MGM101 Chapter 7 – Developing a business strategy
The long-term success of an organization, and its ability to evolve and grow, is predicated on two
1. the ability to define and create a strategic direction and market position for the organization
(strategic plan); and
2. the ability to execute the core tactical initiatives within the plan in a manner that ensures the
Business growth and profitability:
1. Well directed and positioned strategy
2. Efficient effective tactics execution
For business managers, the development of a business strategy means making decisions and
determining direction in six key areas (see Figure 6.3):
3. Products and services
5. Business system configuration
6. Responsibility and accountability
Mission defines an organization’s purpose or reason for existence.
Vision is a forward-thinking statement that defines what a company wants to become and where
it is going.
Harvesting is a strategy that reflects a reduced commitment to a particular market given its
perceived weak future growth or profitability potential.
A general overview of the steps associated with the development of a strategic plan (see Figure
•Revisit our purpose: Who are we and where do we want to go?
•Undertake an I/E (internal/external) analysis to understand our environment: What changes or
shifts are occurring that threaten us or that provide us with opportunities?
•Assess our view of our world: Based on what we know, what are our choices?
•Choose a direction: Given our capabilities, competencies, competitive advantages, and
resources, which strategic choices should we pursue (where will we play)? What threats must we
•Implement our strategy: How do we develop the strategic thrusts and tactics to achieve our
objectives and successfully execute the plan (how we will win)?
SWOT stands for strengths, weaknesses, opportunities, and threats.
Pestel: Guides us in developing an understanding of the macro-economic environment—
political, economic, societal, technological, environmental, legal Porters five forces:
Guides us in understanding the dynamics of the industry within which we compete— Porter’s
five forces are:
• Intensity of rivalry within the industry
• Threat of new entrants into the industry
• Threat of new product/service substitutes within the industry
• Power or control of suppliers within the industry
• Power or control of buyers within the industry
Types of competition:
Guides us in understanding the nature of the industry’s competitive landscape:
• Perfect competition
• Monopolistic competition
Strengths, weaknesses, opportunities, threats Competitive SWOT to size up competition
Company SWOT to define company strengths, weaknesses, opportunities, and threats
An assessment of our competencies, capabilities, and capacity with respect to the resources that
Corporate-Level Strategy: defines what the organization intends to accomplish and where it
plans to compete.
Business-Level Strategy: outlines specific objectives the organization hopes to achieve for each
of its identified business initiatives and/or business units.
Operating Plan is a detailed, immediate-term set of objectives and corresponding tactics designed
to achieve a specific business initiative.
Key components of the operating plan development process include:
a) Specifics as to how to compete (for each business initiative or business unit)
b) Identification of the key revenue drivers and an assessment of the total potential revenue
forecasts the business can expect from a particular initiative
c) Identification of the upfront and ongoing cost commitments necessary to develop the market
opportunity that the business has decided to focus on.