Business Level Strategy Business level strategy concentrates on developing a firm specific model that will allow the firm to gain competitive advantage over its rivals in the industry such as in which it operates. Business strategy would focus on improving its competitive position of a company’s or business unit’s products within the specific industry or market segment that the company and/ or its business units serve. The question explored in business level strategy is: How a company can best be competed in the industry that they are in? For an example Honda motors, Japan has a domestic market for its products and also it operates internationally. Thus business strategy should be crafted focusing on the ways of how it out beat the domestic competitors who operates both in the domestic market and as well as the in the international market like Mazda, Mitsubishi, Suzuki, Toyota and Nissan and competitors in Continue reading
Strategic Management Terms
What is Competitive Advantage? Definition and Meaning
The choice of industry affects firm performance but, within any given industry, some companies are more profitable than others. Why do some companies do better than their competitors? A firm that formulates and implements a strategy that leads to superior performance relative to other competitors in the same industry or the industry average has a competitive advantage. The greater the performance, the greater is its competitive advantage. A sustained competitive advantage occurs when a firm maintains above-average performance for a number of years. “When a firm sustains profits that exceed the average for its industry, the firm is said to possess a competitive advantage over its rivals. The goal of much of business strategy is to achieve a sustainable competitive advantage” (Porter, 1985) Strategy describes the goal-directed actions a firm intends to take in its quest to gain and sustain competitive advantage. The firm that possesses competitive advantage provides superior Continue reading
Porter’s Value Chain
The term ‘Value Chain’ was used by Michael Porter in his book “Competitive Advantage: Creating and Sustaining superior Performance” (1985). The value chain analysis describes the activities the organization performs and links them to the organizations competitive situation. Value chain analysis describes the activities within and around an organization, and relates them to an analysis of the competitive strength of the organization. Therefore, it evaluates which value every particular activity adds to the organizations products or services. This idea was build upon the insight that an organization is more than a random compilation of machinery, equipment, people and money. Only if these things are arranged into systems and systematic activates it will turn’s possible to manufacture something for which customers are willing to pay a price. Porter argues that the capability to perform particular activities and to manage the linkages between these activities is a source of competitive advantage. Porter Continue reading
Concept of Resource Based View (RBV)
The resource based view is defined as a business management tool utilized to know the strategic resources available to firm. The basic principle of the resource based value is that the basis for a competitive advantage of a company lies primarily in the application of the group of valuable resources at the firm’s disposal. In order to change a short-run competitive advantage into a maintained competitive advantage requires that these resources are heterogeneous in nature and not perfectly mobile. In other words, this will change into valuable resources that either perfectly imitable or substitutable without great effort. If these conditions are remained, the company’s group of resources can help the firm sustaining above average returns. The recent dominant view of corporate strategy – Resource Based Theory or Resource Based View (RBV) of company – is based on the theory of economic rent and the view of the company as Continue reading
Need of Corporate Vision Statements
A corporate entity needs a vision because “where there is no vision, the people perish”(Proverb 29:18). This quotation from the holy writ aptly captures the essence of vision both at individuals and corporate level. Vision is important in that it guides and perpetuates corporate existence. Vision is viewed as a mental picture of a compelling future situation. It originates from creative imagination, the act or power of perceiving imaginative mental images or foresightedness. Corporate vision could be thought of as related to intuition. This is, however, not to eliminate other sources of corporate vision. Corporate vision can be associated with external agencies imposition of strategy or vision and, they can be deliberately formulated as part of strategic planning process. Notwithstanding the process leading to the emergency of vision, from strategic management perspectives, corporate vision creates a picture of a company’s destination and provides a rational for going there – Somewhat Continue reading
Value Stream Mapping (VSM)
Value stream mapping is a framework that could be used by the line-managers to identify the types of wastages in a value chain. The goal of value stream mapping is to identify, demonstrate and decrease the waste. Value stream mapping identifies the non value adding activities in a process and eliminates wastage due to non-value adding activities. It focuses on visual maps the flow of materials and information from the time products come in the back door as a raw material through all manufacturing raw materials. In this frame work, the line-manager could be able to track the process flow and value addition to the product in every activity. Whenever a non value adding activity is identified then it is called as waste. 1. Value stream mapping to identify the type of wastage Value-adding steps are drawn across the center of the map and the non-value-adding steps be represented in Continue reading