Top 5 Tried and tested business strategy frameworks
Business frameworks are helpful tools, which are used to analyze business problems and structure of thinking. Several strategy consultants and business analysts usually use these frameworks in order to clearly communicate their recommendations to their clients. There have been numerous scientific articles trying to come up with innovative and helpful frameworks in business, management and strategy.
In this article, let’s understand the top most highly used and most helpful business strategy frameworks in current business world according to the strategy consultants.
Hambrick and Fredrickson’s Strategy Diamond
Hambrick and Fredrickson’s Strategy Diamond is an attempt to explain the concept of strategy truly means and is a best framework to distinguish the different components, which make up a good strategy. According to this businessmodel, a strategy consists of five crucialcategories that together can form a unified whole: Arenas, Vehicles, Differentiators, Staging& Pacing and Economic Logic. For each component concrete and deliberate choices have to be made on what to do and more essentially what NOT to do. In addition, choices made within one componentmust reinforce and match choices made in the other four components. Only that way firms can achieve a sound and sustainable strategy.
There are various ways of growing a business. Igor Ansoff identified four strategies for growth and termed them as “Ansoff Matrix”. The Ansoff Matrix (also known as the Product/Market Expansion Grid) gives managers to quickly summarize these potential growth strategies and compare them to the risk related with each one. The four growth strategies are Market Penetration (giving more of the existing products to existing markets), Market Development (givingthe existing products to new markets), Product Development (givingnew products to existing markets) and Diversification (launching new products in new markets). The idea is that each time one moves into a new quadrant (horizontally or vertically), risk increases.
Porter’s Five Forces Model
Michael Porter’s Five Forcesmodel is probably the best-known business strategyframework. It is mainly used when analyzing industries. The Five Forces model is useful for determining how competitive an industry is depending on five different factors: the rivalry among existing competitors, the threat of new entrants (potential competitors), the threat of substitute products (alternatives), the bargaining power of suppliers, and the bargaining power of buyers. If these forces are strong, competition will be considered high. Afirm might want to think twice before entering that specific industry.
According to this business framework, industries with little competition give for greater margins and are therefore more attractive to enter.
Treacy and Wiersema’s Value Disciplines
Treacy and Wiersema’s Value Disciplinesbusiness frameworkdevelops upon the crucial message of Porter’s Generic Strategies (i.e. firms should have a clear focus in what they want to be known for and what they want to excel in). If an organization tries to excel in multiple (often contradicting) disciplines, it is likely to end up stuck somewhere in the middle. Treacy and Wiersema’s propose three value disciplines from which the firms can choose from, so that they can be a market leader: Product Leadership (the best and most innovative product providing), Operational Excellence (the most affordable products via a cost-efficient production method), and Customer Intimacy (better customer service and customer relationship management). Choosing each one of the disciplines has tremendous consequences on how the firm should be operating in terms of structure, processes and culture.
BCG Growth-Share Matrix
The Boston Consulting Group’s product portfolio matrix, popularly calledas BCG Growth-Share Matrix is especially designed to help firmsgive priority to growth opportunities by reviewing its portfolio of products or business units to decide where to invest and where to divest. The matrix is divided into four quadrants depending on two factors: market growth and relative market share. The four kinds of business units (or products) are Dogs, Question Marks, Cash Cows and Stars. Many business units start off as Question Marks with a relatively less market share in a high growth market.
Strategy frameworks are too many. There is one for any scenario and there’s a chance that selecting one may actually overwhelm someone new to the field. Hopefully the aforementioned models will help you to select the one that best suits your purpose.