Strategy acts as a means of achieving a strategic goal through the utilization of internal resources within a business. In accordance to the generic business model, the basis of a profit-making businesses goal involves the ability to produce revenue that exceeds the expenses. Therefore, the use of business strategy is imperative if a sustainable competitive advantage is to be achieved, and profit maximized.
Methods of building strategy
* Rational approach: strategy creation is a step by step rational exercise * Not 100% objective e.g. SWOT more often subjective
* Top down approach – influence of personal values, culture * Static – practice suggests something different and less rational or predictable – external environment is always in flux * Competitors might copy you
* Flexible approach: strategy involves preparing for multiple scenarios
* Creative approach: strategy is based vision rather than analysis
* Behavioural approach: strategy is the outcome of negotiations within the business
* Incremental (emergent) approach: strategy is emergent based on organisational environment * A fluid learning process in which formulation and implementation merge to produce effective and creative strategies * Managing emergent and deliberate strategy making
Two dominant views of strategy creation
THE ANALYSIS PHASE
Resource Based View
What resources does the firm have and how can they be used for its competitive advantage? Physical resources, financial resources, and human resources. The analysis should cover the relationships between the firms and their suppliers and customers. Value Chain
The value chain offers a view of the organization as a cumulative build-up of added value for the customer through the interaction between key operational activities. The key element of the value chain is not just the added value the various resources bring to the whole, but added value that derives from the linkages between them, which to gain a competitive advantage should be greater than the sum of the parts.
Collection of organisations, actors, resources and people that are involved in moving the product from the raw material stage to the end consumer
Optimising your supply chain creates new opportunities
In the fast paced world of the 21stcentury, supply chain management is a vital part of strategy
Porters 5 forces model
INTERNAL AND EXTERNAL
Dynamic capabilities are defined as ‘the firm's ability to integrate, build, and reconfigure internal and external competences to address rapidly changing environments’ - Qantas’s formation of new partnerships e.g. partnership with Emirates to accommodate for slowing demand in current region. Swot
Stakeholder – anyone who is affected by the organization or who can be affected by it
An analysis of elements of a company's product mix to determine the optimum allocation of its resources. Two most common measures used in a portfolio analysis are market growth rate and relative market share.
* Helps prioritise particular product offerings and particular markets. * Guides decisions on growth and investment.
* Combines analysis of own products and external industry/market conditions.
Porter’s Generic Strategies
Cost Leadership – Make your product as cheap as possible Price is the key feature of the CVP. Focus on internal efficiencies to lower production costs.
Differentiation – Make your product as unique as possible. Quality and distinctiveness are key features of the Customer Value Proposition. Focus on responding to customer needs.
Focus strategy – Focusing on a particular market segment or geographical area CVP focuses on the needs of your customer segment –...
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