Chapter 7: Developing a Business Strategy
What is the concept of the business strategy?
The concept of the business strategy is to allow the business to grow and make profit using 2 main
principles stacka to the left,
1. Create a strategic plan
2. Effectively execute the plan so that the business is successful
What is the strategy made simple?
Asking 2 questions
• Where do we want to play?
• How do we plan to win?
What are the core elements of assessing a business strategy?
3. Product and services
5. Business system configuration
6. Responsibility and accountability
Purpose is the mission of the organization and vision of the owners/managers have for the business.
• Mission statement explains broad goals of the business and how they plan to get there.
• Vision statement is what the business wants to become and where it is going.
Markets are the specific market or market segments in which businesses see itself competing in. This is
important because it allows for future profitability and growth potential
Explain product and services.
Product and services is the review of current product and services the business offers as well as new
products that are going to be made available.
Products become obsolete because of new technology and customer wants changes .. managers must
change or decide which products to keep in business portfolio.
Explain Resources. Resources is the allocation of the business’s resources to support its strategic decisions. (i.e closing down
Explain business system configuration.
This is the change in the business infrastructure and the way it does business to ensure success of plan.
This could mean changing, distribution, plants and factories, and marketing campaigns.
(ie. Avon adding an ecommerce website for sales of products)
Explain responsibility and accountability.
This identifies who is responsible for each aspect of the strategic plan.
SMAC (specific, measureable, actionable and controllable)
What is the strategic planning process?
Steps of strategic planning process:
1. Revisit our purpose: who we are and where do we want to go
2. I/E analysis of environment: Threats and opportunities available
3. View of our world: What are our choices? What is our competitive advantage?
4. Choose a direction: Where will we play
5. Implement strategy: How we will win
Explain I/E analysis (4 main parts)
• There are 4 key parts of I/E analysis:
o Macroeconomics: PESTEL
o Industry: PORTER’S 5 FORCES
o Competitors: SWOT
o Company: 3CS
• External analysis involves what influences markets today, main business models to use for this
analysis are PESTEL, Porter 5 forces, 3 c’s, SWOT, types of competition. • Internal Analysis focuses on company competencies, resources, capacity and capabilities and
should include a full internal audit
• Businesses need to anticipate and react quickly to changes by competitors
• Customer analysis is identifying what changes in customer base have occurred based on attitudes,
behaviours, and needs.
PESTEL: political, economical, social, technological, environmental, legal
Porters 5 forces:
• Intensity of rivalry
• Threats to new entreats
• Threats to new products
• Power of supplies
• Power of buyers
Types of competition: perfect competition, monopolistic competition, oligopoloy, monopoly
SWOT: Strength, weakness, opportunity, threats
3C Analysis: competencies, capabilities and capacity
Explain competitive advantage identification (2 types)+ (4 Areas)
• Competitive advantage is providing goods/services of more value compared to other goods and
services provided by competitors.
• Why customers choose your product over others.
• Strategic competitive advantage is how the company changes the game in the market
• Operational competitive advantage is being for effective and efficient by being for responsive to
• Q ICE
Explain Strategy development
• Corporatelevel strategy
o What the business plans to accomplish
o Big picture
• Businesslevel strategy
o How to accomplish corporate level strategy
o How to compete in market sectors
• Operating plan o Specific tactics to ensure the business strategy is achieved
Explain Strategy execution.
This is where the business changes from what they want to achieve to actually achieving it. The company
takes on “directional lockin” role which is the financial and operational commitment to the strategy that
Key requirement: managers to constantly monitor success of strategy and try to fix anything it things
What are the challenges in SME ?
SME owners tend to have to take in all the roles that a large company would have different sectors for.
They do not have time to make strategies and when they do its only for current year profits. They might
not have the resources or expertise to create a proper strategy. As well as many owners may copy other
businesses strategies and fail.
How to plan strategically for NFP sector?
For profit = maximizing profit on behalf of business owners/ shareholders.
NFP = based of social goals of a segment of society, and actions are assessed by collective group
(government, membership base) No revenue
1. Mission balance: social mission and goals are met
2. Vitality: maintain vitality of organization through growth of membership
3. Collective entrepreneurship: ensures involvement of community where it is located
4. Rootedness: strengthening partnerships and NFP networks
5. Operational effectiveness: service provided are priced at levels so it accessible for social audience Chapter 8: Organizing
What is organization architecture? POOCI
Organization architecture is the totality of the firm’s organization. (Organization structure, control
systems, people, and incentive systems, organizational culture)
• Organization structure
o location of decisions making responsibilities in firm
o division of firm into subunits
o establishment of mechanisms to coordinating the activities of subunits
o Metrics used to measure performance of subunits
o Devices used to encourage employee behaviour
• Organizational culture
o Values and assumptions that are shared among employees and organization
o Strategy to recruit, compensate, motivate individuals
What is Designing Structure: VERTICAL DIFFERENTIATION
Vertical differentiation: location of decisionmaking responsibilities in firm
Horizontal differentiation: division of organization into subunits
Integrating mechanisms: the mechanisms used to coordinate subunits
What is the difference between centralization and decentralization?
Centralization: decisionmaking at high level in management hierarchy
Decentralization: decisionmaking at low level management hierarchy
What are 4 main arguments of centralization?
1. Can facilitate coordination
2. Consistent decisions with organizations objectives
3. No duplication of activities
4. One person can make major organizational changes
What are the 5 main arguments of decentralization?
1. Gives top management time to focus on critical issues and give routine issues to lower level
2. Allows for employee empowerment
3. Greater flexibility
4. Better decisions
5. Increase control
• Autonomous subunit: a unit that has all resources to run operations daily
What is the difference between tall and flat hierarchies?
• Tall has many layers of management while flat as a few.
• As organizations get larger they become taller. What is span of control?
The number of direct reports and manager has
What are problems in tall hierarchies?
1. Accidental distortion (telephone)
2. Deliberate distortion (greed)
How to reduce the size of a hierarchy?
Because of problems firms try to limit layers to boost performance
Ex. Jack Welch’s GE when he laid off workers and reduce from a 9 layer to 5 layer.
What is Designing Structure: HORIZONTAL DIFFERENTIATION
4 main types of structures: FMGM
What is the functional structure?
• This follows the obvious division of labour within the firm, different functions focusing on
• Overseen by CEO or top manager
• Subdivided into subunits
• Lack of accountability, which can lead to poor control
What is the multidivisional structure?
• Divided into different product divisions and each is responsible for its distinct business area.
• Selfcontained, autonomous entity.
• Usually left alone as long as they hit targets
• Focus on efficiency
What is the geographic structure?
• Subunits are organized by geographic areas (regions in a country)