Business strategy
Domain 6, for A Level only, tests strategic analysis, choice and implementation. You must connect analytical models to a firm's resources, competitive environment and stakeholders, then evaluate whether a proposal is suitable, acceptable and feasible.
Core rules
- Strategy is the long-term direction of the whole organisation. It may be deliberate or emergent; Mintzberg argues that intended strategies are reshaped by experience.
- Analysis tools include SWOT, PESTLE, Porter's five forces, the value chain and core competences. SWOT is only a summary: pair strengths with opportunities (SO) or weaknesses with threats (WT) to generate options.
- Ansoff's matrix gives four growth directions: market penetration (lowest risk), product development, market development and diversification (highest risk).
- Porter's generic strategies are cost leadership, differentiation and focus. A firm stuck between them may lack a clear competitive advantage.
- Implementation requires structure, culture, leadership and resources. Lewin's unfreeze–change–refreeze and Kotter's change steps explain why strategy often fails in execution.
- Evaluation criteria are suitability, acceptability and feasibility. Decision trees use expected values but ignore risk attitude and qualitative factors.
Worked example
A retailer is deciding whether to open a new outlet. Success has probability 0.6 and a net payoff of $200,000; failure has probability 0.4 and a net loss of $50,000. The outlet costs $80,000. Expected value = (0.6 × $200,000) + (0.4 × −$50,000) = $120,000 − $20,000 = $100,000; net EV = $100,000 − $80,000 = $20,000. This is positive, but the downside is a $50,000 loss plus the $80,000 cost. The break-even probability p solves 200p − 50(1 − p) − 80 = 0, giving p = 0.52. Reasoning: the project is worthwhile only if the manager is confident that success probability exceeds 52%, and a risk-averse owner may still reject a 40% chance of failure.
Traps
Diversification is the highest-risk Ansoff option, not the safest. Cost leadership is not the same as low price with negative margins. SWOT lists without links earn little. Stakeholder mapping uses power and interest, not wealth and status. Expected value ignores risk attitude and non-financial factors. Strategy is not the same as an objective; implementation and evaluation must be addressed.