approaches to developing business strategy

one that exploits uncontested market space through product differentiation and low cost

- to help identify a blue ocean a business should consider the four actions framework:
-raise - what factors can be raised above industry standard (customer service)
-reduce - what factors were a result of competing against other businesses and which of these can be reduces ( competitive advertisement)
-eliminate - which factors that the business has used to compete against rivals could be eliminated altogether
-create - which factors should be created that industry has never offered before

one that comeptes with rivals in existing markets

-comepte in existing markets
-out compete the compitition
-exploit existing demand
-product differentiation OR low cost (cant have both)

identifying possible future situations and how the business might respond to them

Benefits:
-forces managers to consider the main risks that affect their business
-manager have to develop a range of strategies to deal with different scenarios
-it makes managers adopt a flexible approach as different scenarios will require different strategies

limitations:
-managers try to consider too many uncertainties and become confused by range of possible scenarios
-some managers might only focus on one possible scenario and be unprepared for others
-less effective if onyl short term risks are considered. looking far ahead into the future can lead to more creative strategies

SWOT analyis - Strengths , Weaknesses , Opportunities , Threats (S&W internal factors , O&T external factors)

- SWOT helps managers asses most likely succesful future strategies and constraints on them
- SWOT is a common starting point for developing new corporate strategies

SWOT eval. :
-it is very subjective and that is a limitation of SWOT as different managers may not necessarily agree on the assesment of the comany they work for
-not a quantitative assesment so the cost of correcting a weakness cannot be compared to the profit of pursuing an opportunity
-SWOT's value is that managers gaina greater understanding about their business from the focus that the analysis provides

PEST analysis - Political , economic , social , technological ; anaylsis of these macro enviornent factors (external - link to O & T of SWOT)

PEST eval. :
- any major business strategy should be preceded by an analysis of the wider enviornment in which the strategy must operate and be sucessful in
-PEST must be constantly updated and reviewed not just done once as external enviornment in always rapidly changing

Porters 5 forces - a technique for analysing comeptitve forces within an industry

the 5 forces :
-Competitive rivalry (key force)
-Barriers to entry
-The power of buyers
-the power of suppliers
-threat of substitutes

Competitive rivalry:
- based on other four forces
-most likely to be high when:
- cheap and easy to enter an industry
-there is a threat from substitutes
- suppliers have much power
-buyers have much power
-large number of firms with similair market share
-high fixed costs force firms to try to obtain economies of scale
-ther is slow market growth that forces firms to take a share from rivals if they wish to increase sales

Barriers to entry
-ease with which competitors can join the industry and compete with existing firms
-threat of entry is greatest when
-economies of scale are low
-technology needed to enter industry is cheap
-distrubution channels are easy to access
-there are no legal or patent restrictions
-the importance of product differentiation is low

Power of buyers
-power that customers have over the producing industry
-buyer power will increase when
-there are many undifferentiated small supplying firms
-cost of switching suppliers is low
-buyers can realistically and easily buy from other suppliers

Power of suppliers
-suppliers will be realtively powerful comapred with buyers when:
-cost of switching is high
-brand being sold is very powerful and well known (Nike)
-suppliers could realistically threaten to open their own forward - integration operation ( coffee suppliers open their own cafe)
-customers haeve little bargaining power

Threat of substitutes
-in porters model substitutes are products in others industries that act as substitutes ( price of aluminium cans if partly affected by the price of glass for bottling and the price of plastic for containers)
-threats of substitution will exists when:
-new tech makes other options available
-price competition forces customers to consider alternative
-any siognificant new product leads to a switch in consumer spending

Porters 5 forces as a framework for business strategy
-helps business decide whether to enter an industry or not , provides insight into potential profitability of markets
-with the knowledge gained of the competitive forces business can develop strategies thast might improve their own competitive position

Five forces Eval.:
-benefit is that it enables managers to think about the current competitive structure of their industry in a logical way
- regarded as a good starting point for the development of business strategy
-it is criticised because
-static analysis that only analysis one moment in time. industries are changing rapidly due to globalisation so may become outdated quickly and have to be redone
-can become very complex when trying to use it to analyse modern industries with different market segments , multiple product groups etc. all will have different comeptitive forces

core competencies - an important business capability that gives a firm comeptitive advantage
(e.g - sonys ability to miniaturise electronics which led to many core products)

to be of commercial and profitable benefit to the business a core competence should:
-provide clear beenfits to consumers
-be difficult for other businesses to copy
-be applicable to a range of different products and markets

developing core competencies
-patented production processes may be considered a core competence
-developing a core competence depends on integrating multiple technologies and product skills

core competencies and strategy
-once a core competence is developed it opens up strategic opportunities for developing core products and new markets

core product - product based on businesses core competencies but not necessarily for the final consumer or end user

Ansoff matrix - a model used to show the degree of risk associated with the four growth strategies ; makret penetration , market development , product development , diversification

shows the two main variables in a strategic marketing decision are:
-the market in which the business is going to operate
-the product it plans to sell\

managers can:
-remain in existing market or enter new ones
-sell exisitng products or develop new one

Market penetration - sell existing products in existing markets
product development - sell new products in existing markets
Market development - existing products in new markets
Diversification - sell new products in new markets
-least risk is marekt penetration and most risk is diversification

Ansoff matrix Eval.
-matrix allows managers to analyse the degree of risk associated with each area
-only considers two main factors (Product and market) managers should consider swot and pest to get a more complete picture
-does not suggest detailed marketing options; if a marketing strategy is used by a business the matrix does not indicate in which market and with which of the existing products

force field analysis - a technique for identifying and analysing the psotive factors that support a decison and negative factors that contrain it

1.) analyse current situation and desired one
2.) list factors driving change
3.) list all factors constraining factors agaisnt change
4.) allocate score from 1-10 for all factors
5.) chart factors driving forces on left restraining on left
6.) add up scores on either side
7.) whichever one has higher total decides wether it is worth going ahead or not

Force Field Eval.
-two main limitation
-unskilled or inexperienced managers could fail to identify all relevant factors or forces
-the allocation of scores from 1-10 is highly subjective

decision trees - a diagram that sets out the options conencted with a decision and the outcomes and economic returns that may result

decision trees Eval.
-potential limitations
-accuracy of the data used
- porbabilities may be based off past data and circumstances chagne so probabilities may be slightly off