Business strategy and growth: competitive analysis, growth strategies, internationalisation
Domain 7 - Business strategy and growth
This domain combines industry analysis, competitive positioning and growth or internationalisation choices. Answers score on the chain: analysis → option → justification → risk.
Core rules and concepts
- PESTEL scans macro factors; Porter's five forces judges industry attractiveness (rivalry, new entrants, substitutes, buyer power, supplier power). It explains industry profitability, not one firm's performance.
- SWOT summarises internal strengths and weaknesses plus external opportunities and threats; use it to choose, not to list.
- Porter's generic strategies: cost leadership (broad market, lowest cost), differentiation (broad market, unique offer), focus (narrow segment with either). Being "stuck in the middle" is the risk.
- Value chain: primary activities (inbound logistics, operations, outbound logistics, marketing and sales, service) plus support activities; advantage comes from a cheaper or better-configured chain.
- Growth: organic versus external (merger, acquisition, joint venture, strategic alliance, franchising). Motives: economies of scale, market power, diversification, technology access. Risks: integration failure, culture clash, overpayment.
- Internationalisation: entry modes ranked by control and commitment - indirect or direct export, licensing, franchising, joint venture, wholly owned subsidiary/FDI. Drivers: market seeking, efficiency seeking, resource seeking, strategic asset seeking.
Worked example
A Cantabrian ceramics manufacturer wants to enter France. Exporting through an agent is cheap and low-risk but gives weak control over pricing and service; a sales subsidiary gives control but needs capital and local managers. Applying the five forces: buyer power among large French distributors is high, so a differentiated product and direct relationships matter; a joint venture with a French distributor shares risk while retaining partial control. A defensible answer names the deciding criterion (control versus risk versus speed) and accepts the trade-off explicitly.
Traps that cost marks
- Using five forces to describe a single firm's strengths.
- Listing SWOT items without drawing a conclusion.
- Confusing a merger (combination) with an acquisition (purchase of control).
- Treating licensing as high control - it is the opposite.
- Recommending internationalisation without discussing financing, risk or mode of entry.