approaches to develop business strategy such as blue ocean strategy, scenario planning, SWOT analysis, PEST analysis, Porter's five forces, core competence framework, Ansoff matrix, force field analysis and decision trees

6.2 Business Strategy – Developing Business Strategy

In this section we explore the main tools and frameworks that help businesses plan their future. Think of them as different lenses that let you see the same landscape in new ways. 🚀

Blue Ocean Strategy

Instead of fighting for a share of a crowded market (a red ocean), Blue Ocean Strategy encourages companies to create a new market space where competition is irrelevant.

  • 🔍 Value Innovation: Combine value for customers with innovation in cost.

  • 🌊 Four Actions Framework – Eliminate, Reduce, Raise, Create to reshape the industry.

Exam Tip: When asked to apply Blue Ocean, identify one industry and suggest one new value curve that could open a “blue ocean”.

Scenario Planning

Imagine a storybook where you write several possible futures. Scenario planning helps you prepare for each one.

  1. 📌 Define the scope – What time frame and key variables?

  2. 🧩 Identify drivers – Economic, social, tech, political.

  3. 🌪️ Create scenarios – e.g., “Tech Boom”, “Economic Downturn”, “Regulatory Shift”.

  4. 🛠️ Develop strategies that work across scenarios.

Exam Tip: Use the Drivers list to show how you would build a scenario for a given company.

SWOT Analysis

SWOT is a quick snapshot of a company’s Strengths, Weaknesses, Opportunities, and Threats.

StrengthsWeaknessesOpportunitiesThreats
Strong brandHigh cost structureEmerging marketsNew competitors

Exam Tip: For a given company, list at least two items for each SWOT cell and explain how they influence strategy.

PEST Analysis

PEST looks at the big picture forces that shape an industry.

PoliticalEconomicSocialTechnological
Tax policyInflation rateChanging lifestylesAI advancements

Exam Tip: Link each PEST factor to a specific strategic decision (e.g., “High inflation → price adjustment”).

Porter’s Five Forces

Assess how much power each force gives to the industry players.

ForceImpact
Threat of New EntrantsHigh barriers → Low threat
Bargaining Power of SuppliersFew suppliers → High power
Bargaining Power of BuyersMany buyers → Low power
Threat of SubstitutesMany alternatives → High threat
Industry RivalryMany competitors → High rivalry

Exam Tip: Use the Five Forces to explain why a company might choose a cost‑leadership vs. differentiation strategy.

Core Competence Framework

Core competencies are the unique strengths that give a firm a competitive edge.

  • 🔧 Unique skills – e.g., Apple’s design team.

  • 🗝️ Customer value – features that customers can’t find elsewhere.

  • 📈 Competitive advantage – sustained over time.

Exam Tip: Identify two core competencies for a chosen firm and discuss how they shape strategy.

Ansoff Matrix

Decide whether to grow by market or product changes.

Existing ProductsNew Products
Market PenetrationProduct Development
Market DevelopmentDiversification

Exam Tip: Match a real company’s recent move to one of the four Ansoff cells and justify the choice.

Force Field Analysis

Visualise the forces that push or pull a company toward a goal.

  • 🚀 Driving forces – e.g., new technology, market demand.

  • 🛑 Restraining forces – e.g., regulatory hurdles, high cost.

Balance the two to decide whether to proceed.

Exam Tip: Create a simple force field diagram for a company launching a new product.

Decision Trees

Step‑by‑step maps of choices and outcomes, often used for risk assessment.

  1. 🔄 Start with a decision node (e.g., “Invest in R&D?”).

  2. 📊 Branch into outcomes (Yes → Success/Failure; No → Status quo).

  3. 💰 Assign probabilities and pay‑offs to each leaf.

  4. 📈 Calculate expected value to choose the best option.

Exam Tip: Show a simple decision tree for a firm deciding whether to enter a new market.