Business Strategy Analysis and Development

The provided assignment is related to business strategy, which involves analyzing and developing a strategy for a company to achieve higher profitability. The document covers various business strategy models such as Porter's Five Forces and Pestle analysis, and tools like SWOT analysis, PESTEL analysis, and social media strategy. It also discusses the importance of management control systems, business strategy, and performance in family businesses. The assignment aims to help students develop a comprehensive understanding of business strategy and its applications.

BUSINESS STRATEGY

Table of Contents
INTRODUCTION ..........................................................................................................................3
1.1 Determine and Understand the strategic decision made...................................................4
1.2 Application of strategic management thinking.................................................................9
1.3 Analyse decision framed resulted in better or worse results..........................................11
1.4 Evaluate causality of decision made...............................................................................12
1.5 Execution of corrective action measures .......................................................................12
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
The concept of Strategic Management can be understood as the set of actions or decision
which help entrepreneurs in accomplishing specific business goals and objectives (Business
Strategy, 2018). It is a kind of long term action plan, mainly used by firm's management to
secure competitive position in market, carry on its operations, satisfying customers and attain
desired ends of the company (Acquaah, 2011.). In terms of business, strategy means set of
competitive actions or moves that an organization uses in order to attract customers,
strengthening performance, compete successfully and achieve define targets. In general, it
abstracts how business activities needs to be performed to reach the desired ends. The given
report is based on Athletic Industry which is the largest growing sector worldwide. The main
purpose of this report is to determine strategic issues, evaluate strategic management thinking
and its implications. Along with this it also outline execution of corrective actions, subsequently
taken to manage decision.
Overview of Athletic Industry
An athletic industry continues to be one of the biggest and fastest-developing sector in
United Kingdom and the world. This advanced growth has nourished the continued want of
many individuals to seek a career in the spot industry. In past few years, sports industries have
gained momentum and recorded a green development all across the globe. Emerging concern
towards fitness and accelerative health consciousness among people in urban areas, growing
enthusiasm, increasing level of consumer disposable income and flourishing e-commerce retail
sector worldwide are some of the main elements that have increase the demand for athletic
footwear. In 2017, athletic industry was valued at 75.2 Billion (in Pounds) and is estimated to
reach a value of 115.6 Billions (in Pounds) by 2023. Along with this, market is also projected to
register a CAGR of 5.3% from 2018-2023. Also, individuals are increasingly understanding the
significance of utilizing suitable types of shoes for different sports activities which prevent them

from leg injuries, back pain, muscle injuries etc. Therefore, the demand for athletic footwear is
anticipated to rise over the coming years.
Large Players in the market like Skechers, Nike, Puma, Adidas, Rebook, New Balance
Athletics are emphasizing on developing advance technologies so as to gain the stability of sport
shoes & make them comfortable. Athletic industry mainly operates in the region of Europe
Africa, North America, Latin America and Asian Pacific (Alsudiri, Al-Karaghouli and Eldabi,
2013). The sector is mainly targetting all age groups right from adults, children, teenagers etc.
Products under Athletic industry are mainly classified into types one is ratio of consumers who
are willing to pay high prices to get good quality products and other is percentage of such
consumers who prefer to have low price satisfactory quality footwear (Annabi and McGann,
2013.. It is important to maintain right balance between these two types and this can done after
critically investigating macro-environmental factors and then formulate appropriate strategies
accordingly.

1.1 Determine and Understand the strategic decision made
Before entering into a new region or market, an organization needs to investigate both
micro and macro factors of that particular market that is affecting its business operation or
activities either positively or negatively. These forces can be identified through conducting
PESTLE Analysis, Porter's Five Forces Framework etc.
Once the company is done with identifying macro factors and its impact on firm's
operation, effective strategies can be developed ( Campbell, Edgar and Stonehouse, 2011). In
addition to this, these frameworks also help in understanding the external variables that shape
competition within an industry.
PESTLE Analysis:
Political: Political climate of North America, Europe Africa is stable in
majority of markets which comes out as a main advantage for the
industry. The VAT rate of North America is 20% which is relative
to other European countries. This indicates that customers won't be
influenced in to import product from other countries due to their
high tax rate. Developing free trade policies encourage better
market entrance overseas. Increasing support of government for
infrastructure, particularly in developing countries provides ample
opportunities to Athletic Industries to expands its business
practices in these markets. Furthermore, industry can improve its
global expansion and market presence in the category of sports
apparel, accessories etc.
Economical: The business performance of athletic industry rely upon economic
condition of the country in which it offers its athletic apparel,
equipment and footwear. The market of North America, Latin
America are comparatively stable which comes out as an
opportunity for Athletic industry in terms of stable growth rate.
The unemployment rate in North America, Latin America are
very low which positively shows that economy of these countries
are doing well & customers have high purchasing power i.e. they
can able to easily afford it. North America is facing high national

debt which indicates that in future, there might be chances that
government can increase the tax rate for local residents which
indirectly affects their purchasing power.
Social: Social issues influence the attractiveness of Athletic apparel,
equipment and shoes. In developing countries, companies in this
sector can tap customers with raising individual wealth. In-fact,
firms have the opportunity to create safer products & highlight the
safety dimension of its sports, equipment, shoes and apparel
through extensive use of market campaigns. In footwear industry,
quality over price is valued more. Rising concern towards fitness
& health is also carried out as a biggest opportunity for Athletic
Sector. However, the major drawback is people in North America
and Latin America are still not interested in any sort of physical
activity.
Technological: The region is highly advance in context of e-commerce like social
media, internet marketing etc. The significance of e-commerce is
playing key role in promoting the products at vast level. New
advance technologies are emerging which enable sports companies
to reduce its overall cost of operations as well as become highly
efficient. With the help of social media systems, company can
promote its product on vast level such as developing mobile-apps.
For example: During Summer Olympics, Adidas launched new
Olympic Kit which will attract large number of customers
instantly. Residents of North America are very found of Olympics
which means, people with definitely get attracted to this kit. On
the contrary, new technology developed by BMW for field and
track runners comes out as major threat for Adidas technology of
running gear at that particular moment. Considering the fact that
Adidas and BMW are from same country, this results in
developing competition in the area of sportswear oncer entering in

North America sports market.
Legal: Athletic industry is a labour intensive industry. Employment law is
improving in developing countries comes out as a main threat for
this sector as it results in increasing the cost of labour in regions
where majority of sports production plants are located.
Simultaneously, this carry out as an opportunity for businesses to
apply higher standards for employment and labour. Legal terms
and procedures help to consolidated the ethical formulation of
business execution parallel to sustainable growth and
development. Firms also have the opportunity to enhance its safety
and healthy measures to direct growing safety and health
regulation. Moreover, enterprises gets the chance to improve its
corporate reputation and brand image.
Environmental: Environmental issues also impact operations of Athletic Industry.
Growing environmental law develop opportunities for companies
to enhance its sustainability and environmental programs. Firm
can use these programs to address issues related with climate
change which impact supply chain of Athletic Industry in some
regions.
Porter's Five Forces Model: It is simple yet powerful tool that provide better
understanding related with competitive business environment and also determines strategy's
potential profitability of company (Chu, KrishnaKumar and Khosla, 2014). Porter acknowledged
that companies need to keep a close watch on its competitors along with various factors that are
also affecting company's performance. With the application of this model, organizations can
shape its strategies in most significant manner. The model comprises of five forces which are
discussed below:
Competitive rivalry (Strong Force) Competition identifies how companies under
Athletic Industry can maintain its market share
in sports footwear. This element evaluates how
competition impact the environment of

industry as well as the performance of
individual companies. Competitive spirit of
this sector is quite high as every organization
aims at providing either premium quality
services or best in line products to end-users.
Bargaining power of customers (Moderate
Force)
The low switching cost make easier for buyers
to remain loyal and stick to a particular brand
for a course of period. Moderate availability of
substitute firm also enable consumers to
purchase products from other brands that offer
similar product but on low cost. High level of
risk involved in this force.
Threat of substitutes (Moderate Force) Availability of substitute companies possess
significant threat against leading player of
Athletic Industry. Basically, it provide
considerable choices of options to consumers.
However, there are certain small scale firm that
produce identical products that to with cheaper
quality which might not attract brand conscious
consumer.
Threat of new market(Medium Force) Initial investment in this sector is high which
lower the chance of new entrants in this
industry. High cost of brand development
makes it complex for new entrants to thrive in
competing against already established and
globally famed brands.
Bargaining power of suppliers (Low Force) The demand for athletic industry is increasing
tremendously. It gives an option of switching
to suppliers from brand to another as there are
numerous other prominent brands that are

already operating well in athletic industry.
Along with this, high economies of scale
render competitive edge to already existing
firm with the entrance of new companies.
Moreover, suppliers do have specific level of
command in requesting their desirable cost in
the market for sports footwear.
(Source: Porter's Five Force Model, 2017)
Above discussed are two main technique that help in identifying various external factors
and its impact on overall operation of business. Once the industry is done with investigating
these forces, appropriate strategies can be developed by companies according to prevailing
market condition or trends (Ghezzi, 2013). Porter's Generic Strategy Model can be taken into
Illustration 1: Porter's Five Force Model

account for gaining high competitive advantage. Key generic strategies for achieving high
performance within an industry include cost leadership, differentiation and focus strategies.
1.2 Application of strategic management thinking
In order to determine the direction of organisation, generic strategies can be used by
company. Relative position of firm within industry identifies whether its profitability is below or
above the industry average. The important basis of supra average profit in long term is
sustainable competitive advantage. A company can possess 2 basic kinds of competitive
advantage: differentiation or low cost. In Athletic industry, there are various competitors exist in
market place such as Nike, Reebok, Adidas, Puma etc. All these firms tries to apply some
creative strategic management thinking in order to maintain their position in market place for
long term. Generic strategies reverberate the selection made related to both type of scope and
competitive advantage. These approaches can be implemented to any size of business. Brief
description of these strategies are defined below:
Cost leadership strategy:
In this strategy, firm target large market & offer the possible lowest price. Company have
2 conditions, either to keep lowest possible cost or ensure that they have large market share
along with average prices. By applying this strategy, firm tries to lead market through offering
goods in lowest prices. For example: In 2011, key players of this industry had decided to opt
Cost Leadership Strategy in all four operating region namely North America, Latin America,
Europe Africa and Latin America (Maté, Trujillo and Mylopoulos, 2012). All players mutually
took a decision to lower the price of their products. However, the extent to which companies had
decided to bring down the cost was kept at keeping it at marginally lower than the average cost
of current market. Before implementing this, it was essential for companies to reach out vast
customers. Thus, decided to make optimum use of all retail outlets so as to spread out its
products to ample size of customers. In Asia Pacific, number of retail store utilization was 1467,
however the competing industrial average in same year was 1312 that indicates higher utilization
of retail stores. As a result, opting this strategy comes out a wrong option for leading player of
Athletic industry.
Differentiation Strategy:
In 2013, after the failure of above chosen strategy, key players by the time had decided to
shift to Differentiation Strategy because companies realise the need for offering more models in

market. The budget of advertising also needs to be revamped with the introduction of many new
models (Montgomery, 2011). Sales of Latin America was relatively low at that, which enable
key players to put this region on top priority for advertising. However, the result expected by
opting this strategy was not up to the mark. As overall revenues got dropped by 232205%
because of faster delivery and more variety offered.
Focus Strategy:
Again, when the chosen strategy turn up to be wrong for key players of athletic industry
in terms of financial loss, once again organizations mutually decided to swap to focus strategy.
Under this strategy, companies has decided to concentrate on peculiar market segment and
investing lesser as compared to other years. Lesser investment indicates that firms had to look at
the option of selling its products online. Knowing the fact that other competitors had already
gained more profits due to internet sales as compared to retail outlets. For gaining high
competitive advantage at this point, key players lower the prices by 8.3% in the internet segment
in all 4 operating areas. As a result, projected benefits were attained in context of high sales,
capturing good market share & strong customer base in all region.
1.3 Analyse decision framed resulted in better or worse results
By doing market analysis of last 7 years, it had been figured out that strategies were
formulated keeping in mind the prevailing market condition and trends. From 2011-2013, key
players opted cost leadership strategy with a purpose of capturing high market share in all four
operating region. During this year, company also decided to step up on advertising initiatives as
well as introduce more models through retailer support (Reich and Benbasat, 2013). At that time,
it was important to highlight core features of products through advertising and improve S/Q
rating. But the chosen strategy was already followed by majority of other competitors. As a
result, estimated results was not up to the level. But still this strategy helped them in rising
wholesale segment sales when compared to 2010. Along with this, overall revenue of companies
went up by 205767% and Stock Price increase by 22.17%. Also the ROE and EPS gets improved
too at 2.19% and 15.0% respectively. From all this, it can be interpreted that companies had done
better but still the strategy needs to get revamped (Scholes, 2015).
During the year 2013-15, key players shift to Differentiation Strategy so as to overcome
the shortcomings faced in previous years. Organizations needs to increase the number of model
as well as advertising budget. Here, main objective of firm is to faster the delivery of products in

all four operating regions. But, entire revenue generating system got affected due to this system.
By primarily concentrated on the process of faster delivery, companies are ignoring the use of
good quality raw material. But still organizations was not able to get the projected results. Thus,
call for revamping the strategy.
During the year 2015-17, key players swap to focus strategy because firms were not able
to generate adequate amount of profits as expected. Key concentration area during this year was
to lower the amount of investment and focus on particular market segments. Strong
concentration on pricing policy related with internet segment means key players are ignoring the
wholesale segment. As a results, companies were able to generate fruitful amount of revenues
that help in making its customer and market base more stronger.
1.4 Evaluate causality of decision made
From above analysis, it can be conclude that decisions related with formulating
appropriate strategies are made according to the prevailing condition of market. From past 7
years, different strategies were made according to overall organizational goals and objectives.
For example: Strong concentration was made on advertising products via medium of internet in
the year 2015. Every year, key players first investigate the market trend, project profits and then
formulate strategies accordingly (Spender, 2014). In 2015, companies laid stress on promoting
its product and services with the use of online platforms. Casual decisions were made in context
of dropping the price in the internet segment to 8.3%. This gives high competitive advantage to
company over other rivals.
1.5 Execution of corrective action measures
The scope of athletic industry is very wide, thus companies must know how to exploit the
available opportunity in an effective manner. From all above discussed strategies, it has been
figure out that focus strategy is the most effective & appropriate one that allow industry to gain
high competitive advantage (Verbeke, 2013). With the application of this strategy, companies
can potentially leverage to improve their success as well as capture high market share.
CONCLUSION
From the above mentioned report it can be concluded that for attaining high competitive
advantage in the market, companies need to formulate effective business strategy. There are
various macro factors that affect the way business perform their operation either positively or

negatively. There are various tools through which impact of these factors can be determined
including Pestle analysis, Porter five forces model etc. With the application of these tools,
appropriate strategy can be formulated that help in achieving higher profitability ratio.

REFERENCES
Books and Journals
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Online
Business Strategy. 2018. [Online]. Available
through:<https://en.wikibooks.org/wiki/Business_Strategy>.