Business Strategy Framework #1 ANSOFF MATRIX ANALYSIS
The Ansoff Matrix is a business strategy framework and a planning tool that provides managers with a template to devise strategies for future growth.
There are 4 growth strategies within the Ansoff Matrix:
- Market penetration strategy = in which the company seeks to improve business performance either; by increasing the volume of sales to its present customers or by finding new customers for present products;
- Market development strategy = in which the company sells its existing products to new markets;
- Product development strategy = in which the company develops new products for the same market;
- Diversification strategy = in which the company develops new products in a new market.
What growth strategies does Apple use?
Learn from our Ansoff Matris analysis of Apple.
Business Strategy Framework #2 BCG GROWTH-SHARE MATRIX
The BCG Growth-Share Matrix helps companies analyze their business units (i.e. their product lines) or any other cash-generating entities by their degree of profitability.
This business strategy framework provides the company with a four-quadrant chart where products are ranked on the basis of their relative market shares and growth rates:
“cash cows”,
“dogs”,
“question marks” and
“stars”.
Cash cows are products in low-growth areas for which the company has a high market share.
Products with a low market share in areas with slow growth are dogs.
Question marks are the products with a low market share in a high growth rate market.
Stars are products with a high market share in a high growth rate market.
To show how you can use the matrix for your business, read our analysis of e-commerce leader Amazon, specifically four of its products: Amazon AWS, Amazon Video, Amazon Live and Amazon Echo with Alexa.
Business Strategy Framework #3 PORTER DIAMOND MODEL
The Porter Diamond Model is a business framework that describes a nation’s competitive advantage in the international market.
It also refers to innovation and why certain companies based in certain nations are capable of consistent innovation.
The 4 attributes of the Porter’s Diamond Model:
Factor Conditions = defines the nation’s position in factors of production, such as labour, land, natural resources, capital or infrastructure, necessary to compete in a given industry.
Demand Conditions = refers to the nature of home-market demand for the industry’s product or service.
Related and Supporting Industries = reveals the presence or absence in the nation of supplier industries and other related industries that are internationally competitive.
Firm Strategy, Structure, and Rivalry = highlights the conditions in the nation governing how companies are created, organized, and managed, as well as the nature of domestic rivalry.
Curious to see Porter’s Diamond Model applied to two leading brands?
Read Porter’s Diamond Model Analysis – Louis Vuitton and BMW.
Business Strategy Framework #4 PESTEL
PESTEL business analysis is a framework for helping entrepreneurs and business people to understand the impact of macro-environmental factors on their businesses.
The PESTEL acronym stands for 6 factors: POLITICAL, ECONOMIC, SOCIAL, TECHNOLOGICAL, ENVIRONMENTAL, and LEGAL.
Political factor = helps you appraise the degree to which a government intervenes in the economy or a certain industry.
Economic factor = examines the economic growth, exchange rates, interest rates, unemployment rates, the state of the country’s infrastructure, and taxes.
Social factor = analyzes the profile and behaviour patterns of your customers.
Technological factor = lists the technologies impacting your industry and whether they are or not favourable.
Environmental factor = takes into account any negative impact your company operations have on the environment and prompts your company to reduce the carbon footprint, reduce waste and pollution, and preserve the environment.
Legal factor = looks into the laws and regulations of your industry.
Not sure how to apply the framework to your business?
Read A Pestel Analysis of Nike.
Business Strategy Framework #5 PORTER’S 5 FORCES
Porter’s 5 Forces framework is a valuable business tool that helps entrepreneurs shape their strategy to drive profitability.
Porter’s 5 forces are:
1. Existing rivals = Evaluate the existing rivals by looking at the number of competitors, their size and power, the industry growth rate and product differentiation.
2. Buyers = The buyers are powerful and can influence the industry if they make purchases in large volumes. Are they price-sensitive? Do they have many alternatives to buy from?
3. Suppliers = Factors in determining supplier power: number of suppliers and concentration, switching costs, availability of substitutes, uniqueness of product, whether or not the industry is an important customer of the supplier and its availability to cut out the middleman.
4. Substitutes = Substitutes are alternative products that fulfil the same need by different means. In the airline industry, the substitutes are trains and cars.
5. New rivals = Is it easy for new rivals to enter the industry? If the entry barrier is low, which means requirements to enter the industry are affordable or readily accessible, then there are increasing chances of new entrants in great numbers. In this case, the threat is high.
Attend the BUSINESS STRATEGY MASTERCLASS, on October 27, and learn strategic business moves from Costas Markides, Professor of Strategy & Entrepreneurship at London Business School.
