Unit 32-LO4 Apply models, theories, and concepts to assist with the understanding and interpretation of strategic directions available to an organization-BTEC-HND-Level 4 & 5

Course: Pearson BTEC Levels 4 and 5 Higher Nationals in Business

Strategic leadership as used in this context means the ability to simultaneously develop and execute a strategy. Strategists must make hard decisions, often with imperfect or incomplete information, under intense time pressure. They require knowledge of business fundamentals – most importantly finance and macroeconomics – but they also need to be experts on strategy subjects like marketing, technology, operations, competitive dynamics.

Additionally, strategic leaders are required to have analytical skills that are grounded in facts and data but can also deal effectively with ambiguous situations; creativity that helps manage new problems that other entrepreneurs never encountered before; communication skills for persuading professionals inside as well as outside an organization when taking measures that affect them about decisions he has already made; confidence and self-confidence which means leading, inspiring and encouraging people to a common goal; leadership that means having the ability to gain commitment from his subordinates and co-leaders towards the organization’s mission; management which includes creating efficiency in an organization so as to guarantee its survival despite competition.

Strategic choices and directions:

The application of Porter’s generic strategies: cost and price leadership strategy, differentiation strategy, focus strategy, and the extended model of Bowman’s strategy clock.

The Porter generic strategies are designed to help businesses develop and refine their own competitive strategies. The following is an explanation of how the cost and price leadership strategy would work for a company.

For a business to employ the cost leadership strategy, they must have low costs or produce greatly in excess of what they can sell.

For example, Walmart has been able to expand its operations without making major investments into building new stores because its infrastructure was already in place through its acquisition of Walmart Canada and various arrangement contracts with suppliers (Chung).

Essentially, this system relies on high volume sales rather than higher prices -which makes sense for products such as food that will rot if not sold- but doesn’t make sense for products like designer clothing that people will pay top dollar for regardless of how much is available.

Hybrid strategy

There are many possible hybrid strategies and each company is different. A strategy that may be successful for one company may not work well for another.

With all the strategic options, choosing which is best can be difficult. It’s important to ask yourself what you want to achieve with your business in the long term and those needs should then drive the decision about how you decide on a strategy.

Some companies may want to grow their core business market quickly before moving into new markets while others who have been around for generations might just need to maintain their current size or find ways of ensuring they stay profitable in an unstable economic environment where there are constant changes in population demographics and buying trends.

Diversification

Diversification is a common business strategy that seeks to reduce risk by investing in different aspects of the market.

For example, if you’re running a restaurant and you cook everything from french fries to cornbread to dessert, your chances for success are greater than if you only served one dish.

If all my eggs are in one basket and I drop it (and make be oopsie), then I’m going bankrupt. But if I have all sorts of baskets with lots of eggs and plates underneath them (mortgage payments, groceries bills, utility bills) then at least when oopsie happens I’ll have something left over instead of nothing. Diversification allows us to weather storms more easily because it provides stability — diversification is not risk-free. It may never actually be able to eliminate risk but it can provide a buffer against the most severe forms of risk.

Vertical/horizontal integration

Vertical integration is different from horizontal integration. Horizontal integration means the company produces a range of products and services, whereas vertical integration refers to owning the production chain all the way “up” through much of it (from raw material suppliers to wholesale distributors).

For instance, owning farms that produce cattle or grains as well as processing factories that can produce meat or flour.

Vertical/Horizontal Integration is implemented for various reasons. Typically mentioned are economies of scale and moving closer to customers for better service. Also, being close to raw material suppliers can allow an organization more potential control over where they buy their goods which will, in turn, minimize costs if done successfully.

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