Business Strategy and Strategic Management Study Notes

Introduction to Business Strategy

  • Business Strategy: A long-term plan of action for the whole organization set at the highest management level to achieve corporate aims.

  • Tactics: Short-term decisions for different departments used to implement the broader strategy.

  • Strategic Management: The process of analysis, choice, and implementation to lead a business toward long-term goals.

  • Key Differences: Strategic decisions are long-term, cross-functional, and difficult to reverse, while tactical decisions are short-term, department-specific, and lower cost to change.

Strategic Analysis and Choice Frameworks

  • Strategic Management Stages:     * Strategic Analysis: Assessing the current position relative to the external environment.     * Strategic Choice: Identifying and selecting the best strategic options to gain competitive advantage.     * Strategic Implementation: Allocating resources and managing change to put plans into effect.

  • Blue Ocean Strategy (W.Chan Kim and Reneé Mauborgne): Developing uncontested markets through high differentiation and low cost. Contrasts with Red Ocean strategy, which focuses on existing competition.

  • SWOT Analysis: Identification of internal Strengths and Weaknesses, and external Opportunities and Threats.

  • PEST Analysis: Analysis of external influences: Political, Economical, Social, and Technological.

  • Porter’s Five Forces (Michael Porter):     1. Barriers to entry.     2. Power of buyers.     3. Power of suppliers.     4. Threat from substitutes.     5. Competitive rivalry.

  • Core Competency (Hamel and Prahalad): A unique business capability that is difficult to copy, applicable to many markets, and provides recognizable consumer benefits.

  • Ansoff Matrix Growth Strategies:     * Market Penetration: Existing products in existing markets (lowest risk).     * Market Development: Existing products in new markets.     * Product Development: New products in existing markets.     * Diversification: New products in new markets (highest risk).

Quantitative Decision-Making Tools

  • Force-Field Analysis: Identifying driving forces (for change) and constraining forces (against change) using numerical scores from 11 to 1010.

  • Decision Trees: A diagrammatic technique using probabilities and financial returns to select options with the highest expected value.     * Decision Node: Represented by a square.     * Chance Node: Represented by a circle.     * Example Calculation: If Success probability is 0.700.70 with a return of $9000\$9000 and Failure is 0.300.30 with a return of $5000\$5000:     0.70×9000+0.30×5000=78000.70 \times 9000 + 0.30 \times 5000 = 7800

Corporate Culture and Strategic Change

  • Types of Corporate Culture:     * Power Culture: Concentrated at the top (autocratic).     * Role Culture: Defined roles and bureaucracy.     * Task/Team Culture: Matrix structure with team cooperation.     * Person Culture: Laissez-faire style focused on individual talent.     * Entrepreneurial Culture: Risk-taking and innovation at all levels.

  • Change Management: Requires leading the change, motivating staff, and using Project Champions.

  • Resistance to Change: Caused by fear of the unknown, loss of job security, lack of trust, or inertia.

  • Transformational Leadership: Focuses on employee needs to encourage acceptance of change and improve efficiency.

Corporate and Contingency Planning

  • Corporate Planning: Setting overall objectives and departmental goals for a specific time period.

  • Contingency Planning: Also known as "disaster-recovery" or "business continuity planning." It prepares for unforeseen events like IT failure, fire, or economic crises.

  • Process: Identify disasters, assess likelihood, minimize impact, and plan for continued operations.