Strategy Formulation, Evaluation and Choice
Levels of strategy
Distinguish corporate-level (portfolio, diversification, vertical integration), business-level (competitive strategy: cost leadership, differentiation, focus) and functional/operational strategy. A frequent error is answering a corporate-level question with business-level tools.
Generic strategies and the stuck-in-the-middle trap
Porter's cost leadership, differentiation and focus require distinct value chains and cultures. 'Stuck in the middle' arises when a firm pursues cost leadership but carries differentiation costs, or vice versa. Hybrid strategies can work (e.g. lean differentiation) but need a coherent logic - exam answers should justify, not merely assert.
Ansoff and the growth vector
Ansoff's matrix (market penetration, product development, market development, diversification) classifies growth by novelty of product and market. Related diversification shares resources/competences; unrelated (conglomerate) diversification relies on portfolio and financial synergies. Trap: calling any new product 'diversification' when it is really product development in an existing market.
Evaluation criteria
Use the SAF framework: Suitability (does it fit the environment and capabilities?), Acceptability (risk, return, stakeholder reactions), Feasibility (resources, finance, skills). A strong answer applies all three, not just suitability.
Worked rule of thumb
For any strategic option, state the option, test suitability → acceptability → feasibility, then recommend with a condition ('proceed subject to securing funding and piloting in one region').