Week 2: Business strategies and models

(SWOT and TOWS)

Homework Task
Think about it critically: which tabletop is longer?

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Homework Task
• Reading by Alex Fisher on ‘What Critical Thinking Is’:
• Analysis: Identify and explain the key elements involved in the process of
analysis as described in the text. How do these elements contribute to
understanding reasoned cases and arguments?

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Homework Task
• Reading by Alex Fisher on ‘What Critical Thinking Is’:
• Evaluation: Describe the various kinds of evaluative activities central to
critical thinking outlined in the text. How do different types of reasoning
require different standards of evaluation, and why is creativity important in
this process?

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Homework Task
• Reading by Alex Fisher on ‘What Critical Thinking Is’:
• Self-Regulation: Discuss the importance of self-regulation in critical thinking
according to the text. How does applying critical thinking principles to one's
own ideas and communications contribute to effective reasoning and
problem-solving?

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Homework Task
• Reading by Alex Fisher on ‘What Critical Thinking Is’:
• Disposition: List and explain at least three affective dispositions of critical
thinking approaches to life and specific issues as outlined in the text. How
do these dispositions contribute to the development of critical thinking
skills?

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Homework Task
• Reading by Alex Fisher on ‘What Critical Thinking Is’:
• Critico-Creative Thinking: Define and discuss the concept of "critico-creative"
thinking as presented in the text. How does this concept highlight the
positive and imaginative aspects of critical thinking, and why is it
considered essential for effective evaluation of arguments and ideas?

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Overview
• Critical Thinking Action Plan
• Introduction to the Business Model Canvas
• Business Strategies
• SWOT and TOWS
• Introduction to Assessment 1, Part A (infographic)

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Task 1
Critical Thinking Action
Plan
• See Task 1 instructions in
Canvas.

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Reflection and Discussion
Reflect on the importance of
critical thinking in decision-
making and consider how you
can apply these skills in other
real-life scenarios. Discuss with
your group members and the
class what you learned from
this activity.

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In the Business Context…
How can this process be applied to decision-making in business?

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The Business Model Canvas

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Introduction to the Business Model
Canvas: Video

https://www.youtube.com/watch?v=I8nwNcCfyig 12
The Business Model Canvas
1. Customer Segments
2. Value Proposition
3. Channels
4. Customer Relationships
5. Key Activities
6. Revenue Streams
7. Key Resources
8. Key Partnerships
9. Cost Structure

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Thinking about the Donut Task…
Value Proposition
• How would you describe the unique value proposition of your chosen
donut shop?

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Thinking about the Donut Task…
Customer Segments
• Were customer segments easily covered by the products on offer, or is
there potential for a new shop that addresses these?

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Thinking about the Donut Task…
Channels and Customer Relationships
• What channels did the company use to communicate with you?
• How did it establish and maintain positive relationships with you to ensure
customer satisfaction?

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Thinking about the Donut Task…
Revenue Streams
• Did the company use different pricing strategies for its donuts based on
factors such as ingredients, or exclusivity?
• Did it offer additional options, or add-ons?

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Thinking about the Donut Task…
Key Activities, Resources, and Partnerships:
• What key activities were essential for preparing and selling the donuts to
you?
• Were there any partners involved, e.g. delivery services?

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Thinking about the Donut Task…
Cost Structure
• Could you identify, or could you suggest, any cost-saving strategies or
considerations for maximising the company’s profit?

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What if…?
• Customer Segments: What if you discovered that a significant
portion of customers discovered they were allergic to soy, which
is commonly used in emulsifiers? How would you adjust your
customer segments and donut offerings accordingly?

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What if…?
• Value Proposition: What if you received feedback that certain
donut flavours were particularly popular among customers? How
would you leverage this information to enhance your value
proposition and cater to future customer preferences?

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What if…?
• Channels and Customer Relationships: What if you encountered
communication challenges with the delivery partner? How would
you adapt your channels and customer relationships to ensure
smooth coordination and customer satisfaction?

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What if…?
• Revenue Streams: What if you realised that offering specialty
donuts with premium ingredients could command higher prices
among certain customer groups? How would you adjust your
revenue streams and pricing strategy to capitalise on this
opportunity?

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What if…?
• Key Activities, Resources, and Partnerships: What if you faced
unexpected delays or shortages in sourcing ingredients for your
donuts? How would you adapt your key activities, resources, or
partnerships to mitigate these challenges and ensure timely
delivery?

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What if…?
• Cost Structure: What if you exceeded your initial budget due to
unanticipated expenses related to equipment rental or
transportation? How would you reassess your cost structure and
prioritise expenditures to stay within budget constraints while
maintaining quality?

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Business Strategies
Generic Strategies, Interactive Strategies, and Business Models

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Business Strategy: Generic Strategies
• Cost leadership
• Differentiation
• Focus
• Hybrid

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Business Strategy: Interactive
Strategies
• Hypercompetitive strategy
• Game Theory

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Business Strategy: Business Models
• Value creation
• Value configuration
• Value Capture

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Case Study: ReMarkable
• Developed by a former
Masters student to keep
track of files and notes.
• Offers distraction-free
reading, writing, and
annotating.

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Case Study: ReMarkable
• In first iteration, customer
buys tablet and has access
to free cloud storage. At this
time, the ReMarkable did not
connect to another cloud.
• Later updated to connect to
Google Drive.
• Next iteration, customer buys
tablet and pays subscription
to access ReMarkable’s
cloud storage. Google Drive
still an option.

…consider this case study as we discuss the business strategies in more depth.

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Generic Competitive Strategies
• Michael Porter introduced the term ‘generic strategy’ to mean
basic types of competitive strategy that hold across many kinds of
business situations.
• Competitive strategy is concerned with how a company, business
unit or organisation achieves competitive advantage in its domain
of activity.
• Competitive advantage is about how a company, business unit or
organisation creates value for its users, both greater than the
costs of supplying them and superior to that of rivals.

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Three Generic Strategies

Adapted from Porter, M. E. (1985, 1998)

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Cost-Leadership
Cost-leadership strategy involves becoming the lowest-cost
organisation in a domain of activity.
• Four key cost drivers that can help deliver cost leadership:
• Lower input costs.
• Economies of scale.
• Experience.
• Product process and design.

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Economies of Scale and the
Experience Curve

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Costs, Prices and Profits for Generic
Strategies

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Differentiation Strategies
• Differentiation involves uniqueness along some dimension that is
sufficiently valued by customers to allow a price premium.
• Two key issues:
• The strategic customer on whose needs the differentiation is based.
• Key competitors – who are the rivals and who may become a rival.

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Focus Strategies
• A focus strategy targets a narrow segment of domain of an
activity and tailors its products or services to the needs of that
specific segment to the exclusion of others.
• Two types of focus strategy:
• cost-focus strategy (e.g. JetStar).
• differentiation focus strategy (e.g. QantasLink).

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Focus Strategies
• Successful focus strategies depend on at least one of three key
factors:
• Distinct segment needs.
• Distinct segment value chains.
• Viable segment economics.

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“Stuck in the middle”?
• Porter argues:
• It is best to choose which generic strategy to adopt and then stick rigorously
to it.
• Failure to do this leads to a danger of being “stuck in the middle” i.e. doing
no strategy well.
• The argument for pure generic strategies is controversial. Even Porter
acknowledges that the strategies can be combined (e.g. if being unique costs
nothing).

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Combining Generic Strategies
• A company can create separate strategic business units each pursuing
different generic strategies and with different cost structures.
• Technological or managerial innovations where both cost efficiency
and quality are improved.
• Competitive failures – if rivals are similarly „stuck in the middle‟ or if
there is no significant competition then „middle‟ strategies may be OK.

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Strategic Lock-in
• Strategic lock-in is where users become dependent on a supplier
and are unable to use another supplier without substantial
switching costs.
• Lock-in can be achieved in two main ways:
• Controlling complementary products or services. E.g. Razors that only work
with one type of blade, or printers that only work with one brand of ink
cartridge.
• Creating a proprietary industry standard. E.g. Microsoft with its Windows
operating system, or Apple’s App Store.

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Interactive Strategies
Business strategy choices depend on what competitors do: they
are interactive.

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Interactive Strategies
Richard D’Aveni
and Robert
Gunther (1994)
provide an example
of how competitors
may interact in
terms of
competitive moves
in price and
perceived quality.

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Interactive Strategies
Kumar (2006)
demonstrates
how firms might
respond to the
entry of a low-
price rival.

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Cooperative Strategy
• Sometimes too much competition can be damaging and it is in the
interests of competitors to restrain competition.
• Collaboration with some competitors may give competitive
advantage over other competitors (or potential entrants).

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Game Theory
• Game theory encourages an organisation to consider competitors’
likely moves and the implications of these moves for its own strategy.
• Game theory is particularly important where competitors are
interdependent.
• In these circumstances it is important to:
• get in the mind of competitors;
• think forwards and reason backwards.

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Lessons from Game Theory
• Game theory encourages managers to consider how a “game” can be
transformed from “lose–lose” competition to “win–win” cooperation.
• Four principles:
• Ensure repetition.
• Signalling.
• Deterrence.
• Commitment.

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Task 2
Analysis of ReMarkable
Case Study
• See Task 2 instructions in
Canvas.

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SWOT and TOWS
What they are, and how to use them.

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SWOT
SWOT analysis is a strategic planning tool used to identify and
evaluate the strengths, weaknesses, opportunities, and threats
involved in a business venture or project. It provides a structured
framework for assessing internal and external factors that may
impact the success of a business or initiative.

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Origin of SWOT Analysis
• The SWOT analysis framework is credited to Albert S. Humphrey,
a management consultant who led a research project at the
Stanford Research Institute (SRI) in the 1960s and 1970s.
• The purpose of the project was to identify why corporate planning
failed and develop a systematic approach to strategic planning.
• Humphrey and his team developed the SWOT analysis as part of
their research, aiming to provide organisations with a simple yet
effective tool for assessing their competitive position and
formulating strategies.

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Components of SWOT Analysis
• Strengths
Internal factors that give an organisation a competitive advantage or unique capabilities.
These may include resources, expertise, reputation, market position, and competitive
advantages.
• Weaknesses
Internal factors that place an organisation at a disadvantage or limit its ability to achieve its
objectives. These may include deficiencies in resources, skills, infrastructure, processes, or
market vulnerabilities.
• Opportunities
External factors that present favorable conditions or prospects for growth, innovation, or
advancement. These may include market trends, emerging technologies, changes in
regulations, or untapped market segments.
• Threats
External factors that pose risks or challenges to an organisation's success or sustainability.
These may include competitive pressures, economic downturns, regulatory changes,
technological disruptions, or shifts in consumer preferences.

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Applications of SWOT Analysis
• Strategic Planning
SWOT analysis helps organisations formulate strategies that leverage strengths,
mitigate weaknesses, capitalise on opportunities, and address threats.
• Business Evaluation
SWOT analysis can be used to assess the viability of new business ventures, evaluate
existing business units, or identify areas for improvement.
• Decision Making
SWOT analysis provides a structured framework for decision-making by highlighting
key factors that may influence outcomes and guiding resource allocation and
prioritisation.
• Stakeholder Communication
SWOT analysis facilitates communication and alignment among stakeholders by
providing a common language and understanding of the organisation's internal and
external environment.

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TOWS
• The TOWS analysis is a later adaptation of the SWOT framework
and was popularised by Heinz Weihrich in his 1982 book The
TOWS Matrix: A Tool for Situational Analysis. Weihrich
rearranged the components of the SWOT analysis to emphasise
the prioritisation of external factors (threats and opportunities)
over internal factors (weaknesses and strengths), hence creating
the TOWS framework.

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Components of the TOWS Analysis
• Threats
• External factors or challenges that have the potential to negatively impact the organisation's
performance or objectives. These could include changes in market trends, regulatory issues,
competitive pressures, economic downturns, etc.
• Opportunities
• External factors or trends that present favorable circumstances for the organisation to
achieve its goals or gain a competitive advantage. These could include emerging markets,
technological advancements, changing consumer preferences, etc.
• Weaknesses
• Internal limitations or shortcomings within the organisation that hinder its ability to
achieve its objectives or compete effectively in the market. These could include lack of
resources, outdated technology, poor leadership, etc.
• Strengths
• Internal capabilities, resources, or advantages that give the organisation a competitive edge
or enable it to achieve its goals effectively. These could include strong brand reputation,
talented workforce, proprietary technology, etc.

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TOWS Analysis: The Next Step
• Once the threats, opportunities, weaknesses, and strengths are
identified, the next step in a TOWS analysis is to develop
strategic actions or recommendations that capitalise on strengths
to exploit opportunities, minimise weaknesses to mitigate threats,
convert weaknesses into strengths, or counter threats with
strengths.

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Task 3
SWOT versus TOWS
See Task 3 instructions in
Canvas.

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Assessment 1, Part A
• This assessment requires you to conduct a SWOT analysis and a
TOWS analysis on one of the following scenarios and create an
infographic for each using Canva to visually communicate your
analyses to your reader.

• Each infographic should contain approximately 250 words (2 x 250

words = 500 words total).
• Most likely your TOWS will be longer than your SWOT, as it has extra components,
so this is not a strict division of your word count.

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Scenarios
1. Aussie Outback Adventure Tours | Market Entry or Expansion
2. Melbourne BrewCrafters | Product or Service Launch
3. AussieTech Solutions Acquisition of Local Software Innovators |
Mergers and Acquisitions
4. Sydney Green Ventures Fund | Investment Decisions
5. Coastal Conservation Collective | Nonprofit or Social Enterprises

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Use of AI for this Assessment
AI is NOT permitted for this assessment task. This includes the use
of generative AI platforms, such as ChatGPT, QuillBot and
Grammarly.
Students must demonstrate that they can conduct the analysis on
their own and communicate the findings of their analysis. Minor
grammatical or spelling errors will not result in a deduction of
marks.

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Next Week
• Complete a draft of your analysis for Assessment 1, Part A
• Business Models (continued)
• Porter’s Five Forces

Check the ‘Summary and Homework Activity’ page for instructions on

preparing for next week’s class.

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