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Unit 8 -- Choosing strategic direction - Coggle Diagram
Unit 8 -- Choosing strategic direction
Direction and choice
Strategic choice
This is the process of deciding which dirrection a business should move and how it is going to do it.
Strategic direction
This refers to the decisions made regarding the markets which a business competes in and the products its offers.
Ansoff matric
https://docs.google.com/drawings/d/1KUpDWgJj5vRp07RCF6parqiEF7DyPdaieGuYfco_hEo/edit
This offers a simple framework to analyse the options available to a business.
It is hard to catorgrise what new markets and products are, if Apple were to release a new Iphone that could be seen as a new product and not a new product.
Options don't lie soley in one box and can cross over into over boxes.
If a supermarket where to buy a farm this would be diversifaction, but it is not completly alien so would be up near the product development box.
Businesses can have several stratergies on the go at once, this could mean trying to expand sales, while also launching new products into China.
Selecting a strategy
When selecting a strategy a business will consider many factors such as:
Expected cost
Expected return
Opportunity cost
Risk
How it fits with the business' resources
Impact on other stakeholders
Ethical issues involved
Strategic postioning
A business needs to consider not just where in the market they will compete, but also how they will compete in the market. These are long term and high risk strategies, that determine the survial of a business
If a business offers the wrong products or competes in the worng market it will be very hard for the business to survive.
Porter's strategies
This is based on the idea that a succesful business strategy relies on the business being different from its competitors.
Porter developed 2 approaches for a business
Cost leadership
This means that the business becomes the lowest cost business in the industry, this can be achieved by:
Lower input costs
Economies of scale
Expereience
Product/process design
Cost leadership enables a business to either charge the same prices and have a higher profit margin or for the business to cut prices and increase sales.
Differenation
This is where a business aims to make their products unique to that of their competitors.
This would enable them to charge a premiuim price for their products.
Porter believed that both strategies could be aimed at either the market as a whole, or just a small section (focus strategy).
This is described as the business' competive scope.
Broad scope = market as a whole
Narrow scope = focues on a market niche
Porter argued a business should focus on the scope and the strategy deployed and not get stuck in the middle.
Some analysts disagree on the idea that you can't be low cost and have a differentiated product.
Bowman's clock
This aims to plot the position a business is in on a clock from this a business can analyse its current strategic position and where it wants to go in the future.
Not all combinations are competive and what combinations are competive will vary for each business/market.
https://docs.google.com/drawings/d/1Lk-Nm9H9HzDNyhShAwXMFqGR1acvSGRzIdYi-J_fSPg/edit
Unlike Porter, Bowman's clock
Focuses on price to customer rather then cost to organistation.
Highlights a full range of options, whereas Porter's strategies offers a few options.
Infleunces on strategic positioning
Where the competitors are positioned.
The external envrioment.
The strenghs and ccompetences of the business.
Strategic postioning is not fixed and changes over time, this is becuase markers and consumer preferences change.
Strategic positioning is very important as a business needs to make sure it delivers the right products to the right markets.
Sustianable competitive advantage
Competive advantage occurs when a business provides a benefit for the customers that is both greater nthen the cost in supplying the benefit and superioir to competitors.
This advantage becomes sustiable when it can be maintained overtime.
Competive advantage can be protected through:
Legal protection (patents and copyrights).
Control over resources.
Mainting a particular business culture.
This is something that has to be nurtured and created, unlike the others it is very hard to buy a culture. When a business buys another business with a good culture they are partly buying the culture, however they must sucesfully intergrate the culture into themselves.
Competive advantge can be gained through
Innovation
Architecture -- relationship between suppliers and the business
Reputation