Lecture 7- Strategy and growth

Micro environment- Refers to [blank_start]immediate[blank_end] environment of business, such as its [blank_start]suppliers[blank_end] & [blank_start]distributors[blank_end]

Macro environment- Refers to factors [blank_start]outside[blank_end] of business’s control, such as [blank_start]political[blank_end], [blank_start]economic[blank_end], [blank_start]social[blank_end] & [blank_start]technological[blank_end] environments

Strategic drift occurs when [blank_start]strategy[blank_end] of business is no longer [blank_start]suitable[blank_end] given its strengths & weaknesses & [blank_start]environment[blank_end] in which it operates

Strategy- [blank_start]Long-term[blank_end] plan that sets out how [blank_start]business[blank_end] will achieve its [blank_start]objectives[blank_end]

Strategic planning- Process that is used to decide on [blank_start]strategy[blank_end]. When undertaking strategic planning, managers will consider factors such as [blank_start]initial costs[blank_end], [blank_start]amount[blank_end] & [blank_start]timing[blank_end] of [blank_start]expected returns[blank_end] & finally [blank_start]risk[blank_end]

Three main features of strategic decisions are it will require [blank_start]large[blank_end] investment of resources, involve making [blank_start]decisions[blank_end] that cannot easily be [blank_start]reversed[blank_end] & include [blank_start]high[blank_end] level of risk

Strategy of business depends largely on four factors: internal [blank_start]strengths[blank_end] & [blank_start]weaknesses[blank_end] of business & external [blank_start]opportunities[blank_end] & [blank_start]threats[blank_end] that exist

Strategic planning needs to take account of [blank_start]external[blank_end] environment in which it operates. This is because these [blank_start]changes[blank_end] open up new [blank_start]opportunities[blank_end] & create new [blank_start]threats[blank_end]

Micro environment can be analysed using [blank_start]Porter's Five Forces[blank_end] & macro environment can be analysed using [blank_start]PESTEL analysis[blank_end]

Once business has chosen which market(s) to [blank_start]compete[blank_end] in, it will want to decide where it wants to [blank_start]position[blank_end] itself. Decision on where to [blank_start]position[blank_end] your business will depend on [blank_start]strengths[blank_end] of your organisation & [blank_start]external[blank_end] environment, including economic factors

Strategy determines [blank_start]direction[blank_end] in which business is headed. Strategic decisions are taken by [blank_start]senior management[blank_end] of business & determine [blank_start]long-term[blank_end] success of organisation

Planned strategy refers to what you [blank_start]intend[blank_end] to do to achieve your [blank_start]objective[blank_end]. However, what you actually end up doing may be [blank_start]different[blank_end] from what you [blank_start]intended[blank_end]. Changes in [blank_start]circumstances[blank_end], [blank_start]external[blank_end] events, or [blank_start]internal[blank_end] events may lead to slightly [blank_start]different[blank_end] course of action. This is known as emergent strategy

There are two forms of business growth. [blank_start]Internal growth[blank_end] occurs when business sells more of its [blank_start]products[blank_end]. For example, effective [blank_start]marketing[blank_end] increases demand & sales. [blank_start]External growth[blank_end] occurs when one business [blank_start]joins[blank_end] with another; this is known as ‘[blank_start]integration[blank_end]’

One form of external growth is [blank_start]merger[blank_end]. This occurs when one business [blank_start]joins[blank_end] together with another to form [blank_start]new business entity[blank_end]

Another form of external growth is [blank_start]acquisition (takeover)[blank_end]. This occurs when one business gains [blank_start]control[blank_end] of another business. To take over another company you might offer [blank_start]cash[blank_end] for their [blank_start]shares[blank_end], or you might offer some [blank_start]shares[blank_end] in your own [blank_start]business[blank_end] (paper offer), or combination of both

Forward vertical integration is when business buys one of its [blank_start]customers[blank_end] or [blank_start]distributors[blank_end]. Backward vertical integration is when business buys one of its [blank_start]suppliers[blank_end]

Franchising occurs when one business sells [blank_start]right[blank_end] to other businesses to produce their [blank_start]product[blank_end] or provide their [blank_start]services[blank_end]. Seller of franchise is called [blank_start]franchisor[blank_end]; buyer of franchise is called [blank_start]franchisee[blank_end]

One advantage of selling franchise is that [blank_start]franchisor[blank_end] can earn revenue from original [blank_start]sale[blank_end] of franchise & from [blank_start]sales[blank_end] of franchisee. Another advantage is that [blank_start]franchisor[blank_end] can benefit from ideas being [blank_start]shared[blank_end] & [blank_start]experiences[blank_end] of different franchises

One disadvantage of selling franchise is [blank_start]franchisor[blank_end] lose some [blank_start]control[blank_end]. Another disadvantage is that there is [blank_start]risk[blank_end] to [blank_start]brand[blank_end] if one franchisee performs badly

One advantage of buying franchise is [blank_start]franchisee[blank_end] would already have an [blank_start]established[blank_end] name & reputation. Another advantage is that [blank_start]franchisee[blank_end] can benefit from experience of [blank_start]franchisors[blank_end]. Third advantage is that franchisee can benefit from experience of other [blank_start]franchisees[blank_end]

One disadvantage of buying franchise is that there is an [blank_start]initial cost[blank_end]. Another disadvantage is that there is [blank_start]loss of revenues[blank_end] to pay franchisors. Third disadvantage is franchisee may be at [blank_start]risk[blank_end] from [blank_start]actions[blank_end] of other franchisees