Topic 6 - Business Strategy Flashcards
Business Strategy
the way in which a firm addresses its fundamental challenges over the medium to long-term
The type of strategy which is appropriate for business depends
on the context which the strategy is being developed
five Ps
Plan, Ploy, Pattern, Position and Perspective
Corporate governance
The way in which firms are run and the structure of the decision making
Five Forces Model of Competition
- bargaining power of suppliers
- bargaining power of buyers
- threat of potential new entrants
- threat of substitutes
- extent of competitive rivalry
Constraints on Growth
- Financial conditions
- Shareholder confidence
- Demand conditions
- Managerial conditions
Internal growth
Horizontal - differentiation
Vertical - different products same production process
Conglomerate - diversification with new products
External expansion
Strategic alliances - informal networks
Mergers and Acquisitions
Reasons for vertical integration
Greater efficiency - EOS
Monopoly power
Barriers to entry
Research and development
Three factors encourage firms to diversify
– Stability: Diversification spreads the risk.
– Maintaining profitability: If markets are saturated the firm may need to make alternative products.
– Growth: If the market is dying then diversifying may be the only opportunity for the firm.
What hinders the success of small businesses?
- Selling and marketing
- Funding R&D
- Management skills
- Economies of scale
Why do Firm’s Go Global?
- Market size:
- Increased profitability
- Spreading the risk:
- Keeping up with rivals
