Essay Three Marketing Strategy

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Virginia Tech *

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Business

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Apr 3, 2024

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pdf

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Essay Three: Tools for Analyzing Strategic Decisions Marketing Strategy A1 Madison Barbee September 15th, 2023 Word Count:1,504
Strategic decision-making is the process of charting a course based on long-term goals and a longer-term vision. Every aspect of business includes strategic decisions. Choices such as the cost of certain products or what would the target market find the best product to be. Strategic decisions are so important in a business's success that it is crucial to analyze them. To take a step back and decide if the outcome of a certain choice is worth it to create a successful firm. Before you make such an important decision it is best to take a look at all options and outcomes to best set up the correct choice for the company. There are certain tools that managers commonly use to help analyze strategic decisions. These tools ensure that the choices the firm is making are the correct and most beneficial choices. The first tool is called hypothesis testing, which simply unearths the major assumptions about what must be true about a strategic choice. Hypothesis testing is a critical component in analyzing whether to pursue a particular choice of action. Each strategic choice is simply a hypothesis, in science, we always test our hypothesis with an experiment so it makes sense that in this case scenario, we also should test these assumptions. The first step in hypothesis testing is to identify the core assumptions that the success of the proposed strategic action depends upon. Once you have nailed down the core assumptions there are a few tests you can put them through such as the value test. The value test tells us if the strategic choice will create any value. There is also the execution test where the firm can create and deliver the strategic action at a cost that works for the firm. After going through a couple of these tests you then want to conduct thought experiments. Split data into categories as “what you know,” “what you don’t know but could,” and “what you don’t know and can’t know” By splitting this data up you can best choose which strategic choice is the best overall by being beneficial to the firm.
Another great tool for analyzing strategic decisions is payoff matrices. Payoff matrices are visual aids that show the payoffs associated with the strategic moves of a player the moves and the countermoves of competitors. Game theory in general is extremely helpful in the analysis of a discrete number of options. Payoff matrices is a graph in which you can see all available outcomes of a certain situation. The first step in creating a payoff matrix is to identify strategic actions available to competitors and the choices that you wish to analyze. One common example of a payoff matrix is the simple 2x2 version in which two competitors are considering one of two strategies either price high or price low. This matrix shows what would happen in all situations whether both competitors' prices were low or high or if they each separately did one or the other. After you have the matrix set up the next step is to assess the value associated with each strategic action contingent on competitors. After collecting data on the payoffs associated with each strategic option you can then analyze which would be the most beneficial option for your firm. You can visually see how each option has different outcomes. The next step is to identify dominant strategies. An optimal strategy is one that no matter what the competitor does your payoff is still optimal. This is the strategy a business wishes to find, one that no matter what has the same payoffs. This payoff matrix visual is a great way to analyze strategic decisions by allowing businesses to find the best solution no matter what the competition is doing. The third tool is called acquisition analysis. This is important when a business is deciding whether or not to merge with another firm. Acquisition analysis is the evaluation of the strategic value of one firm when deciding to merge. This is critical for a company that is considering a specific acquisition opportunity. Mergers can be extremely beneficial to a company when done correctly which is why it is important to analyze the benefits and any potential drawbacks. To use acquisition analysis firstly a manager must analyze the strategic benefits. If we do this merge,
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