Posted: December 6th, 2014

BUSINESS STRATEGY REPORT

BUSINESS STRATEGY REPORT

Order Description

(i) Choose a business. This should be listed on the London (FTSE) or New York stock exchanges.
Where the target company has multiple listings, please state the details of this at the top of your a) Proposal and b) Main report and include with these details the ISIL number for your company’s listing.
(ii) The chosen business should be facing competitive disadvantages and/or serious strategic issues. If you choose a company which is not facing serious strategic issues (ie one which dominates its sector without other strategic problems, or is otherwise doing well), you will not be able to generate insightful strategic recommendations.
The company needs to have a clear like-for-like competitor set offering as far as possible like for like comparable products: If this clear competitor set is absent, then a competitive analysis in this context is impossible.
If your target company is in a global marketplace then you must do your analysis with reference to this global marketplace. The reason for this is because it is highly likely that the global economies of scope and scale will affect the competitive position of your target company in any national market.

N1079, BUSINESS STRATEGY REPORT, Autumn 2014
KEY ELEMENTS FOR REPORT

KEY ELEMENT    KEY QUESTIONS TO CONSIDER    SUGGESTED TOOLS FROM THE TOOLBOX    LEVEL(s) OF ANALYSIS
1 Strategic Analysis
Profile of the industry, sector, competitors, consumers & company    In what market(s) does the firm operate?  What sector/s is it in? Who are the competitors? What is the market share size, growth and market share  history of the company/competitors? What is the size, shape and recent history of demand, and what are the trends?

What products does it sell, and which are the most important to the firm?  How large is the firm?  How much has it grown in the last 5 (10, 20) years?  How many employees does it have?    Identify market size & trends
Key players

Market share calculations    Industry

Company
Organisational purpose    What is the company’s  Mission statement?  Stated Vision?  Do you see any evidence in your research that the stated mission/vision of the firm is different from what it is actually doing? What ethical Values does it champion if any?

What are its and its competitors’ key financial indicators for the last few years (e.g., Sales, PBIT, Capital Employed, ROCE)?  How strong is its balance sheet?    Mission, vision & value statements (value in the sense of cultural /operational values) :
•    How they treat employees, customers, suppliers…
Sales & profit analysis for past 5 years
•    ROCE & Component ratios: their evolution over time and compared with competitors
Organisational goals (see lecture)     Mainly corporate.
Also business stream.

Keep a record of any strategic options that you generate from your analysis!
External and internal environment
– incl. competitive environment    External:  What are the most important environmental issues and changes affecting the firm’s ability to operate and to compete?  (e.g., legal, political, natural environment, demographic etc).
Internal:  What capabilities or competences  that are better than most firms in the market? In other words, what if any are sources of competitive advantage?  In what area(s) is the company particularly weak?  What resources (tangible, intangible, human resources) can the firm exploit?  Which of these capabilities/resources are VRIN (valuable, rare, inimitable, nonsubstitutable?) What constrains expansion? (finance, production, people?)
Competitive environment:  How concentrated is the industry, and how intense is competition?  Bargaining power of customers and suppliers?  Threat of substitutes?  Threat of new entrants into the market?     External – PESTEL, OT (from SWOT)

Internal – SW (from SWOT), VRIN, Distinctive competencies & resources. Constaints.

Competitive environment – Porter’s 5 Forces

•    Think about implications of each factor.
•    What does each strength & weakness  mean for their future? Something to exploit or build up? (ie strategies!)    Business stream level ( different for different business streams).

Corporate.

Functional (marketing, R&D, production etc).

Keep a record of any strategic options that you generate from your analysis!
Basis of competition & Key Success Factors    How does the firm compete in its market(s)?  What is in the mind of customers in choosing between competitors? This implies KSFs – what every co. needs to do be successful.    Basis of competition & implied KSFs

Or use ROCE & component ratios to identify KSFs (see example in Org Purpose lecture)    Primarily business stream level analysis.
Very useful way to identify strategies!

2 Strategic Development
Existing strategy(s)    Based on all you’ve learned so far, how would you define the firm’s current strategy?  How does the firm compete today & what do you believe are its strategic objectives?

At the corporate level, how do you think the firm views its strategy?  How do the existing business streams fit together, or complement each other? Has it gone outside to acquire  new capabilities, technology, market share? Ie added a new business stream? Licenced technology or entered into a JV?    Business stream level:  The ‘Strategic direction matrix’ is a good way to bring together elements of other tools, (such as Porter’s generic strategy, Ansoff, …objectives, resource levels). One matrix for each business stream

Corporate level:  Portfolio planning tools, primarily BCG &  ADL because cash based    SBU and corporate.

Show how business stream strategies fit into overall ‘corporate’ strategy.
Generation of strategic options    What are (feasible) strategic options available to the firm?  How is firm going to continue to increase profits? Expand into new products/ services, sectors or geographic markets? Diversify? Sell peripheral businesses?

Look at cost reduction, and if so, how/where?  Or do they compete on basis of differentiation? Or both?

Will the firm look to increase its share of existing markets, and if so, how?
Which options are financially feasible?

While you cannot do a full financial analysis, you should be able to make an order-of-magnitude judgment of feasibility based on the company’s existing balance sheet.

Try to come up with a range of feasible options; don’t get stuck on one or two that are your favorites (there’s time for that in your final recommendation).
A good starting point is ROCE and its related components – think about ways that firm could increase ROCE (by increasing numerator and/or decreasing denominator) within external & internal constraints

Plus… a broad framework of models:
For external strategies
•    Porter’s generic strategies
•    Ansoff’s matrix (market options)
•    Expansion strategies
For internal (resource-based) strategies
•    Value chain
•    Resources/competencies
•    Cost reduction strategies

Business stream identification & ‘Strategic Direction’ matrix for each business stream. Give ‘broad’ business stream direction assuming no constraints

The 6x framework allows you to think of strategies applicable to the whole company (ie. Corporate) … or to each business stream

Some functional  strategies e.g:
•    hiring key HR talent
•    competing on low cost, both  operations &  supply chain)

Keep your list of strategic options updated!
Evaluation and ranking of options    Business stream  level:
•    What are estimated costs & benefits of each strategic option? What are the major risks associated with each?
•    What is the timing of required investment and expected benefits?
•    Ideally, investment timing and implementation  will be staggered (ie, not all occurring at the same time)

Corporate level:  After evaluating and ranking strategic options, then evaluate and  rank the overall  portfolio of SBUs.
•    Are there any Business streams that you think the company should divest (sell)?
•    Any new product /market business streams available by acquiring or licensing new technology? (Ansoff). Related diversification?
•    Any geographic areas the company should consider entering/exiting at the corporate) level? Strategic acquisitions /disposals?
•    Use BCG or ADL matrices to decide prioritise between business streams
•    Rank  business stream-level strategy options in a list – you’re ranking the various business stream strategies, given that there are limited resources (ie, not all business streams can do everything they want).    Use BCG or ADL matrix. Position on matrix determines priorities between business streams & between any other strategies – given that cash, time, people etc are limited.

Likely ‘strategies’ & ‘investment strategies’ dependent on business stream position on ADL matrix. Helps to decide priorities.

See lectures on this site for details.

Cash profiling prioritises your list of strategic options. Compare the business stream’s or company’s  cash generation from existing operations with the estimated investment required for new strategies (if using BCG or ADL matrix).

Make basic, order-of-magnitude estimates of cash generation (from existing operations) versus investment requirements, based on the information you have – just show estimates     •    Corporate for portfolio options

•     SBU level for product/market options

•    Functional
Choice of strategies    Based on the ranking above, choose the strategies that you recommend the firm should implement over the next 5 years (& beyond).        All levels

3  Implementation    What are the major implementation issues for your recommended strategies?
What is the timing of each major strategic initiative, and the key milestones of progress within each strategic initiative?
How should the company address the major risks associated with the strategic options?
What controls should be put into place to address these risks?    Gantt chart or other simple bar chart to show key actions & timing. Milestones.

Check against McKinsey’s 7S framework. Have you covered each S?

See  lecture on ‘Strategy Implementation.’

Don’t ignore implementation!    All levels.

Focus on the ‘bigger’ strategies in any bar chart.

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