Chapter 4 Flashcards
What is “Business Strategy”?
A business strategy outlines the plan of action to achieve the vision and set objectives of an organization and guides the decision-making processes to improve the company’s financial stability in a competing market => the roadmap which leads to the desired goals.
Business Strategy in Simple Terms
What opportunities exist?
What opportunities could we pursue?
Which opportunities will we choose?
What action path will we take?
Intended or Deliberate Strategy (where to play and how to win)
Strategy Vs. Tactics
A strategy (goal/aim)=> organization’s long-term goals + how it plans to reach them. It shows the path to achieve the defined vision.
A tactic (objective)=> specific actions taken to reach the set goals in line with the strategy.
Strategy is the planning. large scale, the why, it is difficult to copy and over a long time frame
Tactics is the doing, small scale, the how, is easy to copy and over a short time frame.
Business Strategy Components
- Vision, mission and values:
Your mission shapes your today
Your vision tells your tomorrow
Your core values guide the way
- Business strategy action plans
Get (Specific, Measurable, Achievable, Relevant, Time-Bound) goals
Identify tasks
Allocate resources
Prioritize tasks
Set deadlines and milestones
Monitor and revise plan - SWOT Analysis
Strength
Weakness
Opportunity
Threats - Operational Tactics - operational details of how the work needs to be done in order to be most effective and efficient.
- Resource allocation plan - where and how to procure the required resources, how will it be allocated, and who will be responsible for handling it.
- Measurement - ways to track the company’s output and performance against the set targets.
Why is having a business strategy important?
Effectiveness of business functions:
Without a strategy you are going in every direction and lost
With a strategy you are going in a clear 1 direction and on a good track
Why is having a strategy important?
Planning => helps to identify the key steps to take to reach your business goals.
Strengths and weaknesses => allows to identify and evaluate a company’s strengths and weaknesses.
Efficiency => allows to effectively allocate resources for business activities (makes a business more efficient) + helps to plan ahead for deadlines, allocate job roles and stay on track.
Control => gives more control over choosing the kinds of activities that will directly help to reach goals.
Competitive advantage => helps to capitalize on strengths, using them as a competitive advantage that makes your company unique in the marketplace.
Business Strategy – Business Plan – Business Model: The Difference
Business strategy - sets out a company’s goals and defines the actions it takes to get there => part of a business plan.
Business plan - explains how a company brings in money and how it’s run on a daily basis, including its budget and resources.
Business model - the foundation of a company + the center of the business plan => the main idea of the business together with the description of how it is working.
Different Levels of Business Strategy
Corporate Level
Business Level
Function Level
Strategy Level 1: The Corporate Level
Corporate Level - a multi-level plan used by the leaders of companies and organizations to define, outline and reach its business direction and objectives.
It gives a strategic business direction.
It helps manage change.
It improves decision-making.
Elements of a corporate strategy:
Visioning.
Setting objectives.
Resource allocation.
Strategic prioritization.
Key decisions in the following areas:
- Diversification (increasing number of business unites and markets in which the company is competing).
- Divestment (decreasing presence and sophistication).
Types of Corporate Level Strategy:
Stability Strategies
Expansion Strategies
Retrenchment Strategies
Combination Strategies
Growth
1) Concentration => to compete more successfully within a single industry.
2) Diversification - a company follows a diversification strategy when there is a change in its target market.
3) Forward Or Backward Integration - takes place when an organization takes over the role another company fulfilled in its supply chain.
Stability
4) No Change - you’re happy with your business’s current position in the market.
5) Profit - allows an organization to build capital for spending after providing for its expenses.
6) Investigation - testing the waters before committing to a specific strategy.
Retrenchment
7) Turnaround - aims to increase the effectiveness of an organization’s products to sell more of them.
8) Divestment - is a retrenchment strategy aimed at downsizing to resolve its problems and enhance its results.
9) Liquidation - the last option an organization can take.
Strategy Level 2: The Business Unit Level
Business Level: Business level strategies integrate into the corporate vision, but with a focus on a specific business.
What happens at this level: the vision + objectives=> turned into concrete strategies that inform how a business is going to compete in the market.
Main questions to be asked:
Who are the customers?
What product do I offer?
How do I reach those customers?
Segmentation Targeting Positioning (STP).
Things to do:
Differentiate yourself from your competitors => use SWOT analysis.
Create objectives and initiatives that support the unit while simultaneously contributing to the objectives and initiatives of the organization as a whole.
Strategy Level 3: Functional Level
Functional Level => in charge of day-to-date operations (how the Strategy is being implemented).
Key task(s): functional level strategies are designed to answer how functional departments like Marketing, HR or R&D can support the defined business + corporate strategies of an organization.
How to Build a Business Strategy?
Phase 1: Who are we?
Values and Missions
Phase 2: Where are we now?
SWOT Analysis and Performance Data
Phase 3: Where do we want to go?
Goals and Objectives
Phase 4: How we’ll know we’re arrived?
Performance and Targets
Phase 5: How are we getting there?
Actionable Steps
How to Build a Business Strategy?
1) Identify your business’ aspirations and values.
2) Conduct a self-assessment.
3) Pinpoint which segments of your market you want to capture.
4) Determine how you’ll beat your competition.
5) Set clear goals.
6) Make a plan.
7) Figure out which competencies are needed to beat your competition and sustain your business’ success.
8) Decide which management systems are needed to hone these competencies.
9) Measure your results.
10) Be flexible and willing to adapt.
11) Consider hiring a business consultant.
