BUSINESS STRATEGIES
Business strategies are long-term plans that outline how a company will achieve its goals and
gain a competitive edge, encompassing decisions on resource allocation, market positioning,
and overall direction.
What is a Business Strategy?
Definition:
A business strategy is a comprehensive plan that guides a company's actions and decisions to
achieve its objectives and gain a competitive advantage.
Purpose:
It serves as a roadmap for the organization, ensuring that all efforts are aligned towards
achieving long-term success.
Key Aspects:
Goal Setting: Defining clear and measurable objectives.
Resource Allocation: Deciding how to allocate resources (financial, human,
technological).
Market Positioning: Determining how the company will compete in the market.
Competitive Advantage: Identifying ways to stand out from competitors.
Adaptability: Being flexible and able to adjust to changing market conditions.
Levels of Strategy:
Corporate-level strategy: Focuses on the overall direction and scope of the entire
organization.
Business-level strategy: Deals with how a specific business unit or product line
competes in the market.
Functional-level strategy: Addresses the strategies of specific departments or
functions within the organization (e.g., marketing, operations, finance).
Examples of Business Strategies:
Cost Leadership: Focusing on being the lowest-cost producer in the industry.
Differentiation: Offering unique products or services that stand out from
competitors.
Focus: Concentrating on serving a specific market niche.
Growth: Expanding market share, product line, or geographic reach.
Innovation: Creating new products, services, or processes.
Sustainability: Integrating environmental and social considerations into the
business model.
Importance:
Clear Direction: Provides a roadmap for the organization.
Competitive Advantage: Helps companies gain a competitive edge in the
market.
Resource Optimization: Guides the allocation of resources effectively.
Improved Decision-Making: Provides a framework for making strategic
decisions.
Enhanced Performance: Contributes to overall business success.
VALUE CHAIN ANALYSIS IN STRATEGIC MANAGEMENT
Value chain analysis, a strategic management tool, examines all activities a company
performs to create and deliver a product or service, identifying areas for improvement and
competitive advantage.
What it is:
Value chain analysis is a systematic way to dissect a company's operations, from sourcing raw
materials to delivering the final product or service, to understand how each activity contributes
to the overall value creation process.
Why it's important:
By analyzing each step in the value chain, companies can identify areas where they can:
Reduce costs: By streamlining processes and eliminating inefficiencies.
Improve product/service quality: By focusing on activities that enhance value for
customers.
Differentiate their offerings: By investing in activities that create unique value
propositions.
Gain a competitive edge: By understanding their strengths and weaknesses
relative to competitors.
Key Components:
Primary Activities: These are the core activities directly involved in creating, delivering,
and supporting the product or service. Examples include:
Inbound logistics: Receiving, storing, and distributing inputs.
Operations: Transforming inputs into outputs.
Outbound logistics: Distributing the finished product to customers.
Marketing and sales: Promoting and selling the product or service.
Service: Providing after-sales support.
Secondary (Support) Activities: These activities support the primary activities and are
crucial for overall efficiency and effectiveness. Examples include:
Procurement: Sourcing raw materials and other inputs.
Human resource management: Recruiting, training, and managing employees.
Technology development: Developing new technologies and processes.
Company infrastructure: Providing the necessary infrastructure, such as facilities
and systems.
How to conduct a value chain analysis:
1. Map the value chain: Identify all the activities involved in creating and delivering
the product or service.
2. Analyze each activity: Evaluate the cost and value of each activity, and identify
potential areas for improvement.
3. Identify linkages: Determine how different activities are interconnected and
dependent on one another.
4. Benchmark against competitors: Compare your company's value chain activities
with those of your competitors to identify areas where you can gain a
competitive advantage.
Benefits of Value Chain Analysis:
Improved efficiency and cost reduction: By identifying and eliminating
unnecessary activities.
Enhanced product/service quality: By focusing on activities that create value for
customers.
Increased competitive advantage: By understanding your strengths and
weaknesses relative to competitors.
Better strategic decision-making: By providing a comprehensive understanding
of the company's operations.
HOW TO MAKE VALUE CHAIN ANALYSIS?
To perform a value chain analysis, identify primary and support activities, analyze their
costs and value contributions, and pinpoint competitive advantages and areas for improvement
to optimize efficiency and profitability.
1. Map the Value Chain:
Identify Primary Activities:
These directly contribute to the creation and delivery of the product or service, including
inbound logistics, operations, outbound logistics, marketing and sales, and service.
Identify Support Activities:
These activities support the primary activities, such as firm infrastructure, human resource
management, technology development, and procurement.
Diagram the Flow:
Visualize the entire process, from raw materials to the final customer, to understand the flow of
activities and value creation.
2. Analyze Activities:
Cost Analysis:
Determine the cost of each activity, including labor, materials, tools, and other resources.
Value Analysis:
Evaluate how each activity contributes to the overall value proposition for the customer and the
business.
Identify Cost Drivers:
Determine which activities are the biggest cost drivers and where cost efficiencies can be
achieved.
Identify Value Drivers:
Determine which activities are the biggest value drivers and where value can be added.
3. Identify Competitive Advantages and Areas for Improvement:
Competitive Advantage:
Identify activities where the company excels and can create a competitive edge.
Areas for Improvement:
Identify activities that are inefficient, costly, or do not add sufficient value.
Strategic Actions:
Develop strategies to improve the value chain, such as optimizing processes, reducing costs, or
adding new value-creating activities.
4. Examples of Value Chain Activities:
Inbound Logistics: Receiving, storing, and distributing raw materials.
Operations: Manufacturing, assembly, and production processes.
Outbound Logistics: Warehousing, distribution, and delivery to customers.
Marketing and Sales: Activities related to promoting and selling the product or service.
Service: Activities related to customer support and maintenance.
Firm Infrastructure: Activities related to the company's overall operations, such as
accounting, finance, and legal.
Human Resource Management: Activities related to recruiting, training, and managing
employees.
Technology Development: Activities related to developing new technologies and
processes.
Procurement: Activities related to purchasing raw materials and other inputs.
5. Benefits of Value Chain Analysis:
Enhanced Efficiency: Identify and eliminate inefficiencies in the value chain.
Cost Optimization: Identify opportunities to reduce costs and improve profitability.
Improved Value Creation: Identify opportunities to create more value for customers.
Competitive Advantage: Identify areas where the company can gain a competitive
edge.
Strategic Decision Making: Provide insights for making better strategic decisions.
Technological Development and Innovation: Identify opportunities for incorporating
new technologies.
