Corporate Strategy Formulation and Implementation †MyAssignmenthelp

Question: Discuss about the Corporate Strategy Formulation and Implementation. Answer: Introduction: A sustainable competitive advantage happens when an entity outperforms its competitors by having a quality or set of additional qualities. This generally happens in the monopolistic market where there exists competition in the market. In simple words it can be explained as something that places an entity or an individual above its competitors These characteristics can include access to materials or substances occurring in nature or access to having highly trained staff or workforce(Amadeo, 2017). Competitive advantage is a key source of high performance, and ensures better standing in the market place. Performing better than the competitors is the ultimate goal of the organization as higher profits leads to higher position goodwill in the market. This will also give an advantage to become the leader in the market How an industry outperforms depends upon its nations competitiveness. The firms excel and perform better than its competitors just because of pressure and challenge. They get financial reward from having challenging home based suppliers and domestic rivals. Current competitive advantage is rapidly changing. Corporate Entrepreneurship is no doubt a risky proposition. New segments set up by existing business face challenges in accepting the market conditions. The unique features face the following challenges i.e. emerging business usually lack hard data, financial forecast are also undependable . The third challenge is poor fit between new businesses and old system. New ventures normally operate in highly ambiguous environment, so a strategy should be developed by trial and error. Competitive Advantage can be better explained with the help of a diagrammatic representation: Main aspects of Competitive Advantage: The competition between two existing sellers in the market Likely threat of New entrants Threat of Multiple substitutes available for one product Negotiation done by the consumer(Porter, 2008) Negotiation done by the suppliers/vendors Key Success factors and Competitive Advantage: Key success factors are the majorly the areas, where better performance and high profits will make it certain that competitive advantage can be achieved and can result into individual growth and business excellence. There is no organization which can afford to make a strategy which fails to pay heed to the principal factors, which play the main role in determining the success of the organization(Porter, 2011). Also a company must develop accomplishments on its industry key features, if it has to be a leader in the market. A core competency mainly covers: Focus on customer benefit It is hard for competitors to compete Building products with new design and technology(McGranth, 2013) It is clear in todays world that if the company is not proficient in one particular activity it can outsource the same so that the business performance does not suffer. For example in the automobile Industry lets take an example of Volvo which focuses on safety as its core competency, so it will keep its focus on research and development of high safety components. It can be illustrated with diagram: Good Sustainability practices help companies gain competitive advantage. It is a very old saying that if you dont have competitive advantage dont compete Jack Welch Why companies like Apple and Mitsubishi are so successful in the modern era? It resolves issues and alternatives Stakeholders are better performers Top management to guide and help in decision making Effectiveness of strategy implementation Lets quote an example to explain competitive advantage better: There are two players in the market who makes cup cakes i.e. classic and Nic bakers. Classic makes the cup cakes at the cost of Rs 25 and sells it for Rs 100, while Nic makes the cup cake at the cost of Rs 60 and sells it for Rs 120. Classic earns more than Nic and uses better ingredients to make the cup cake i.e strategies that both follow are different. Hence it is very clear from the above situation that Classic would get more customers and earn more profits than the competitor(Coles, 2003). Why might Organic (or Internal) development be recommended as an appropriate method for strategic development? Organic Growth Strategy implies increasing company performance and profits using its own power and resources. This methodology is slower than other processes, but incurs less cost comparatively. This method is beneficial for small enterprises that want to widen their business but dont have large amount of funds/capital to expand(Riley, 2010). Internal Development states, strategic considerations developed and articulated for expanding various segments of the business. An enterprise develops its own strategy to up sell in the market. Benefits of Internal Growth strategy It helps the business to grow at a uniform rate Funding options are more easier i.e. surplus profits can be used for expansion It is less risky The higher the market share, the more easier it can control the price of its products It is relatively low in price(Johnson., 2008) Better control and co-ordination Risks associated with Internal Growth Strategy Restructuring is the missing element Takes more time to achieve growth Likely to lose capital investment Slow growth Difficulties in building market share i.e. where firm is already a leader Here are some examples of businesses that have flourished with Internal Growth: Dominos a leading Pizza seller have flourished its business by opening multiple outlets in every city. Also no of Pizzas sold during the day have increased as it serves quality and also at a cheaper rate than other competitors in the market(Bowhill, 2008). Apple, as one of the most valuable brands in the world has adopted intensive strategies to excel in the market. It has developed wide range of new products like I-Pad to develop and expand worldwide An Ice-cream maker Mackies of Scotland has increased profits of the organization and expanded its business to other countries basis Internal Growth Strategy. The strategies used by the biggest Ice-cream seller are stated below: Introduction of New flavors in the market Increased Investment in Infrastructure(Evans, 2015) Selecting best market route for expansion Achieving operational efficiencies and cost benefit through procuring economies of scale Because it is a niche market, higher price can be charged Risks involved in making it a success: Slow growth and expansion due to limited resources Time consuming in building substitutes of products Lack in targeting better focused customers Lack of highly skilled staff Michael Porter a graduate of Harvard University, wrote a book on different strategies that can help in gaining competitive advantage in the year 1985. All firms can make use of these approaches i.e. whether Product Based or Service Based. He named the strategies as Generic Strategies. Listed below are the major strategies encountered in the business: Discuss the contrasting characteristics and objectives of a Cost Leadership Strategy and a Differentiation Strategy? Characteristics and Objectives of a Cost Leadership Strategy and Differentiation Strategy The terminology Cost leadership was introduced by Michael Porter and utilized in building up business strategies. Cost leadership basically means lowering the per unit cost of operation (i.e. production cost) in order to achieve competitive advantage(Hitt, 2016) and reduce production cost below the industry average. Ways in which cost can be controlled: Control Cost drivers: Cost can be controlled by driving down the cost of various activities to be performed. It also includes effectively working on the cost segments, by performing better than its competitors. Revive Value Chain: Making new innovations in building new products, improving technology, using low cost material can help to revamp Value chain (Hiriyappa., 2013) Differentiation strategy is a way under which an enterprise proposes to build and sell unique products in the market for different segments of customer. This strategy helps those enterprises who can afford expensive advertising campaign. Steps taken to build a successful Differentiation Strategy: Scientific Research with best features: Successful adoption of new methods and programmes through detailed research and marketing strategies will help in successful business Skilled and Innovative Workforce: When a company has intellectual and innovative workforce it can help in winning the customers and develop new products Better sales force: If the strategies adopted by the company are in synchronization, and the sales executives are able to explain their products in a better manner Goodwill: When an enterprise has better goodwill in the market and can showcase its products better than its competitors then it is a win-win in situation for the company(Ireland, 2008). Focus Strategy as the name suggests, keeps its centric point on Specific group of customers rather than focusing on everyone. Its main need is Customer satisfaction and improvement in already existing products which can help in improving their daily lives. Feedback is taken from the customers from time to time. Cost Leadership Strategy and Differentiation Strategy can be better explained with the help of a diagram: Michael Porter, who established these competitive strategies, has explained it very well which strategy to opt for as per ones business requirements. A cost leadership strategy focuses on price parameter. The main goal to adopt this strategy is to become a leader in the market i.e. having maximum share across the industry Differential strategy on the other hand focuses on building new products in the market which can be differentiated from competitors products i.e. should vary in features, technology, and customer service and distribution channels So to conclude Porter suggested that both the strategies are equally effective and serves the organization at its best but choosing the right kind of strategy should be the main objective. An enterprise should hang in the middle i.e. in order to generate huge profits its builds products which are cost effective and neglects the other things which are required to make an organization successful. The situation can be well explained with the help of the diagram: Refer to the matrix attached to explain the cost leadership vs. differentiation strategy. In the matrix if we refer to the 4th cubicle i.e. cost leadership it explains market leader position in the market. This can be adopted by an organization where cost effectiveness plays an important role. With time as the company matures, this strategy can give company under performance so in order to survive in the market an enterprise should replace with better technology and scrap old material and assets. In cube 2 which is a combination of low cost and high differentiation is another substitute. If an organization has low production cost and high degree of differentiation, then it can achieve high share of profit margins having the benefit of low cost. Other scenario in the same situation is if the company is not the market leader in cost but provides differentiated products then it can win if its customers are willing to pay more for the Value added product. The major drawback of this situation is over a period of time when premium customers tend to shift to low priced products, then this strategy cannot fit in the existing environment Where the above two strategies fail it can be replaced with cube 1 i.e. Market Niche, where the company focuses of single segment or product, with high cost and differentiated from all the other substitutes available in the market. This strategy is mainly fruitful for businesses who can afford high cost. For example car manufacturers i.e. Volkswagen, Porsche How do Porter (1980) and Bowman (1995) differ in their view on combining these approaches to competitive strategy? The main purpose of a cost leadership strategy is to achieve low production cost per unit, thereby obtaining advantage over other competitors in the industry. Adopting such strategy results into offering best featured product to the customer at low cost as per his/her needs or requirements. This helps a firm in maximizing its profits and become a market leader in the industry. This can be explained with the help of an example i.e. there are 4 major players in the market providing tariff packs, Data packs and other recharge options to the customer. Seeing from the customer prospective, he would prefer a product which has the quality network and the one which is provided at low cost and maximum benefits. Companies adopting cost strategy should not forget the other key factors which play an important role in order to survive i.e. product quality, design service etc There are many risks interlinked with this strategy i.e. while focusing on cost per unit at times company forgets about the technology, new innovative methods to be adopted which will result in eradication of all savings done in the product to become the market leader. For example Ola Cabs vs. Taxi. The customer preferences and tastes keeps changing with time so in order to be successful one must adopt the principle of winning the customer On the other hand differentiation strategy main aim lies in building products with multiple qualities, which are well considered by the customer, keeping in mind the uniqueness of the product. Differentiation strategy focuses more on customer demands and choices and builds a product from customer prospective. Companies following differentiation strategy invest more in a product and makes product keeping in mind the priorities of the customers needs. For adopting this strategy lot of research and development is required so that at the end, the results are good. Example of Differentiation strategy is Volkswagen a car manufacturer. To adopt this strategy a company should have a good reputation and existence in the market place. A recent framework developed states that, one should adopt single strategy at one time (as Porter explains) do not get stuck in the middle. Whereas Bowman puts pressure on Hybrid strategy which is a combination of perceived added advantage and gaining market share The major drawback of this strategy is at times focusing on customer needs can lead to lose sight of cost development Porter likely is of the point of view that both the strategies cannot be adopted at same time as this would result in reduced performance and higher costs. He entreats that companies should compete either on price or differentiated product. For example Reliance Gio or Patanjali with cost effective products and on the other hand Harley Davidson/Audi with differentiation strategy In order to combine both the strategies strong emphasis should be on both delivering unique quality products and low cost products. Implementation of both the strategies all together will lead to better organizational performance and business excellence Conclusion: Hence we can conclude that we can simultaneously adopt two strategies which are termed as Hybrid strategy. This strategy depends on the ability to deliver best quality products with cheaper cost also. It will help in attaining sufficient margins for re-investment and maintain a good place in the market. In the era of global competition this strategy is best suited for organizations. Under exceptional circumstances, a hybrid strategy can be adopted as agreed by Porter. Yet Bowmans strategy fails to survive in these conditions. Also it can be supported that Bowmans model is biased on gaining maximum market share Thus competitive advantage states that over- performance from other competitors in the market with better features to compete within the industry. So in order to have stable sustainable development one needs to come up with new ideas to survive for long term within the industry. Bibliography Amadeo, K., 2017. thebalance.com. [Online] Available at: https://www.thebalance.com/what-is-competitive-advantage-3-strategies-that-work-3305828 [Accessed 10 May 2017]. Bowhill, B., 2008. Business Planning and Control: Integrating Accounting, Strategy. Coles, C., 2003. The Ultimate Competitive Advantage. Evans, N., 2015. Strategic Management for Tourism, Hospitality and Events - Page 378. New York: Cenagge. Hiriyappa., 2013. Corporate Strategy Formulation and Implementation Process. Hitt, M., 2016. Strategic Management: Concepts: Competitiveness and Globalization. Ireland, D., 2008. Understanding Business Strategy: Concepts and Cases - Page 100. Jakson, S., 2007. Managerial Accounting: A Focus on Ethical Decision Making - Page 478. Johnson., 2008. Exploring Corporate Strategy: Text Cases, 7/E - Page 348. London: Springer. McGranth, R., 2013. The End of Competitive Advantage: How to Keep Your Strategy Moving. London. Porter, M., 2008. Competitive Advantage: Creating and Sustaining Superior Performance. Porter, M., 2011. Competitive Advantage of Nations: Creating and Sustaining Superior. New York: Springer. Riley, J., 2010. QA - Explain organic or internal growth. [Online] Available at: https://www.tutor2u.net/business/blog/qa-explain-organic-or-internal-growth [Accessed 10 May 2017].