7. Strategic options

Question 1

What are three distinct groups of strategic options?

Answer 1

• Competitive strategy: The way that the firm will seek to win customers and secure profitability against rivals.
• Product/market strategy: he decision on what products to offer over the coming years and the markets to be served.
• Development strategy: The decision on how to gain access to the chosen products and markets.

Question 2

What is important in SWOT analysis?

Answer 2

In the exam it is vital that you indicate the relative importance of points that you identify and provide a summary of the key issues to go with your cruciform.

Strengths which do not match any available opportunity are of limited use while opportunities which do not have any matching strengths are of little immediate value.

Conversion requires the development of strategies which will convert weaknesses into strengths to take advantage of some particular opportunity, or converting threats into opportunities which can then be matched by existing strengths.

Question 3

What are the strategies in the TOWS materix?

Answer 3

• SO strategies employ strengths to seize opportunities.

• ST strategies employ strengths to counter or avoid threats.

• WO strategies address weaknesses so as to be able to exploit opportunities.

• WT strategies are defensive, aiming to avoid threats and the impact of weaknesses.

Question 4

What does gap analysis compare?

Answer 4

1. The organisation’s targets for achievement over the planning period.
2. What the organisation would be expected to achieve if it carried on in the current way with the same products and selling to the same markets, with no major changes to operations.

Gap analysis: The comparison between an entity’s ultimate objective and the expected performance from projects both planned and under way, identifying means by which any identified difference, or gap, might be filled.

Planning gap may originate from:

1. Ambitious objectives being set by management (or imposed on management by investors).
2. Underperformance of existing product portfolio (eg, maturity stage approaching).
3. Difficult environment (eg, industry or economic slow-down).

Question 5

What are strategies used to fill the gap in gap analysis?

Answer 5

1. Efficiency strategies: reduce the costs of present products and economise on the assets used.
2. Expansion strategies: develop new products and/or new markets.
3. Diversification strategies: enter new industries which have better profit and growth prospects.