This summary contains all the information from Chapter 8 that CIE could ask students about business strategies, such as:
Business Strategies
Strategic Management
Strategic Choice
Strategic Implementation
Approaches to developing business strategies
(Blue/Red Ocean, Scenario Planning, SWOT...
Business strategy
8.1 Business Strategy: Meaning and Purpose
● Strategy is how we get from where we are now to where we want to be in the
future
● A successful business has SMART objectives, which will help the business to
focus and achieve its aims
● Business strategy questions which market the business wants to be in and
what products they want to sell
● It also asks if it can expand from manufacturing operations to retailing
● All businesses need strategies to provide integration, direction and focus
Establishing business strategy
Resources available
● All resources are finite, limited resources force the business to choose which
strategies to proceed with and which ones to drop or scale back on
● Eg, the strategy of launching a new product nationwide may have been scaled
back due to a lack of resources
Strengths of the business
● If a business has proven capabilities in certain areas, it is advised that they
apply these strengths when developing future strategies
● A long-term plan to take a business in a direction they have no experience in
may require business skills and knowledge that they don’t have
● The expansion of the business may be best achieved if some of the
underperforming areas of the company are sold off, this will allow the
business to focus on its current success and achieve growth
● Eg. Pepsi sold off its breakfast cereal division but kept the soft drink division,
which allowed them to sell Gatorade and further develop Pepsi’s strength in
soft drinks
Competitive environment
● Competitors’ actions are a major constraint on business strategy
● Innovations by competitors may be difficult to copy or better
● All businesses operate in a competitive environment to a greater or lesser
degree
● Price reductions by supermarkets selling petrol in the UK forced a change of
strategy by the main petrol retailers – Esso adopted a strategy called
pricewatch, which promised to keep their prices as low as the supermarkets
, Objectives
● Maximising the returns to the shareholders might not be the central objective
of a business if it aims for the triple bottom line approach to corporate
objectives
● If a business has a clear social responsibility objective, it will pursue different
strategies than those businesses that prioritise the shareholder returns
8.2 strategic management
● Once SMART objectives have been set, the process of strategic management
has 3 key stages:
○ Strategic analysis
○ Strategic choice
○ Strategic implementation
Strategic management: analysis of the current business situation, setting long-term
objectives, deciding on business strategies to achieve them and then implementing
these strategies
Stages of strategic Main purpose Definition
management
1. Strategic analysis: Decisions that don’t start from The process of conducting
assessing the current the knowledge of where the research into the business
position in relation to its business is now may be environment and into the
market, competitors and inappropriate and ineffective business itself, to help identify
external environments future strategies
2. Strategic choice: taking A new direction for a business A process that leads to a
important long-term will require key decisions to be decision to choose a particular
decisions that will push the taken about products and strategy from various
business toward the set markets alternatives and the techniques
objective used to help make the choice
3. Strategic implementation: New business strategies The process of planning,
allocating sufficient always require additional allocating and controlling
resources to put decisions resources, these must be resources to support the
into effect and evaluating provided at the right time and in chosen strategy
the success sufficient quantities to allow the
new strategies to be effective
, Strategic analysis tries to find answers to 3 key questions:
1. Where is the business now?
2. How might the business be affected by what is happening or is likely to
happen?
3. How could the business respond to these likely changes?
Strategic choice
● A process that leads to a decision to choose a particular strategy from various
alternatives and the techniques used to help make the choice
● After potential strategies were identified through strategic analysis, the
strategic choice is the next step
● Strategic choice analyses the benefits and limitations of different strategic
options and decides between them
● Successful strategic choices have to be challenging enough to gain a
competitive advantage
● They must be achievable and affordable within the resources available
● There are techniques to assist managers in making strategic choices but
judgement, experience and skills are also important
Strategic implementation
● The process of planning, allocating and controlling resources to support the
chosen strategy
● Without successful strategic implementation, there will be no effective change
in the organisation
● It involves ensuring that all the following factors are in place:
○ An appropriate organisation structure to deal with the change
○ Adequate resources to make the change happen
○ Well-motivated staff who want the change to be successful
○ Leadership style and organisational culture to allow change to happen
with wide-ranging support
○ Control and review systems to monitor the firm’s progress towards the
final objective
Strategy and tactics
● Strategic management is the highest level of managerial activity
● It’s done by the chief executive officer and approved by a board of directors
● Tactics are concerned with smaller-scale decisions aimed at achieving more
limited and measurable goals, which are part of the long-term strategic aim
Difference between strategic and tactical decisions
Strategic decision Tactical decision
Long-term Short to medium-term
Decision difficult to reverse as The decision is reversible, some costs
departments have committed resources may be involved
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