Life cycle analysis relies on the belief that there are predictable relationships among the stages of business unit life cycles on one hand, and certain elements of strategy on the other. The typical business life cycle curve is analogous to the life cycle of products. During pre-introduction and introduction, the firm is investing heavily to build sales growth through product awareness and refinement, with emphasis on the latter. Thus profit margin is negative until growth begins to occur. If sales growth proceeds at a high enough rate, then unit profit margin will swing positive during the growth phase. Typically the firm’s emphasis is shifted from product refinement to building market share, thus increasing the length and slope of the curve during this phase. As more and more competitors enter the market, however, share is whittled away. Consequently the product’s growth rate begins to level off and the product enters the Continue reading
Strategic Management Tools
Corporate Entrepreneurship
Corporate entrepreneurship (also called intrapreneurship) is defined by Guth and Ginsburg as “the birth of new business within existing organizations, that is, internal innovation or venturing; and the transformation of organizations through renewal of the key ideas on which they are built, that is, strategic renewal. A large corporation that wants to encourage innovation and creativity within its firm must choose a structure that will give the new business unit an appropriate amount of freedom while maintaining some degree of control at headquarters. Burgelman proposes that the use of particular organizational design should be determined by (1) the strategic importance of the new business to the corporation and (2) the relatedness of the unit’s operations to those of the corporation. The combination of these two factors results in nine organizational designs for corporate entrepreneurship. Designs for Corporate Entrepreneurship Direct Integration: A new business with a great deal of strategic Continue reading
Benchmarking as a Strategic Business Tool
Benchmarking is the process of continuously measuring and comparing the business processes against comparable process of the leading organization to obtain the information that will help the organization to identify and implement improvement programs. Benchmarking as a tool stems from the early 1980s when organisational specialists from Xerox were discussing the big performance gaps between Xerox and its competitors. These specialists found two major applications for the process. First, benchmarking can be used to understand competitors and any other organisation by isolating and analyzing common functions and comparing the company’s own practices with them. Second, benchmarking can be used to compare the details of processes used in design, manufacture, marketing and services, as opposed to just the ï¬nished result In simple words, benchmarking is an approach of setting goals and measuring productivity based on best industry practices. It developed out of need to have information against which performances can Continue reading
VRIO Analysis – Meaning, Components, Advantages, and Disadvantages
Resources and capabilities have been considered as one of the biggest factors that aids and assists the business entity in performing and executing the varied range of operations and functionalities. Moreover, the business corporation should utilize various mechanisms for stimulating the resources and capabilities of the enterprise. VRIO analysis will be proven very much beneficial for any business entity while analyzing the internal sources and capabilities of the enterprise. It has been noted down that Jay B Barney introduced the framework of VRIO in 1991. This tool was introduced in his work ‘Firm Resources and Sustained Competitive Advantage’. Valuable: Resources and capabilities minimize the impacts of threats and moreover, the stakeholders determine whether or not the resources are beneficial to the company or not. The resources are proven very much beneficial for the business in various areas, internally and externally and thus will assist in the firm’s development process. Rare: Continue reading
Competitive Analysis of DELL using Porter’s Five Forces Model
Dell Company was founded in 1984 by Michael Dell. It is the world’s largest direct-sale computer vendor; Dell Inc. is now also the leading seller of computer systems in the world, capturing a global market share of more than 15 percent. Dell markets desktop personal computers, notebook computers, network servers, workstations, handheld computers, monitors, printers, high-end storage products, and a variety of computer peripherals and software. In this article we will use Porter’s Five Forces to analysis Dell’s great success in the industry. Force 1: The Degree of Rivalry The PC industry consists of a number of companies; hence the threat from industry competitors is high. Due to the product being highly standardized and shifting costs between brands is low, there is fierce competition which leads to lower margins and profitability in the market. The PC industry can be described as a high competitive industry. For Dell the main competitors Continue reading
Innovation in Large versus Small Firms
In 1940s, Austrian economist Joseph Schumpeter argued that large firms would be more effective innovators and he point out that better able to obtain financing for R&D projects and better able to spread costs of R&D over large volume. Large size firms may also enable for greater economies of scale and learning effect and taking on large scale or risky projects. However, large firms might also be disadvantaged at innovation because; R&D efficiency might decrease due to loss of managerial control Large firms have more bureaucratic inertia More strategic commitments tie firm to current technologies Small firms often considered more flexible and entrepreneurial. Many big firms have found ways of “feeling small” because break overall firm into several sub-units and can utilize different culture and controls in different units. A large firm gains experience in choosing and developing innovation projects, it may learn to make better selections of projects that Continue reading