When it comes to business planning, choosing the best strategic model can be the difference between steering towards success or just treading water. It doesn’t matter whether you’re revisiting your business plan or starting a new one from scratch; getting to grips with and applying the right frameworks can help you craft a strategy that’s both robust and adaptable.
Here, I’ll be discussing some of the essential strategic models for UK business, including SWOT analysis, Porter’s Five Forces, and the BCG Matrix.
SWOT Analysis
As some readers will know, SWOT stands for strengths, weaknesses, opportunities, and threats. It’s potentially one of the most widely used strategic tools, and it is not without good reason. It’s simple but powerful and gives you a comprehensive look at your business’s internal pros and cons, as well as a chance to analyse what’s going on beyond your company’s front door.
With SWOT analysis, the devil is in the detail.
In my experience, the key to leveraging SWOT analysis effectively lies in the quality of the insights you can gather. It’s all too easy to list strengths like ‘strong brand recognition’ or ‘skilled workforce’ – the real value comes when you dig a bit deeper.
For example, identifying that a key strength is your company’s agile decision-making process lets you explore opportunities that require rapid adaptation to market changes.
SWOT’s simplicity is a strength.
This is unarguable, but it requires honest and thoughtful introspection and a willingness to confront uncomfortable truths. Understanding your weaknesses isn’t just about acknowledging them. You’ve got to recognise how your weaknesses can impact your strategy.
Let’s say you’re experiencing high employee turnover. Here, the threat goes beyond recruitment costs – it could also bleed into customer service and brand reputation. Figuring out what this means for your long-term business plan is vital for sustained success.
Source: Oxford College of Marketing
Porter’s Five Forces
While SWOT analysis provides an internal and external snapshot, Porter’s Five Forces offers you a more nuanced view of the competitive landscape. Developed by the eponymous Michael Porter, this model analyses five key forces that shape every industry:
- The bargaining power of buyers.
- The bargaining power of suppliers.
- The threat of new entrants.
- The threat of substitutes.
- The intensity of competitive rivalry.
You might notice some overlap between this strategic framework and the SWOT model for business success. That’s because, essentially, they’re trying to do the same thing – provide you with a clear way to identify the current situation and the best move going forward.
How does it work in practice?
Imagine you’re operating in a market with low barriers to entry, like the commodity market. Here, the threat of new entrants might be high, prompting you to consider strategies that build customer loyalty or create propriety advantages by marking your product out as a premium.
On the other hand, what if you’re dependent on the commodity market – something that’s relatively common among food and beverage producers? In this instance, barriers to entry can be high, reducing the risk of competitors, but supplier power can also be high. In that case, to reduce the influence your supplier has on your business, you might consider diversifying your offerings to minimise risk.
Porter’s Five Forces encourage a broader view beyond your immediate competitors.
This pushes you to consider other factors that could impact profitability. By doing so, this strategic framework helps UK businesses not only identify potential threats but also uncover opportunities for differentiation and market positioning.
The Boston Consulting Group (BCG) Matrix
The BCG Matrix is another essential strategic model for UK businesses, particularly for companies managing a portfolio of products or business units. It categorises offerings into four quadrants based on market growth versus market share:
- Stars
- Cash Cows
- Question Marks
- Dogs
From my perspective, the BCG Matrix is most valuable for resource allocation decisions. ‘Cash Cows,’ which are products with high market share in low-growth markets, can generate a steady revenue with minimal investment. These funds can then be redirected towards ‘Stars,’ which have high market growth and share.
However, it’s the ‘Question Marks’ that often demand the most strategic thought. These are products in high-growth markets but with low market share. The decision here is whether to invest heavily to turn them into Stars or divest if the potential doesn’t justify the cost.
As you might have guessed, the ‘Dogs’ make up the final quadrant – low market share in low-growth markets. Typically, these are candidates for discontinuation unless they serve a strategic niche purpose.
The BCG Matrix gives you a clear, visual insight into where your products stand, helping to prioritise investments and divestments based on their potential growth for profitability.
Image Source: thePower
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