Introduction to business strategy

Chapter-04
What is business strategy?
A business strategy is a course of action with a specification of resource to achieve some
objectives.
A business strategy is concerned with
1. Long term direction
2. The resources at its disposal
3. The environment in which it operates
4. The return it makes to its stakeholders

What are the levels of strategy?

1. Corporate level:
 Determines the corporate mission and vision and strategies
 Decision to expand, close down or

2. Strategic business unit:

 It relates to how a particular market is approached for example djuice of Grameen phone
 Bridges between functional level and corporate level

3. Functional (operational):
 To carry out the main function like operation, production, distribution, human resource
management, marketing etc.

What is strategic management?

A strategic management is a process of making decision on the scope of business’ activities, long
term direction and the allocation of resource to achieve the objective.

What are the formal approaches of strategic planning? /What are the levels of
strategic management?
1. Strategic analysis
2. Strategic choice
3. Implementation of choice
4. Review and control

Mohammad Moniruzzaman FCA, FSIB PLC

What are the emergent approaches of strategic planning?
1. Strategic analysis
2. Strategic choice and implementation
3. Review and control

This approach is flexible to changing environment. It continuously evolves over the changes.
Here the strategic choice and implementation go at the same time. If one project is failure, then
alternative emerges.

What are the stages of strategic planning?

1. Strategic analysis
2. Strategic choice
3. Implementation of choice
4. Review and control

The strategic planning carried out depends on whether the business takes a positioning-based
view or resource-based view.
 Positioning-based view: The forces in an industry, sectors and markets are the most
important factors.
 Resource-based view: The business’s strategic capabilities are the most important
factors.

What are the benefits and drawbacks of strategic management and planning?
Benefits:
1. Ensuring coherent response to market and environmental forces
2. Making the best use of scarce resources
3. Harmony of objectives between different SBUs
4. Specifying milestone for achievement of goal and monitoring progress by stage
5. Improving stakeholder’s perception of business

Drawbacks:
1) Expense in term of money and time particularly in small business
2) The danger of creating bureaucratic structure that slows down the process
3) The danger of straitjacket approach discouraging opportunism
4) Lack of goal congruence
Mohammad Moniruzzaman FCA, FSIB PLC
Analyzing general Environment:

PESTEL analysis:
1. Political factors like govt. stability, regulation, taxation
2. Economic factors inflation, recession, interest rate, globalization, productivity etc
3. Social factors culture, social mobility, social perception, education etc
4. Technological factors like R & D policy, innovation
5. Ecological factors like sustainability issues, pollution, green issues
6. Legal factors like legislation, environmental protection, consumer right protection.

What are the stages in the life cycle of a product?

Introduction:
1. Product enters into the market
2. Unit cost is high because of low production
3. The product is loss maker

Growth:
1. Sales sharply increase
2. Unit cost falls down
3. Product starts making profit

Maturity:
1. It is the longest period of the life
2. The rate of sales slows down
3. Profit is good

Decline:
1. Sales sharply falls down
2. Profit also falls down
3. Severe competition

Mohammad Moniruzzaman FCA, FSIB PLC

What is competitive (task) environment?
Task environment relates to a factor of particular relevance to the business such as competitors,
customers and suppliers of resources.

Analyzing competitive (Task) Environment:

Porter five factors analysis:
a. Bargaining power of suppliers
b. Bargaining power of customers
c. The threat of new entrant
d. The threat of substitute product
e. The rivalry among existing firms

What is value chain?

The sequence of business activities by which value is added to the product and services is value
chain.

Porter’s value chain model:

Two types of activities
Primary activities:
1. Inbound logistic
2. Operation
3. Outbound logistic
4. Marketing and sales
5. Service

Support activities:
1. Procurement
2. Technological development
3. Human resource management
4. Infrastructure facility

Mohammad Moniruzzaman FCA, FSIB PLC

What is supply chain management?
Optimizing the activities of business working together to produce the product and service is
called supply chain management.

What is BCG Matrix?

Boston Consulting Group developed a matrix to assess the product in term of potential cash
generation and cash expenditure requirements.

Market Share
High Low
High Star Question mark
Low Cash cow Dog

What is SWOT analysis? What are the purposes of such analysis?

A critical assessment of the strength weakness, opportunity and threat in relation to the external
and internal factors affecting the entity are SWOT analysis.
Here strength and weakness is internal; opportunity and threat is external.

The purpose of SWOT analysis:

1. To assist in the preparation of long term plan
2. To assess the viability of business in a new industry
3. To exploit the opportunity in a new industry

What is SWOT analysis? What aspects of business should be analyzed?

SWOT analysis:

It is a critical assessment of strength, weakness, threat and opportunity in relation to its external
or internal sources affecting the entity to achieve its objectives.

The following aspects of the business should be analyzed

1. The value chain

2. The supply chain
3. The resources and competencies using resource and position audit
4. Its product and market

Mohammad Moniruzzaman FCA, FSIB PLC

As an articled student in chartered accountancy profession make your SWOT analysis.

Internal
Strong determination
Strength Laborious
Sound educational background
Weakness Finance constraints
External
Threat of market being narrower
Threat Opportunity cost
Severe competition
Far reaching prospect
Opportunity Financial solvency
Global career

What is resource audit and position audit?

1. Resource audit: It considers how well or badly the resources of the company are
utilized.
2. Position audit: It is a part of planning process that examines the current position of the
entity.

Stakeholders mapping, power and interest:

Power is the means by which the stakeholder can influence the objectives.

Sources of power
Internal source External Source
Hierarchy Control over strategic resources
Reputation Involvement in implementation
Relative pay External links
Knowledge Legal rights

What is mission statement? What information a standard mission statement should

include?
A formal document that states the basic functions of business in society in term of how it
satisfies its stakeholders is called mission statement.

Mohammad Moniruzzaman FCA, FSIB PLC

World’s Local Bank-HSBC
Mission statement is where the organization is now and what it is doing.
There is no standard format of mission statement. In general a mission statement includes the
following information
1. The purpose of the business
2. The strategies of the business
3. Values and policies
4. Standard of behavior

What is Gap analysis?

Gap analysis looks at the gap between what the organization would achieve if it continued on its
existing course measured in term of profit.

New strategy can close the gap so that business can achieve the objectives.

Explain porter’s generic competitive advantages.

Porter believes in three competitive advantages

Cost Leadership:

1. Producing at a lower cost

2. Achieving economics of scale
3. Using latest technology

Differentiation:

1. Build up brand image

2. Particulars and special product features

Focus or niche strategy:

1. Concentrate one or more particular segment with a single product and service

Mohammad Moniruzzaman FCA, FSIB PLC

How to evaluate corporate strategy?

Jhonson and Scholes set three criteria for evaluating corporate strategy.

Suitability:

Is the strategy suitable for the business operation?

2. Does it exploit strength

3. Does it rectify weakness
4. Does it satisfy business objectives

Feasibility:

Can the strategy be implemented?

1. Is there enough money

2. Is there ability to deliver goods and service
3. Does we have access to technology

Acceptability:

1. Financial consideration
2. Customers
3. Government
4. Public

What are the levels of plan?

• Strategic plan: it sets out the general direction that will be taken into consideration to
achieve corporate strategy.
• Business Plan: What market to serve? How to serve the market? What finance is
required for that?
• Operational plan: It specifies what is expected for each function and what actions are
required to meet the expectation

Thanks

Mohammad Moniruzzaman FCA, FSIB PLC