Table of Contents

TASK 1.....................................................................................................................................................1

BUSINESS STRATEGIES.............................................................................................................................1

THEORIES RELATED TO BUSINESS STRATEGIES......................................................................................1

Systemic approach...............................................................................................................................1

The classical approach.........................................................................................................................1

Evolutionary approach.........................................................................................................................2

Processual approach............................................................................................................................2

COMPARISON OF DIFFERENT THEORIES RELATING TO BUSINESS STRATEGY..........................................2

DIFFERENT APPROACHES TOWARDS BUSINESS STRATEGY.....................................................................3

Cost-leadership....................................................................................................................................3

Differentiation.....................................................................................................................................3

Focus Strategy.....................................................................................................................................4

COMPARISON BETWEEN VARIOUS APPROACHES TO BUSINESS STRATEGY..............................................4

ROLE OF ETHICS IN FORMULATING STRATEGY FOR BUSINESS SUCCESS................................................5

REFERENCES............................................................................................................................................6
TASK 1
BUSINESS STRATEGIES
Business strategy can be described as an action plan specifically formulated for long run. The
main purpose of such strategies is to achieve the mission and goals of the organization. Formulation
of these strategies is considered as an integral function in every corporation. A business strategy is
capable of giving solutions to several questions like prospective needs as well as demands of
customers, business scope and etc. (Business Strategies, n.d). Prior to the development of business
strategies, several issues need to be thoroughly considered. Some of the major steps involve deciding
upon the vision and mission statement of the company, developing balanced scorecard, conducting
SWOT analysis, agreeing upon the aims and objectives for the enterprise and lastly strategy mapping.
The management and maintenance of business performance is also based on these strategies.
The strategies play the role of information tools and motivate as well as stimulate the actions
of the whole organization (Business Strategies, n.d). Opportunity identification and facilitating higher
revenue are also some of the functions performed by business strategies.

THEORIES RELATED TO BUSINESS STRATEGIES

A number of theories are present which are related to business strategies. Some of them are
systematic approach, classical approach, evolutionary approach and processual approach towards
strategy. All these theories have been explained below:

Systemic approach
The advocates of systematic approach state that emphasizes on following a rational
methodology and value of evaluation (Mun, 2010). These people regarded the principles and systems
of society according to the sociological reference. The supporters of this approach are of the opinion
that a strategy needs to explicit and formal.

The classical approach

The fundamentals of this approach to strategy draw largely from the processes in army and
military. The classical methodology considers the entire world as one inflexible hierarchy, which is
composed of a lone patriarch who takes all the important decisions. In the words of Whittington, the
primary objective behind this approach is to garner maximum revenue for the corporation. This is
accomplished by logical and sound planning (Stonehouse and et.al., 2004).
Such variety of business strategies lay stress on the proficiency and promptness of managers
so that strategies can be effectively executed and reap desired results. All types of organizations,
notwithstanding their size and scale seek to acquire highest return on capital. However, when an
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enterprise fails to acquire a sustained growth and profitability level then these gaps need to be filled
(Business Strategies, n.d).

Evolutionary approach
The backers of evolutionary approach proposed that for the survival and continuance of a
business, high effectiveness and productivity are imperative. This approach shifts the focus from
managers to the behavior of the marketplace or industry. This theory suggests that an organization
should not be too reliant on the abilities and proficiencies of its senior management; instead it should
be more inclined towards the activities taking place in the industry, if it wishes to gain maximum
results (Mun, 2010). Sound and reasonable planning is also discarded in this approach. Its supporters
believe that only the finest performer can sustain in the industry and no method or approach can stand
in front of an unsurpassed leader.

Processual approach
While the classical approach emphasized only on the in-house plans of an enterprise, the
Processual theory lays emphasis on the in-house state of affairs and conditions. The propagators of
this theory said that the whole world suffers from the shortage of skills and knowledge and hence all
companies ought to recognize and reorganize their strategic processes. They also stated that long
range planning is useless (Stonehouse and et.al., 2004). Furthermore, the believers of the Processual
approach are not very optimistic in context of the future of the business. The theory lies down that
organization must not struggle to achieve unfeasible goals and ideas; instead should accept the
industry as it is.

COMPARISON OF DIFFERENT THEORIES RELATING TO BUSINESS STRATEGY

The table shown below depicts the comparison among the various theories of business
strategy i.e. systematic, classical, evolutionary and processual. They have been evaluated on certain
factors such as kind of strategy, key influence, focus, principles, authors and the year in which they
were formulated by them (Karlof, 1996). This comparison facilitates the identification and evaluation
of business strategies in context of their efficiency levels.

Systematic Classical Evolutionary Processual

Type of Strategy Embedded Formal Effective Created
Rationale Local Maximization of Sustenance Ambiguous
Profit
Chief Influence Sociological Military Biology/Economics Psychology

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 Context
Emphasis External (Society) Internal External (Industry) Internal state of
(strategies) affairs
Authors Granovetter Chandler, Ansoff, Freeman March Mintzberg
Whitley Porter Williamson and Pettigrew and
Hannan Cyert
Time period 1990s 1960s 1980s 1970s

DIFFERENT APPROACHES TOWARDS BUSINESS STRATEGY

There are primarily three core approaches towards business strategy and executing any of
these will bring in high revenues for the organization. These approaches are cost leadership,
differentiation and focus. Following is a discussion about these three approaches:

Cost-leadership
With help of this strategic approach, an organization can gain an edge over its competitors by
curtailing unnecessary overhead costs and bringing them to an extent below its rivals. Cost leadership
approach has been embodied in business strategies (Cunill, 2006). In simple terms it can be described
as a method to build competitive advantage by focusing on minimizing its operating costs and thereby
keeping the prices low. Competitive edge can also be attained by augmenting the profit levels. Firms
adopting this type of strategic approach are vulnerable to several risks and challenges. This strategic
option has become very ordinary and rival firms can without any difficulty imitate this technique
(Proctor, 2000).

Differentiation
Differentiation strategy focuses on making the firm’s product or service distinct from that of
competitors. This approach involves adding some distinctive feature in the core offering of a firm.
Differentiation strategy can be adopted based on the type and nature of an industry. While talking
about hospitality sector, differentiation can be incorporated in the type of services and offerings being
provided to the customer, ambience, culture, food, customer satisfaction level and service quality
(Kumar, 2010). By making its product or service unique, the company can construct an effective
brand image for itself. Differentiation strategy is more effective than cost leadership at least in one
way. The competitive entities cannot easily imitate the unique offerings and even if they do, it will be
only after a considerable time period. This strategy can be effectively formulated only if the firm has
a strong research and development team (McDonald and et.al., 2007).

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Focus Strategy
This strategy focuses on entering into a narrow market segment and concentrating its
marketing resources to target that particular narrow customer segment only. Focus strategy can also
be of two types mainly cost focus and differentiation focus. Cost focus strategy is basically targeting
a niche target market and implementing cost leadership strategy in that segment. Differentiation focus
refers to employing all the resources for targeting a narrow market segment and using differentiation
as their core strategy (Cunill, 2006). Companies adopt this strategy when they are confident about
their service or product offering and when they have selected a potential target market.

COMPARISON BETWEEN VARIOUS APPROACHES TO BUSINESS STRATEGY

Market Forces Focus Cost Leadership Differentiation
Rivalry Competitors are not able Better capable of Brand Loyalty to prevent
to meet differentiation competing on price. customers from switching
focused consumer brand.
demands.
Entry Barrier Focus strategies create Capability to curtail price Consumer loyalty
core competencies which in retribution deters discourages new entrants.
play the role of entry probable new entrants.
barriers.
Supplier Power Due to low volumes, Better protected from Better capable of passing
suppliers enjoy power; strong suppliers. any increase in supplier
however, differentiation prices to consumers.
focus companies are
capable of passing any
increase in supplier
prices to consumers.
Buyer Power Due to few choices, large Capable of offering lower Due to unavailability of
buyers have less bargain prices to strong many alternatives, buyers
power. customers. have less negotiating
power.
Threat of Substitutes Core competencies and Might capitalize on low Consumers become
distinctive products prices to counteract attached to the distinctive
lessen threat from substitutes. characteristics,
substitute products. alleviating threat of
substitutes.

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ROLE OF ETHICS IN FORMULATING STRATEGY FOR BUSINESS SUCCESS
Ethics have a very significant role to play in developing strategies for the prosperity of a
business concern. Ethics has also been regarded as a fascinating discipline of business theory because
it is innately motivating in the economy. With help of business ethics, companies are able to tread on
the correct path in the right direction for conducting its various business processes. They also have an
important part in the growth and success of organizations (Marthavasquez, n.d). There are several
parameters by which it can be made evident that business ethics play a critical part in development of
strategy for the success of a business. Some of them are mentioned below:
 Investment – The substance of ethics can be recognized by taking a look at the association
between business ethics and investment. When an enterprise aspires to invest or execute a
diversification strategy, ethics ought to be kept in mind. The profit margin of the company in
addition to all other pertinent qualitative elements like product and public image should be
considered (Badaracco and Webb, 1995). Corporations making several investments have a
good sense of ethics. Thus, it can be said that business ethics are very significant in
developing all the strategies for the growth and development of firms.
 Public image – It is not possible for organizations to take into consideration ethics without
comprehending the connection between public image and business ethics. Every business
concern has an image in public which is a reflection of the manner in which it is conducting
its operations. When a company is formulating its strategies, the image they have in society
ought to be born in mind (Marthavasquez, n.d). This image or reputation can be attained by
the corporation by properly adhering to the regulations and principles that exist around it.

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REFERENCES
Books, Journals and Articles
Cunill, O. M., 2006. The Growth Strategies of Hotel Chains: Best Business Practices by Leading
Companies. Taylor & Francis.
Karlof, B., 1996. Key Business Concepts: Concise Guide. Routledge.
Kumar, D., 2010. Enterprise Growth Strategy: Vision, Planning and Execution. Gower
Publishing, Ltd.
McDonald, M. and et.al., 2007. Marketing Due Diligence: Reconnecting Strategy to Share Price.
Butterworth-Heinemann.
Mun, H., 2010. Global Business Strategy: Asian Perspective. World Scientific.
Proctor, T., 2000. Strategic Marketing: An Introduction. Routledge.
Stonehouse, G. and et.al., 2004. Global and Transnational Business: Strategy and Management.
2nd ed. John Wiley & Sons.
Online References
Badaracco, J. L. and Webb, A. P., 1995. Business Ethics: A View from the Trenches. [pdf].
Available through: California Management Review. Website: <>. [Accessed on 22
November 2012].
Business Strategies. n.d. [pdf]. Available through: Website:
<http://www.oup.com/uk/orc/bin/9780198782292/ch14.pdf>. [Accessed on 22 November
2012].
Marthavasquez, n.d. Why business ethics is important for a company and its success. [Online].
Available through:
<http://www.streetdirectory.com/travel_guide/161760/corporate_matters/
why_business_ethics_are_important_for_a_company_and_its_success.html>. [Accessed
on 22 November 2012].