Slides in this set
What is strategy?
A business strategy is the means by which a
business sets out to achieve its desired objectives. It
can be described as the long-term plan of a
business. Typically a business strategy will cover a
period of the next 35 years and look to set out the
overall direction of the business.…read more
The main types of generic strategies that a business may use are:
(1) Market dominance through internal growth (e.g. expanding assets)
and in developing new products, and acquisitions (mergers and
(2) Globalisation i.e. moving operations into more and more countries.
For example, Whole Foods entering the UK market.
(3) Retrenchment involves cutting back to focus on your best lines. The
Americans refer to this as `sticking to the knitting'.
(4) Restructuring: a complete rethink of the way the business is
organised using a range of techniques such as delayering (which involves
flattening the management structure, removing bureaucracy and speeding
up decision making).…read more
Competitive strategies are concerned with doing things better than rivals.
There are two main ways of being competitive:
(1) Cost leadership: selling goods at lower prices than rivals. This is possible
when a firm is the market leader and benefits from economies of scale.
(2) Differentiation: making your product different from competitors enables
you to charge a higher price if desired.
For example, the airline industry is divided into two main segments. At one end
of the market are the premium price firms such as Virgin and Emirates that
concentrate on differentiation. They offer better service to passengers, more
legroom and better in-flight entertainment. At the other end of the market the
emphasis is on being the lowest-cost producer, exemplified by `no frills' airlines
such as easyJet and Ryanair. Ryanair focuses on short-haul destinations and
keeping its planes in the air as frequently as possible in a 24 hour period.…read more
Porter's generic model
Porter argued that there are two major strategies a business should focus
(1) Cost leadership: be the cheapest and most cost-effective product.
(2) Product differentiation: your product is the most innovative and
different on the market. This attracts customers and generates large
Porter argued that the big danger is that a firm is both moderate in terms
of cost and moderately differentiated -- this attracts few customers to the
product. It is better for the business to focus on one of the two strategies.…read more