Strategy frameworks are numerous. There is one for any scenario and there’s a chance that selecting one may actually overwhelm someone new to the field. Show That’s why we have rounded up the most commonly used strategy frameworks from among them to help you select the one that best suits your purpose. What is a Strategy FrameworkStrategy frameworks are tools that help structure business thinking and guide businesses as they grow and accomplish their missions. They can also be used to analyze business issues and develop strategies. And strategy consultants often use them to communicate their solutions to their clients. Top Strategy Frameworks for BusinessesWhen it comes to selecting a strategy framework, you need to consider what type of organization yours is, what you are trying to achieve, and your strengths and weaknesses. Below we have listed 7 strategic frameworks for businesses, and you can decide which ones to use based on the explanations provided. Porter’s Five ForcesPorter’s five forces is a framework that helps an organization understand the intensity of competition in an industry, and its attractiveness and profitability level. Porter’s 5 forces are
When to use it
How to use itStep 1: Start by gathering information on the five forces. The aspects you need to focus on are highlighted in the template below. Porter’s Five Forces Analysis Template (Click on it to edit it online)Competitive rivalry Focusing on these aspects below you can determine how competitive and profitable the industry is.
Supplier power Determine the power suppliers have to increase their prices or provide low-quality material which in turn will affect your product or service. Focus on
Buyer power How much power do your customers have over you? They have the ability to drive prices low and demand higher-quality products. Here you should focus on
Threat of new entrants Determine how easy it is to enter and establish a business in the industry you are competing in. If an industry is profitable and only has few barriers to enter, new companies can easily establish themselves posing a threat to you. Focus on
Threat of substitute products Determine how easily your customers can find a substitute product. If there are substitutes that are cheaper and can be easily purchased, that may weaken your stance.
Step 2: Once you have collected all the information, you can use Porter’s five forces template to display them. This will make it easier to analyze and communicate them to the various stakeholders. Step 3: Based on your analysis and conclusions, develop efficient strategies. Porter’s Diamond Model BCG MatrixThe BCG “Boston Consultant Group” matrix is a portfolio management framework that helps businesses decide which products or services to invest in and not according to market growth and market share. Market growth – how well the product is growing when compared to other products? Market share – what is the size of the market the product has captured compare to the competition? It’s also known as the growth-share matrix and contains four quadrants that represent different categories of the company’s offerings. The y-axis represents the rate of market growth and the x-axis represents the market share. BCG Matrix Template (Click on it to edit it online)
When to use it
Learn how to use this tool in more detail with our resource on the BCG Matrix. GE-McKinsey Nine-Box MatrixThis strategy tool helps business portfolio planning. Multi-business corporations use it to evaluate their individual business units and prioritize investments among them systematically. In the matrix, the y-axis represents the market/ industry attractiveness, and the x-axis shows the strength of the business unit. The scale is high, medium and low. It generates nine industry attractiveness measures and twelve business strengths measures. GE McKinsey Matrix Template (Click on it to edit it online)When to use it
How to use itStep 1: Identify the factors that contribute to the market attractiveness of your different business units. Some of them are market size, pricing trends, competition levels, market profitability and so on.
Step 2: Next evaluate the competitive strength of each business unit. This follows a similar path to step 1. First, determine the factors that contribute to competitive strength. Assign each factor a weight based on their importance in helping the company gain a competitive advantage. Then rate each factor for the different business units, before calculating the final scores. Step 3: Plot the information you have gathered on the GE-McKinsey matrix. When plotting the business unit in the matrix, use circles and the size of the circle can be used to show the revenue the unit generates. Step 4: Analyze the information. Based on the position of each of the business unit on the matrix, there are three actions the company can take;
Step 5: Based on the analysis, determine the future directions of the business units and determine how to prioritize the company investments among the units. Ansoff MatrixBusinesses use the Ansoff matrix to analyze and plan strategies for growth and understand associated risks. According to the matrix, there are two approaches to building a growth strategy;
Accordingly, the matrix delivers four strategic options that have different levels of risks; Ansoff Matrix Template (Click on the template to edit it online)
When to use it
To learn about this tool and how to use it in more detail, refer to our resource on the Ansoff matrix. Scenario PlanningScenario planning involves creating and brainstorming around possible future scenarios and understand how they would affect the objectives of the company. It helps companies develop effective strategies and adapt them where necessary, by considering the impact and discussing the responses. Scenario Planning Matrix Template (Click on it to edit it online)When to use it
Learn about scenario planning in more detail with this resource. Value Chain AnalysisThis strategy tool helps organizations analyze their internal firm activities. It helps identify which activities are most valuable to the company and which ones can be improved for competitive advantage. Value Chain Analysis Template (Click on the template to edit it online)When to use it
Additional resources: Value Chain Analysis VRIO AnalysisVRIO analysis is used to analyze the internal resources of a company. It identifies attributes that a company’s resources must have in order to provide a competitive advantage. The analysis involves asking four questions with regard to the resources; Valuable: If a resource can help find opportunities or defend against threats it can be considered valuable. Moreover, a valuable resource should help increase customer value. Rare: If a resource can only be acquired by one or a few companies, it is considered rare. A resource that is valuable and rare will provide a significant competitive advantage. Costly to imitate: If other organizations that don’t have the resource can’t imitate it, buy it or find a substitute for it at a reasonable price, that resource is considered costly to imitate. Organized to capture value: The organization should have processes, policies, and systems in place to capture the value created by valuable, rare and costly to imitate resources. VRIO Analysis Template (Click on it to edit it online)Learn how to do a VRIO analysis here. More Useful Resources on Strategy FrameworksHere we have shared a list of resources and blog posts that discuss various other strategy frameworks. The Easy Guide to Performing an Effective Situation Analysis The Easy Guide to Making a Business Plan for Presentations SWOT Analysis: What, Why and How to Use Them Effectively The Ultimate List of Marketing Strategy Planning Tools 5 Gap Analysis Tools to Identify and Close the Gaps in Your Business The Easy Guide to the Strategic Planning Process Balanced Scorecard Examples Business Diagram Software Strategy Diamond Template Don’t forget to leave your feedback in the comments section below. |