Business Strategy and Planning
Core Concepts
Strategy is about making choices that position a firm to create sustainable value. Key frameworks include SWOT (Strengths, Weaknesses, Opportunities, Threats), PESTLE (Political, Economic, Social, Technological, Legal, Environmental), Porter’s Five Forces (industry attractiveness), and the Resource-Based View (VRIN/VRIO: Valuable, Rare, Inimitable, Organized). You must understand the difference between corporate-level strategy (what businesses to be in) and business-level strategy (how to compete: cost leadership, differentiation, focus).
Traps in Questions
- Confusing SWOT with strategy formulation: SWOT is an analysis tool, not a strategy itself. A question may ask “which is a strategy?” and list SWOT items as distractors.
- Mixing up Porter’s generic strategies: Cost leadership targets broad market with low cost; differentiation targets broad market with unique value; focus targets narrow market. Trying to be both cost leader and differentiator is “stuck in the middle.”
- Forgetting that opportunities and threats are external, while strengths and weaknesses are internal. A common trap is labeling a competitor’s move as a strength.
- Assuming VRIN resources guarantee competitive advantage: they must be organized to capture value (VRIO adds “Organized”).
Worked Example / Rule of Thumb
A question describes a firm entering a new market with a low-cost airline model. Rule: Apply the “fit” test. Does the strategy fit the firm’s resources (e.g., standardized fleet), industry structure (price-sensitive customers), and competitive environment (high rivalry)? If yes, cost leadership is plausible. If the firm lacks scale, it may be “stuck in the middle.” Always match the strategy to the context described.
Planning
Business planning translates strategy into action: vision/mission, objectives (SMART), initiatives, budgets, and KPIs. Understand the difference between strategic (long-term, direction), tactical (medium-term, functional), and operational (short-term, day-to-day) plans. A trap is confusing goals (broad) with objectives (specific, measurable).