Essentials of strategic management: the quest for competitive advantage is a response by most business managers to businesses heads due to high demand of requests. The request aims at achieving a well written theory-driven and robust strategic management content that needs to be supported with compelling arguments. The book serves as a theoretical foundation for learning simulations that involve business strategies for students.
What is strategy and why is it important?
A company may achieve success if it acts in compliance with the set up strategy that clarifies the way in which an organization or a company is heading, thus, understanding the changes in strategies that they require for long term success. It is responsibility of the manager to ensure that performance of the company is meets the requirements set. Current chapter identifies purposes of strategic management, and defines tasks and approaches that involve strategic management for developing vision and mission that will lead a company to achieving its strategic goals; the management needs to set realistic goals, the other task involving strategic planning is implementation and execution of the strategy, thus, evaluating performance and initiating corrective adjustment.
Management strategy involves understanding of the company, for instance, it explains that the company needs to know its financial position, the present market share resources and its economic capability (Gamble et al, 2013). In strategic management, the company needs to discover its future goals, the needs of their clients, opportunity for further growth and the changes that may arise in the course of business operations. When choosing strategic approaches in the business, the management should try to increment low cost for its operations, and attract best costs in returns, hence, have a broad and focused differentiation. It is so, because the company structure is a mixture of reactive adjustments that are not in the planning list and the initiatives that are taking place. In order to value the strategy management that is in use, the management needs to assess it by checking its performance, in a profit making sense.
Charting a Company’s Direction: Vision and Mission Objectives
Strategy making and execution of the process entail developing of a strategic vision, whereby the directors access the strategy they are using to identify its strengths and weakness, thus, rectify it to suit the company objectives. The managers execute and implement a strategy that is favorable to the company, hence, reducing the unfavorable effects that affect the company. Strategy management enables the managers to monitor developments in the company, evaluate their performance and initiate adjustments that are correct. In order for a management to have an effective management strategy, they need to develop a strategy for the company, set the objectives that they intend to achieve while using the strategy; adjusting it will enable achievements of the intended path, after crafting the managers execute the strategy to performance and lastly, monitor its operations. Factors that influence decision making in designing the strategy and its further execution are classified in two categories: the internal considerations and the external considerations. The internal considerations focus on the company products and services that they sell to their clients, the image that the outsider perceives in regards to the company, for instance, this consideration observes the products and the capability of their strength in their to fight completion while as external considerations involves growth and profitability performance of the company. The external considerations make the management more vigorous in forces that bring change in the industry, the external opportunities that the company can take advantage of in its operations. The characteristics of worded vision statements in strategic performance are that they have a graphic nature as they portray a picture of the company market position. The statement is directional, as it gives a description of strategic course that the management is using, more so, technological changes in the future that involve their products, customers, markets, thus, give them room for future preparations. The statement provides a guideline of decision making and resource allocation to the managers. Flexibility is a characteristic that allows adjustments by the managers in cases of changes in the markets, technology or customers preferences. The vision statement is feasible and desirable in that it offers the reason as to why the strategy chosen is reliable in the business, more so the statement is easy to communicate and explain. The company should have both a strategic vision and a mission statement. A strategic vision puts its interest in the business matters that directly rely to future of the business and focuses on matters like inventing new markets that the business needs to pursue, and the products, technology, and customer relations that need changes in the future. The mission statement, on the other hand, deals with the present matters of the business, for example, company products and services that the business currently offers. Strategic vision matters to the company as it acts as a senior executive that owns the long-term view of the company. The vision reduces the risks in decision making due to rudderless at the management level. It acts as a convincing tool to employees in making the vision a reality. A vision statement aids in future preparation of the business. More so, the mission statement acts as a descriptive of the present state of the company, as it identifies company services and products; thus, specifies clients’ needs giving the company its identity (Gamble et al, 2013).
Evaluating External Environment of the Company
Any company has two environments: industrial and competitive . When assessing a company industrial and competitive environment the following should be done: identifying economic characteristics that are dominant by checking the market size and the growing rate rivalry competition, the demand and supply conditions, segmentation of markets and technological change pace. The kind of competitive forces present in the business industry and the strength of the business, more so, the forces that have influence in industrial change. Competitive forces that affect industrial attractiveness include presence of substitute products from other industries, suppliers and buyers, bargaining powers, new entrants in the market that increase completion and the increase rate of rivalry that attracts clients through competition. If these forces attract the conditions in the markets, then there is an attractive environment that results to making profits. More so, when the environment is attractive it creates danger of losses or standpoints that are dangerous to the business (Gamble et al, 2013).
Evaluating Company Resources, Cost Positioning and Competitiveness
In evaluation of a company working strategy, the indicators of a successfully performing company are to be defined by checking recordings. The managers should check on the valuable resources including the competitive capabilities like skills or specialization of expertise, the physical assets in a company including human and intellectual assets. The management should check on valuable alliances and cooperative ventures that are available. The SWOT analysis assists the company to conduct its operations in a sufficient manner, thus, allowing in seizing market opportunities and avoiding external threats. The factors that considered when evaluating a company SWOT are: decrease in market growth due to slow downs, developing a higher bargaining power by the customers, presence of new competitors and restrictive policies. In evaluation of the company, checking the company competitive cost structure and the customers value proposition a vital part of costs assessment and value propositions. The value chain analysis and benchmarking are the tools used for the above procedure. Understanding importance of the analysis outlines the matters and the problems that need immediate action so they enhance performance and improve business outlook (Gamble et al, 2013).
The Five Generic Competitive Strategies
These deal with a game plan that the management conducts in assisting them to secure a competitive merit from their rivals. The generic competitive strategies are a symbol of the efforts that a company makes in order to show the value to their clients, for example, by providing good products and/or lowering their prices. The strategy of providing low cost acts as a powerful competition tool, as it wins the advantage of the buyers that are sensitive in prices. In order to achieve low cost leadership, the business needs to carry cost effective activity as compared to its rivals. The management needs to revamp the value chain and eliminate activities that are cost ineffective. Another strategy that the management uses is competitive and powerful approach used in cases of diversity and standardization of services and products where the buyers have options of preference. Another strategy is the best cost provider; this is a hybrid of differential and low cost provider strategy (Gamble et al, 2013). The strategy aims at giving the client his value for money on being of high quality according to the customers expectations. This approach is best for value conscious clients on the quality at affordable prices. Cost strategy works best in markets that have a norm of product differentiation, where a provider has the capability of offering medium quality product at average costs or slightly above the average. The demerit of this strategy is that it is vulnerable both the low cost provider and the person at high end differentiator. Successful competitive strategy bases its operation on the narrow segment of issues, because it must have the capability to provide high quality of performance that will satisfy the niche buyers.
Supplementing the Chosen Competitive Strategy. Other Important Strategy Choices
Supplementing the chosen competitive strategy would be useful in decision making regarding the manner in which the company positions itself in the market, attempts to improve the company market position, regardless of the initial strategic move, More so, it looks on when and whether to use defensive strategies in protection of the company market position and articulates strategic moves based on the merits of the first mover. Launching an offensive strategy assists in improving a company market position and spot the chances in acquiring profitable market shares. More so, the best offensive attack affects the rival by use of his resources. Another kind of offensive strategy is blue ocean strategy which makes use of the firm seeking for advantages of competition by abandoning their existing markets, thus, getting into new industries. Defensive strategies aid to fortify a completive position, as they lower the risk of attacks (Gamble et al, 2013). They also influence challenges in redirection for their competitive efforts on the side of the rivals.
Strategies for Competing in International Markets
Companies expand in markets primarily to have access to new customers. They achieve lower costs and enhance the competitiveness. The other objective is to eliminate the risks of business in the market base. The factors that influence and shape the strategy choices in the markets include difference in tastes in different countries. Presence of adverse risks that include the currency exchange rates and policies that govern business environment set by the government. Entering foreign markets includes maintaining a production base nationally, thus, exporting goods to foreign markets. The company can decide to use the franchising strategy and establish subsidiaries in the foreign markets. Additionally, it can rely on strategic alliance that involves getting in a joint venture with other partners in different countries to get new markets. Exporting strategies involve the use of domestic production plants to act as exporting zone to the foreign markets, as they reduce the risks of capital investments. The strategy is venerable when there is an occurrence of currency exchange rates. The strategies that involve completion in developing countries are usually aimed at tailoring the products to fit the conditions of the new markets. Advertisement, in this case, makes the products familiar and adaptable to new markets, their cultures and habits. Changes in pricing, packaging and other features of the products are reviewed to suit the current markets.
Corporate Strategy: Diversification and Multi-Business Company
Crafting corporate strategy involves four main tasks: choosing and making decisions on new industries and how to venture in them. Perusing opportunities that leverage cross business through relationship and gaining advantages in competitive business world. A business can grow through building the value of the shareholders. Development of the business is esteemed by three tests: the industry attractiveness test, the cost of entry test and the better-off test. More so, it can be done by diversification, through acquiring an existing business. It is a quicker and a simpler way to make a business more popular to its clients. A business that enters in the line of business through internal development has more advantages as the parent business has possession of resources and can support the other firm accordingly. Another way for carrying diversification is through joint venture. It is a good option in complex situations where risks are high. In diversifying a business it is advisable to use related businesses as they have a value of chain and cross business relationship.