Business Strategy and Business Planning

Objectives Examples may include the following: Profit Maximisation Survival Market Growth Corporate Image Environmental Social considerations Employee welfare

Profit Maximisation Growth in revenues Growth in earnings Higher dividends Higher profit margins Higher earnings per share Improved cash flow

Survival Maintaining market share Making sufficient money to cover liabilities and keep the business operating Able to convince shareholders that actions taken are necessary and appropriate Content employees Content stakeholders

Market Growth Increase in the market share Establishing a customer base Extending brand loyalty Quicker production times than rivals Wider global coverage than rivals Better product quality than rivals Competing with rival costs Quicker delivery times than rivals

Corporate Image Creating value for shareholders Commitment to business partners Engaging with the community eg sponsorship, school visits etc Satisfied customers Reputation for reliability Stability

Environmental Caring for the environment through careful monitoring of business activities in relation to: –Waste disposal –Recycling –Targets for emissions –Renewable energy –Code of practice

Decision Making using Objectives Objectives Define problem Collect data Analyse the problem and identify constraints Formulate alternative solutions Evaluate alternatives Choose the best solution Implement Monitor and evaluate

SWOT Analysis INTERNAL Strengths facing a business Weaknesses facing a business EXTERNAL Opportunities facing a business Threats and challenges facing a business

SWOT Diagram Strengths Opportunities Results of internal audits Results of external audits

PESTEL A systematic way of looking at the factors which impact on a: Political Economic Social Technological Environmental Legal

PESTEL contd. A systematic way of looking at the factors which impact on a business: Political - local, regional, nationally, internationally Economic -fiscal, interest rates, inflation Social - population, flexible work practices etc. Technological - developments Environmental -global warming, public opinion on environmental issues Legal -new and existing legislation

Decision Making Models Ansoff’s Matrix is a decision-making tool used by management to analyse a firm’s potential for growth Boston Matrix is a decision-making tool for firms who have to manage a product of portfolio

Ansoff Matrix Existing PRODUCTS Market Penetration Product development Market development Diversification MARKETSMARKETS New Increasing risk New

Ansoff Matrix Market Penetration Market existing products to existing customers. Increasing the revenue by promoting the product, repositioning the brand, finding new customers, taking customers form competitors etc The product is not altered and no new customers are sought. Market Development Market the existing product range in a new market. The product remains the same, but it is marketed to a new audience eg exported. Product Development Changing an existing product and developing a new one. Diversification Develop a new product.

Benefits of using Ansoff’s Matrix as a decision-making tool Ansoff’s Matrix can be used as part of a marketing audit It is a useful tool for management to help analyse the strategic position of the firm and set objectives for the way forward The Matrix sub-divides the options into four specific strategies that management could consider for long term growth It indicates the level of risk associated with each strategy thus encouraging management to focus carefully on the impact of any decision made

Limitations of using Ansoff’s Matrix as a decision-making tool Ansoff’s Matrix is often criticised for being too simplistic as it doesn’t taken into consideration the external environment Its main focus tends to be market potential rather then the resources required by the firm to support its chosen strategy The Matrix outlines strategies for growth so its usefulness will be very limited to a firm whose objective is survival There is no guarantee of success even if a firm follows a particular strategy Any decision taken regarding a particular strategy is still subjective therefore increasing the risk of bias by management personnel Information relating to future growth will be based on forecasts regardless of which strategy the firm chooses and this is a further risk Ansoff’s Matrix only tells part of a story so it is necessary for other decision-making tools to be used in conjunction with it so an informed decision can be made by management

Boston Matrix High Low High Low Market growth % Market share C B A D Cash cow Problem child Star Dogs High Low HighLow

Looks at market share and how fast that share is growing in terms of relative market share, market growth and its position on the grid relative to other products Gain perspective from this analysis that allows you to plan with confidence to use money generated by cash cows to fund stars and possibly question marks Boston Matrix

Benefits of using Boston Matrix as a decision-making tool The Boston Matrix is beneficial to firms who are trying to manage a product portfolio as management have to create a balance between the number of products in each quadrant of the matrix By positioning each product on a grid management can make decisions about the products at each stage depending on whether the product attracts high or low market share or growth rate The Matrix assists management in identifying the most appropriate time for launching new products onto the market The information provided by the Boston Matrix can indicate the likely cash flow position of each product within the context of its market

Guide to Developing Strategies 1. Planning Gathering information Analysing information Forecasting Course of action 2. Processing Responding to the environment Power of suppliers Power of buyers

Limitations of using the Boston Matrix as a decision-making tool Critics suggest that the Boston Matrix analysis is too simplistic as it does not consider the influence of the external environment on the business Decisions based on cash flow forecasts can be risky for the business particularly as consumers are quite fickle and are likely to respond if a competitor offers a better product Even if management do use the Boston Matrix to help manage their portfolio of products there is no guarantee of success The Boston Matrix should be used in conjunction with other decision-making tools to reduce the risk

Types of Strategies 1.Cost leadership 2.Differentiation focus 3.Cost focus 4.Differentiation

Implementing Strategies Generation of a Statement of Intent Identification of Strategic Thrusts & Critical Success Factors Sequencing and Action Plans- Including Communication

Objective versus Subjective e.g. Increase sales by 24% e.g. business values

Issues related to developing and implementing strategies It is essential for management to consider the following factors: Creating a culture for change The extent of market research carried out The quality of the data collected The ability of the management team to analyse the data Converting the data into SMART targets The level of resistance from staff Choosing appropriate motivation strategies Procedures for monitoring progress Review of chosen strategy