Durability of competitive advantage determines how long the competitive advantage can be sustained and is considered in terms of the ability of competitors to imitate through gaining access to the resources on which the competitive advantage is built. The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage. The products or services that have wide, sustainable moats around them are the ones that deliver rewards to investors. —Warren Buffett (1999) The durability of competitive advantage of a company is a function of three factors: the height of barriers to imitation, the capability of competitors, and the general dynamism of the industry environment. 1. Barriers to Imitation Barriers to imitation are factors that make it difficult for a competitor to copy Continue reading
Strategic Management
Strategic management is the art and science of formulating, implementing and evaluating cross-functional decisions that will enable an organization to achieve its objectives. It involves the systematic identification of specifying the firm’s objectives, nurturing policies and strategies to achieve these objectives, and acquiring and making available these resources to implement the policies and strategies to achieve the firm’s objectives. Strategic management, therefore, integrates the activities of the various functional sectors of a business, such as marketing, sales, production etc. , to achieve organizational goals. It is generally the highest level of managerial activity, usually initiate by the board of directors and executed by the firm’s Chief Executive Officer (CEO) and executive team.
Importance of Organizational Culture in Strategic Management
Culture plays an important part in our society. It refers to beliefs and codes of practice that makes a community what it is. It also plays the same role in organizations. A strong organizational culture will provide stability to an organization as it has significant influence on the attitudes and behaviors of organization’s members. Most of company’s top managers have a strong awareness that the culture of a company is crucial to everything they do and plays irreplaceable part in their success. However, not many companies can admit that they can describe their culture and fully understand how important it is in the success of their businesses. There are various explanations and elements to define organizational culture. For some, it means top management beliefs and values about how they should manage the organization and conduct the business. For some, it is an evolutionary process relating to people that creates unique Continue reading
Business Level Strategies – Cases of Wal-Mart, Apple, Zara and Ikea
Business Level Strategy is concerned more with how a business competes successfully in a particular market. It relates to strategic decisions about the choice of products, identifying and fulfilling the needs of customers, building competitive advantages over competitors, exploiting or creating new opportunities etc. Business level strategies are essentially positioning strategies whereby businesses tend to secure for themselves an identity and position in the market. The aim here is to increase the business value for the corporate and stakeholders by increasing the brand awareness and value perceived by the customers. They can either focus on pricing or product differentiation to increase the perceived customer value. Customers are the foundation of successful business-level strategy – Who will be served by the strategy? What needs shall the strategy satisfy? How will the strategy satisfy those needs? The low cost strategy emphasizes having the lowest costs, not necessarily the lowest price, in a Continue reading
Types of Merger
An extensive appraisal of each merger scheme is done to patternise the causes of mergers. These hypothesized causes (motives) as defined in the mergers schemes and explanatory statement framed by the companies at the time of mergers can be conveniently categorized based on the type of merger. The possible causes of different type of merger schemes are as follows: Horizontal merger: These involve mergers of two business companies operating and competing in the same kind of activity. They seek to consolidate operations of both companies. These are generally undertaken to: Achieve optimum size Improve profitability Carve out greater market share Reduce its administrative and overhead costs. Vertical merger: These are mergers between firms in different stages of industrial production in which a buyer and seller relationship exists. Vertical merger are an integration undertaken either forward to come close to customers or backwards to come close to raw materials suppliers. These Continue reading
Hypercompetition
Hypercompetition is a relatively new term in strategic management, coined by Richard D’Aveni, professor of business strategy at the Amos Tuck School at Dartmouth College, in his book “Hypercompetition: Managing the Dynamics of Strategic Maneuvering.” In this book he defines hypercompetition as; “an environment characterized by intense and rapid competitive moves, in which competitors must move quickly to build advantage and erode the advantage of their rivals.” Richard D’Aveni (1994: 217-218) Hypercompetition results from the dynamics of strategic maneuvering among global and innovative combatants. It is a condition of rapidly escalating competition based on price-quality positioning, competition to create new know-how and establish first-mover advantage, competition to protect or invade established product or geographic markets, and competition based on deep pockets and the creating of even deeper pockets dalliances. In hypercompetitions the frequency, boldness, and aggressiveness of dynamic movement by the players accelerates to create a condition of constant disequilibrium Continue reading
The Concept of Business Growth
Meaning of Business Growth Business growth is a natural process of adaptation and development that occurs under favorable conditions. The growth of a business firm is similar to that of a human being who passes through the stages of infancy, childhood, adulthood and maturity. Many business firms started small and have become big through continuous growth. However, business growth is not a homogeneous process. The rate and pattern of growth varies from firm to firm. Some firms grow at a fast rate while others grow slowly. Also, not all enterprises survive to grow big. This may be due either to the nature of the firm or the entrepreneur. Some entrepreneurs do not want to grow their ventures, choosing instead to pursue other interest, spend more time with family or develop other business activities. Generally, the term ‘business growth’ is used to refer to various things such as increase in the Continue reading