CHAPTER 5
BUSINESS STRATEGIES
STRATEGY DEFINITION
• A long-term plan of action to achieve a goal
• Plan of action to address an opportunity or to solve a problem
• Business needs a strategy to achieve its vision and mission
ENVIRONMENTAL SCAN
STRATEGY MANAGEMENT PROCESS
1. Review vision and mission statement – measurable and realistic objectives in place
2. Conduct environmental scan – SWOT/ pestle/ porters – Situation analysis
3. Formulate alternative strategy to respond to challenges – Defensive strategy and Retrenchment strategy
4. Develop action plan – tasks and deadlines
5. Implement strategy by communicating to all stakeholders
6. Organizing business resources and motivate staff
7. Continuously evaluate and monitor strategies to take corrective action
8. Corrective action enables goals to be met
INDUSTRIAL ANALYSIS
SWOT ANALYSIS
INTERNAL
Strengths – (what advantages – better than others)
• Do you provide high quality/ best price/ good employees
Weaknesses – (high cost infrastructure or weak brand)
• What factors cause loss of sales
EXTERNAL
Opportunities – (market growth for business product)
• New technology that would improve
Threats – (corporate tax may increase)
• Competition and inflation
PORTERS FIVE FORCES MODEL
1. POWER OF SUPPLIERS
- Assesses power of suppliers in influencing prices
- Suppliers that deliver high quality products – power over business
- More powerful – less control business has over them
- Small number of suppliers – less power for business as they don’t have a choice of suppliers
2. POWER OF BUYERS
- Assess how easy it is for businesses to drive prices down
- Buyers buying in bulk can bargain for prices in their favour
- Conduct market research to gather more information about buyers
- Few powerful buyers are often able to dictate their terms to the business
- Buyers can do without business’ products – they have more power to determine prices and terms of sale
BUSINESS STRATEGIES
STRATEGY DEFINITION
• A long-term plan of action to achieve a goal
• Plan of action to address an opportunity or to solve a problem
• Business needs a strategy to achieve its vision and mission
ENVIRONMENTAL SCAN
STRATEGY MANAGEMENT PROCESS
1. Review vision and mission statement – measurable and realistic objectives in place
2. Conduct environmental scan – SWOT/ pestle/ porters – Situation analysis
3. Formulate alternative strategy to respond to challenges – Defensive strategy and Retrenchment strategy
4. Develop action plan – tasks and deadlines
5. Implement strategy by communicating to all stakeholders
6. Organizing business resources and motivate staff
7. Continuously evaluate and monitor strategies to take corrective action
8. Corrective action enables goals to be met
INDUSTRIAL ANALYSIS
SWOT ANALYSIS
INTERNAL
Strengths – (what advantages – better than others)
• Do you provide high quality/ best price/ good employees
Weaknesses – (high cost infrastructure or weak brand)
• What factors cause loss of sales
EXTERNAL
Opportunities – (market growth for business product)
• New technology that would improve
Threats – (corporate tax may increase)
• Competition and inflation
PORTERS FIVE FORCES MODEL
1. POWER OF SUPPLIERS
- Assesses power of suppliers in influencing prices
- Suppliers that deliver high quality products – power over business
- More powerful – less control business has over them
- Small number of suppliers – less power for business as they don’t have a choice of suppliers
2. POWER OF BUYERS
- Assess how easy it is for businesses to drive prices down
- Buyers buying in bulk can bargain for prices in their favour
- Conduct market research to gather more information about buyers
- Few powerful buyers are often able to dictate their terms to the business
- Buyers can do without business’ products – they have more power to determine prices and terms of sale
