strategies

• Strategy


  A long term plan of action to achieve a goal
• Steps in developing a strategy

  1. Apply SWOT analysis/PESTLE/Porter's Five Forces/environmental scanning

  2. Formulate strategies to meet objectives/Develop measurable strategic goals/objectives

  3. Implement strategies using action plans

  4. Evaluation of strategies/Compare the expected performance with the actual performance/Measure business performance in order to determine the reasons for deviations and analyse these reasons
• The strategic management process

  1. Have a clear vision, a mission statement and measurable/realistic objectives in place

  2. Identify opportunities/weaknesses/strengths/threats by conducting environmental scanning/situational analysis

  3. Tools available for environmental scanning may include a SWOT analysis/Porter's Five Forces model/PESTLE analysis/industrial analysis tools

  4. Formulate alternative strategies to respond to the challenges

  5. Develop (an) action plan(s), including the tasks to be done/deadlines to be met/resources to be procured

  6. Implement selected strategies by communicating it to all stakeholders/organising the business's resources/motivating staff

  7. Continuously evaluate/monitor/measure strategies in order to take corrective action
• SWOT analysis


  An analysis of the Strengths, Weaknesses, Opportunities and Threats of a business
• Strengths


  • Advantages the organisation has, what it does better than anyone else, unique or lowest-cost resources, skilled employees, strong customer base, high quality product, sufficient resources, core competency
• Weaknesses


  • High cost infrastructure, high employee turnover, weak brand portfolio, high debts level, factors causing loss of sales, competitors doing better
• Opportunities


  • Market growth, new technology, changing customer habits, increasing disposable income, government incentives, growing online sales
• Threats


  • Corporate tax increase, rising pay levels, intense competition, increasing fuel price, aging population, stricter environmental laws, currency fluctuations, changing technology
• The SWOT analysis can be assessed in the form of a scenario
• Example of a SWOT analysis for Dave Digital Sound (DDS)


  • Strengths: Employs qualified sound engineers, specialises in radios and car sound systems

  Weaknesses: Insufficient capital to cater for large events

  Opportunities: Competitors closing down due to ineffective marketing

  Threats: Located in high crime area
• Porter's Five Forces


  An analysis of the power of suppliers, power of buyers, power of competitors, threat of substitutes, and threat of new entrants
• Power of suppliers


  • The more powerful the suppliers, the less control the business has over them. The smaller the number of suppliers, the more powerful they may be as the choice of suppliers may be limited. The business should identify the kind of power its suppliers have in terms of the quality of products/services/reliability/ability to make prompt deliveries.
• Power of buyers


  • Buyers buying in bulk can bargain for prices in their favour. If a business is dealing with a few powerful buyers, they are often able to dictate their terms to the business. If buyers can do without the business's products then they have more power to determine the prices and terms of sale. The business must assess how easy it is for buyers/customers to drive prices down.
• Power of competitors/Competitive rivalry

  • Competitive rivalry refers to the number of competitors and their ability to influence/control the market. If competitors have a unique product/service, then they will have greater power. A business with many competitors in the same market has very little power in their market. Businesses must draw up a competitor's profile so that they can determine their own strength as well as that of competitors.
• Threat of substitution/substitutes


  • Substitute products or services are different products/services that satisfy the same needs of consumers and can be used to replace one another. If the business's product can be easily substituted, it weakens the power of the business in the market. Substitute products may cause the business to completely lose its market share. Unique products will not be threatened by substitute products.
• Threat/Barriers of new entrants to the market

  • New entrants are other businesses that are selling the same/similar products in the existing market for the first time. The power will depend on how easy it is for new businesses to enter the market. New competitors can quickly/easily enter the market, if it takes little time/ money to enter the market. If there are a few suppliers of a product/service but many buyers, it may be easy to enter the market. If the business is highly profitable, it will attract potential competitors that want to benefit from high profits. If the barriers to enter the market are low, then it is easy for new businesses to enter the market/industry.
• The main aim of Porter's Five Forces model is to analyse the business position in the market. This is more of a research study done by businesses. Do not focus on recommendations as this is not required at this stage.
• PESTLE analysis


  An analysis of the Political, Economic, Social, Technological, Legal and Environmental factors affecting a business
• PESTLE analysis


  Name the PESTLE factor

  Identify challenges of each factor

  Recommend ways businesses can deal with the identified challenges
• Market with many suppliers but few buyers

  • Easy to enter the market
• Business is highly profitable


  Attracts potential competitors wanting high profits
• Barriers to market entry

  • Low - easy for new businesses to enter
• The main aim of Porter's Five Forces model is to analyse the business position in the market
• Porter's Five Forces model is more of a research study done by businesses
• Do not focus on recommendations as this is not required at this stage
• PESTLE analysis requires naming the PESTLE factor, identifying challenges, and making recommendations
• Political factor


  Government policies, consumer rights organisations, trade agreements
• Economic factor


  Inflation, interest rates, foreign currency fluctuations
• Social factor


  Customer affordability, language barriers
• Technological factor


  Keeping up with latest technology, employee skills, affordability of new technology, online transactions
• Legal factor


  Relevant legislation, legal requirements for operating businesses, legal costs, legalities of business contracts
• Environmental factor


  Harmful chemicals/ingredients, waste disposal, environmentally unfriendly packaging
• Forward integration


  The business combines with or takes over its distributors
• Backward integration


  The business combines with or takes over its suppliers
• Horizontal integration


  A business takes control of/incorporates other businesses in the same industry
• Market penetration


  New products penetrate an existing market at a low price, then prices increase
• Market development


  Selling existing products in new markets
• Product development


  Introducing new products into existing markets or modifying existing products
• Advantages of intensive strategies

  • Increased market share
  • Increase in sales/income and profitability
  • Improved service delivery
  • More control over product/service prices
  • Gain loyal customers
  • Decrease in prices may influence customers
  • Regular sales to existing customers
  • Eliminate competitors and dominate market
  • Focus on well-researched quality products
• Concentric diversification


  Adding a new related product/service that appeals to new customers