Business Strategy Study Notes

Influences on Strategy Formation

  • Internal environment: resources, culture, leadership
  • External environment: market conditions, competition
  • Stakeholder expectations
  • Globalisation and technological change
  • Implications
    • Strategies must align internal capabilities with external opportunities and threats
    • Leadership style and organizational culture shape strategic choices
    • Stakeholder expectations (owners, employees, customers, suppliers, regulators) influence priorities and acceptable risk
    • Globalisation and tech change create both opportunities (scaling, new markets) and challenges (rapid disruption, increased competition)

Strategic Choice

  • Ansoff’s Matrix – growth strategies
    • Market Penetration: increase market share in existing markets with existing products
    • Market Development: enter new markets with existing products
    • Product Development: new products for existing markets
    • Diversification: new products in new markets
  • Porter’s Generic Strategies – competitive approaches
    • Cost Leadership: offering products at the lowest cost in the industry
    • Differentiation: offering unique features valued by customers
    • Focus: targeting a narrow segment (could be cost focus or differentiation focus)
  • Risk vs return considerations
    • Higher potential returns often come with higher risk and more uncertainty
    • Portfolio of strategies may balance risk (e.g., mix of market development and product development)
  • Long-term vs short-term orientation
    • Some strategies emphasize sustainable competitive advantage over time; others aim for quicker wins or quick market share gains

Resource Allocation and Strategic Implementation

  • Resource allocation
    • Allocation of financial, human, and physical resources to strategic priorities
  • Organisational structure and culture
    • Structure should support strategy; culture must enable change and alignment with strategic goals
  • Change management
    • Managing organizational transition when strategy changes; people, processes, and systems adjustments
  • Monitoring and controlling performance
    • Track progress against strategic objectives; adjust as needed

Strategy and Tactics

  • Strategy – long-term direction and scope
  • Tactics – short-term actions to support strategy
  • Strategies guide decision-making, tactics operationalise it
  • Both are essential for success

Need for Strategic Management

  • Provides clear direction
  • Helps businesses adapt to change
  • Ensures effective resource use
  • Improves competitiveness and sustainability

Blue Ocean Strategy

  • Creating uncontested market space
  • Making competition irrelevant
  • Value innovation – differentiation and low cost
  • Examples: Cirque du Soleil, Nintendo Wii
  • Significance
    • Shifts focus from beating rivals to creating new demand in untapped markets
    • Requires redefining value propositions and cost structures

Scenario Planning

  • Anticipating future uncertainties
  • Developing multiple potential strategies
  • Helps manage risk and uncertainty
  • Supports long-term resilience
  • Practical use
    • Build flexible plans and early warning indicators; ensure readiness for different futures

SWOT Analysis

  • Strengths – internal capabilities
  • Weaknesses – internal limitations
  • Opportunities – external factors
  • Threats – external challenges
  • How to use
    • Leverage strengths to capitalize on opportunities
    • Address weaknesses to mitigate threats
    • Align strategy with external environment

PEST Analysis

  • Political – government policies, trade
  • Economic – inflation, interest rates, growth
  • Social – demographics, lifestyle changes
  • Technological – innovation, automation
  • Purpose
    • Scan macro-environmental factors that affect strategy and risks

Porter’s Five Forces Analysis

  • Threat of new entrants
  • Threat of substitutes
  • Bargaining power of buyers
  • Bargaining power of suppliers
  • Industry rivalry
  • Use
    • Assess overall industry attractiveness and identify leverage points for competitive advantage

Core Competencies

  • Unique strengths that provide competitive advantage
  • Difficult for competitors to imitate
  • Basis for strategic decisions
  • Example: Apple’s innovation, IKEA’s supply chain
  • Importance
    • Focus on core capabilities that enable differentiation or cost advantage

Ansoff Matrix (Detailed)

  • Market Penetration – increase market share
  • Market Development – enter new markets
  • Product Development – new products for existing markets
  • Diversification – new products in new markets
  • Strategic implications
    • Each quadrant carries different risk profiles and required resources

Force Field Analysis

  • Identifies driving and restraining forces for change
  • Helps decision-making on feasibility of change
  • Strengthening drivers or reducing resistors
  • Example: adopting new technology
  • Framework
    • Driving forces: factors pushing for change
    • Restraining forces: factors resisting change
    • Net feasibility = sum(Driving) − sum(Restraining)

Decision Trees

  • Quantitative decision-making tool
  • Considers possible outcomes and probabilities
  • Assesses expected values of different choices
  • Supports rational decision-making
  • Key formula
    • Expected value of a decision: E = \sumi pi \, vi where pi is the probability of outcome i and v_i is the value ( payoff ) of outcome i
  • Uses
    • Compare options under uncertainty; choose option with highest expected value