Business chapter 1.8
8.1 Business Strategy: Meaning and purpose.
v Strategy is ‘how we get from where we are now to where we want to be
in the future’.
v A successful business will have SMART objectives.
v Its business strategy will be a clear plan and set of policies that should
help it focus on achieving these aims.
v All businesses need strategies to provide integration, direction and focus.
1. Establishing business strategy
a. Resources available
v All business resources are finite.
v Limited resources force a business to choose which strategies to proceed
with, and which to drop or scale back.
b. Strengths of the business
v If a business has proven capabilities in certain areas, it is often advisable
to apply these strengths when developing future strategies.
v 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.
v expansion of the business may be best achieved if some
underperforming areas are sold off.
v The business will then focus on its current successes to achieve growth.
c. competitive environment
v Competitors’ actions are a major constraint on business strategy.
v Innovations by competitors may be difficult to copy or better.
v All businesses operate in a competitive environment to a greater or lesser
degree.
d. Objectives
v The objectives of the business also influence strategy.
, v 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.
v Maximising returns to shareholders might not be the central objective of
the business
v if it aims for the triple bottom line approach to corporate objectives.
v If a business has a clear social responsibility objective, it will pursue
different strategies from those of a business that is focusing solely on
shareholder returns.
8.2 Strategic management: meaning and purpose
Stages of Strategic Management Main Purpose
1 Strategic analysis: assessing the current Decisions that do not start from knowledge of
position of the company in relation to its market, where the business is now may be ineffective.
and external environment.
2 Strategic choice: taking important long-term A new direction for a business will require key
decisions that will push the business towards the decisions to be taken about products and
objectives set. markets.
3 Strategic implementation: allocating sufficient New business strategies always require
resources to put decisions into effect, and additional resources. These must be provided at
evaluating success. the right time and in sufficient quantities
v Strategic analysis is about looking in detail at a business’s current
position, now and in the future
v Then managers can make sure that their long-term plans or strategy for
the business fit in with this external analysis.
Strategic analysis 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?
1. Strategic choice
v After potential strategies have been identified through strategic analysis,
strategic choice is next.
, v Strategic choice analyses the benefits and limitations of different
strategic options and decides between them.
v Successful strategic choices have to be challenging enough to gain
competitive advantage.
v Must be achievable and affordable with the resources available.
2. Strategic implementation
v Without successful strategic implementation, there can be no effective
change within an organisation.
v Implementing a major strategic change is a very important cross-
functional management task.
v 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.
3. Strategy and tactics
v Strategic management is the highest level of managerial activity.
v It is undertaken by the chief executive officer and approved by the board
of directors.
v Tactics are concerned with making smaller-scale decisions aimed at
reaching more limited and measurable goals, which themselves are part
of the longer-term strategic aim.
v A strategic decision is something like developing into a new market.
Where a tactical decision is a decision about selling a product in a
different size package. Both have significantly different importance within
the business.
4. The need for strategic management
If a business did not undertake strategic management, it would fail to:
• plan for the future
• respond logically to the changing business environment
• make effective long-term decisions based on clear objectives.
8.1 Business Strategy: Meaning and purpose.
v Strategy is ‘how we get from where we are now to where we want to be
in the future’.
v A successful business will have SMART objectives.
v Its business strategy will be a clear plan and set of policies that should
help it focus on achieving these aims.
v All businesses need strategies to provide integration, direction and focus.
1. Establishing business strategy
a. Resources available
v All business resources are finite.
v Limited resources force a business to choose which strategies to proceed
with, and which to drop or scale back.
b. Strengths of the business
v If a business has proven capabilities in certain areas, it is often advisable
to apply these strengths when developing future strategies.
v 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.
v expansion of the business may be best achieved if some
underperforming areas are sold off.
v The business will then focus on its current successes to achieve growth.
c. competitive environment
v Competitors’ actions are a major constraint on business strategy.
v Innovations by competitors may be difficult to copy or better.
v All businesses operate in a competitive environment to a greater or lesser
degree.
d. Objectives
v The objectives of the business also influence strategy.
, v 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.
v Maximising returns to shareholders might not be the central objective of
the business
v if it aims for the triple bottom line approach to corporate objectives.
v If a business has a clear social responsibility objective, it will pursue
different strategies from those of a business that is focusing solely on
shareholder returns.
8.2 Strategic management: meaning and purpose
Stages of Strategic Management Main Purpose
1 Strategic analysis: assessing the current Decisions that do not start from knowledge of
position of the company in relation to its market, where the business is now may be ineffective.
and external environment.
2 Strategic choice: taking important long-term A new direction for a business will require key
decisions that will push the business towards the decisions to be taken about products and
objectives set. markets.
3 Strategic implementation: allocating sufficient New business strategies always require
resources to put decisions into effect, and additional resources. These must be provided at
evaluating success. the right time and in sufficient quantities
v Strategic analysis is about looking in detail at a business’s current
position, now and in the future
v Then managers can make sure that their long-term plans or strategy for
the business fit in with this external analysis.
Strategic analysis 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?
1. Strategic choice
v After potential strategies have been identified through strategic analysis,
strategic choice is next.
, v Strategic choice analyses the benefits and limitations of different
strategic options and decides between them.
v Successful strategic choices have to be challenging enough to gain
competitive advantage.
v Must be achievable and affordable with the resources available.
2. Strategic implementation
v Without successful strategic implementation, there can be no effective
change within an organisation.
v Implementing a major strategic change is a very important cross-
functional management task.
v 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.
3. Strategy and tactics
v Strategic management is the highest level of managerial activity.
v It is undertaken by the chief executive officer and approved by the board
of directors.
v Tactics are concerned with making smaller-scale decisions aimed at
reaching more limited and measurable goals, which themselves are part
of the longer-term strategic aim.
v A strategic decision is something like developing into a new market.
Where a tactical decision is a decision about selling a product in a
different size package. Both have significantly different importance within
the business.
4. The need for strategic management
If a business did not undertake strategic management, it would fail to:
• plan for the future
• respond logically to the changing business environment
• make effective long-term decisions based on clear objectives.
