3.9 Strategic methods: how to pursue strategies

Organic growth

Growth from within the business e.g launching of new products

External growth

Growth from outside the business e.g takeover of competitor

Retrenchment

Reducing the scale of a business operations in order to improve financial targets, usually in response to changing market conditions.

Economies of scope

When unit costs are lower when a business produces a wider range of products rather than specialise in one or a few products.

Economies of scale (RMFPTM)

Risk bearing

Managerial

Financial

Purchasing

Technical

Marketing

Diseconomies of scale

Average unit costs increase as output increases

Synergy

Arises when the whole is greater than the sum of individual parts.

Overtrading

When a business expands too quickly without having the financial resources to support such a quick expansion.

Mergers

Combination of two previously separate businesses achieved by forging a completely new business where both of the businesses are integrated.

Horizontal integration

Acquiring a business at the same stage of the supply chain - e.g. a manufacturer buys a competitor.

Conglomerate integration

Where the acquisition has no clear connection to the business buying it (diversification)

Forward integration

Acquiring a business further up the supply chain e.g. manufacturer buys a distributor.

Backward integration

Acquiring a business earlier in the supply change e.g. a manufacturer buys a competitor

Two main types of innovation

Product innovation

Process innovation

Product innovation

Launching new or improves products (or services) on to the market.

Product innovation benefits

Greater perceived added value

Higher prices

Build early customer loyalty

Process innovation

Finding better or more efficient ways of producing existing products, or delivering existing services.

Process innovation benefits

Reduced costs,

Improved quality

More responsive customer service

Greater flexibility of operations

Kaizen

Management philosophy of continuous improvement.

Intrapreneurship

Where large businesses enable employees and managers to demonstrate entrepreneurial behaviour in their work to the benefit of their employer.

Benchmarking

Understand and evaluate the current position of a business or organisation in relation to best practice and to identify areas and means of performance improvement.

Why protect intellectual property?

Maintain a "Unique Selling Point"

Maximise return on investment

Reduce threat of competition

Patents

The legal right granted by a government that gives an inventor exclusive control over their invention for a limited period of time.

Copyright

Automatically gives the creator of an original work exclusive legal control over how that work is used.

Methods of entering an international market

Exporting direct to international customers

Selling via international agents & distributors

Opening an operation overseas

Joint venture or takeover

Factors affecting the attractiveness of an international market

Size of the market

Economic growth & disposable income

Exchange rates

Infrastructure

Competition

Offshoring

Relocation of a business activities from the home country to overseas.

Reshoring

A business brings production back to its home country after it was previously moved overseas.

Multinational company (MNC)

Operations in more than one country.

Big data

Identifying and analysing large data sets from traditional and digital sources to identify trends and patterns which can be used in decision making.

Data mining

Analysing data from different perspectives and summarising it to useful information.

Examples of where data mining is used

Sales forecasting

Market segmentation

Database marketing

E-commerce

Buying and selling of goods and services over electronic the internet where transactions are done digitally.

Automation

The use of machinery to replace or reduce human resources.

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