what are strategic alternatives in a business plan quizlet

What Are Strategic Alternatives in a Business Plan for 2023? 

Clear objectives and a strong company strategy are necessary for navigating the commercial world. Analyzing strategic options is essential. These many strategies aid in a company’s achievement of its objectives. They are crucial to effective strategic management and planning because they create a foundation for stakeholder satisfaction and competitive advantage.

In this journey, we will delve into strategic alternatives in a business plan and their role in shaping robust business strategies. Our goal is to offer advice on making informed decisions and evaluating strategic alternatives. It’s about finding the best alternative to ensure profitability and shareholder returns.

Join us as we investigate how to plan your company’s course, engage in successful competition, and adjust to the strategies that are always changing in the market. Let’s uncover how to capitalize on opportunities and mitigate risks in the pursuit of successful strategic management.

Table of Contents

Understanding Strategic Alternatives in Business Plan

What are Strategic Alternatives?

Strategic alternatives are different options that a business can choose to meet its goals. Some common strategic alternatives in a business plan are expanding into new markets, adding new products, mergers, takeovers, and partnerships. Evaluating alternatives helps companies pick the best path forward. It lets them weigh the pros and cons of different choices.

How it Aligns with the Goals and Objectives of a Business:

• Picking alternatives that match short and long-term goals is key. It keeps plans focused.
• Alternatives should move the business closer to objectives. Like growing market reach or profits.
• Metrics help track progress. Is a new market increasing sales as projected?
• Compare alternatives to see which fits goals best. Ensure they align before moving forward.
• Gaps appear when current options miss key goals. It signals a need for new alternatives.

Alignment keeps plans on track. It lets leaders pick options to strategically hit targets.

Why are Strategic Alternatives Important for Business Success?

• Weighing options forces move beyond the status quo to drive growth.
• Analysis uncovers risks so companies can prepare.
• Seeing multiple paths allows seizing opportunities as conditions change.
• Leaders can make bold strategic shifts to gain an edge.
• Regular evaluation gives the flexibility to pivot when needed.

Without assessing options, firms hit roadblocks. Alternatives let them route around issues. They allow smart risk-taking. Companies must scan the horizon. They need visibility to emerging routes. Evaluating alternatives powers informed choices. It provides potential paths for progress.

The SWOT Analysis Framework: A Strategic Beacon

SWOT analysis is a useful strategic planning tool to evaluate alternatives. It identifies internal strengths and weaknesses. It also looks at external opportunities and threats. Conducting a SWOT analysis helps businesses in several ways:

• It assesses the current strategic position based on concrete factors.
• The insights it provides allow businesses to leverage strengths and mitigate weaknesses.
• By revealing potential threats, it helps businesses prepare contingency plans.
• Looking at opportunities allows seizing promising openings at the right time.

SWOT has four elements that provide a comprehensive picture:

• Strengths: Internal attributes like human talent, IP, processes, and brand equity.
• Weaknesses: Internal gaps like inadequate capacity, lack of skills, and high costs.
• Opportunities: External potential upsides like unmet customer needs, new markets, and partnerships.
• Threats: External hazards like new regulations, shifting technology, and increased competition.

SWOT’s Role in Strategic Alternatives:

• SWOT provides a detailed overview, aiding in the selection of the best alternative.
• It ensures the chosen strategic alternatives align with the business’s capabilities and the market landscape.
• Businesses may carve themselves a distinct niche in the market by capitalizing on their advantages and capabilities.
• It promotes the creation of plans that set a company apart from rivals and guarantee its enduring prosperity and profitability.

Types of Strategic Alternatives in a Business Plan

Market Penetration:

Market penetration focuses on increasing market share for existing products in their current markets.

• It typically involves tactics like increased marketing, lower prices, and more distribution channels.
• The goal is to drive growth by reaching and selling to more customers within existing segments.
• Pros are relatively low risk and quick implementation. Cons are lack of diversification and reliance on existing products.
• Examples include boosting marketing spend to gain share or expanding distributors.

Product Development:

Product development means creating new products and services to offer existing customers and markets.

• This leverages existing competencies but expands offerings to provide fresh value.
• Risks include high development costs and uncertain demand. Rewards include diversified revenue streams.
• Risks and Rewards: Balancing innovation with market acceptance is crucial.
• Pace of innovation must match customer needs and tech trends. Offerings should build on current strengths.
• Examples include R&D efforts, new feature development, and entering new segments.

Market Development:

Market development brings current offerings into new markets and customer segments.

• Diversification into new demographics, distribution channels, and geographic regions.
• Reduces reliance on existing markets while expanding consumer and audience reach.
• Requires market research to identify and effectively engage new opportunities.
• Examples include entering new countries, new distribution channels, and product repositioning.

Diversification:

Diversification expands offerings and markets simultaneously.

• Involves new products for new segments, expanding the business scope.
• Mitigates risk of a slowing market by broadening into multiple streams.
• Should fit cohesively with the core business to maximize existing capabilities.
• Examples include technology firms expanding into hardware and software.

Acquisition:

Acquiring competitors and complementary businesses can fuel growth.

• Provides quick access to new capabilities, offerings, customers, and market share.
• Risks include high acquisition costs and integration challenges.
• Aligns best when the target company augments current weaknesses and fits culturally.
• Examples include merging with a competitor or buying a tech startup.

Restructuring:

Restructuring overhauls internal organization, operations, and staffing.

• Used to reduce inefficiencies, streamline processes, and optimize operations.
• Improves resource allocation, decision-making, innovation, and accountability.
• Risks include the temporary decline in productivity and morale challenges.
• Examples include reorganizing business units, consolidation, and headcount optimization.

Divestment/Liquidation:

Divestment involves selling off assets, units, or entire parts of the business.

• Sheds low-performing segments to focus on more profitable activities.
• Provides influx of capital from sale which can fuel more strategic goals.
• Carries the risk of valuable capability loss and buyer uncertainty.
• Examples include selling an underperforming business unit.

How to Develop Strategic Alternatives for Your Business:

• Research the industry trends, competitors, and market deeply.
• Look internally at strengths, weaknesses, and resources (SWOT).
• Brainstorm possibilities like new markets, products, and deals.
• Judge strategic fit and feasibility to filter options.
• Analyze risks, returns, and costs of remaining alternatives. 
• Gather input from key internal and external stakeholders.
• Weigh the pros and cons. Measure against goals.
• Pick 1-2 best options with the highest potential.

Developing alternatives takes work. Leaders must study the landscape. They need insights to craft options tailored to their strategy. With diligent efforts, they can design pathways aligned with objectives. On the chosen route, progress awaits.

Brief Mention of Stakeholders and Their Role in Strategic Alternatives:

• Leadership weighs in based on priorities. Investors on profits. Staff on company culture.
• Stakeholder views provide a wider lens to assess each alternative.
• Their input reveals blind spots. It highlights the pros, cons, and tradeoffs.
• Engaging stakeholders enables well-rounded decisions.
• It aligns the path with diverse needs across the business.

Stakeholders hold pieces to the puzzle. Their perspectives enlighten strategic thinking. Collaboration evaluates all angles. Smooth integration depends on inclusion. United around decisions, stakeholders help guide the way forward.

Frequently Asked Questions – FAQs

A business plan’s executive summary, company overview, market analysis, competitor analysis, marketing plan, operations plan, and finance plan are its main parts.

Strategic alternatives for a business are identified through research, SWOT analysis, brainstorming sessions, and evaluating options like entering new markets or offering new products.

Business objectives are specific goals, while strategic alternatives are different options to achieve those goals.

Strategic alternatives like expanding into new markets or acquiring competitors can fuel business growth if chosen and implemented effectively.

Risks with strategic alternatives include high costs, inadequate ROI, poor integration, and opportunity costs from pursuing losing propositions.

Choosing the optimal strategic alternative can strengthen competitive advantage by improving strategic positioning and differentiation.

The purpose of strategic alternatives in a business plan is to evaluate different courses of action to achieve goals and select the best path forward.

Strategic alternatives provide flexibility to change course and pivot strategies to adapt to evolving market conditions.

Businesses choose the best alternative through analysis of factors like feasibility, risk, costs, ROI, alignment with objectives, and competitive impact.

In wrapping up, exploring strategic alternatives is a vital component of business success. Evaluating options in depth provides avenues to make prudent moves that strengthen competitive advantage.

Leaders must adopt a broad perspective when assessing multiple courses of action. Consider insights from analysis as well as stakeholder needs. Develop metrics that map to overarching goals. With diligence and foresight, companies can pivot strategies to capitalize on emerging opportunities.

Strategic alternatives empower businesses to make progress amid evolving conditions. They allow adapting with agility to shape advantageous positioning in the market. Commit to regularly re-evaluating alternatives as a navigation tool. Keep the end destination in focus, but be open to choosing a better route. With alternatives in their toolkit, leaders can make informed decisions to propel their company forward.

The road brings twists, but opportunities exist around each turn. Alternatives provide the fuel, flexibility, and sightlines needed for the journey. Companies willing to explore options and make bold moves at the right moments can gain sustainable market footholds. Assess, analyze, and decide – a continuous cycle driving strategic management success.

Muhammad Asif Saeed has extensive experience in commerce and finance. Specifically, He holds a Bachelor of Commerce degree specializing in Accounts and Finance and an MBA focusing on Marketing. These qualifications underpin his understanding of business dynamics and financial strategies.

With an impressive 20-year career in Pakistan’s textile sector, including roles at Masood Textile (MTM) and Sadaqat Limited, excelling in business & financial management. His expertise in financial and business management is further evidenced by his authoritative articles on complex finance and business operation topics for various renowned websites including businessproplanner.com,businesprotips.com,distinctionbetween.com, trueqube.com, and bruitly.com, demonstrating his comprehensive knowledge and professional expertise in the field.

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4 Levels of Strategy: Types of Strategic Alternatives

Strategic Alternatives are developed to set directions in which the business’s human and material resources will be applied for a greater chance of achieving selected goals. The strategy is a comprehensive concept, and for this reason, it is often used in different ways.

But this difference creates a major problem when some writers focus on both the endpoints (mission, goals, objectives) and the means of achieving them (policies and plans). Still, others emphasize the means only rather than the ends in the strategic process.

Strategy refers to the determination of the purpose or mission and the basic long-term objectives of an enterprise and the adoption of courses of action and allocation of resources necessary to achieve these aims.

Therefore, the objectives discussed earlier are a part of strategy formulation .

Policies are general statements that guide managers’ thinking to make a decision. They provide a broad boundary within which decisions should fall.

Therefore the essence of the policy is discretion strategy.

However, concerns the direction in which human and material resources will be applied to increase the chance of achieving selected objectives.

The key function of strategies and policies is to unify and give direction to plans. But if one of them stands alone, it can hardly ensure that an organization will reach its goal.

Strategic planning seems to be a simple exercise; it analyses the current and expected future situation, decides the firm’s direction, and develops the means for achieving the goal.

In reality, strategic planning is a very complicated process that demands a systematic approach to identify and analyze factors external to the organization and matching them with the firm’s capabilities.

Features of Strategic plans

The following are some of the most important characteristics of strategic plans :

• They are long-term in nature and place an organization within its external environment .
• They are comprehensive and cover a wide range of organizational activities.
• They integrate, guide, and control organizational activities for the immediate and long-range future.
• They set the boundaries for managerial decision-making . Since strategic plans are the primary documents of an organization, all managerial decisions are required to be consistent with its goals . Strategic plans, thus, set forth the long-term objectives, intermediate objectives, and main purpose or the basic role of an organization .

4 Levels of Strategy-Making / 4 Types of Strategic Alternatives

Strategy-making involves identifying the ways an organization can undertake to achieve performance targets, weaken competitors, achieve a competitive advantage , and ensure the organization’s long-term survival.

In a diversified company with different lines of business under one umbrella, strategies are initiated at four levels.

The strategies at each level of the organization are known by the name of the level.

4 levels of strategy are;

• Corporate Level Strategy
• Business Level Strategy
• Functional Level Strategy
• Operational Level Strategy

Corporate-level strategy

Corporate strategy defines the markets and businesses in which a company will operate.

Corporate strategy is formulated at the top level by the top management of a diversified company (in our country, a diversified company is popularly known, as a group of companies, such as Alphabet Inc.). Such a strategy describes the company’s overall direction regarding its various businesses and product lines .

Corporate strategy defines the long-term objectives and generally affects all the business units under its umbrella.

A corporate strategy, for example, of P&G may be acquiring the major tissue paper companies in Canada to become the unquestionable market leader .

The corporate-level strategy is the set of strategic alternatives from which an organization chooses as it manages its operations simultaneously across several industries and several markets.

Business-level strategy

Business strategy defines the basis on which firm wilt compete.

It is a business-unit-level strategy formulated by the senior managers of the unit. This strategy emphasizes strengthening a company’s competitive position in products or services.

Business strategies are composed of competitive and cooperative strategies.

The business strategy encompasses all the actions and approaches for competing against the competitors and the ways management addresses various strategic issues.

As Hitt and Jones have remarked, the business strategy consists of plans of action that strategic managers adopt to use a company’s resources and distinctive competencies to gain a competitive advantage over its rivals in a market.

Business strategy is usually formulated in line with corporate strategy. The main focus of the business strategy is on product development, innovation, integration (vertical, horizontal), market development, diversification, and the like.

The competitive strategy aims at gaining a competitive advantage in the marketplace against competitors .

And competitive advantage comes from strategies that lead to some uniqueness in the marketplace. Winning competitive strategies are grounded in sustainable competitive advantage.

Examples of competitive strategy include differentiation strategy, low-cost strategy, and focus or market-niche strategy .

Business strategy is concerned with actions that managers undertake to improve the market position of the company by satisfying the customers. Improving market position implies undertaking actions against competitors in the industry.

Thus, the concept of competitive strategy (as opposed to cooperative strategy) has a competitor orientation. The objective of competitive strategy is to win the customers’ hearts by satisfying their needs and, finally, to outcompete the competitors (or rival companies) and attain competitive advantages .

The success of a competitive strategy depends on the company’s capabilities, strengths, and weaknesses in its competitors’ capabilities, strengths, and weaknesses .

In doing business, companies confront a lot of strategic issues. Management has to address all these issues effectively to survive in the marketplace. Business strategy deals with these issues, in addition to how to compete.

A business-level strategy is the set of strategic alternatives an organization chooses as it conducts business in a particular industry or market.

Such alternatives help the organization focus on each industry or market in a targeted fashion.

Check out our full article on business strategy and its issues, elements, types, formulation, and process .

Functional strategy

A functional strategy is, in reality, the departmental/division strategy designed for each organizational function.

Thus, there may be a production strategy, marketing strategy , advertisement strategy, sales strategy, human resource strategy , inventory strategy, financial strategy, training strategy, etc.

A functional strategy refers to a strategy that emphasizes a particular functional area of an organization . It is formulated to achieve some objectives of a business unit by maximizing resource productivity.

Sometimes functional strategy is called departmental strategy since each business function is usually vested with a department .

For example, the production department of a manufacturing company develops a production strategy’ as the departmental strategy, or the training department formulates ‘a training strategy’ for providing training to the employees .

A functional strategy is concerned with developing a distinctive competence to provide a business unit with a competitive advantage.

Each business unit or company has its own set of departments, and every department has a functional strategy. Functional strategies are adopted to support a competitive strategy.

For example, a company following a low-cost competitive strategy needs a production strategy that emphasizes reducing the cost of operations and a human resource strategy that emphasizes retaining the lowest possible number of highly qualified employees.

Other functional strategies, such as marketing strategy , advertising strategy, and financial strategy, are also to be formulated appropriately to support the business-level competitive strategy.

Operating strategy

Operating strategy is formulated at the operating units of an organization. A company may develop an operating strategy for its factory, sales territory, or small sections within a department.

Usually, the operating managers/field-level managers develop an operating strategy to achieve immediate objectives . In large organizations, the operating managers normally take assistance from the mid-level managers while developing the operating strategy.

In some companies, managers “develop an operating strategy for each set of annual objectives in the departments or divisions.

Companies today compete in a variety of industries and markets.

So, as they develop business-level strategies for each industry or market, they also develop an overall strategy that helps define the mix of industries and markets that are of interest to the firm .

These levels provide businesses with a rich combination of strategic alternatives.

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The Strategic Planning Process in 4 Steps

To guide you through the strategic planning process, we created this 4 step process you can use with your team. we’ll cover the basic definition of strategic planning, what core elements you should include, and actionable steps to build your strategic plan..

Free Strategic Planning Guide

What is Strategic Planning?

Strategic Planning is when a process where organizations define a bold vision and create a plan with objectives and goals to reach that future. A great strategic plan defines where your organization is going, how you’ll win, who must do what, and how you’ll review and adapt your strategy development.

A strategic plan or a business strategic plan should include the following:

• Your organization’s vision organization’s vision of the future.
• A clearly Articulated mission and values statement.
• A current state assessment that evaluates your competitive environment, new opportunities, and new threats.
• What strategic challenges you face.
• A growth strategy and outlined market share.
• Long-term strategic goals.
• An annual plan with SMART goals or OKRs to support your strategic goals.
• Clear measures, key performance indicators, and data analytics to measure progress.
• A clear strategic planning cycle, including how you’ll review, refresh, and recast your plan every quarter.

Overview of the Strategic Planning Process:

The strategic management process involves taking your organization on a journey from point A (where you are today) to point B (your vision of the future).

Part of that journey is the strategy built during strategic planning, and part of it is execution during the strategic management process. A good strategic plan dictates “how” you travel the selected road.

Effective execution ensures you are reviewing, refreshing, and recalibrating your strategy to reach your destination. The planning process should take no longer than 90 days. But, move at a pace that works best for you and your team and leverage this as a resource.

To kick this process off, we recommend 1-2 weeks (1-hour meeting with the Owner/CEO, Strategy Director, and Facilitator (if necessary) to discuss the information collected and direction for continued planning.)

Questions to Ask:

• Who is on your Planning Team? What senior leadership members and key stakeholders are included? Checkout these links you need help finding a strategic planning consultant , someone to facilitate strategic planning , or expert AI strategy consulting .
• Who will be the business process owner (Strategy Director) of planning in your organization?
• Fast forward 12 months from now, what do you want to see differently in your organization as a result of your strategic plan and implementation?
• Planning team members are informed of their roles and responsibilities.
• A strategic planning schedule is established.
• Existing planning information and secondary data collected.

Action Grid:

Step 1: Determine Organizational Readiness

Set up your plan for success – questions to ask:

• Are the conditions and criteria for successful planning in place at the current time? Can certain pitfalls be avoided?
• Is this the appropriate time for your organization to initiate a planning process? Yes or no? If no, where do you go from here?

Step 2: Develop Your Team & Schedule

Who is going to be on your planning team? You need to choose someone to oversee the strategy implementation (Chief Strategy Officer or Strategy Director) and strategic management of your plan? You need some of the key individuals and decision makers for this team. It should be a small group of approximately 12-15 people.

OnStrategy is the leader in strategic planning and performance management. Our cloud-based software and hands-on services closes the gap between strategy and execution. Learn more about OnStrategy here .

Step 3: Collect Current Data

All strategic plans are developed using the following information:

• The last strategic plan, even if it is not current
• Mission statement, vision statement, values statement
• Past or current Business plan
• Financial records for the last few years
• Marketing plan
• Other information, such as last year’s SWOT, sales figures and projections

Step 4: Review Collected Data

Review the data collected in the last action with your strategy director and facilitator.

• What trends do you see?
• Are there areas of obvious weakness or strengths?
• Have you been following a plan or have you just been going along with the market?

Conclusion: A successful strategic plan must be adaptable to changing conditions. Organizations benefit from having a flexible plan that can evolve, as assumptions and goals may need adjustments. Preparing to adapt or restart the planning process is crucial, so we recommend updating actions quarterly and refreshing your plan annually.

Strategic Planning Phase 1: Determine Your Strategic Position

Want more? Dive into the “ Evaluate Your Strategic Position ” How-To Guide.

Action Grid

Step 1: identify strategic issues.

Strategic issues are critical unknowns driving you to embark on a robust strategic planning process. These issues can be problems, opportunities, market shifts, or anything else that keeps you awake at night and begging for a solution or decision. The best strategic plans address your strategic issues head-on.

• How will we grow, stabilize, or retrench in order to sustain our organization into the future?
• How will we diversify our revenue to reduce our dependence on a major customer?
• What must we do to improve our cost structure and stay competitive?
• How and where must we innovate our products and services?

Step 2: Conduct an Environmental Scan

Conducting an environmental scan will help you understand your operating environment. An environmental scan is called a PEST analysis, an acronym for Political, Economic, Social, and Technological trends. Sometimes, it is helpful to include Ecological and Legal trends as well. All of these trends play a part in determining the overall business environment.

Step 3: Conduct a Competitive Analysis

The reason to do a competitive analysis is to assess the opportunities and threats that may occur from those organizations competing for the same business you are. You need to understand what your competitors are or aren’t offering your potential customers. Here are a few other key ways a competitive analysis fits into strategic planning:

• To help you assess whether your competitive advantage is really an advantage.
• To understand what your competitors’ current and future strategies are so you can plan accordingly.
• To provide information that will help you evaluate your strategic decisions against what your competitors may or may not be doing.

Learn more on how to conduct a competitive analysis here .

Step 4: Identify Opportunities and Threats

Opportunities are situations that exist but must be acted on if the business is to benefit from them.

What do you want to capitalize on?

• What new needs of customers could you meet?
• What are the economic trends that benefit you?
• What are the emerging political and social opportunities?
• What niches have your competitors missed?

Threats refer to external conditions or barriers preventing a company from reaching its objectives.

What do you need to mitigate? What external driving force do you need to anticipate?

Questions to Answer:

• What are the negative economic trends?
• What are the negative political and social trends?
• Where are competitors about to bite you?
• Where are you vulnerable?

Step 5: Identify Strengths and Weaknesses

Strengths refer to what your company does well.

What do you want to build on?

• What do you do well (in sales, marketing, operations, management)?
• What are your core competencies?
• What differentiates you from your competitors?
• Why do your customers buy from you?

Weaknesses refer to any limitations a company faces in developing or implementing a strategy.

What do you need to shore up?

• Where do you lack resources?
• What can you do better?
• Where are you losing money?
• In what areas do your competitors have an edge?

Step 6: Customer Segments

Customer segmentation defines the different groups of people or organizations a company aims to reach or serve.

• What needs or wants define your ideal customer?
• What characteristics describe your typical customer?
• Can you sort your customers into different profiles using their needs, wants and characteristics?
• Can you reach this segment through clear communication channels?

Step 7: Develop Your SWOT

A SWOT analysis is a quick way of examining your organization by looking at the internal strengths and weaknesses in relation to the external opportunities and threats. Creating a SWOT analysis lets you see all the important factors affecting your organization together in one place.

It’s easy to read, easy to communicate, and easy to create. Take the Strengths, Weaknesses, Opportunities, and Threats you developed earlier, review, prioritize, and combine like terms. The SWOT analysis helps you ask and answer the following questions: “How do you….”

• Build on your strengths
• Shore up your weaknesses
• Capitalize on your opportunities
• Manage your threats

Strategic Planning Process Phase 2: Developing Strategy

Want More? Deep Dive Into the “Developing Your Strategy” How-To Guide.

Step 1: Develop Your Mission Statement

The mission statement describes an organization’s purpose or reason for existing.

What is our purpose? Why do we exist? What do we do?

• What are your organization’s goals? What does your organization intend to accomplish?
• Why do you work here? Why is it special to work here?
• What would happen if we were not here?

Outcome: A short, concise, concrete statement that clearly defines the scope of the organization.

Step 2: discover your values.

Your values statement clarifies what your organization stands for, believes in and the behaviors you expect to see as a result. Check our the post on great what are core values and examples of core values .

How will we behave?

• What are the key non-negotiables that are critical to the company’s success?
• What guiding principles are core to how we operate in this organization?
• What behaviors do you expect to see?
• If the circumstances changed and penalized us for holding this core value, would we still keep it?

Outcome: Short list of 5-7 core values.

Step 3: casting your vision statement.

A Vision Statement defines your desired future state and directs where we are going as an organization.

Where are we going?

• What will our organization look like 5–10 years from now?
• What does success look like?
• What are we aspiring to achieve?
• What mountain are you climbing and why?

Outcome: A picture of the future.

Step 4: identify your competitive advantages.

A competitive advantage is a characteristic of an organization that allows it to meet its customer’s need(s) better than its competition can. It’s important to consider your competitive advantages when creating your competitive strategy.

What are we best at?

• What are your unique strengths?
• What are you best at in your market?
• Do your customers still value what is being delivered? Ask them.
• How do your value propositions stack up in the marketplace?

Outcome: A list of 2 or 3 items that honestly express the organization’s foundation for winning.

Step 5: crafting your organization-wide strategies.

Your competitive strategy is the general methods you intend to use to reach your vision. Regardless of the level, a strategy answers the question “how.”

How will we succeed?

• Broad: market scope; a relatively wide market emphasis.
• Narrow: limited to only one or few segments in the market
• Does your competitive position focus on lowest total cost or product/service differentiation or both?

Outcome: Establish the general, umbrella methods you intend to use to reach your vision.

Phase 3: Strategic Plan Development

Want More? Deep Dive Into the “Build Your Plan” How-To Guide.

Strategic Planning Process Step 1: Use Your SWOT to Set Priorities

If your team wants to take the next step in the SWOT analysis, apply the TOWS Strategic Alternatives Matrix to your strategy map to help you think about the options you could pursue. To do this, match external opportunities and threats with your internal strengths and weaknesses, as illustrated in the matrix below:

TOWS Strategic Alternatives Matrix

Evaluate the options you’ve generated, and identify the ones that give the greatest benefit, and that best achieve the mission and vision of your organization. Add these to the other strategic options that you’re considering.

Step 2: Define Long-Term Strategic Objectives

Long-Term Strategic Objectives are long-term, broad, continuous statements that holistically address all areas of your organization. What must we focus on to achieve our vision? Check out examples of strategic objectives here. What are the “big rocks”?

Questions to ask:

• What are our shareholders or stakeholders expectations for our financial performance or social outcomes?
• To reach our outcomes, what value must we provide to our customers? What is our value proposition?
• To provide value, what process must we excel at to deliver our products and services?
• To drive our processes, what skills, capabilities and organizational structure must we have?

Outcome: Framework for your plan – no more than 6. You can use the balanced scorecard framework, OKRs, or whatever methodology works best for you. Just don’t exceed 6 long-term objectives.

Step 3: Setting Organization-Wide Goals and Measures

Once you have formulated your strategic objectives, you should translate them into goals and measures that can be communicated to your strategic planning team (team of business leaders and/or team members).

You want to set goals that convert the strategic objectives into specific performance targets. Effective strategic goals clearly state what, when, how, and who, and they are specifically measurable. They should address what you must do in the short term (think 1-3 years) to achieve your strategic objectives.

Organization-wide goals are annual statements that are SMART – specific, measurable, attainable, responsible, and time-bound. These are outcome statements expressing a result to achieve the desired outcomes expected in the organization.

What is most important right now to reach our long-term objectives?

Outcome: clear outcomes for the current year..

Step 4: Select KPIs

Key Performance Indicators (KPI) are the key measures that will have the most impact in moving your organization forward. We recommend you guide your organization with measures that matter. See examples of KPIs here.

How will we measure our success?

Outcome: 5-7 measures that help you keep the pulse on your performance. When selecting your Key Performance Indicators (KPIs), ask, “What are the key performance measures we need to track to monitor if we are achieving our goals?” These KPIs include the key goals you want to measure that will have the most impact on moving your organization forward.

Step 5: Cascade Your Strategies to Operations

To move from big ideas to action, creating action items and to-dos for short-term goals is crucial. This involves translating strategy from the organizational level to individuals. Functional area managers and contributors play a role in developing short-term goals to support the organization.

Before taking action, decide whether to create plans directly derived from the strategic plan or sync existing operational, business, or account plans with organizational goals. Avoid the pitfall of managing multiple sets of goals and actions, as this shifts from strategic planning to annual planning.

Questions to Ask

• How are we going to get there at a functional level?
• Who must do what by when to accomplish and drive the organizational goals?
• What strategic questions still remain and need to be solved?

Department/functional goals, actions, measures and targets for the next 12-24 months

Step 6: Cascading Goals to Departments and Team Members

Now in your Departments / Teams, you need to create goals to support the organization-wide goals. These goals should still be SMART and are generally (short-term) something to be done in the next 12-18 months. Finally, you should develop an action plan for each goal.

Keep the acronym SMART in mind again when setting action items, and make sure they include start and end dates and have someone assigned their responsibility. Since these action items support your previously established goals, it may be helpful to consider action items your immediate plans on the way to achieving your (short-term) goals. In other words, identify all the actions that need to occur in the next 90 days and continue this same process every 90 days until the goal is achieved.

Examples of Cascading Goals:

Phase 4: Executing Strategy and Managing Performance

Want more? Dive Into the “Managing Performance” How-To Guide.

Step 1: Strategic Plan Implementation Schedule

Implementation is the process that turns strategies and plans into actions in order to accomplish strategic objectives and goals.

How will we use the plan as a management tool?

• Communication Schedule: How and when will you roll-out your plan to your staff? How frequently will you send out updates?
• Process Leader: Who is your strategy director?
• Structure: What are the dates for your strategy reviews (we recommend at least quarterly)?
• System & Reports: What are you expecting each staff member to come prepared with to those strategy review sessions?

Outcome: Syncing your plan into the “rhythm of your business.”

Once your resources are in place, you can set your implementation schedule. Use the following steps as your base implementation plan:

• Establish your performance management and reward system.
• Set up monthly and quarterly strategy meetings with established reporting procedures.
• Set up annual strategic review dates including new assessments and a large group meeting for an annual plan review.

Now you’re ready to start plan roll-out. Below are sample implementation schedules, which double for a full strategic management process timeline.

Step 2: Tracking Goals & Actions

Monthly strategy meetings don’t need to take a lot of time – 30 to 60 minutes should suffice. But it is important that key team members report on their progress toward the goals they are responsible for – including reporting on metrics in the scorecard they have been assigned.

By using the measurements already established, it’s easy to make course corrections if necessary. You should also commit to reviewing your Key Performance Indicators (KPIs) during these regular meetings. Need help comparing strategic planning software ? Check out our guide.

Effective Strategic Planning: Your Bi-Annual Checklist

Never lose sight of the fact that strategic plans are guidelines, not rules. Every six months or so, you should evaluate your strategy execution and strategic plan implementation by asking these key questions:

• Will your goals be achieved within the time frame of the plan? If not, why?
• Should the deadlines be modified? (Before you modify deadlines, figure out why you’re behind schedule.)
• Are your goals and action items still realistic?
• Should the organization’s focus be changed to put more emphasis on achieving your goals?
• Should your goals be changed? (Be careful about making these changes – know why efforts aren’t achieving the goals before changing the goals.)
• What can be gathered from an adaptation to improve future planning activities?

Why Track Your Goals?

• Ownership: Having a stake and responsibility in the plan makes you feel part of it and leads you to drive your goals forward.
• Culture: Successful plans tie tracking and updating goals into organizational culture.
• Implementation: If you don’t review and update your strategic goals, they are just good intentions
• Accountability: Accountability and high visibility help drive change. This means that each measure, objective, data source and initiative must have an owner.
• Empowerment: Changing goals from In Progress to Complete just feels good!

Step 3: Review & Adapt

Guidelines for your strategy review.

The most important part of this meeting is a 70/30 review. 30% is about reviewing performance, and 70% should be spent on making decisions to move the company’s strategy forward in the next quarter.

The best strategic planners spend about 60-90 minutes in the sessions. Holding meetings helps focus your goals on accomplishing top priorities and accelerating the organization’s growth. Although the meeting structure is relatively simple, it does require a high degree of discipline.

Strategy Review Session Questions:

Strategic planning frequently asked questions, read our frequently asked questions about strategic planning to learn how to build a great strategic plan..

Strategic planning is when organizations define a bold vision and create a plan with objectives and goals to reach that future. A great strategic plan defines where your organization is going, how you’ll win, who must do what, and how you’ll review and adapt your strategy..

Your strategic plan needs to include an assessment of your current state, a SWOT analysis, mission, vision, values, competitive advantages, growth strategy, growth enablers, a 3-year roadmap, and annual plan with strategic goals, OKRs, and KPIs.

A strategic planning process should take no longer than 90 days to complete from start to finish! Any longer could fatigue your organization and team.

There are four overarching phases to the strategic planning process that include: determining position, developing your strategy, building your plan, and managing performance. Each phase plays a unique but distinctly crucial role in the strategic planning process.

Prior to starting your strategic plan, you must go through this pre-planning process to determine your organization’s readiness by following these steps:

Ask yourself these questions: Are the conditions and criteria for successful planning in place now? Can we foresee any pitfalls that we can avoid? Is there an appropriate time for our organization to initiate this process?

Develop your team and schedule. Who will oversee the implementation as Chief Strategy Officer or Director? Do we have at least 12-15 other key individuals on our team?

Research and Collect Current Data. Find the following resources that your organization may have used in the past to assist you with your new plan: last strategic plan, mission, vision, and values statement, business plan, financial records, marketing plan, SWOT, sales figures, or projections.

Finally, review the data with your strategy director and facilitator and ask these questions: What trends do we see? Any obvious strengths or weaknesses? Have we been following a plan or just going along with the market?

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Examples of Strategic Alternatives

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Strategic alternatives are strategies that a business develops to set the direction, for which human and material resources will be applied, for a greater chance of achieving selected goals, notes iEduNote. Generally, a company develops strategic alternatives when it's struggling and seeking a new direction to increase profits, or even simply to save itself from dissolution or bankruptcy.

A Floundering Company

The term strategic alternatives is somewhat of a code word for a company trying to put itself up for sale, says Mike Krantz of "USA Today," adding:

"Typically, when a company’s management or its investors think the firm needs to restructure itself in a radical way, it will announce that it’s looking for alternatives. That might involve selling the company to a competitor that can find efficiency or taking the company private by selling to private investors or the management."

Krantz says that companies generally take some time to fall to this point. He gives the example of retailer Aeropostale, which had stated it was looking for strategic alternatives in 2015. The company's stock plunged in 2016 when it appeared that the trendy teen-centered clothing store would fold if it didn't find investors to come to the rescue. The company did eventually declare bankruptcy, but investors came to the rescue with a "strategic alternative" plan of their own. Vicki M. Young, writing on WWD, explains:

"Just when it looked like it was game over for the teen retailer, ABG ... stepped in to lead a consortium to acquire Aéropostale for $243.3 million as a going concern. The consortium included mall landlords Simon Property Group and General Growth Properties. "

The chain soon reopened 500 stores in 2017, with the new owners saying they would roll out a grand marketing campaign, showcasing the brand’s positioning under new owner Authentic Brands Group. Nick Woodhouse, ABG’s president and chief marketing officer, explained his firm's new vision for the clothing chain:

“Aéropostale’s DNA is inherently free-spirited and appeals to a young audience who seek brands that deliver authenticity.”

Woodhouse explained that his company planned to revitalize the brand, so it again would embrace its "core youthful and aspirational energy." This is, of course, an extreme case of a "strategic alternative" – in which a company goes bankrupt and new owners take over – but the term does generally refer to friendly investors coming to the rescue of a flailing company, bringing with them fresh ideas, and usually plenty of cash.

Other Examples of Strategic Alternatives

There are actually six examples of strategic alternatives, says Dr. M. Thenmozhi, a professor in the Department of Management Studies at Indian Institute of Technology, Madras Chennai, a public engineering college in Southern India. Thenmozhi lists these examples of strategic alternatives:

• Concentration , such as vertical or horizontal growth
• Diversification , such as concentric or conglomerate
• Stability , which involves following a steady course and trying to maintain profits
• Divestiture/sale
• Liquidation

Aeropostale is an example of the last three strategic alternatives on this list. As "USA Today's" Krantz noted, the business hoped for a turnaround. That, of course, did not happen under the current management. They seemed headed for liquidation via the bankruptcy, but in the end, the clothing chain found itself the target of what was essentially a sale through bankruptcy court. The new owners did achieve a turnaround. As of June 1, 2018, the chain has more than 21,000 employees working at hundreds of stores worldwide. So, this was a strategic alternative that clearly worked, albeit with new leadership.

The first three examples of strategic alternatives on the above list are, to a lesser degree, examples of companies that are struggling, and seeking alternatives that will help them survive. Concentration, as a strategic alternative, means that the company is ready to throw off many of its diversified holdings, so that it can concentrate on its core business.

Diversification is just the opposite: it indicates that a company is suffering from falling sales and/or profits, and hopes to link up with other businesses to increase its bottom line. Stability, as a strategic alternative, is the least likely path for a company. By definition, if a company is doing well, if sales are booming or if customers are clamoring for its services, it would not need a strategic alternative.

So, if you see the term "strategic alternative" or you hear that a company is looking at "strategic alternatives," you know that the firm in question is almost certainly floundering: Its core business is not doing well, so it is looking for a way – any way – to climb out of a sinking hole; hence, the term strategic alternative. A company that's strong, is selling its products, and is well-connected to its customers, does not need a strategic alternative to survive and flourish.

• USA Today: Ask Matt: What are 'strategic alternatives?'
• SlideShare: Strategic Management and Strategic Alternatives
• iEduNote: Strategic Alternatives Types in Strategic Planning
• Aeropostale: Company Website
• National Programme on Technology Enhanced Learning (NPTEL): Types of Strategies
• WWD: Aéropostale Reopens 500-Plus Doors

Leon Teeboom has written for such newspapers as "The Los Angeles Times" and "The Orange County Register." He has also written for/and worked as an editor at "The Press-Enterprise" as well as two business publications and several online media companies.

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Stop Making Plans; Start Making Decisions

• Michael Mankins
• Richard Steele

In most companies, strategic planning isn’t about making decisions. It’s about documenting choices that have already been made, often haphazardly. Leading firms are rethinking their approach to strategy development so they can make more, better, and faster decisions.

The Idea in Brief

Most executives view traditional strategic planning as worthless. Why? The process contains serious flaws. First, it’s conducted annually, so it doesn’t help executives respond swiftly to threats and opportunities (a new competitor, a possible acquisition) that crop up throughout the year.

Second, it unfolds unit by unit—with executive committee members visiting one unit at a time to review their strategic plans. Executives lack sufficient information to provide worthwhile guidance during these “business tours.” And the visits take them away from urgent companywide issues, such as whether to enter a new market, outsource a function, or restructure the organization.

Frustrated by these constraints, executives routinely sidestep their company’s formal strategic planning process—making ad hoc decisions based on scanty analysis and meager debate. Result? Decisions made incorrectly, too slowly, or not at all.

How to improve the quality and quantity of your strategic decisions? Use continuous issues-focused strategic planning . Throughout the year, identify the issues you must resolve to enhance your company’s performance—particularly those spanning multiple business units. Debate one issue at a time until you’ve reached a decision. And add issues to your agenda as business realities change.

Your reward? More rigorous debate and more significant strategic decisions each year—made precisely when they’re needed.

The Idea in Practice

To create an effective strategic-planning process:

Link Decision Making and Planning

Create a mechanism that helps you identify the decisions you must make to create more shareholder value. Once you’ve made those decisions, use your traditional planning process to develop an implementation road map. Example: 

At Boeing Commercial Airplanes, executives meet regularly to uncover the company’s most pressing, long-term strategic issues (such as evolving product strategy, or fueling growth in services). Upon selecting a course of action, they update their long-range business plan with an implementation strategy for that decision. (By separating—but linking—planning and execution, Boeing makes faster and better decisions.)

Focus on Companywide Issues

During strategy discussions, focus on issues spanning multiple business units. Example: 

Facing a shortage of investment ideas, Microsoft’s leaders began defining issues—such as PC market growth and security—that are critical throughout the company. Dialogues between unit leaders and the executive committee now focus on what Microsoft as a whole can do to address each issue—not which strategies individual units should formulate. Countless new growth opportunities have surfaced.

Develop Strategy Continuously

Spread strategy reviews throughout the year rather than squeezing them into a 2-3-month window. You’ll be able to focus on—and resolve—one issue at a time. And you’ll have the flexibility to add issues as soon as business conditions change. Example: 

Executives at multi-industry giant Textron review two to three units’ strategy per quarter rather than compressing all unit reviews into one quarter annually. They also hold continuous reviews designed to address each strategic issue on the company’s agenda. Once an also-ran among its peers, Textron was a top-quartile performer during 2004–2005.

Structure Strategy Reviews to Produce Results

Design and conduct strategy sessions so that participants agree on facts related to each issue before proposing solutions. Example: 

At Textron, each strategic issue is resolved through a disciplined process: In one session, the management committee debates the issue at hand and reaches agreement on the relevant facts (e.g., customers’ purchase behaviors, a key market’s profitability figures). The group then generates several viable strategy alternatives. In a second session, the committee evaluates the alternatives from a strategic and financial perspective and selects a course of action. By moving from facts to alternatives to choices, the group reaches many more decisions than before.

Is strategic planning completely useless? That was the question the CEO of a global manufacturer recently asked himself. Two years earlier, he had launched an ambitious overhaul of the company’s planning process. The old approach, which required business-unit heads to make regular presentations to the firm’s executive committee, had broken down entirely. The ExCom members—the CEO, COO, CFO, CTO, and head of HR—had grown tired of sitting through endless PowerPoint presentations that provided them few opportunities to challenge the business units’ assumptions or influence their strategies. And the unit heads had complained that the ExCom reviews were long on exhortation but short on executable advice. Worse, the reviews led to very few worthwhile decisions.

• Michael Mankins is a leader in Bain’s Organization and Strategy practices and is a partner based in Austin, Texas. He is a coauthor of Time, Talent, Energy: Overcome Organizational Drag and Unleash Your Team’s Productive Power (Harvard Business Review Press, 2017).
• RS Richard Steele ( [email protected] ) is a partner in Marakon’s New York office.

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11 Alternative Strategies In Strategic Management

Introduction.

Strategic management is the process of making decisions and taking actions that will enable an organization to achieve its goals and objectives. It involves the formulation of strategies and plans to achieve the desired outcomes. While traditional strategic management focuses on the development of a single strategy, alternative strategies in strategic management provide organizations with a range of options to choose from. These alternative strategies can be used to address a variety of challenges and opportunities, and can be tailored to the specific needs of the organization. This article will discuss 11 alternative strategies in strategic management, including diversification, market penetration, product development, joint ventures, alliances, mergers and acquisitions, and more.

Exploring the Benefits of Strategic Alliances in Strategic Management

Strategic alliances are becoming increasingly popular in the business world as organizations recognize the potential benefits of collaboration. Strategic alliances are cooperative agreements between two or more organizations that are designed to achieve a common goal. These alliances can be used to gain access to new markets, share resources, and develop new products and services.

The primary benefit of strategic alliances is that they allow organizations to leverage the strengths of each partner to create a competitive advantage. By combining resources, organizations can reduce costs, increase efficiency, and gain access to new markets. Additionally , strategic alliances can help organizations develop new products and services more quickly and cost-effectively.

Strategic alliances also provide organizations with access to new technologies and expertise. By partnering with other organizations, organizations can gain access to new technologies and expertise that they may not have access to on their own. This can help organizations stay ahead of the competition and remain competitive in their industry.

Finally , strategic alliances can help organizations build relationships with other organizations. By working together, organizations can build trust and understanding, which can lead to long-term partnerships. This can help organizations develop a strong network of partners that can provide support and resources when needed.

In conclusion , strategic alliances can provide organizations with a number of benefits, including cost savings, access to new markets, and access to new technologies and expertise. By leveraging the strengths of each partner, organizations can create a competitive advantage and build strong relationships with other organizations. Strategic alliances can be a powerful tool for organizations looking to gain a competitive edge in their industry.

Examining the Role of Mergers and Acquisitions in Strategic Management

Mergers and acquisitions (M&A) are a key component of strategic management. They are used to create value for shareholders, increase market share, and gain access to new markets and technologies. M&A can also be used to reduce costs, increase efficiency, and diversify a company’s portfolio.

When considering an M&A strategy, it is important to understand the potential risks and rewards associated with the transaction. The most important factor to consider is the strategic fit between the two companies. It is important to ensure that the two companies have complementary strengths and weaknesses, and that the combined entity will be able to achieve its strategic objectives.

The process of M&A can be complex and time-consuming. It is important to have a clear understanding of the legal, financial, and regulatory implications of the transaction. It is also important to have a thorough understanding of the target company’s financials, operations, and competitive landscape.

Once the strategic fit has been established, it is important to develop a comprehensive integration plan. This plan should include a timeline for the integration process, a budget for the transaction, and a strategy for managing the transition. It is also important to consider the potential impact of the transaction on employees, customers, and other stakeholders.

Finally , it is important to monitor the performance of the combined entity. This includes tracking financial performance, customer satisfaction, and employee morale. It is also important to ensure that the combined entity is meeting its strategic objectives.

In conclusion , M&A is an important tool for strategic management. It can be used to create value for shareholders, increase market share, and gain access to new markets and technologies. However , it is important to understand the potential risks and rewards associated with the transaction, and to develop a comprehensive integration plan. Finally , it is important to monitor the performance of the combined entity to ensure that it is meeting its strategic objectives.

Analyzing the Impact of Joint Ventures on Strategic Management

Joint ventures (JVs) are strategic alliances between two or more organizations that combine resources and capabilities to pursue a common goal. JVs are increasingly being used by organizations to gain access to new markets, technologies, and resources. As such, they have become an important tool for strategic management.

The impact of JVs on strategic management can be significant. By forming a JV, organizations can gain access to new markets, technologies, and resources that would otherwise be unavailable. This can help them to expand their operations and increase their competitive advantage. Additionally , JVs can help organizations to reduce costs and risks associated with entering new markets.

JVs can also help organizations to develop new products and services. By combining resources and capabilities, organizations can create innovative products and services that would not be possible without the JV. This can help them to stay ahead of the competition and increase their market share.

Finally , JVs can help organizations to build relationships with other organizations. By forming a JV, organizations can develop relationships with other organizations that can be beneficial in the long run. This can help them to gain access to new resources and capabilities, as well as to build trust and loyalty with other organizations.

In conclusion , JVs can have a significant impact on strategic management. By forming a JV, organizations can gain access to new markets, technologies, and resources, reduce costs and risks associated with entering new markets, develop new products and services, and build relationships with other organizations. As such, JVs can be a powerful tool for strategic management.

Investigating the Use of Franchising in Strategic Management

Franchising is a strategic management tool that has been used by businesses for decades. It is a form of business ownership in which a franchisor grants a franchisee the right to use its business name, logo, and other proprietary information in exchange for a fee. The franchisee then operates the business according to the franchisor’s guidelines and pays a percentage of the profits to the franchisor.

Franchising is an attractive option for businesses because it allows them to expand their operations without having to invest in additional resources. It also provides a way for businesses to enter new markets quickly and efficiently. Additionally , franchising can help businesses to build brand recognition and loyalty, as well as to benefit from the expertise of experienced franchisees.

When considering franchising as a strategic management tool, it is important to consider the advantages and disadvantages. On the plus side , franchising can provide businesses with access to new markets, increased brand recognition, and a steady stream of income. On the downside , franchising can be expensive and time-consuming to set up, and it can be difficult to maintain control over the franchisees. Additionally, there is always the risk that the franchisee will not follow the franchisor’s guidelines or that the franchisee will not be successful.

When deciding whether to use franchising as a strategic management tool, businesses should carefully weigh the pros and cons . If the potential benefits outweigh the risks, then franchising can be a great way to expand a business and increase its profits. However , if the risks outweigh the potential benefits, then it may be best to pursue other options.

Understanding the Benefits of Licensing in Strategic Management

Licensing is an important strategic management tool that can be used to increase a company’s competitive advantage. It is a form of agreement between two parties, in which one party grants the other the right to use its intellectual property, such as patents, trademarks, copyrights, or trade secrets, in exchange for a fee or other consideration. Licensing can be used to expand a company’s product line, enter new markets, and increase its revenue.

One of the primary benefits of licensing is that it allows a company to leverage its intellectual property without having to invest in the development of new products or services. By licensing its intellectual property, a company can access new markets and customers without having to invest in research and development. This can be especially beneficial for companies that are looking to expand their product offerings without having to invest in the development of new products.

Licensing can also be used to increase a company’s competitive advantage. By licensing its intellectual property, a company can gain access to new technologies and processes that can help it stay ahead of the competition. This can be especially beneficial for companies that are looking to stay ahead of the competition in terms of product innovation and customer service.

Finally , licensing can be used to generate additional revenue for a company. By licensing its intellectual property, a company can receive royalties from the licensee, which can be used to fund research and development or other activities. This can be especially beneficial for companies that are looking to increase their revenue without having to invest in the development of new products or services.

In summary , licensing is an important strategic management tool that can be used to increase a company’s competitive advantage, access new markets and customers, and generate additional revenue. By leveraging its intellectual property, a company can gain access to new technologies and processes, as well as additional revenue streams. As such , licensing can be a powerful tool for companies looking to increase their competitive advantage and generate additional revenue.

Examining the Role of Strategic Outsourcing in Strategic Management

The role of strategic outsourcing in strategic management is becoming increasingly important in today’s business environment. Strategic outsourcing is the process of transferring certain business functions to an external provider, such as a third -party vendor, in order to gain a competitive advantage. By outsourcing certain functions, organizations can reduce costs, increase efficiency, and gain access to specialized expertise.

Strategic outsourcing can be used to support a variety of strategic management activities. For example , it can be used to reduce costs by transferring certain functions to a third -party provider who can provide the same services at a lower cost. It can also be used to increase efficiency by allowing organizations to focus on their core competencies and outsource non-core activities. Additionally , strategic outsourcing can provide access to specialized expertise that may not be available internally.

In addition to cost savings and efficiency gains, strategic outsourcing can also provide organizations with access to new markets and technologies. By outsourcing certain functions, organizations can gain access to new markets and technologies that may not be available internally. This can help organizations stay competitive in a rapidly changing business environment.

Finally , strategic outsourcing can help organizations manage risk. By outsourcing certain functions, organizations can reduce their exposure to certain risks, such as legal or financial risks. This can help organizations protect their assets and ensure their long-term success.

Overall , strategic outsourcing can be a powerful tool for organizations looking to gain a competitive advantage. By outsourcing certain functions, organizations can reduce costs, increase efficiency, gain access to specialized expertise, and manage risk. As such , strategic outsourcing should be an integral part of any organization’s strategic management plan.

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5.2 Understanding Business-Level Strategy through “Generic Strategies”

Learning objectives.

• Understand the four primary generic strategies.
• Know the two dimensions that are critical to defining business-level strategy.
• Know the limitations of generic strategies.

Why Examine Generic Strategies?

Business-level strategy addresses the question of how a firm will compete in a particular industry ( Table 5.1 “Business-Level Strategies” ). This seems to be a simple question on the surface, but it is actually quite complex. The reason is that there are a great many possible answers to the question. Consider, for example, the restaurants in your town or city. Chances are that you live fairly close to some combination of McDonald’s, Subway, Chili’s, Applebee’s, Panera Bread Company, dozens of other national brands, and a variety of locally based eateries that have just one location. Each of these restaurants competes using a business model that is at least somewhat unique. When an executive in the restaurant industry analyzes her company and her rivals, she needs to avoid getting distracted by all the nuances of different firm’s business-level strategies and losing sight of the big picture.

The solution is to think about business-level strategy in terms of generic strategies. A generic strategy is a general way of positioning a firm within an industry. Focusing on generic strategies allows executives to concentrate on the core elements of firms’ business-level strategies. The most popular set of generic strategies is based on the work of Professor Michael Porter of the Harvard Business School and subsequent researchers that have built on Porter’s initial ideas (Porter, 1980; Zeng, 2009).

Table 5.1 Business-Level Strategies

Firms compete on two general dimensions — the source of competitive advantage (cost or uniqueness) and the scope of operations (broad or narrow). Four possible generic business-level strategies emerge from these decisions. An example of each generic business-level strategy from the retail industry is illustrated below.

According to Porter, two competitive dimensions are the keys to business-level strategy. The first dimension is a firm’s source of competitive advantage. This dimension involves whether a firm tries to gain an edge on rivals by keeping costs down or by offering something unique in the market. The second dimension is firms’ scope of operations. This dimension involves whether a firm tries to target customers in general or whether it seeks to attract just a segment of customers. Four generic business-level strategies emerge from these decisions: (1) cost leadership, (2) differentiation, (3) focused cost leadership, and (4) focused differentiation. In rare cases, firms are able to offer both low prices and unique features that customers find desirable. These firms are following a best-cost strategy. Firms that are not able to offer low prices or appealing unique features are referred to as “stuck in the middle.”

Understanding the differences that underlie generic strategies is important because different generic strategies offer different value propositions to customers. A firm focusing on cost leadership will have a different value chain configuration than a firm whose strategy focuses on differentiation. For example, marketing and sales for a differentiation strategy often requires extensive effort while some firms that follow cost leadership such as Waffle House are successful with limited marketing efforts. This chapter presents each generic strategy and the “recipe” generally associated with success when using that strategy. When firms follow these recipes, the result can be a strategy that leads to superior performance. But when firms fail to follow logical actions associated with each strategy, the result may be a value proposition configuration that is expensive to implement and that does not satisfy enough customers to be viable.

Analyzing generic strategies enhances the understanding of how firms compete at the business level.

Limitations of Generic Strategies

Examining business-level strategy in terms of generic strategies has limitations. Firms that follow a particular generic strategy tend to share certain features. For example, one way that cost leaders generally keep costs low is by not spending much on advertising. Not every cost leader, however, follows this path. While cost leaders such as Waffle House spend very little on advertising, Walmart spends considerable money on print and television advertising despite following a cost leadership strategy. Thus a firm may not match every characteristic that its generic strategy entails. Indeed, depending on the nature of a firm’s industry, tweaking the recipe of a generic strategy may be essential to cooking up success.

Key Takeaway

• Business-level strategies examine how firms compete in a given industry. Firms derive such strategies by executives making decisions about whether their source of competitive advantage is based on price or differentiation and whether their scope of operations targets a broad or narrow market.
• What are examples of each generic business-level strategy in the apparel industry?
• What are the limitations of examining firms in terms of generic strategies?
• Create a new framework to examine generic strategies using different dimensions than the two offered by Porter’s framework. What does your approach offer that Porter’s does not?

Porter, M. E. 1980. Competitive strategy: Techniques for analyzing industries and competitors . New York, NY: Free Press; Williamson, P. J., &amp.

Zeng, M. 2009. Value-for-money strategies for recessionary times. Harvard Business Review , 87 (3), 66–74.

Mastering Strategic Management Copyright © 2015 by University of Minnesota is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License , except where otherwise noted.

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We are here to help you with essays and not to expose your identity. Your anonymity is our priority as we know it is yours. No personal data is collected on our service and no third parties can snoop through your info. All our communication is encrypted and stays between you and your writer. You receive your work via email so no one will have access to it except you. We also use encrypted payment systems with secure gateways for extra security.

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Finished Papers

PenMyPaper: a student-friendly essay writing website

We, at PenMyPaper, are resolute in delivering you professional assistance to write any kind of academic work. Be it marketing, business, or healthcare sector, we can prepare every kind of draft efficiently, meeting all the points of the question brief. Also, we believe in 'research before drafting'. Any work without ample research and evidence will be a flawed one and thus we aim to make your drafts flawless with exclusive data and statistics. With us, you can simply relax while we do the hard work for you.

From a high school essay to university term paper or even a PHD thesis

EssayService strives to deliver high-quality work that satisfies each and every customer, yet at times miscommunications happen and the work needs revisions. Therefore to assure full customer satisfaction we have a 30-day free revisions policy.

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PenMyPaper: a student-friendly essay writing website

We, at PenMyPaper, are resolute in delivering you professional assistance to write any kind of academic work. Be it marketing, business, or healthcare sector, we can prepare every kind of draft efficiently, meeting all the points of the question brief. Also, we believe in 'research before drafting'. Any work without ample research and evidence will be a flawed one and thus we aim to make your drafts flawless with exclusive data and statistics. With us, you can simply relax while we do the hard work for you.

Once I Hire a Writer to Write My Essay, Is It Possible for Me to Monitor Their Progress?

Absolutely! Make an order to write my essay for me, and we will get an experienced paper writer to take on your task. When you set a deadline, some people choose to simply wait until the task is complete, but others choose a more hands-on process, utilizing the encrypted chat to contact their writer and ask for a draft or a progress update. On some occasions, your writer will be in contact with you if a detail from your order needs to be clarified. Good communication and monitoring is the key to making sure your work is as you expected, so don't be afraid to use the chat when you get someone to write my essay!

Benefits You Get from Our Essay Writer Service.

Typically, our authors write essays, but they can do much more than essays. We also offer admissions help. If you are preparing to apply for college, you can get an admission essay, application letter, cover letter, CV, resume, or personal statement from us. Since we know what the admissions committee wants to see in all these papers, we are able to provide you with a flawless paper for your admission.

You can also get help with business writing from our essay writer online. Turn to us if you need a business plan, business proposal, presentation, press release, sales letter, or any other kind of writing piece for your business, and we will tailor such a paper to your requirements.

If you say, "Do not write an essay for me, just proofread and edit it," we can help, as well. Just provide us with your piece of writing and indicate what exactly you need. We will check your paper and bring it to perfection.

Emery Evans