Business Strategy

RELEVANT TO ACCA QUALIFICATION PAPER P3

Studying Paper P3? Performance objectives 7, 8 and 9 are relevant to this exam

POSITION-BASED AND RESOURCE-BASED STRATEGIES

Imagine you are in the middle of a country. To your north there is a mountain range, to the south an ocean, to the west a desert and to the east, jungle. You are running out of food and have to move. But to where? So you look at whatever evidence you can get: weather forecasts, travellers’ tales, unreliable maps (because this is before GPS). No direction is without peril and all offer some reward, but you have to go somewhere. There seems to be a storm brewing in the mountains, malaria in the jungle and it’s the wrong season to tackle the desert. So you go for an ocean crossing, hoping to find a promised land, but always aware that more information might make you rue your choice, aware that you might have to change your direction, and aware that at some point, a change of direction will become impossible because you have reached a point of no return. Essentially, what has been described above is a position-based approach to strategy. The destinations are four possible strategies or business developments, the weather forecasts, tales and maps are the equivalent of tools such as PESTEL and Porter’s Five Forces. You are dealing with imperfect information and might have to abandon or modify a strategy. These tools might indicate that market and environmental factors make some strategies seem very unattractive, but that others offer safer alternatives. As time passes, the factors might change and you discover that the wrong choice has been made and your company needs to modify its objectives and strategies to survive and prosper. Overall, the company alters its position in response to environmental and market forces. The approach is sometimes described as ‘outside-in’ because you look outside the organisation and then alter what you do inside it. However, looking at the environment, judging the options...