8.3 Approaches to developing business strategy Flashcards
What is the basis of Blue Ocean Strategy?
To stop competing in existing markets and start creating uncontested markets.
What are Blue Oceans?
Newly created markets or market segments with no close competitors.
What do W. Chan Kim and Renée Mauborgne suggest is essential for Blue Ocean strategies?
A combination of high product differentiation and low cost.
What is the goal of Blue Ocean strategies?
To make the competition irrelevant rather than just beating it.
What are the four questions in the Four Actions Framework for identifying Blue Oceans?
Raise: What factors can be raised above the industry standard?
Reduce: What factors can be reduced?
Eliminate: Which factors can be eliminated?
Create: What factors should be created that the industry has never offered before?
What do Red Ocean strategies focus on?
Competing in existing markets and ‘out-competing’ the competition.
What common characteristic do Amazon, Alibaba, and Air Asia share regarding business strategy?
They have all adopted a Blue Ocean strategy, focusing on excellent customer service and innovative offerings.
What is scenario planning?
A technique where senior managers identify possible future outcomes (scenarios) and discuss strategies for each.
What are some benefits of scenario planning?
It forces managers to consider main risks and uncertainties.
Managers develop a range of strategies for different scenarios.
It encourages flexibility in strategic planning.
What are some limitations of scenario planning?
Managers may become confused by too many uncertainties.
Some may only focus on one possible scenario, leaving them unprepared.
Less effective if only short-term risks are considered.
What does a SWOT analysis consist of?
Strengths
Weaknesses
Opportunities
Threats
How are strengths defined in a SWOT analysis?
Internal factors that provide real advantages to a business, such as experienced management or product patents.
How are weaknesses defined in a SWOT analysis?
Internal factors viewed as disadvantages, such as a poorly trained workforce or limited production capacity.
What do opportunities refer to in SWOT analysis?
Potential areas for business expansion and future profits identified through an external audit.
What do threats refer to in SWOT analysis?
External factors that could negatively impact the business, such as new competitors or regulatory changes.
What does PEST analysis stand for?
Political, Economic, Social, and Technological factors that influence a business.
How is PEST analysis complementary to SWOT analysis?
While SWOT assesses internal and external factors, PEST focuses solely on external macro-environmental factors that can present opportunities or threats.
What is PEST analysis?
PEST analysis may need constant updates and reviews due to rapid changes in the wider environment.
What factors are included in the Political and Legal category of PEST analysis?
Stability of the government, legal changes impacting the industry, environmental regulations, employment law, competition regulations, consumer protection laws, and government attitudes towards free market controls.
What economic factors are considered in PEST analysis?
Rate of economic growth, exchange rate stability, membership in free trade areas, tax rates, interest rates, inflation rates, and stage of the business cycle.
What social factors are evaluated in PEST analysis?
Demographic changes, dominant religion, education standards, gender roles, social issues, labour mobility, and language diversity.
What technological factors are analysed in PEST?
New manufacturing technologies, government support for research, internet access, renewable energy costs, and the speed of technological obsolescence.
What is the purpose of Porter’s Five Forces analysis?
It models an industry’s competitive environment by analyzing five key forces to help managers understand and strategize for competitive advantage.
Name the five forces in Porter’s model.
Barriers to entry
The power of buyers
The power of suppliers
The threat of substitutes
Competitive rivalry