Strategy Formation

Question 1

Why do businesses fail in the long term?

Answer 1

• Failure to adapt to new conditions
• Businesses MUST offer a unique experience to customers

Question 2

What is a Strategy?

Answer 2

A plan or action that prescribes resource allocation, aiming to achieve competitive advantage in order to achieve goals

Question 3

What are processes of strategy formation?

Answer 3

• Identifying current strategy and core competencies = analyse: SWOT
• Revise its strategy and core competency
• Implements new strategy –> using 4 functions of management
• Porter’s Five Forces

Question 4

What is the SWOT analysis?

Answer 4

Strengths (internal) = + internal characteristics to achieve strategic goals by looking at internal info e.g. reports and employee surveys

Weaknesses (internal) = - internal characteristics which restricts org ability to achieve e.g. financial reports and employee surveys

Opportunities (external) = external characteristics of environment that MAY help org achieve strategic goals e.g. competitor analysis and customer surveys

Threats (external) = external characteristics which may hinder org. from achieving goals e.g. competitor analysis and customer surveys

Question 5

What does Porter’s Five Forces help to do?

Answer 5

Helps org. determine overall attractiveness of industry such as financial, healthcare or food industries

Question 6

What are the 5 Porter’s Forces?

Answer 6

1. Threat of potential to new entrants = economies of scale required by other org. that may wish to compete in industry
2. Threat of substitute products
3. Bargaining power of buyers = Corp. customers typically have greater bargaining power
4. Bargaining power of sellers = Availability of substitute suppliers
5. Firm’s rivalry vs Industry competitors = forces combine to create comp. within industry

Question 7

What are the 3 levels of strategy revision?

Answer 7

1. Corporate Level
2. Business Level
3. Functional Level

Question 8

What is the Corporate Level Strategy revision?

Answer 8

Looking at the attractiveness of the industry then work out how they can best grow business

Question 9

What is the Business level Strategy revision?

Answer 9

‘How do we compete?’ = related to different business units or product lines
- Business needs a competitive advantage

Question 10

What is Functional Level Strategy Revision?

Answer 10

‘How do we best support each of our business strategies?’
–> functional areas xof business such as Research and development, marketing, human resource use

Question 11

What is Sustainability as a Strategy as a process of strategy formation?

Answer 11

• Today’s values revolves around sustainability
• Environmental, social and governance (ESG) metrics used to measure how ethical and sustainable a company is

Question 12

Why is ESG required?

Answer 12

• Safeguard brand + mitigate risks
• Purpose-driveness provides a competitive advantage
• Market for sustainable goods is increasing
• Cooperative action can influence change
• Tax advantages