Business Strategy Tools
There are many helpful business strategy tools. The positioning school of strategy formulation offers strategy tools to focus on strategies to help business best position themselves. The concepts and tools below are largely founded on the writings from two of Michael Porter’s books – Competitive Strategy (1980) and Competitive Advantage (1985).
The “five forces model” outlines the driving forces within any industry. These include:
In his book Competitive Strategy, Michael postulates that for any industry, there are really only four different “generic” strategies that companies can pursue.
Cost Leadership Strategy
Cost “Focus” Strategy
Differentiation “Focus” Strategy
Michael Porter identifies what is called a “generic value chain” – one of the important business strategy tools available. In the operational model below, we see reference to primary and support activities. Primary activities are those employed directly to develop and service products for customers. The support activities help to enable or sustain the primary activities (e.g., human resource management).
Business Strategy Tools
This model is one of several business strategy tools intended to help businesses to determine competitors’ courses of action. There are four categories of analysis that help.
What Drives the Competitor? (Motivation)
What are the current plans and actions of your competitor? (Actions)
What are the assumptions of your competitor? (Assumptions)
What is your competitor capable of? (Capabilities)
Boston Consulting Group (BCG) developed what is referred to as the “BCG growth-share matrix” to help large corporations determine what businesses they should invest in (or not) to maximize their profits. The matrix a business strategy tool to help companies know where to invest.
Star businesses are those tin markets with high growth rates and where business have high market share. If a market is a star, that means it is growing quickly. In this case, a corporation may need to invest heavily to maintain their lead.
A business unit that is in the cash cow sector has a large market share in a mature, slow growing industry. Little investment is needed here and profits could be used to invest in other businesses.
This is a business that has a small market share in an industry that is growing quickly. This is typically a high risk high reward situation. Question mark businesses require investments
This is a business that has a small market share in a mature industry. Typically, dog businesses are liquidated.
Game theory is another business strategy tool that involves strategic decision making. To survive and compete, businesses need to consider the likely plans and actions of their competitors.
Generic Steps The generic steps in game theory include:
For a good overview of game theory click here.
Strategy Group Analysis helps to:
Michael Porter (1980) developed this business strategy tool or concept called “strategy group analysis.” This is integral to his overall system of strategic analysis. Strategic group analysis involves identifying and analyzing group of companies within an industry that are competitors, and then determine how to best compete.
The key is to successfully identify organizations with similar competing strategies, and then looking at their strategies – see examples below:
Recommended Links to Other Business Strategy Tools