things the company or organization does well. Core competencies are those things that are fundamental to the organization. Core competencies provide the organization a competitive advantage in the marketplace
• Core competency


  • It fulfils three key criteria: 1) It provides consumer benefits, 2) It is not easy for competitors to imitate, 3) It can be leveraged widely to many products and markets. A core competency can take various forms, including technical/subject matter know-how, a reliable process and/or close relationships with customers and suppliers. It may also include product development or culture, such as employee dedication
• Ansoff Matrix


  An analytical tool that helps managers choose and devise product and market growth strategies. The choice of growth strategies depends on the company's objectives for its products and markets

  
• Market penetration


  • Involves a business choosing to focus on selling existing products to existing markets. Features are: minimal risk, seeks to maintain or increase market share, intense competition
• Product development


  • Involves selling new products in existing markets. Features are: moderate risk, innovation to replace existing products, product improvements
• Market development


  • Involves selling existing products in new markets. Features are: moderate risk, entry into overseas markets, new distribution channels
• Product development


  1. Selling new products in existing markets

  2. Moderate risk

  3. Innovation to replace existing products

  4. Product improvements
• Market development


  1. Selling existing products in new markets

  2. Moderate risk

  3. Entry into overseas markets

  4. New distribution channels
• Diversification


  1. Selling new products in new markets

  2. High risk

  3. Enables spreading of risks with a balanced product portfolio

  4. Use of subsidiaries and strategic units
• Related diversification


  When a business caters for customers within the same industry
• Unrelated diversification


  Growth by selling completely new products in untapped markets
• Ansoff's matrix growth strategies


  • Market penetration
  • Product development
  • Market development
  • Diversification
• Market penetration


  • Same products for existing customers
  • Minimal risk
  • Seeks to maintain or increase market share
  • Intense competition
• Product development


  • New products for existing customers
  • Moderate risk
  • Innovation to replace existing products
  • Product improvements
• Market development


  • New customers for existing products
  • Moderate risk
  • Entry into overseas markets
  • New distribution channels
• Diversification


  • New products for new customers
  • High risk
  • Spreads risks
  • Uses subsidiaries and strategic business units
• Ansoff's matrix enables discussions about potential risks and rewards of each growth strategy.
• Ansoff's matrix does not quantify the level of risk of each strategy. Other decision-making tools are required to do this.
• Decision tree


  A diagrammatic representation of the different options a manager can select, showing their probable outcomes