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Useful Frameworks to Drive your Business Strategy – Part 2 of 2

This post is a continuation of an earlier post. For the first four business strategy frameworks please read the earlier post.

5. Porter's Five Forces: Porter's five forces analyze the competitive forces in your industry - specifically, new entrants, substitutes, buyer power, supplier power, intensity of rivalry- so that you can optimally position yourself for sustainable competitive advantage and thus profitability. Nike's 5 forces show that overall it's an attractive industry for Nike with three of the five forces in favor for Nike - supplier power, threat of new entrants and buyer power.

6. Value Proposition and Positioning (4Ps & 3Cs): Value proposition defines the value you deliver to your target audience (benefits minus cost; benefits include points of parity and points of differences with respect to competitors) and positioning defines where the brand is in the customer's mind (hopefully customer and company perceptions are aligned). These terms can be better defined with the 4Ps and 3Cs. The 4Ps define your Product, Price, Promotion, Place (how you distribute your product) and the 3Cs define your Company, Customer and Competitors. The Land Rover positioning as well as the positioning for its individual car segments is seen on the image in the left.

7. Value Chain Analysis: The value chain analysis looks at the activities that reinforce the value proposition. It is a group of integrated value-added activities that are provided to the customer. It's easier for competitors to copy a company's value proposition but not it's value chain. The image below on the left shows the value chain for Crown Cork and Seal.

8. Boston Consulting Group's Growth-Share Matrix: The Boston Consulting Group suggests you look at two factors - market share and growth - to determine which products you should keep in your product portfolio and which you should drop. The image below gives you clear direction in terms of what to do if your product is a dog (divest), cow (milk), question mark (analyze further) or star (invest).

Happy New Year, Dear Readers! I wish you and your loved ones a blessed new year. May all your dreams come true!


Useful Frameworks to Drive your Business Strategy – Part 1 of 2

Over the past year I have learned a few useful business frameworks that can be applied to any industry. I have divided this post into two parts as it would be too long to fit 8 frameworks in one post. Each framework is explained with a case study. All case studies were done as part of my MBA coursework at University of California, Irvine and are not endorsed by the companies mentioned in these two posts on business strategy.

What is business strategy? Business strategy is about planning how an organization will achieve its goals; about winning; choosing activities different than rivals; deciding where to compete and how to compete

1. Porter's Four Corners Analysis: This framework is used to understand your company's drivers, assumptions, current strategy and capabilities (4 corners) as well as your competitors' strategies and thus better position your future strategy. Future strategies can be based on a specific scenario or a specific market. For example the case study below analyzes GE's strategy to win the contract for China's Smart Grid (specific market). The second presentation shows how GE would change it's strategy if  China decides to own 33% of all GE's Smart Grid patents (specific scenario).

2. Judo Strategy: This is a market entry strategy and how to win against bigger competitors with agility and nimbleness, hence the name Judo Strategy. Its typically used by smaller companies who value skill over size and strength. Large companies use it to unite superior skill to move into new areas where powerful opponents exist.

3. Network Effects: This strategy is specific to the hi-tech industry. The value of the product/service increases as more people use it. The size of suppliers (one side of the network) influences the size of consumers (other side) and thus the value of the network. For example, increasing the number of games/applications built for the iPhone was one reason for the increase in iPhone users when compared to other phones. This also applies to Groupon - more restaurant tie -ups = more consumers compared to other location based advertisers.

4.  SWOT Analysis: Strengths, Weaknesses, Opportunities and Threats for a company gives a good overall picture of what internal and external factors to capitalize on and what to watch out for. These reports for almost every company are already available on Datamonitor (online database of company reports, news, etc) but if you don't have access to such reports you can always create your own. Google's SWOT Analysis from Datamonitor is available on the right.

Frameworks 5-8 can be read in the next post.

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