Cost Leadership is the strategy that focuses on making the operations more efficient and cutting costs wherever possible. It may result from scale/scope efficiencies, tight overhead control, careful selection of customers, standardization and automation. Cost leadership aims at having the lowest costs in a market. This makes the company best placed to survive a price war and generates the highest margins if a price war does not occur. The largest retail chain in the world, Wal-Mart also believes in cost leadership. According to Michael Porter (1980), the low cost leadership strategy attempts to increase market share by emphasizing low cost relative to competitors. “gives the firm defense against rivalry from competitors because its lower cost means that it can still earn returns after competitors have competed away their profits through rivalry. A low cost position defends the firm against powerful buyers because buyers can exert power only to drive 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.
SWOT Analysis: Strengths, Weaknesses, Opportunities and Threats
SWOT which stands for an abbreviation of Strengths, Weaknesses, Opportunities and Threats; is an analysis that defined as method to examine organization’s internal factors dealing with strengths and weaknesses, and its environmental opportunities and also the threats. SWOT analysis usually use in the preliminary phase of decision making as a general tool which it designed for being antecedent to strategic planning in different case and applications. SWOT Analysis can be used as a model, process, technique or framework to provide information about those factors strengths, of an organization by having many applications with possibility of being used in all the levels of the organization. SWOT analysis is a part of the strategic planning process. Companies have some internal and external forces in the business environment. As a first step of a strategic planning system, the strategic factors that are related with the potential of the company, should be identified and Continue reading
Levels of Strategy
It is believed that strategic decision making is the responsibility of top management. However, it is considered useful to distinguish between the levels of operation of the strategy. Strategy operates at different levels of organization viz-Ã -viz: Corporate level Business level Functional level There are basically two categories of companies; one, which have different businesses organized as different directions or product groups known as profit centers or strategic business units (SBUs) and other, which consists of companies which are single product companies. Eg. Reliance Industries and Ashok Leyland Limited. The SBU concept was introduced by General Electric Company (GE) of USA to manage product business. The fundamental concept in the SBU is the identification of discrete independent product/market segments served by the organization. Because of the different environments served by each product, a SBU is created for each independent product/segment. Each and every SBU is different from another SBU due to Continue reading
Modes of Strategic Management
Modes of strategic management are the actual kinds of approaches taken by managers in formulating and implementing strategies. They address the issues of who has the major influence in the strategic management process and how the process is carried out. Research indicates that managers tend to use one of three major approaches to, or modes of strategic management: entrepreneurial, adaptive, and planning. The mode selected is likely to influence the degree of innovation that occurs within the organization. Innovation is particularly important in the context of strategic management, because organizations that do not continually incorporate new ideas are likely to fail behind competitively, particularly when the environment is changing rapidly. 1. Entrepreneurial Mode “Entrepreneurial mode is an approach in which strategy is formulated mainly by a strong visionary chief executive who actively searches for new opportunities, is heavily oriented toward growth, and is willing to make bold strategies rapidly” (Management, Continue reading
Mass Customization – Dynamic Stability Product/Process Matrix
Mass Customization Concept “It is the customer who determines what a business is” – Drucker, 1954 The concept of mass customization was coined by Stan Davis in 1987, in his book “Future Perfect”. In this book, he emphasizes that in traditional industrial production there is on the one hand mass production, using economies of scale to produce goods at low costs, but with nearly no variety or on the other hand individual production with a high degree of variety but in small volumes with high costs. Joseph Pine, an IBM-executive turned consultant and author who is the father of the mass customization concept, in his 1993 book “Mass Customization — A New Frontier in Business Competition”, outlines more about Mass Customization. “developing, producing, marketing and delivering affordable goods, and services with enough variety and customization that nearly everyone finds exactly what they want.” – Joseph Pine, 1993 “Mass customization is a system Continue reading
The Concept of Strategic Groups
Meaning of Strategic Groups Strategic group is a group of firms within an industry which face the same environmental forces, have same resources and follow similar strategy in response to the environmental forces. These strategies include pricing practices, level of technology investment and leadership, product scope and scale capabilities, and product quality. By identifying strategic groups, analysts and managers are better able to understand the different types of strategies that multiple firms are adopting within the same industry. For example, the restaurant industry can be divided into several strategic groups including fast-food and fine-dining based on variables such as preparation time, pricing and presentation. The number of groups within an industry and their composition depends on the dimensions used to define the groups. The concept of strategic groups in strategic management stems from an observation by Hunt (1972). Hunt coined the term strategic groups to describe a group of firms Continue reading