Grade 12, Business Studies & Economics Notes.

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Definition of a strategy
- a strategy is an long term action plan to reach a goal.

STRATEGIC MANGEMENT PROCESS STEPS
1. A clear vision , a mission statement and measurable objectives
2. =Use an industrial analysis tool to conduct environmental reconnaissance.

INDUSTRIAL ANALYSIS TOOL
-Micro = SWOT ANALYSIS
Market= PORTERS 5 FORCES
Macro= PESTLE ANALYSIS
3. Formulate Strategies to achieve goals
4. DEVELOP ACTION PLAN (e.g tasks to be done by deadlines
5.Evaluate strategies regularly in order to take corrective action.

STEPS TO STRATEGY EVALUATION
1.examine the underlying basis of a business strategy
2.look forward and backwards after the implementation process
3. take affirmative steps that deviations corrected can be
4. suggest specific dates_control and follow up
5. decisions about the desired outcome

TYPES OF BUSINESS STRATEGIES

INTEGRATION STRATEGIES
- Forward vertical - the business combines or take over its distributors
- Backward vertical - business combines with or takes over its suppliers.
- Horizontal - a business takes control of other businesses in the same industry

DEFENSIVE STRATEGIES
- Divestiture - the business sell some assets section that is no longer profitable

RETRENCHMENT - termination of the employment contracts of employees for operational reasons
Liquidation - all assets are sold to pay creditors due to lack of capital.

INTENSIVE STRATEGY
- Market pe*******on - new products pe*****te an existing market at a low price.
- Market Development - Businesses existing products on new markets sell
- product development - business sets new products in existing markets known.

Diversification strategy
- concentric diversification - business adds a new product that is related within existing products and which will appeal to existing customers.
-Horizontal diversification - business adds new products or services that are not related to existiong products, but which may appeal to existing ones customers
-Conglomerate diversification - business adds new products or services unrelated to existing products that may appeal to new customers

Advantages of Intensive strategies
1. increase in sales/ income and profitability
2. Improved services delivery may improve business image.
3. Gain loyal customers through effective promotion campaigns.

Disadvantages of diversification strategies
1. increase sales and business growth.
2. improve business brand and image.
3. reduce the risk of relying on one product.