Strategic management is that ideas and injunctions that enable the organization achieve its objective or long-term target to perform a better performance. The purpose of strategic management is to seek the opportunities for better future of the organization. Generally, good strategic management practices can improve the organization performance and achieve the organization target objectives. The strategies on an organization are made by the management itself to ensure the successful of the organization. The strategic management process consists of three stages which are strategy formulation, strategy implementation and strategy evaluation. Strategy formulation want to ensure that the organization achieve the objectives that they have been made. Strategy formulation includes the decision on what business to conduct, how to allocate the resources, and whether want the business join or enter to international market. Besides, strategy formulation phase includes developing a vision and mission, identifying an organization external opportunities and threats, determining internal Continue reading
Strategic Management Basics
How Innovation Contributes to Competitive Advantage?
From competitive environment, products within the same marketing from each provider are quite similar and difficult for customers to realize the difference. Innovation capability is the key productivity that creates competitive advantage by perceiving or discovering the new or better way to compete in an industry and launch them into the market. One of success factor depends on innovation’s relative advantage. Innovation has become the most important asset that creates competitive advantage for company, and the first mover advantage when getting magnitude of market acceptance. In the long run, maintaining product innovation is the way to sustain competitive advantage and drive the growth of productivity for further competitiveness of the company. However, product innovation always comes along with new process technology. Around half of the Fortune 500 in 1980s was disappeared from the list in 1990s because of three fundamental forces; wealth, fashion and invention. From this information, it showed Continue reading
Organization Design
Designing organizations is a complex exercise. Organization Design involves making choices about how to group individuals and structure their tasks. According to Harvard Business School professor Robert Simons, in his article “How Risky is your Company?”, organization design must take into account the company’s strategy, competitive environment, stage of the life-cycle and various other factors. In short, it is a fine balancing act. In the early days of an organization, organization design receives little attention. But over time, problems emerge as the charisma of the founders becomes insufficient to manage a larger enterprise. Systems and processes become important. This is when a functional structure is typically chosen. After some time, the functional structure becomes inadequate to respond to the needs of the market place because of centralized decision making. At that point, a divisional structure becomes necessary. But with time, a divisional structure leads to fiefdoms. Coordination becomes difficult, resources Continue reading
Divestitures in Business – Concept, Reasons, and Benefits
In the modern world, so many organizations are using several strategies to enhance their performance and improve their competitive advantages. Some of the mostly relied on strategies are divestitures or mergers & acquisitions. The two though somehow different have some similarities. Mergers and Acquisitions refers to two companies combining together to form a single entity or one parent company absorbing another company and completely eliminating the entity of the target company to incorporate its operations in the parent company. Divestitures or rather divestment on the other hand is the opposite of investment and refers to the reduction/addition of the firm’s partial assets or complete sale of an existing business by a firm due to some ethical or business reasons. One of the reasons behind the above corporate strategies is to increase the firm’s chances of survival in a market environment characterized by many competitors and in particular perfect market industry. This is Continue reading
Relationship between Strategy Formulation and Strategic Planning
The word “strategy” or “strategic” is used in both terms, there is a possibility of confusion. The distinction is that strategy formulation is the process of deciding on new strategies, whereas strategic planning is the process of deciding how to implement the strategies. In the strategy formulation process, management arrives at the goals of the organization and creates the main strategies for achieving those goals. The strategic planning process then takes the goals and strategies as given and develops programs that will carry out the strategies and achieve the goals efficiently and effectively, The decision by an industrial goods manufacturer to diversify into consumer goods is a strategy formulation, a strategic decision, after which a number of implementation issues have to be resolved: whether to diversify through acquisition or through organic growth, what product lines to emphasize, whether to make or to buy, which marketing channels to use the document Continue reading
Sources of Attaining Competitive Advantage by a Business Firm
When a firm sustains profits that exceed the average for its industry, the firm is said to possess a competitive advantage over its rivals. A competitive advantage is an advantage over competitors gained by offering consumers greater value, either by means of lower prices or by providing greater benefits and service that justifies higher prices. Competitive advantages are capabilities that are difficult to replicate or imitate and are non-tradable. Pitts and Snow define a competitive advantage as “any feature of a business firm that enables it to earn a high return on investment despite counter pressure from competitors.” A competitive advantage exists when the firm is able to deliver the same benefits as the competitors are but at a lower cost (cost advantage), or deliver benefits that exceed those of competing products (differentiation advantage). Thus, a competitive advantage enables a firm to create superior value for its customers and superior Continue reading