BUSINESS STUDIES

GRADE 12

TERM ONE
WEEK 9-10
REVISED CHAPTER 5

BUSINESS STRATEGIES

2025
Business strategies 2025/NW/Chapter 5

Table of Contents
A . Extract from the EXAMINATION GUIDELINE ......................................................................................................... 3
B TERMS AND DEFINITIONS ................................................................................................................................... 4
1. Definition of a strategy............................................................................................................................................ 4
2. The strategic management process ....................................................................................................................... 4
3. INDUSTRIAL ANALYSIS........................................................................................................................................ 5
3.1 COMPILATION OF A SWOT ANALYSIS ....................................................................................................... 5
3.2 Example of a scenario that requires learners to compile a SWOT analysis ................................................... 5
4. PORTERS’ FIVE FORCES MODEL....................................................................................................................... 6
4.1 APPLICATION OF PORTERS’ FIVE FORCES MODEL.................................................................................
4.1.1 Power of suppliers ............................................................................................................................... 6
4.1.2 Power of buyers ................................................................................................................................... 6
4.1.3 Power of competitors/Competitive rivalry ............................................................................................. 6
4.1.4 Threat of substitution/substitutes ......................................................................................................... 6
4.1.5 Threat/Barriers of new entrants to the market...................................................................................... 7
5. PESTLE ANALYSIS ............................................................................................................................................... 7
5.1 Challenges posed by the PESTLE factors and recommendations ............................................................. 7-9
6. TYPES OF BUSINESS STRATEGIES ................................................................................................................... 9
6.1 Integration strategies ............................................................................................................................................. 9
6.1.1 Forward Vertical integration ......................................................................................................................... 9
6.1.2 Backward Vertical integration ...................................................................................................................... 9
6.1.3 Horizontal integration ................................................................................................................................. 10
6.2 Intensive strategies.............................................................................................................................................. 10
6.2.1 Market penetration .................................................................................................................................... 10
6.2.2 Market Development ................................................................................................................................. 10
6.2.3 Product Development ................................................................................................................................ 10
6.3 Advantages of intensive strategies .................................................................................................................. 10-11
6.4 Diversification strategies....................................................................................................................................... 11
6.4.1 Concentric diversification............................................................................................................................. 11
6.4.2 Horizontal diversification.............................................................................................................................. 11
6.4.3 Conglomerate diversification ....................................................................................................................... 11
6.5 Advantages of diversification strategies ............................................................................................................... 11
6.6 Types of defensive strategies ............................................................................................................................... 12
6.6.1 Divestiture/ Divestment............................................................................................................................... 12
6.6.2 Retrenchment 12

6.6.3 Liquidation ................................................................................................................................................... 12

7 Steps in evaluating a strategy .............................................................................................................................. 13

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Extract from the Examination Guideline 2021(Refer to page 9 and 10 of the 2021 exam guidelines)
Learners must be able to:

MACRO-ENVIRONMENT: BUSINESS STRATEGIES

 Outline/Explain/Describe/Discuss the strategic management process.
 Apply the strategic management process to solve business-related problems.

INDUSTRIAL ANALYSIS TOOLS

 Compile a SWOT analysis of a particular business from a given scenario.
 Name and identify Porter’s Five forces model from given statements/Scenarios.
 Explain/Advise businesses on how they could apply Porter’s Five Forces model to analyse their position in the
market.
 Name and apply the PESTLE analysis factors from given scenarios/statements.
 Explain how the PESTLE factors pose challenges to businesses.
 Recommend ways in which businesses can deal with the challenges that are posed by the
PESTLE factors.

TYPES OF BUSINESS STRATEGIES

 Explain/describe/discuss the following types of business strategies:
o Integration strategies
o Intensive strategies
o Diversification strategies
o Defensive strategies
 Discuss/Elaborate on the effectiveness (positives/advantages) of intensive and diversification
strategies.

STRATEGY EVALUATION
 Outline/Explain/Recommend/Advise businesses on the steps in strategy evaluation:
o Examine the underlying bases of the business strategy.
o Look forward and backwards into the implementation process.
o Compare expected performance (measure business performance).
o Take corrective action where necessary.
o Set specific dates for control and follow up.
o Decide on the desired outcome.

Terms and definitions

Term Definition
Formulation of strategies To devise/develop a strategy.
Implementation of strategies This takes place after the formulation of the strategy and involves all the activities that are
required for putting the strategy into action.
Evaluation of strategies This takes place after the implementation of the strategy and determines whether the
implemented strategy resolved the challenge.
Industry analysis tools SWOT, Porter’s Five Forces and PESTLE analysis models are used
to analyse the challenges posed by business environments.
Suppliers Include factories/providers of goods/services that businesses would obtain/buy from in order to
operate their business.
Buyers The final users of the product/services.
Competitors All other businesses selling the same/similar products/services

Substitute product or service Different products/services that satisfy the same needs of consumers and can be used to replace
one another.
New Entrants New businesses that are selling the same/similar products entering the market for the first time.

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Week 9
13 – 15 March

1 Definition of a strategy

 A strategy is a long term plan of action to achieve a goal.

 A strategy is a plan of action to address an opportunity or to solve a problem.
 The business needs a strategy to achieve its vision and mission.

2 The strategic management process

Option 1
 Have a clear vision, a mission statement and measurable/realistic objectives in place.
 Identify opportunities/weaknesses/strengths/threats by conducting environmental scanning/situational
analysis.
 Tools available for environmental scanning may include a SWOT analysis/Porter's Five Forces
model/PESTLE analysis/industrial analysis tools.
 Formulate alternative strategies to respond to the challenges. (This involves different types of
business strategies)
 Develop (an) action plan(s), including the tasks to be done/deadlines to be met/resources to be
procured, etc.
 Implement selected strategies by communicating it to all stakeholders/organising the business's
resources/motivating staff.
 Continuously evaluate/monitor/measure strategies in order to take corrective action. (This involves
steps in evaluating a strategy)

Option 2

 ‘Review/Analyse/Re-examine their vision/mission statement’

 Conduct an environmental analysis using models such as PESTLE/PORTER'S/SWOT.
 Formulate a strategy such as a defensive/retrenchment strategy.
 Implement a strategy, using a template such as an action plan.
 Control/Evaluate/Monitor the implemented strategy to identify gaps/deviations in implementation.
 Take corrective action to ensure goals/objectives are met.

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3 INDUSTRIAL ANALYSIS

3.1 COMPILATION OF A SWOT ANALYSIS

STRENGTHS WEAKNESSES

 What advantages does your organisation have  High cost infrastructure

and what do you do better than anyone else?  High employee turnover
 What unique or lowest-cost resources can you  Weak brand portfolio
draw upon that others can't?  High debts level
 Do you have skilled employees and a strong  What are people in your market likely to see as
customer base? weaknesses?
 Do you provide high quality product?  What factors cause loss of sales
 Do you have sufficient resources?  Are your competitors doing any better than
 What is your core competency? you?
OPPORTUNITIES THREATS
 Market growth for the business product.  Corporate tax may increase
 New technology that will enhance quality  Rising pay levels.
services and products  Intense competition.
 Changing customer habits.  Increasing fuel price.
 Disposable income level will increase.  Aging population.
 Government’s incentives for ‘specific industry  Stricter laws regulating environment pollution
 Growing number of people buying on line  Currency fluctuations.
(electronic marketing)  Changing technology.
 What good opportunities can you spot?

NOTE: The SWOT analysis is usually assessed in the form of a scenario as indicated below:

3.1.1 Example of a scenario that requires learners to compile a SWOT analysis

DAVE DIGITAL SOUND (DDS)

DDS specialises in selling radios and car sound systems. They employ qualified sound engineers. The business
does not have sufficient capital to buy and sell sound systems that cater for large events. Businesses in the same
industry are closing down due to ineffective marketing campaigns. DDS is located in a high crime area.

An example of a SWOT analysis of Dave Digital Sound DDS

STRENGTHS WEAKNESSES
 DDS employs qualified sound engineers.  The business does not have sufficient capital to
 DDS specialises in selling radios buy/sell sound systems that
and car sound systems. cater for large events.

OPPORTUNITIES THREATS
 Businesses in the same industry are closing  DDS is located in a high crime area.
down due to ineffective marketing campaigns.

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4 PORTERS’ FIVE FORCES MODEL

 Power of suppliers
 Power of buyers
 Power of competitors/Competitive rivalry
 Threat of substitution/substitutes
 Threat/Barriers of new entrants to the market
NOTE: Ensure that you are able to correctly name the above mentioned Porter’s Five Forces
model to avoid losing marks.

4.1 APPLICATION OF PORTERS’ FIVE FORCES MODEL

4.1.1 Power of suppliers

 Suppliers that deliver high quality product may have power over the business.
 The smaller the number of suppliers, the more powerful they may be as the choice of suppliers may be
limited.
 The more powerful the suppliers, the less control the business has over them.
 Assess the power of the suppliers in influencing prices.
 Identify the kind of power suppliers' have in terms of the quality of products/services/reliability/ability to
make prompt deliveries, etc.

4.1.2 Power of buyers

 A few powerful buyers are often able to dictate their terms to the business.
 If buyers can do without the business's products then they have more power to determine the prices and
terms of sale.
 Buyers buying in bulk can bargain for prices in their favour
 Conduct market research to gather more information about its buyers.
 Determine the number of buyers/the importance of each buyer to the business and the cost of switching
to other products.

4.1.3 Power of competitors/Competitive rivalry

 If competitors have a unique product/service, then they will have greater power.
 Competitors selling the same/similar products/services may have a greater impact on the market of the
business.
 A business with many competitors in the same market has very little power in their market.
 Competitors using various pricing and marketing strategies are likely to have power over the business.
 Some businesses have necessary resources to start price wars and continue selling at a loss until
some/all competitors leave the market.
 Draw up a competitor's profile so that they can determine their own strength as well as that of
competitors.

4.1.4 Threat of substitution/substitutes

 If the business's product can be easily substituted, it weakens the power of the business in the market.
 If the business sells unique products it will not be threatened by substitute products.
 Establish whether the sellers of substitute products have improved their product/sell lower quality goods
at lower prices.
 Assess if customers are using substitute products/services and determine reasons for using substitutes.

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4.1.5 Threat/Barriers of new entrants to the market

 If the barriers to enter the market are low, then it is easy for new businesses to enter the
market/industry.
 If the business is highly profitable, it will attract potential competitors that want to benefit from high
profits.
 New competitors can quickly/easily enter the market, if it takes little time/ money to enter the market.
 If there are a few suppliers of a product/service but many buyers, it may be easy to enter the market
NOTE: The main aim of Porter’s Five Forces model is to analyse the business position in the market.
This is more of a research study done by businesses. Do not focus on recommendations
as this is not form part of an analysis. You must also be able to identify Porter’s Five forces
model from given statements and scenarios.

Week 10
12– 18 March
5 PESTLE ANALYSIS

RECOMMENDATIONS OF DIAGNOTIC REPORT 2022

Conduct a baseline assessment on the PESTLE elements by requesting learners to explain and give practical
examples of challenges posed by each element. Learners can be requested to make recommendations on how
businesses can deal with each challenge. Regular short assessment tasks can be used to close the content gaps

 Political factors
 Economic factors
 Social factors
 Technological factors
 Legal factors
 Environmental factors
NOTE: Ensure that you are able to name and identify the PESTLE factors from given
statements/scenarios and recommend ways businesses can deal with the identified challenges
as explained in the table below:

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5.1 CHALLENGES POSED BY THE PESTLE FACTORS AND RECOMMENDATIONS

NOTE: You need to name the PESTLE factor, identify challenges of each factor and recommend
ways businesses can deal with the identified challenges as explained in the table below:

FACTOR CHALLENGES RECOMMENDATIONS

Political  Some government policies may affect  Research recent government policies
businesses  Network and lobby with the NGOs and all
 Consumer rights organisations may consumer rights organisations.
prevent businesses from selling  Trade only with countries that have favourable
products if they do not meet certain trade agreements with the government.
requirements
 Trade agreements may prevent
businesses from importing some
medicine/products
Economic  Inflation/Interest rates may negatively  Consider decreasing profit margins rather than
impact on business. increasing product prices.
 Loans may be expensive due to high  Borrow money from financial institutions when
interest rates. interest rates are favourable.
 Fluctuations in foreign currency may  Negotiate favourable interest rates with
restrict import. creditors
 Sell/Dispose parts of assets that are no longer
profitable.
 Consider exchange rates when trading with
other countries.
 Sell shares at competitive/lower the prices to
attract more foreign direct investments.
Social  Customers may not be able to afford  Sell substitute/generic products at lower prices.
products due to low income levels/high  Learn local languages/Hire employees who are
unemployment. well conversant with the local language.
 Businesses may not be conversant with
the language of their customers.
 Some customers may prefer to spend
their money on medical bills for the
treatment of chronic illnesses.
 High crime rate may affect the trading
hours of businesses resulting in
decreased profit.
Technological  Businesses may not keep up with/be  Continuous research on the latest available
aware of the latest technology. technology/equipment in the market.
 Employees may not be skilled to  Train existing/appoint new employees to
operate/maintain new technology/ maintain/use new equipment.
equipment.  Compare prices/Select suitable suppliers for
 Businesses may not be able to afford new equipment at reasonable prices.
new technology.  Businesses must be geared for online
 May not be able to cater for/ afford trading/e-commerce
online transactions/e-commerce.
Legal  Certain Acts may have a direct impact  Comply with all relevant legislation that may
on a business, e.g. the CPA/BCEA. impact on businesses.
 Legal requirements for operating certain  Comply with the legal requirements for
types of businesses time-consuming. operating businesses, e.g. licence/trade mark
registration/patents.

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 High legal costs involved in obtaining a  Budget for high legal establishment costs.
licence/trade mark/patent may prevent  Businesses must know the legalities of
some establishments. business contracts so that they comply with all
 Legalities of business contracts may the requirements.
limit business operations
Environmental  Chemicals/Ingredients in business’ 
Chemicals/Ingredients should be clearly
products may be harmful to customers
indicated on labels/packaging to inform
 customers about possible side effects/correct
Measures to dispose of business waste
may be expensive. use of products.
  Implement cost effective measures to dispose
Packaging of some products may not be
of medical waste.
environmentally friendly may not be
recyclable.  Implement recycling measures to prevent
pollution of the environment/Use packaging that
is re-usable/recyclable.
 Engage in environmentally sustainable
practices such as the conservation/preservation
of natural resources.
NOTE: The industrial analysis tools (SWOT, PESTLE AND PORTERS’FIVE) and business strategies form
part of the strategic management process.

6 Types of business strategies

RECOMMENDATIONS OF DIAGNOSTIC REPORT 2022

Teachers should develop a mind-map/spider diagram illustrating the meaning of the four main types of strategies
outlined in the 2021 Examination Guidelines. Suitable practical examples should be used to enhance the teaching and
learning of Business Strategies

6.1 Integration strategies

6.1.1 Forward Vertical integration

 The business combines business with or take over its distributors down the supply chain/production
chain/The business merges with businesses that were once their customers, while still maintaining
control of the initial /primary business activity.
 Involves expansion of business activities to gain control over the direct distribution of the
products/services.
 The business takes over the distribution system and sells products/services directly to
consumers/customers.
 Increases profitability as the intermediary/distributor/middleman is excluded.

6.1.2 Backward Vertical integration

 The business combines with/merges/takes over suppliers up the supply chain/production chain. / The
business expands its role to fulfil activities/tasks that were formerly/previously completed by the
suppliers.
 The aim is to decrease the business’s dependency on the supplier.
 Enables the businesses to cut the costs and have the influence over the prices/quality/quantity of raw
materials.

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6.1.3 Horizontal integration

 A business takes control of/ incorporates other businesses in the same industry/which produce/sell the
same/similar goods/services./ It is the acquisition /takeover of a related business that operates at the
same level of supply chain in the industry.
 The aim is to reduce the threat of competition /substitute products/services.
 Increases the market share /sales/profits and enhance the production/distribution.
 Suitable for businesses that operate in multiple geographical areas through joint
ventures/licencing/franchising.

6.2 Intensive strategies

6.2.1 Market penetration
 New products penetrate an existing market at a low price, until it is well known to the customers and
then the prices increases.
 It is a growth strategy where businesses focus on selling existing products to existing markets.
 Focuses on gaining a larger share of the market by reducing prices to increase sales/increasing
advertising and promotion.
 Businesses use the market research on existing clients to decide on how to improve their marketing
mix.
 Aggressive marketing campaigns such as lowering /reducing prices are used to attract potential/existing
clients.
 Embark on intensive advertising campaign to increase awareness and customer loyalty.
 Employ more sales staff to improve sales/services.

6.2.2 Market Development

 It is a growth strategy where businesses aim to sell its existing products in new markets.
 Businesses target consumers in a potential market that is outside of its normal target market.
 Increasing sales to the existing products by finding new ways to develop new markets.
 Prices are restructured /reviewed to cater for customers/consumers of all income levels.

6.2.3 Product Development

 It is a growth strategy where businesses aim to introduce new products into existing markets/modifies
an existing product.
 Businesses generate new ideas and develop new products/services for existing/current markets.
 Businesses conduct test marketing /market research to establish whether new products will be accepted
by existing customers.
 New products may be different /of a higher quality than those of competitors.

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6.3 Advantages of intensive strategies

 Increase in sales/income and profitability due to a variety of advertising campaigns.
 Regular sales to existing customers may increase.
 Gain customer loyalty through effective promotion campaigns.
 Improved service delivery may positively impact/increase sales.
 Eliminate competitors and dominate market prices.
 Decrease in price could influence customers to buy more products.
 Businesses can have more control over the prices of products/services.
 Enables the business to focus on markets/well researched quality products that satisfy the needs of
consumers.
 Increased market share reduces the business’s vulnerability to actions of competitors.

6.4 Diversification strategies

6.4.1 Concentric diversification
 The business adds a new product or service that is related to existing products and which will appeal to
new customers.

6.4.2 Horizontal diversification

 The business adds new products or services that are unrelated/ different to existing products, but which
may appeal to existing/current customers.
 Occurs when a business acquires or merges with a business that is at the same production stage, but it
may offer a different product

6.4.3 Conglomerate diversification

 The business adds new products or services that are unrelated to existing products which may appeal
to new groups of customers.
 Conglomerate diversification means that a business grows into new products, services and markets.

6.5 Advantages of diversification strategies

RECOMMENDATIONS OF DIAGNOSTIC REPORT 2022
Learners must be made aware that the advantages of diversification strategies are embedded in each
type of diversification strategy. Teachers must therefore clearly illustrate the relationship between the
types of diversification strategies with the advantages of these strategies. Open discussions and
debates should be encouraged to enable learners to gain insight in this content

 Increase sales and business growth.

 Improves the business brand and image.
 Reduces the risk of relying only on one product for sales/revenue/income.
 More products can be sold to existing customers and additional more new markets can be established.
 Businesses gain more technological capabilities through product modification
 Diversification into a number of industries or product line can help create a balance during economic
fluctuations.
 Business produce more output using less inputs as one factory may be used to manufacture more
products.

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6.6 Types of defensive strategies

RECOMMENDATIONS OF DIAGNOSTIC REPORT 2022
Unpack the meaning of ‘defensive’ in the context of business and impress upon learners that defensive strategies are
only used by businesses as a last resort in an effort to continue operating. Adequate assessment and remediation
during the academic year must follow. Research on businesses that applied these strategies is also useful to enhance
the understanding of this concept

6.6.1 Divestiture

NOTE: Divestment will no longer be accepted as alternative response for DIVESTITURE

 The business disposes/sells some assets/divisions that are no longer profitable/ productive.
 Businesses may sell off divisions/product lines with slow growth potential.
 The business sells ownership by decreasing the number of shareholders.
 Unproductive assets are sold to pay off debts.
 Process used to withdraw its investment in another business (divesting).

6.6.2 Retrenchment
 Terminating the employment contracts of employees for operational reasons.
 Decreasing the number of product lines/Closing certain departments may result in some workers
becoming redundant.

6.6.3 Liquidation
 All assets are sold to pay creditors due to a lack of capital/cash flow.
 Selling the entire business in order to pay all liabilities/close down the business.
 Companies in financial difficulty may apply for business rescue to avoid liquidation.
 Creditors may apply for forced liquidation in order to have their claims settled.
NOTE: You must be able to identify the types of business strategies from given
scenarios/statement.

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7 Steps in evaluating a strategy

RECOMMENDATIONS OF DIAGNOSTIC REPORT 2022

Practical examples, role plays, and demonstrations must be used effectively to illustrate the steps in strategy
evaluation. Learners must be made aware of the importance of evaluating strategies to stimulate interest on
how businesses discharge this process. It must be emphasised that the steps in strategy evaluation form part
of the strategic management process. Teachers must guide them on how to unpack these steps

 Examine the underlying basis of a business strategy.

 Look forward and backwards into the implementation process.
 Compare the expected performance with the actual performance.
 Determine the reasons for deviations and analyse these reasons.
 Take corrective action so that deviations may be corrected.
 Set specific dates for control and follow up.
 Draw up a table of the advantages and disadvantages of a strategy.
 Decide on the desired outcome as envisaged when strategies were implemented
 Consider the impact of the strategic implementation in the internal and external environments of the
business.

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