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Strategic Change Plan for an International Business

Strategic Audit

Individual-written essay (online assessment) of a strategic change plan  For an organisation of your choice, you should formulate a strategic change plan either for the operations of an existing international business or for organisation intending to internationalise. The strategic change plan should be based on a detailed strategic audit and evaluation of strategic option(s). Strong rationale should be provided for the chosen strategic option. Critical evaluation of requirements for implementing the strategic option chosen should also be considered.

For instance: issues such as strategic change management, and cross-cultural implications.  You will write a 2000-word essay (strategic change plan), as'management consultant' and are expected to work on this assignment throughout the course of the module. Your 2000-word strategic change plan should be articulated in a professional manner as if delivering the plan to the company’s Board of Directors for its consideration.

The strategic change plan should consist of at least the following major elements:

• A strategic audit

• The generation of strategic change options and evaluation of strategic change plan in terms of feasibility, acceptability and suitability criteria.

• An action plan for implementation.

This assignment is designed to assess the following learning outcomes:

1. Application of appropriate strategic concepts and models to organisational settings.

2. Synthesis of recommendations to strategic situations.

3. Critical analysis and evaluation using key strategic tools.

4. Demonstration of in-depth understanding of implementation difficulties in strategic management.

5. Demonstration of clear written and oral communication.

Assessment one Sample   Strategic Change Plan: a case study of Shanghai Shenzhou Travel Agency Table of Contents

1.0. Introduction 

2.0. Strategic Audit 

2.1. Macro-Environmental Analysis 

2.1.1. Political Factors 

2.1.2. Economic Factors 

2.1.3. Socio-Cultural Factors 

2.1.4. Technological Factors 

2.2. Industrial Analysis (Porter’s five forces). 

2.2.1. Bargaining power of customers/ threat of substitute products/ competitive rivalry 

2.2.2. Bargaining power of suppliers/ Threat of new entrants. 

2.3. Internal Analysis 

2.3.1. SWOT Analysis 

2.3.2. VRIO Analysis 

3.0. Strategic Formulation 

3.1. How to Compete 

3.2. Strategic Change Options 

3.3. Method of Growth

3.4. Evaluation of the Strategic Options 

4.0. Strategic Implementation 

5.0. Conclusion, References      

1.0.  Introduction:-

Organizations operate in dynamic environments that necessitate strategic changes either for survival or to optimize competitive advantages. A strategic change plan is thus important as it avoids a strategic drift by ensuring that an organization’s strategy is at pace with the changing environment (Johnson, et al., 2018 ). The Corona virus pandemic is, arguably, the recent most potent environmental change necessitating strategic changes to organizations.

Macro-Environmental Analysis

A World Economic Forum (2020) report stressed that Covid-19 has devastated the global tourism industry. A related report projected a loss of $1trillion and the loss of 120 million jobs (UNWTO, 2020 ). This is because international travel is a vector of Covid-19 hence its decimation of the tourism industry necessitating strategic changes. The goal of this report, therefore, is to develop a strategic change plan for Shanghai Shenzhou travel agency whose focus on outbound tourism for international students has been affected by Covid-19.

2.0. Strategic Audit:-

An in-depth understanding of the environment is one of the four keys of successful strategies and aligns with the strategy from the outside-in perspective of creating value based on market insights (Grant & Jordan, 2012); (Day & Moorman, 2010). This section will analyze three main layers of the environment as the beginning of strategic thinking for relevant changes.  

2.1. Macro-Environmental Analysis

2.1.1. Political Factors:-

Political responses to Covid-19 have created both opportunities and threats. In January, the Chinese government ordered travel agencies to suspend all forms of tourism especially outbound tourism (Bloomberg, 2020). This meant that Shanghai Shenzhou travel agency could not be able to organize international education exchanges. Recently, the second wave of Covid-19 is leading to lockdown protocols in EU countries as exemplified by France (BBC, 2020).

This is coupled by a government –mandated quarantine for travelers coming from overseas (Enger, et al., 2020). The uncertainty of Covid-19 is thus a threat to the agency’s primary revenue stream. However, in China, domestic tourism has become more lucrative with the ministry of culture and tourism promoting cross-provincial tourism (Cheshire, 2020).

2.1.2. Economic Factors:-

Covid-19 has led to unemployment and loss of income affecting the consumption of Chinese tourists. According to the UNWTO (2020), the global tourism is predicted to lose $1trillion from Covid-19’s impact. This is mainly from Chinese tourists that make a large proportion of international tourists and is a specific threat to Shanghai Shenzhou agency. Ha and Phung (2020) add that prospective international students are not willing to pay high tuition fees for international online courses. This means that the reduced attractiveness of international study can lead to the decline or death of the company given Covid-19’s endemic status.

2.1.3. Socio-Cultural Factors:

Covid-19 has led to a surge in domestic tourism in China. This trend is attributable to the closure of international borders, fear by Chinese of being infected overseas or being quarantined after outbound travels (Hotel News , 2020); (Enger, et al., 2020). Springer (2020) explains that the latter is due to a decline in domestic infections in China while Song (2020) explains that it’s also due to a preference for staycations This means that Chinese travelers are preferring domestic tourism as it’s deemed to have less health risks and cost implications. Local sites have also implemented precautions such as controlled visitors and use of masks. Domestic tourism is also being preferred by younger consumers especially millennials or Generation Z as Covid-19 (Enger, et al., 2020); (Song, 2020). This implies that Covid-19’s severe impact on the elderly is necessitating a shift in the target market.

Political Factors

2.1.4. Technological Factors:-

Young consumers are using the internet to search for domestic tourists’ sites that are considered safe (Hotel News , 2020). This implies that travel agencies must make more use of technology in their marketing campaigns. The PEST analysis indicates that health and safety are the critical success factors driving the recovery of the tourism sector amid Covid-19.

2.2. Industrial Analysis (Porter’s five forces):

.According to Porter, the competitive pressures in an industry determine its profit potential. This section will analyze the main forces in light of the Corona Virus Pandemic.

2.2.1. Bargaining power of customers/ threat of substitute products/competitive rivalry:-

Tourists bargaining power can be deemed to be high. Hotel News  (2020) and Song (2020) explain that Chinese are preferring domestic tourism or travelling regionally in Asian countries due to the perceptions of safety. Ha & Phung (2020) add that international study is not attractive without actual social interactions. This implies that consumers can easily switch from outbound tourism to inbound tourism. Travel agencies that offer comprehensive services thus are good substitutes including China International Travel Service. Singer (2020), reported that the uptake of international travel is dependent on perceptions of safety. Competitive rivalry can thus be deemed to be high based on the company’s value proposition in the current status quo.

2.2.2. Bargaining power of suppliers/ Threat of new entrants:

There is a low threat of new entrants as they’d have to contend with entry barriers such as strong brand reputations. Shanghai Shenzhou travel agency, for example, is renowned by universities abroad for organizing overseas study tours. In terms of suppliers, this threat is low as the Corona pandemic has affected the whole industry resulting in collaborative recovery efforts. Chinese airlines including Hainan airlines and China Eastern airlines have offered heavy discounts incentivizing domestic travel. In a nutshell, the industrial analysis established that the profit potential of tourism is affected through outbound tourism. However, domestic tourism holds profit potential.  

2.3. Internal Analysis:

The resource based view of strategy suggest that the sustainability of competitive advantages results from the optimal use of an organization’s resources and capabilities (Lynch, 2018). This section will thus use two models to analyze the internal environment of Shanghai Shenzhou travel agency.

2.3.1. SWOT Analysis  

Strengths 3.0. Strong brand reputation for organizing international student exchanges. 4.0. Focus on young consumers…not as vulnerable to Covid-19. Weaknesses 5.0. Single revenue stream-reliance on outbound tourism. 6.0. Lack of experience in domestic travel. 7.0. Lack of a strong presence on the internet. Opportunities 8.0. Growth in domestic tourism in China 9.0. 55 UNESCO sites that young consumers have not explored. Threats 10.0. Decline in outbound tourism due to closed borders and fear of contracting Covid-19 abroad.

Economic Factors

2.3.2. VRIO Analysis

The Shanghai Shenzhou travel agency’s main competencies are a reputation for organizing overseas study tours and a niche market for prospective international students. Before Covid-19, this niche-oriented strategy was a source of competitive advantage due to being unique. However, the closure of borders and shift to online learning implies that these competencies are not currently valuable hence are a source of competitive disadvantage. This implies that the agency should re-assess its competencies to uncover value. In 2018, the ministry of education had projected overseas study tours to reach 40 million yuan in 2020 (Wenqian, 2018). However, Covid-19 has affected these figures. Ge (2019) notes that other Asian destinations such as Thailand or Singapore are also popular for overseas study tours. To this end, Shenzhou’s travel agency’s competency can be deemed as valuable. However, they are not rare as competitors such as C-trip have a global study tour unit. This competitive parity calls for a re-assessment of the travel agency’s strategy.

3.0. Strategic Formulation

The strategic audit established that Shenzhou’s travel agency survival is reliant on a strategic change. This section generates and evaluates strategic options that can help the agency to optimize its strengths and, take advantage of the growth for domestic tourism.

3.1. How to Compete:

The generation of strategic options begins with choosing a strategy through which a company pursues competitive advantages (Johnson, et al., 2018 ). Porter (2017) suggests three generic strategies. It is recommended that Shenzhou travel agency should pursue a focus differentiation strategy. The tourism market is intensely competitive with a high risk of mimicking competitive advantages. A differentiation focus will help the company to optimize on its focus on young consumers who are the main target demographic in the Covid-19 domestic spurred tourism.

3.2. Strategic Change Options

Ansoff proposes four types of strategic options. The following two directions of growth are recommended based on the travel agency’s current strategic situation. a) Related Diversification: In this strategy, Shenzhou travel agency will offer comprehensive domestic tourism packages to young millennials in China. Notably, the agency lacks experience in domestic travel. However, this strategy offers the company the opportunity to diversify its income stream and explore on synergies between domestic and outbound travel. b) Product Development: Under this strategy, the travel agency will focus on offering study tours in China and the Asian region. Through this strategy, Shenzhou agency will make use of its competence in organizing overseas student exchange. This package will, however, be tailored to the new normal under Covid-19 by incorporating quarantine insurance.

Socio-Cultural Factors

3.3. Method of Growth:

The above strategies call for the development of new products. The SWOT analysis established that the Shenzhou travel agency is limited by its lack of domestic experience and lackluster presence on the internet. To mitigate these weaknesses and facilitate new product development, it is recommended that the agency should enter into a strategic alliance with a Chinese company. This method of growth is beneficial as it allows for strategic synergy and mitigates limited resource availability (Grant & Jordan, 2012). Shenzhou will thus benefit by gaining competencies in domestic tourism.

3.4. Evaluation of the Strategic Options:

The success of a strategic option is determined by weighing it through three criteria of the SAF model (Johnson, et al., 2018 ).   Suitability Acceptability Feasibility Related Diversification Shenzhou agency lacks experience in domestic travel. However, this strategy is suitable as it helps the agency to take advantage of the growing popularity of domestic tourism in China as well as mitigate the company’s death through international travel bans. Resistance to change among employees is possible as it calls for the development of a new product. Investors acceptance is possible due to the continued survival of the company. Ready market for domestic tourism.

The agency does not have the resources to diversify into a new market with a new product. However, this limitation can be mitigated using a strategic alliance. Product Development This strategy optimizes the travel agency’s competency of study tours and also mitigates the impact of Covid-19 on international tourism. Customers might not be willing to take study tours in China. Investors might be reluctant due to lower returns as compared to international student exchanges. Shenzhou agency has the human resources required for this strategy but it lacks the resources needed for exploring a new market. Based on the above assessment, it is recommended that the agency should implement the related diversification strategy. This is because this strategy is not only suitable for the agency’s strategic position but also faces acceptance. Challenges such as resistance to change and lack of domestic experience can be mitigated using operational strategies.

4.0. Strategic Implementation:

To put related diversification strategy into action and enhance its success the following is recommended: • Strategic Alliance: Shenzhou travel agency’s resources should support the related diversification strategy. A strategic alliance will enable the agency’s employees to gain domestic experience within a short period. The agency will bring in its knowledge of organizing student tours to the alliance.

Technological Factors

• Managing Strategic Change: the strategic alliance combined with implementing a new product and bring employee fear or resistance. Shenzhou agency should begin by explaining the rationale for the alliance and for the venture into domestic tourism. Employees will be reassured that this strategic change ensures that the company survives amid the devastation of Covid-19 hence protecting their jobs. Employees from both agencies will then be given clear information on what the alliance means in terms of control measures.

• Web presence: Shenzhou travel agency will implement an aggressive digital marketing strategy to improve its presence on the web. This will be mainly through social media platforms that are preferred by young Chinese millennials. These will include Weibo and TikTok.

5.0. Conclusion:

This report has established that Covid-19 has impacted negatively on international tourism and by extension threated the survival of Shenzhou travel agency as the primary revenue stream is internal study tours. To this end, it has been recommended that the agency should adopt a related diversification strategy by offering domestic tours in China and the Asian region.  

•Evaluate the Strategy Concept –The role of strategy in success. –Nature and sources of competitive advantage. Strategy and Success  

•Success is not a sole function of availability of superior resources and cannot be exclusively/primarily attributed to luck.  

•More often than not, success is underscored by the presence of a clearly articulated and effectively implemented  strategy.  

•According to Grant (2013) four common characteristics of successful strategies are: –Clear, consistent long term goals –Profound understanding of the competitive environment –Objective appraisal of resources –Effective implementation.   Defining Strategy  

•In a very broad sense, it is the means by which individuals or organizations achieve their objectives.  

•Multidimensionality of strategy (Mintzberg, 1987). Strategy should not be restricted to a single definition: –Strategy as Plan (purposeful conception preceding action)

•As Ploy (specific intentions as opposed to actual implemented actions) –Strategy as Pattern (in recognition of consistency in behaviour) –Strategy as Position (a means of locating the organization in its external environment) –Strategy as Perspective (not just a position adopted but an ingrained way of perceiving the world) Defining Strategy What business strategy is all about is, in a word [sic], competitive advantage …The sole purpose of strategic planning is to enable a company to gain, as efficiently as possible, a sustainable edge over its competitors. Corporate strategy thus implies an attempt to alter a company’s strength relative to that of its competitors in the most efficient way. So what is this Competitive Advantage ? 

Strategic Formulation

•Outline of the strategic management process  

•Relevance of external analysis to business organizations?  

•Understanding the layers of the business environment.  

•The PESTLE framework.  

•Critical Success Factors (CSFs or KSFs). The Strategic Management Process Purpose (Mission, Vision, Objectives) Internal Analysis External Analysis Strategy Formulation (Objectives setting) Strategy Implementation Evaluation & Control Environmental Scanning Strategic Influences on Business   Analysis is the critical starting point of strategic thinking.- Kenichi Ohmae  

•Before you can evaluate an organisation’s business prospects, you need to ask: –What is the nature of the environment, where the firm operates? –What resources and capabilities are at the organisation’s disposal?   Loading… The Organisation As a Transformation System Input Land, premises Materials Labour Technology Finance Managerial Skills .

Business Organisation Outputs:

Goods Services Ideas Information Consumption The Environment  

•The environment will have an impact upon all stages of the transformation process.  

•Resource Acquisition.

•Conversion / Transformation



•Feedback Layers of the Business Environment   Changing conditions in:

• General economic conditions

• Legislation and regulations

• Population demographics

• Societal values & lifestyles

• Technology Some Considerations in Undertaking PESTLE

•Political: –Home country legislation (current & potential) e.g. taxation and employability, International legislation , Political parties and alignments, Regulatory bodies and processes, Trading policies & regulations, State ownership of businesses and attitudes towards competition  

•Economic: –Home economy situation and trends, Overseas economies and trends, Inflation, Interest rates, Currency fluctuations and exchange rates, Consumer purchasing power, Disposable income, Unemployment, Business set-up & running costs  

•Socio-cultural: –Lifestyle trends, Demographics , Consumer attitudes and opinions, Changes in socio-cultural values, Income distribution, Fashion and role models, Ethnic/religious factors, Education and health Some Considerations in Undertaking PESTLE  

•Technological: –Competing technology development,  Expenditure on R&D and innovation potential, Innovation diffusion and new technology adoption, Technology legislation and government investment policy, Intellectual property issues (patents, licensing etc.)  

•Environmental: –Green issues, Pollution, Sustainability, Waste disposal, Climate change and seasonal conditions, Natural disasters, Natural resources   •

Legal: –Competition law and government policies, Health and Safety law, Employment law, International agreements, Human rights issues, Environmental policy PESTLE: Example for the Airline Industry

•Political: –Government Support for national carriers –Security Controls –Restrictions on migration  

•Economic: –National growth rates –Fuel prices  

•Socio-cultural: –Rise in travel by elderly –Student international study exchanges Source: Johnson et al (2011) Exploring Strategy (9th Ed): p51. Loading… PESTLE: Example for the Airline Industry

How to Compete

•Technological: –Fuel-efficient engines and airframes –Security Check technologies –Teleconferencing for business  

•Environmental: –Noise pollution controls –Energy consumption controls –Land for growing airports  

•Legal: –Restrictions on mergers –Preferential airport rights for some carriers Source: Johnson et al (2011) Exploring Strategy (9th Ed): p51. Keynote As managers scan the external environments, they must be alert for potentially important out-ring developments, assess their impact and influence, and adapt the organisation’s direction and strategies as needed” (Thompson et. al. 2017, pg.64). The Solution?: ?Critical Success Factors

•CSFs term coined by Sloan School of Management, MIT, in the 1970s (see also J.F. Rockart’s 1979 Harvard Business Review article: ‘Chief Executives Define Their Own Data Needs’  

•CSFs should be common to all major organisations in an industry and relate to the pool of resources, skills & attributes within organisations that are essential to delivering success in the marketplace.  

•CSFs could take the form of (inter alia): –Branding, Advertising, Low wage costs, Technological process or product innovation, Distribution, After sales service, Product specification and performance attributes Critical Success Factors

•CSFs will vary from industry to industry  

•Think about the following analogy:   “Think of athletes preparing for different races. Clearly they must all train, but they do so differently, depending upon the race they are going to run. The muscular build of a 100m sprinter is completely different from that of a marathon runner. And so are the standard training methods used to    develop their physical fitness. What is key to succeed in a 100m race is different from what it takes to succeed in a marathon.”  

•Speed/agility vs Stamina         Ketelhohn, K. (1998) What is a Key Success Factor, European Management Journal, v16 (3), pp. 335-340. Critical Success Factors   •In identifying CSFs:  

Consider the Demand structure:

1.Who are the customers?

2.What do the customers want?  

3.Analysis of competition (how does the firm survive competition?)

A.What drives competition?

B.What are the main competitive dimensions?

4.What gives superior position to competitors?   Learning Outcomes??

A. Understanding Industry (micro) Environment ?

B. Application of five forces model ?

C. Analysis of the forces in internal Environment Layers of the Business Environment Changing conditions in ?Political ?Economic ?Social/Cultural ?Technological ?Legal ?

The Industry Environment:

• Suppliers • Competitors • Customers Social structure The national/ international economy Technology Government & Politics The natural environment Legal structure Social structure •The Industry Environment lies at the core of the Macro Environment. •The Macro Environment impacts the firm through its effect on the Industry Environment. From Macro to Micro (Industry) Analysis Introduction to Porter’s Five Forces (1979/80) •Most commonly used tool for analysing the competitive environment.   •Describes the environment in terms of five basic competitive forces.   •Collectively, the factors determine the profit potential of an industry.   •Relationships with the forces tend to be seen as conflictual and ‘zero-sum’ in nature. Loading… Porter’s Five Forces Bargaining Power of Suppliers. Threat of New Entrants. Threat of Substitutes. Bargaining Power of Buyers. Five Forces Implications. Most industries are somewhere between the extremes

Strategic Change Options

Threat Of Entry:

•Capital requirements •Economies of scale •Absolute cost advantage •Product differentiation •Access to distribution channels •Legal/ regulatory barriers  

Substitute Competition:

• Buyers’ propensity  to substitute

• Relative prices &  performance of  substitutes SUPPLIER POWER

• Supplier’ price sensitivity

• Relative bargaining  power

Industry Rivalry:


•Diversity of competitors

•Product differentiation

•Excess capacity & exit barriers  

Buyer Power:

• Buyers’ price sensitivity

• Relative bargaining  power Determinants of the strength of the forces. Threat of New Entrants    Entrants’ threat to industry profitability depends upon the height of barriers to entry. The principal sources of barriers to entry are:  

•Capital requirements

•Economies of scale

•Absolute cost advantage

•Product differentiation

•Access to channels of distribution •Legal and regulatory barriers   Buyer’s price sensitivity Relative bargaining power

• Cost of purchases • How differentiated is the  purchased item?        

• How intense is  competition between buyers?                        

• How important is the item to quality of the buyers’ own output?  

• Size and concentration of  buyers relative to sellers.                            

• Buyer’s information Bargaining Power of Buyers Intensity of Rivalry    The extent to which industry profitability is depressed by aggressive price competition depends upon:

•Concentration (number and size distribution of firms)

•Diversity of competitors (differences in goals, cost structure, etc.)

•Product differentiation •Excess capacity and exit barriers

•Cost conditions •Extent of scale economies

•Ratio of fixed to variable costs

Learning outcomes:

  1. Analysis of resource-based view
  2.  Understanding sources of competitive advantage 
  3. Understanding business level strategies Loading…
    •When the external environment is subject to rapid change, internal resources and capabilities offer a more secure basis for strategy than market focus. •Resources and capabilities are the primary sources of profitability Rationale for the Resource-based Approach to Strategy

Resource Characteristics Indicators:

Tangible Resources Financial Borrowing capacity Internal funds generation Debt/Equity ratio Credit rating Net cash flow Physical Plant and equipment: Size, location, technology flexibility. Land and buildings Raw materials Market value of fixed assets. Scale of plants Alternative uses for fixed assets Intangible Resources Technology Patent, copyrights, know how, R&D facilities Technical and scientific employees No. Of patents owned Royalty income R&D expenditure R&D staff Reputation Brands. Customer loyalty, company reputation (with suppliers, customers, government) Brand equity Customer retention Supplier loyalty Human Resources Training, experience, adaptability, commitment and loyalty of employees Employee qualifications, Pay rates, turnover Appraising Resources. Loading… The links among resources, capabilities and competitive advantage

Cost Advantage Differentiation Advantage Competitive Advantage:

Similar product at lower cost Price premium from unique product Sources of Competitive Advantage. Generic strategies

Method of Growth

•Porter introduced the term ‘Generic Strategy’ to mean basic types of competitive strategy that hold across many kinds of business situations.

•Competitive strategy is concerned with how a strategic business unit achieves competitive advantage in its domain of activity.

•Competitive advantage is about how an SBU creates value for its users both greater than the costs of supplying them and superior to that of rival SBUs. Generic strategy Key strategy elements Resource and organisational requirements Cost Leadership Scale-efficient plants Design for manufacture Control of overheads and R&D Process innovation Outsourcing (especially overseas) Avoidance of marginal customer accounts Access to capital Process of engineering skills Frequent reports Tight cost control Specialisation of jobs and functions Incentives linked to quantitative targets Differentiation Emphasis on branding advertising, design, service, quality, and new product development Marketing abilities Product engineering skills Cross-functional coordination Research capability Incentives linked to qualitative performance targets Features of Cost Leadership & Differentiation Strategies.

Three generic strategies Three generic strategies Source: Adapted with the permission of The Free Press, a Division of Simon & Schuster, Inc., from Competitive Advantage: Creating and Sustaining Superior Performance by Michael E. Porter. Copyright © 1985, 1998 by Michael E. Porter. All rights reserved Cost-leadership Cost-leadership strategy involves becoming the lowest-cost organisation in a domain of activity.

Four key cost drivers that can help deliver cost leadership:

• Lower input costs.

• Economies of scale.

• Experience.

• Product process and design. Loading… Differentiation strategies Differentiation involves uniqueness along some dimension that is sufficiently valued by customers to allow a price premium. Two key issues:

• The strategic customer on whose needs the differentiation is based.

• Key competitors – who are the rivals and who may become a rival. ‘Stuck in the middle’? Porter’s argues:

•It is best to choose which generic strategy to adopt and then stick rigorously to it.

•Failure to do this leads to a danger of being ‘stuck in the middle’ i.e. doing no strategy well.

•The argument for pure generic strategies is controversial. Even Porter acknowledges that the strategies can be combined (e.g. if being unique costs nothing). Combining generic strategies

•A company can create separate strategic business units each pursuing different generic strategies and with different cost structures.

•Technological or managerial innovations where both cost efficiency and quality are improved. The Strategic Management Process Purpose (Mission, Vision, Objectives) Internal Analysis External Analysis Strategy Formulation (Objectives setting) Strategy Implementation Evaluation & Control Environmental Scanning Corporate strategy directions Figure

7.2 Corporate strategy directions Source: Adapted from H.I. Ansoff, Corporate Strategy, Penguin, 1988, Chapter 6. Ansoff originally had a matrix with four separate boxes, but in practice strategic directions involve more continuous axes. The Ansoff matrix itself was later developed – see Reference


•Diversification involves increasing the range of products or markets served by an organisation.

•Related diversification involves diversifying into products or services with relationships to the existing business.

•Conglomerate (unrelated) diversification involves diversifying into products or services with no relationships to the existing businesses. Market penetration Market penetration refers to a strategy of increasing share of current markets with the current product range. This strategy: ?strategic capabilities; builds on established strengths ?scope is unchanged; means the organisation’s primary markets remain unchanged ? increased power; leads to greater market share and with buyers and suppliers; ? economies of scale; and provides greater and experience curve benefits. Product development Product development refers to a strategy by which an organisation delivers modified or new products to existing markets.

•This strategy : ?involves varying degrees of related diversification (in terms of products); ? can be an expensive and high risk ?may require new strategic capabilities ? typically involves project management risks.

Market development:

(1) Market development refers to a strategy by which an organisation offers existing products to new markets Market development

(2) This strategy involves varying degrees of related diversification (in terms of markets) it; ?may also entail some product development (e.g. new styling or packaging); ?can take the form of attracting new users (e.g. extending the use of aluminium to the automobile industry); ?can take the form of new geographies (e.g. extending the market covered to new areas – international markets being the most important); ?must meet the critical success factors of the new market if it is to succeed; ?may require new strategic capabilities especially in marketing.    

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