In order to achieve competitive advantage against the competitors, corporations carry out the strategy to distinguish themselves from the competitors in aspects of product, service, image, and etc. The focus of differentiation strategy is to creative the product and service, which is considered to be unique and special by the industry and customers. The foundations of the implement of differentiation strategy are customer needs, competitors, products and services levels. There are many means to carry out differentiation strategy. Such as product differentiation, service differentiation and image differences and so on. By carrying out differentiation strategy, the brand loyalty of users will be cultivated successfully and the corporation can also avoid the direct confrontation of competitors. Therefore, differentiation strategy is an effective competitive strategy, which enables the enterprise to obtain profits above the industry average level. Approaches to Differentiation Strategy Differential Product Strategy: In order to get an advantage different from 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.
Porter’s Generic Strategies – Differentiation Strategy
Differentiation Strategy is the strategy that lays emphasis on offering a superior product, on some dimension(s), compared to what competitors are providing. Differentiation is possible along one or more of various dimensions — product features, quality, customer service, guarantee, distribution, delivery, product customization, etc. Michael Porter asserts that businesses can stand out from their competitors by developing a differentiation strategy. With a differentiation strategy the business develops product or service features which are different from competitors and appeal to customers including functionality, customer support and product quality. “Differentiation provides insulation against competitive rivalry because of brand loyalty . . . The resulting customer loyalty and need for a competitor to overcome the uniqueness create entry barriers. Differentiation yields high margins with which to deal with supplier power and clearly mitigates buyer power since buyers lack comparable alternatives and are thereby less price sensitive. Finally, the firm that has differentiated Continue reading
Relationship Between Organizational Culture and Strategic Management
When any group of people live and work together for any length of time, they form and share beliefs about what is right and proper. They establish behavior patterns based on their beliefs, and their actions often become matters of habit which they follow routinely. These beliefs and ways of behaving create the culture of the organisation. Culture is a pattern of shared tacit assumptions that was learned by a group as it solved its problems of external adaptation and internal integration, which has worked well enough to be considered valid in organisation and it is necessary to be taught to new members as the correct way to think, perceive, and feel in relation to those problems that occur in many organisation today. Culture also influences the selection of people for particular jobs, which in turn affects the way in which tasks are carried out and decisions are made in Continue reading
Important Recommendations for Ensuring Good Corporate Governance
Historically attention was paid to the subject following the collapse of Savings and Loan companies in USA in the mid 1980’s and the SEC of USA taking a tough stand on the same. It is ironical that once again it was the US which brought in Sarbanes Oxley Act and along with it very stringent measures of Corporate Governance. In passing, we may add that there is no corresponding legislation in India. Later, Adrian Cadbury report was an important milestone, which spelt out 19 best practices called the “Code of Best Practices”, which the companies listed on the London Stock Exchange, began to comply with. Some of those guidelines applicable to the Directors, Non-executive Directors, Executive Directors, and others responsible for reporting and control are as follows; Relating to the Directors the recommendations are: The Board should meet regularly, retain full and effective control over the company and Continue reading
Porter’s Generic Strategies – Focus Strategy
Focus Strategy is the strategy which believes in concentrating on a small segment defined in terms of customer segment or geographical territory. A focus strategy means carefully choosing the arena to compete in and narrowing the competitive scope. By selecting carefully a segment and meeting the needs of that segment better than competitors who target more broadly defined segments, companies can gain competitive advantage. A focus strategy takes advantage of the differences between the target segments and other segments in the industry. It is these differences that result in a segment being poorly served by the broad-scope competitor. The firm that focuses on cost may be able to outperform the broad-based firm through its ability to strip out frills not valued by the segment. Alternatively, the product or service can be differentiated, taking into account the unique needs of the segment. A focus strategy can be pursued using either a Continue reading
Role of Environmental Analysis in Strategy Formulation
A great deal must be learned about an organization so that strategy formulation decisions can be based upon appropriate information. It almost goes without saying that strategists must understand all there is to know about the internal operations of an organization before strategy can be effectively formulated and implemented. The external influences acting on the firm also must be analyzed, documented, and understood to mange and implement the strategies effectively. An organization’s environment consists of two parts: The industry within which it operates (for multi-business firms, the industry is usually considered the activity’ in which the firm generates the majority of its revenue), and other environmental dimensions–economic, political/legal, social and technological. Very often financial analysis will bring to light several financial strengths and weakness that are indicative of strategic or operating capabilities and problems within the various strategy levels and within functional areas. Financial analysis is typically followed by internal Continue reading