A term coined by Andrew Grove, former CEO of Intel to describe a dramatic change in competitive forces. At that time, the leaders must give up the past, see closely how the industry is evolving and find new ways of competing. This point of dramatic change in the industry is known as Strategic Inflection Point. “a strategic inflection point is a time in the life of business when its fundamentals are about to change. That change can mean an opportunity to rise to new heights. But it may just as likely signal the beginning of the end” Andrew S. Grove, Only the Paranoid Survive. For example, the arrival of containers marked a strategic inflection point in the shipping industry. The introduction of the IBM PC was a strategic inflection point in the computer industry. The emergence of large discount store chains like Walmart and Tesco may well turn out to Continue reading
Strategic Management Terms
Organization Structure to Control Systems Design
A major factor differentiates the automatic control system from the management control system, is the exercise of control by human beings in the latter case. In automatic control systems, the human element is missing. It is for this reason that an understanding of organization behavior is important for the proper perception of management control systems and processes. Further, as the major focus of the control system is on the performance evaluation of the organizational sub-units, the control system designer should also have an undemanding of the organization structure. Structure refers to the way the enterprise’s organized so as to enable the total task of the organization to be performed in an efficient and effective way. The organizational structure is essentially the arrangement of its sub-systems with authority and responsibility relations. Thus, it refers to whether the organization is centralized or decentralized or whether it emphasizes line or staff or how Continue reading
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
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
Linkage Between Business Models and Innovation
The question of what a business model is often remains relatively vague. The main reason for this is because business people have an intuitive understanding of business models. This is normal, since the business model is about how an organization makes money, which is a manager’s job after all. However, there is often a lack of a more precise and shared understanding of what a business model is. Yet, such a common understanding is required if we want to have high quality discussions of one’s business model and make important business model decisions. Alexander Osterwalder has come up with the 9 building blocks approach to describe business models. This approach has the characteristics of any other type of model (e.g. in architecture or engineering). It is a simplified description and representation of a complex real world object. It describes the original in a way that we understand its essence without Continue reading
Organizational Leadership
Organizations play a very important role in societies. From birth to death we deal with organizations, small or large, public or private. Organizations formed by human beings sometimes even control us, dominate society, stifle development or progress, promote growth and change, alter our environmental conditions, and at the same time fulfill our human and societal needs. Their role is multidimensional and dual in nature: they can contribute to the progress and satisfying human needs, but at the same time they can be a major obstacle in fulfilling accomplishments. They are a powerful instrument in governance and the promotion of democratic values. Initially organizations were simple in structure and management, but as they grew larger they became sophisticated and complex in structure and function, requiring managerial skills and techniques beyond the comprehension of many people. Now here comes the role of the leader who could filter the negative traits and thus Continue reading