1. P3 Business Analysis

2. 2 Section B: Strategic Choices B1. The influence of corporate strategy on an organisation B2. Alternative approaches to achieving competitive advantage B3. Alternative directions and methods of development Designed to give you the knowledge and application of:

3. 3  Generic development directions (employing an adapted Ansoff matrix and a TOWS matrix) available to an organisation.  Internal development, mergers, acquisitions and strategic alliances can be used as different methods of pursuing a chosen strategic direction.  Success criteria to assist in the choice of a strategic direction and method (strategic options).  Suitability of different strategic options to an organisation.  Feasibility of different strategic options to an organisation.  Acceptability of strategic options to an organisation through analysing risk and return on investment. B3: Alternative directions and methods of development Learning Outcomes

4. 4 Motives that determine the type of strategy chosen Strategy = Setting direction +Choosing method MOTIVESMOTIVES Environment based How do we react to changes in the external environment? Capability based How can we use our competencies and resources to gain maximum advantage? Expectation based What must we do to meet stakeholders expectations?

5. 5 TOWS Matrix Strengths (S)Weaknesses (W) Opportunities (O) SO: “ generate options that have the strengths to take advantage of opportunities ” WO: “ generate options that take advantage of opportunities to overcome weaknesses ” Threats (T) ST: “ generate options that use strengths to avoid threats ” SW: “ generate options that minimise weaknesses and avoid threats ”  SWOT analysis used to determine organisation’s current strategic position  TOWS matrix used to help identify strategies that will help organisations: capitalise on their strengths and opportunities guard against their weakness and threats

6. 6 Methods of pursuing a chosen strategic direction strategies are developed by developing an organisation’s own capabilities A formal agreement between two or more organisations to undertake a new venture together  quick way to access new products / areas  advantages of economies of scale Internal development Joint developmentAcquisitions Consortia Joint Venture Franchising Strategic alliance Licensing Purchasing the right to exploit a business brand in return for a capital sum and a share of the profits or turnover Two or more firms working together to share the costs and benefits of a business opportunity Right to exploit an invention or resource in return for a share of the proceeds

7. 7 Internal development: strategies are developed by building on and developing and organisation's own capabilities. Johnson, Scholes and Whittington Why develop a product internally?  Spawn new products and create further opportunities  More favourable and realistic plan: to spread costs over time for monopolists When incapable to find suitable acquisition targets  Avoids teething, political and cultural problems arising from acquisition Internal development as a method of pursuing a chosen strategic direction

8. 8 Acquisitions and mergers as a method of pursuing a chosen strategic direction Acquisition: strategies are developed by taking over ownership of another organisation. Johnson, Scholes and Whittington Why merge?  Capability considerations To make up for the lack of resources Cost efficiency  Stakeholder expectations Continuing growth Achieve greater heights Boost shareholder value  Response to environmental changes Facilitates easy entry into new markets To take stock of competitive environment Deregulation  Financial motives Acquire firms with low share value Asset stripping Refer to Question 12 of Question Bank (page 11)

9. 9 Strategic alliances as a method of joint development Strategic alliances: two or more organisations share resources and activities to pursue a strategy. Johnson, Scholes and Whittington Factors influencing strategic alliances  Speed of market change  How resources will be managed  Spreading financial risk Types of strategic alliances  Joint ventures  Networks  Franchising  Sub-contracting What makes a successful strategic alliance?  Clear strategic purpose for the alliance  Operational compatibility  Defining and meeting performance expectations  Mutual trust between partners

10. 10 Development strategies  Cost leadership  Differentiation  Focus  Do nothing  Sell out / withdraw from market  Market penetration  Product development  Market development  Diversification  Internal development  Acquisition  Joint development GENERIC STRATEGIES ALTERNATIVE DIRECTIONS ALTERNATIVE METHODS DEVELOPMENT STRATEGIES What basis? How? Which direction?

11. 11 Success criteria for evaluating strategies How appropriate is this strategy to the organisation? Will this strategy help us achieve our goal? Suitability Feasibility Acceptability Will this strategy give us the rewards we require and what kind of risks will they involve?

12. 12 Recap  Generic development directions (employing an adapted Ansoff matrix and a TOWS matrix) available to an organisation.  Internal development, mergers, acquisitions and strategic alliances can be used as different methods of pursuing a chosen strategic direction.  Success criteria to assist in the choice of a strategic direction and method (strategic options).  Suitability of different strategic options to an organisation.  Feasibility of different strategic options to an organisation.  Acceptability of strategic options to an organisation through analysing risk and return on investment.

13. [training@getthroughguides.com]