In order for an organisation to make strategic decisions, it must first analyse it's mission and vision.
Vision & Mission -
There are 4 main factors that could influence organisational purpose..
- Corporate Governance (the way a business is run and it's structure of decision making)
- Business ethics
- Cultural context
The business environment -
The 5 forces model of competition..
This model helps a firm choose an appropriate strategy to enhance its competitive opportunities and to protect itself from competitive threats.The 5 forces include..
- The bargaining power of suppliers
- The bargaining power of buyers
- The threat of potential new entrants
- The threat of substitues
- The extent of competitive rivalry
The limitations of the 5 forces model..
- Takes a static view of the business environment, when in actual fact it is everchanging
- Fails to take sufficient account of the microenvironment of the organisation and its HR
Theories of strategic choice fall into 2 main categories..
- Market based theories..
Understanding and identifying ways to deal with the competitive environement, will determine whether a firm is successful or not.
- Resource based theory..
This looks at how strategic decision making is affected by the ownership, control and use of an organisations resources.
Environment or market-based strategy -
There are 3 fundemetal strategies that a business might adopt..
- Cost leadership - (i.e. - low cost leader)
- Differentiation - (i.e. - emphasise and promote unique products)
- Focus strategy - (i.e. - focus on market niches)
Resource-based strategy -
This focuses on exploiting a firms internal organisation and production process in order to develop its competitive advantage. A firms distinctiveness sets it apart from rivals.
- Core competencies..
These are key skills of a business that underpin its competitve advantage.
- What defines a core competence?
A core competence must satisfy the following 4 capabilities to serve as a source of competitive advantage for the business. It must be..
- Costly to imitate
Business strategy in a global economy:
Why go global? -
The following are reasons why a firm may wish to expand beyond it's domestic market..
- Scope for significant cost reductions (i.e - learning by doing)
- Using core competencies
- Spreading risk (diversification)
- Keeping up with rivals
- Location economies
- Market size
- Increased profitability