Business Management and Strategy
What this domain tests
Business Management and Strategy tests how organisations set direction, analyse their environment and choose growth options, plus the structural and human side of implementation.
Core rules
- Analysis tools: PESTLE for the macro environment; Porter's five forces (rivalry, new entrants, substitutes, buyer power, supplier power) for industry attractiveness; the value chain for where cost or differentiation advantage is created.
- Ansoff matrix: existing product/existing market = market penetration; existing product/new market = market development; new product/existing market = product development; new product/new market = diversification.
- Portfolio: the BCG matrix classifies businesses by market growth and relative market share into star, cash cow, question mark and dog, each with a different cash profile.
- Stakeholders: Mendelow's power/interest grid determines whether to inform, consult, involve or partner.
Worked example
A regional bakery wants growth. Selling more loaves to current customers is market penetration - lowest risk. Opening stores abroad with the same products is market development. Launching a gluten-free range to existing customers is product development. Buying an insurance company would be unrelated diversification and the highest risk, requiring capabilities the firm does not have.
Traps that cost marks
- Presenting a SWOT list as if it were a strategy; it only frames the choices.
- Confusing market development with diversification.
- Selecting a strategy without assessing capability, funding or stakeholder reaction.