Essentials of Strategic Management

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February 22, 2018

Essentials of Strategic Management

Concept of Company Strategy and Business Model

Company strategy is an all involving decision of a business, and it concerns all the departments of the firm. The company strategy defines the firm itself and its purpose. Also, it describes the workforce and the financial requirement to achieve its mission. Furthermore, it outlines the products and the customers of the business. Company strategies are developed to create a competitive advantage over rivals. Interestingly, rival companies too will form strategies of their own to outshine the other companies. The success or failure of a company is determined by the approach it develops. Therefore all companies need to generate their unique plan that will set it apart from the other rival companies. Since the consumer remains the final determinant of the success of a company’s strategy, the strategy should be designed in a manner that will favor the company over its rivals in the mind of the consumer (Gamble, Peteraf, and Thompson 2). You can find this strategy in terms of pamphlets if you are an employee or in the company’s websites.

It is easier to identify a gap in the market that needs filling than to actually come up with a plan to fill the gap profitably. This is where the concept of a Business model comes to place. It is the proprietor’s plan, rationale, and strategy on how the organization is going to create value for the customer while making a profit at the same time. The concept of business model and that of company strategy are almost similar. However, the two are different in that while the purpose of the later is to create additional value for the consumer, a business model is a blueprint of availing that product but the motive is profit (Gamble, Peteraf, and Thompson 3). Mostly when someone is applying for loan to expand a business venture. Providing a business model will be more convincing.

Concept of Vision and Mission statements

The concepts of vision and mission statements are easily confused to mean the same thing. However, the two are different regarding scope and functions. A mission statement explains the reason why a company is formed, its core functions and its overall intention. On the other hand, a vision statement is company’s guide to achieving growth. Moreover, they define the company in its present state and where it is going to be in the future. It is more comprehensive than a mission statement in that it challenges the stakeholders of a company and inspire them at the same time. Companies occasionally state their mission with a profit motive (Gamble, Peteraf, and Thompson 17). These concepts are visible whenever you enter a business premise. They are painted on the wall and printed on pamphlets.

Concept of Macro environment and Industry driving forces

A company’s environment comprises of the factors both internal and external that affect its operations and ability to deliver to the customer. The external or macro environment consists of elements that the business has little control over. Business decisions face numerous and complex forces that present a threat or opportunity to the firm. The external forces according to Kotler can be grouped into six major categories. Gamble, Peteraf, and Thompson identify these categories as “Political factors, economic conditions, sociocultural forces, technological factors, environmental factors, and legal/regulatory conditions.” Using Kotler’s PEST analysis tool a firm can identify the macro-environment factors of a business (Koumparoulis, 31-36; Gamble, Peteraf, and Thompson 38).

Driving forces refer to the factors within and outside the organizations and other industry stakeholders that can alter their actions. They change the competitive landscape and the industry in general. They are factors in the company’s external environment but the same industry and competitive environment. Companies can analyze these driving forces to maintain or create a competitive advantage by first, identifying them. After that, they can assess whether the change drivers are collectively changing the competitive landscape or they function individually. Lastly, the organization determines a strategy to employ in anticipation of the impact of the driving forces (Gamble, Peteraf, and Thompson 55).

Concept of Core competence and Value chain

Core competencies refer to internal activities that are revered by an organization given their central function in the company’s entire strategy and conduct of the employees in their daily operations. Basically, they are the organization’s strengths relative to those of the competing organizations in the same industry which creates a basis that is fundamental for providing added values. Gamble, Peteraf, and Thompson state that the core competencies usually are knowledge-based and are patented by copyrights. Furthermore, they are what sets the business apart from the competition. For example, Apples’ core competency is its innovativeness. Its ability to bring a new item to the market each year with distinctive features makes customer always eager for the launching of the products. Companies have to focus on their competencies than concentrate on the competition’s weaknesses (Gamble, Peteraf, and Thompson 72; 77).

When coming up with a strategy to eke out a competitive advantage, management and employees must recognize that companies are not meant merely to “receive raw materials and produce the end product.” Instead, organizations have to undertake a process of value adding to the input in a series such that the final result is a better product. This series of value-added activities to their end products/services are what Michael Porter described as the company’s value chain in the journal article.

Concept of Cost Leadership strategy and Broad differentiation strategy

Cost leadership strategy is a type of plan that companies with the desire of achieving the lowest overall cost structure in the entire industry apply. This tact can be accomplished if a business reduces inefficiencies in its operations and systems. Additionally, for a company to achieve the low-cost leader status as its competitive advantage, its overall costs must be lower than of its rivals. One way of realizing this is by eliminating all processes, departments, and activities that are non-essential to the form. Another way is by out-managing competition in performing the essential operations.

Gamble, Peteraf, and Thompson believe it is a robust market approach given that many buyers are sensitive to prices. There are two options available for a cost leader to get a competitive advantage. The first option is to underprice its products hence appeal to the cost-sensitive buyers. The second option is maintaining their current prices and utilize the lower cost edge to earn higher profit margin than their rivals. This way, the cost leader totals profits and return on investment is raised (Gamble, Peteraf, and Thompson 94; 99). An example of application of this is in the telecommunication industry where companies established firms slash their rates to attract customers.

The business landscape has become very competitive, and marketing managers face a heinous task of achieving set sales targets unless they have an advantageous position over their competitors. Organisations have been more focused on creating even the slightest uniqueness to their services/products that will be considered better by the consumer. Uniqueness generated by a business is what is referred to as differentiation, and it can be in different forms. Unique taste in beverages, multiple features in gadgets and applications, superior service, or after sale services are just a few differentiation angles companies can use (Porter). Classical case of differentiation is coca cola company’s secret recipe they have guarded it for years and it continues to be their trademark.

Works cited

Koumparoulis, Dimitrios Nikolaou. “PEST Analysis: The case of E-shop.” International Journal of Economy, Management and Social Sciences 2.2 (2013): 31-36.

Porter, Michael E. “Towards a dynamic theory of strategy.” Strategic management journal 12.S2 (1991): 95-117.

Porter, Michael E. Competitive strategy: Techniques for analyzing industries and competitors. Simon and Schuster, 2008.