‘I have the simple but strong belief: how you gather, manage and use information will determine whether you win or lose.’ Bill Gates Thought for the day:

RECAP "It's deja vu all over again“ Yogi Berra

RECAP: CPA.

Business Strategy HL Key Outcomes Understand the meaning of business strategy and strategic management Discuss the three key elements of the strategic framework - strategic analysis, strategic choice and strategic implementation Recommend and evaluate business strategies in a variety of business contexts

Starter: SETTING THE SCENE Pg 393

What is a business strategy?.. The plan that directs the activities of the business over a long period of time

What is Business Strategy? A strategy is a plan for getting from where the organisation is now to where it wants to be in the future. A successful business will have a vision or an ultimate goal. Its corporate strategy will be a clear plan and set of policies that should push it towards achieving its vision.

What is Business Strategy? Business strategy is essentially a plan, based on an assessment of the organisation's current position and the external environment, containing key business objectives and the decisions needed to achieve these. So business strategy: Asks the big questions, such as "Which markets and products do we want to be in?"; and Makes the big decisions, such as "Expanding manufacturing operations into retailing too". Business organisations need a corporate strategy to provide integration, direction and focus. Play: (13mins) Very helpful for your ~IAhttp://

KEY WORDS: Business Strategy A long-term plan of action for the whole organisation, designed to meet the needs of markets and to fulfil stakeholder expectations. Strategic Management The role of management when setting long-term goals and implementing cross-functional decisions that should enable a business to reach its goals. Tactic A short-term policy or decision aimed at resolving a particular problem or meeting a specific part of the overall strategy.

Strategic Framework Elements of the strategic framework: 1. Strategic analysis 2. Strategic choice 3. Strategic implementation Table pg 394

Strategic Framework 1. Strategic Analysis Assessing the current position of the company in relation to its market, competitors and the external environment. Important because: Decisions that do not start from the knowledge of 'where the business is now' may be inappropriate and ineffective.

Stage 1: Strategic analysis—where is the business now? Deciding where the business is now involves an analysis of its internal and external situation. This analysis will dictate the nature of future strategy. The opportunities and threats faced will vary according to the nature of the business. An analysis of the present market and the firm’s competitive situation will influence the aims, objectives and core principles. The starting point for this analysis will probably be through the use of a SWOT and PEST analysis (topics 1.5, 1.6). Questions to be considered may include the following. Is the business new or established? (Topic 1.2) Who are the stakeholders? (Topic 1.4) Is the business in the profit or not-for-profit sector? Types of organization (Topic 1.2) What are the objectives of the organization? (Topic 1.3) How does the vision/mission statement reflect what the organization is doing now and where it is heading? (Topic 1.3) What are the attitudes of the business to risk? (Topics 1.3, 2.4, 2.6) What is the firm’s present financial situation, and is it conducive to change? (Topics 1.8, 3.5) Financial analysis and ratio analysis (Topics 3.5, 3.6) Is the present product portfolio adequate and appropriate? Boston matrix (Topic 4.3) What are the resources available to the business? (Topic 1.1) What are the competitive forces facing the business in the market? Porter’s five forces market analysis (Topic 4.2) Should the organization enter international markets? (Topic 4.7)

Strategic Framework 2. Strategic Choice Setting the company's mission, vision and objectives - these may be new if the business is undergoing a significant change of direction. Taking important long-term decisions that will push the business towards the objectives set. Important because: Organisational Objectives (1.3) examined the importance of having clear and well-defined aims and objectives to provide a clear sense of overall direction to the work of the whole organisation. A new direction for a business will require key decisions to be taken about products and markets.

Stage 2: Strategic choice—where is the business aiming to be? Once the business has identified its position in the market, it needs to consider its objectives in the short, medium and long term. To achieve this, the business must examine market opportunities and threats, and then plan for the future. Questions to be considered may include the following. Why are business plans important? (Topic 1.6) How are markets developing? Sales forecasting (Topic 4.2) Which new market opportunities are available? Market research (Topic 4.2) What are the future directions available to the firm? (Topic 1.7) When is expansion desirable and achievable? Small versus large organizations (Topic 1.7) Cash-flow forecasts (Topic 3.3) Gearing (Topic 3.6) Sources of finance (Topic 3.1) Human resource planning (Topic 2.1) How can the core competencies of the business be developed? Potential growth strategies—such as Ansoff’s matrix (Topic 1.7) Investment appraisal (Topic 3.2) What are competitors doing, and how can their offer be matched or improved upon? Benchmarking (Topic 5.4) How do the processes of decision-making help to direct the business? Scientific and formal decision-making (Topic 1.6) Decision trees (Topic 1.6) Force field analysis (Topic 1.8) What are the measures of success? Return on capital employed (Topic 3.6) Market share (Topic 4.1) Motivation and productivity (Topic 2.5)

Strategic Framework 3. Strategic Implementation Integrating and coordinating the activities of the different functional areas. Allocating sufficient resources to put decisions into effect. Evaluating success - evaluating the overall performance of the business and its progress towards objectives. Important because: As strategic decisions are cross-functional, departments must work together to implement them successfully. So a decision to enter a new geographical market will need input from finance, marketing, HR and operations management. Changing strategy is rarely 'cheap' and resources must be provided at the right time and in sufficient quantities to allow the new policies to work. The outcome of the strategy should be measured against the original objectives set for it. Lessons can be learnt from both 'failed' and 'successful' strategies.

Stage 3: Strategic implementation—how is the business going to achieve its objectives? Having decided on the future direction of the business, its mission, aims and objectives, how will the business put its strategies into operation? Questions to be considered may include the following. How can the firm develop competitive advantage? Porter’s generic strategies (Topic 1.7) Which new products and/or services should be developed? (Topic 4.3) Which new technologies could be applied? (Topics 1.6, 2.3, 4.3) How can differentiation be achieved? (Topic 4) How should the business plan for changes in the size and nature of business operations? Workforce planning (Topic 2.1) Recruitment and training (Topic 2.1) Developing flexible working patterns (Topic 2.1) Homeworking (Topic 2.1) Investment appraisal (Topic 3.2)

Stage 3: Strategic implementation—how is the business going to achieve its objectives? Continue…. What is the appropriate scale of operation? Economies and diseconomies of scale (Topic 1.7) Which growth methods can and should be selected? Internal/organic growth (Topic 1.7) External growth: mergers and acquisitions (Topic 1.7) Globalization of sales, manufacturing and operations (Topic 1.9) Which marketing strategies can be implemented? Market leadership and market penetration pricing (Topic 4.4) Segmentation, targeting and positioning (Topic 4.2) Distribution chain management (Topic 4.6) E-commerce (Topic 4.8) What is the appropriate organizational structure? Flattening hierarchies (Topic 2.2) Decentralization (Topic 2.2) Flexible organization structures such as Handy’s shamrock (Topic 2.1) What is the appropriate management and leadership style? (Topic 2.4) How should the firm incorporate social responsibility and ethical approaches? (Topic 1.3) How can change be managed effectively? Developing a change culture (Topic 1.8) Contingency planning and crisis management (Topic 2.8)

Strategic Framework Strategy hierarchy Strategic management is the highest level of managerial activity. It is undertaken by, or at least closely supervised by, the CEO and approved by the board of directors. In most large organisations there are several layers of management. Under the broad corporate strategy role of the senior directors there are, typically, business unit competitive strategies and functional department strategies. These must be coordinated with the overall corporate strategy to increase the chance of achieving the organisation's long- term aims.

Strategic Framework Strategy hierarchy table 38.2 pg 395

Strategic decisions: result in changes to long-term plans, involve many resources and are difficult to reverse. Tactical decisions: involve meeting short term targets, require fewer resources to implement and may be easy to reverse.

Strategy Hierarchy Strategic decisions e.g. develop new markets abroad Long term Difficult to reverse once made - departments will have committed resources to it Taken by directors and/or senior managers Cross-functional - will involve all major departments of the business Tactical decisions e.g. sell products in different packaging Short to medium term Reversible, but there may still be significant costs involved Taken by less senior managers and subordinates with delegated authority Impact of tactical decisions is often only on one department

Strategic or tactical decisions?.... Long-term consequences for the business Usually short-term consequences Taken by middle management Often taken within one department Usually have implications for all departments of the business Taken at senior management level Can be reversed if unsuccessful Difficult to reverse Often involve considerable investment of resources Fewer resources need to be committed to putting these decisions into effect. Activity: Split into Strategic or tactical decisions

Strategic or tactical decisions?.... Strategic decisions Long-term consequences for the business Usually have implications for all departments of the business Taken at senior management level Difficult to reverse Often involve considerable investment of resources Tactical decisions Usually short-term consequences Often taken within one department Taken by middle management Can be reversed if unsuccessful Fewer resources need to be committed to putting these decisions into effect. Were you correct?

Activity Give two examples of strategic decisions and two examples of tactical decisions that a high- street banking business could take to increase numbers of customers holding current accounts.  In Pairs  Link to key words  Justify why your answer

Strategic Framework Strategy Analysis Pg 395 (read and note) Process 1 – 7 pg 396

Porter's Generic Strategies (5mins) Business strategy and competitive advantage pg 396 Core competencies pg 397

Strategic Choice Evaluating and choosing between strategic options Need: Access detailed information Investment appraisals, breakeven levels, ROCE (consider is forecasted information) Computerised simulations Read: pg 399

Corporate Plans A methodical plan containing details of the organisation’s cventral objectives and stratgies to be followed to achieve them. What will it include? (1 – 3) pg 399 Benefits and limitations to a plan pg 400 The main influences pg 400

Strategic Implementation The process of allocating and controlling resources to support the chosen strategy When a strategy has been decided on: Translate to action Organise resources Motivate people So that long term plan put into effect Monitor and review (variance) Regular and frequently updated information management. Pg 400

Activity Assume Dell Computers are considering entering the home TV market with their own branded flat-screen TVs. Outline what data about the market, competitors and the economy the management would need to analyse before taking this decision.  In groups of four  Link knowledge  Justify why your answer

Making strategic decisions... Significance of information management; the ability to process information to make a decision. The value of different approaches to decision making; (ST to LT, functional to organisational, tactical to strategic...decisions are going to be constrained by INTERNAL & EXTERNAL factors. ScientificIntuitive Marketing model Decision trees

[1] Scientific approach to decision making... ScientificIntuitive Marketing model Decision trees 1 Set objectives 2 Gather data3 Analyse data 4 Select a strategy/make a decision 5 Implement and review the decision Logical & research- based approach to decision making

Different approaches to decision- making Scientific decision-making – data analysis, choice & implementation. An attempt to make logical decisions on the basis of data that is analysed and tested. Alternative: ‘hunch’ experience and intuition

[2] Intuitive approach...  Based on a HUNCH...a feeling/ instinct  Most likely to be used by small business  To be appropriate; individual must have expertise & experience  May lead to more creative & innovative decision making.  HOWEVER.... ScientificIntuitive Marketing model Decision trees

Factors to consider between scientific & hunch-based decision making.... Speed of decisionInformation availableSize of businessPredictability of the situationCharacter of the person/culture of the company The marketing model = SCIENTIFIC APPROACH to decision making REMEMBER THE OTHER DECISION MAKING TOOLS.... Ansoffs Porters Decision trees

[3] The Marketing Model 2 Market information & analysis 3 Alternatives & choices 4 Planning the marketing mix 5 Control & review 1 Objectives Market research Forecasting Draft market plans Budgetary control What are the constraints at the different stages? ScientificIntuitive Marketing model Decision trees

Examples of models used in decision making

[4] Decision Trees ScientificIntuitive Marketing model Decision trees Visual approach to decision making Maps out the different options available Possible outcomes are listed which decisions have to be made  Most effective when...  What must be considered is....  Advantages & disadvantages of this tool are...  However I recommend that.... Remember:  = decisions  = uncertain outcomes

The main influences on corporate decision-making Corporate objectives Ethical position Resources available Relative power of stakeholder groups.

The main influences on corporate decision-making Senior management (power day-to-day running) Owners Employees Customers Suppliers The community and governmnet Envrionmnetal groups

Resources Political environment Economic environment Ethics Social environment The law Corporate Decision making Influences on corporate decision making

Influences on corporate decision making : Very similar to SWOT factors (think both internal & external...) Consider...  Ethical position  Resources available  Power of stakeholders

The quality of decisions If the right decisions are made the business will benefit. The quality of decisions depends on a number of factors: Training Quality and quantity information Ability to use decisions making techniques Risk Human element

Where/How could you find this information…

Plenary Level achieved_____ What do you now know as a result of today’s lesson? What are your areas for improvement? What are you going to do about this?