Marketing Business Strategies and Decisions
Porter suggested the generic strategy for businesses to implement them to outperform competitors. His aim to the finding was that these strategies can be implemented singly and together as well and not only within a single industry but also as multi nationals. The name ‘generic’ according to Porter is because these strategies can be applied to a big variety of situations and contexts. The two generic strategies suggested by Porter that are available to firms are differentiation or cost leadership.
Cost leadership strategy is about a company taking up a large market share by attracting towards them the price-sensitive customers, for whom cost is a major factor while making particular purchases. The companies can only attain this either by offering to their target market then lowest price amongst the entire arena of competitors. In order to successfully offer the lowest price to consumers along with reasonable profits and high return on investment, the company should necessarily be able to carry out its operations at a cost lower than its rivals.
On the other hand the differentiation strategy postulates that the company creates a product or service that is brings the perception of being unique in the entire industry (Porter, 2005). A premium
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While differentiation strategies are more likely to earn high profit from the firm but will not be creating high sales volume. Therefore these are not the only two strategies available to firms. These two strategies are also mutually exclusive; reason being suggested by Porter where he emphasizes that only one strategy should be adopted by a firm otherwise the company may end up facing the ‘stuck in the middle’ problem ( R. A. Torgovicky, 2005). Due to implementing both strategies the firm may get off track because when practicing differentiation the firm will incur high cost which directly contradicts to the cost leadership strategy.
Another aspect is that standardized cost affective products would not meet the standards of all customers hence contradicting to the differentiation strategy. 2) According to Hamel and Prahalad strategic intent is what provides the ‘emotional and intellectual energy’ for a firm when formulating it’s future strategies keeping in mind the intense competition faced ahead. Strategic intent according to Hamel and Prahalad would firstly include the view into the future. Where the company sees itself in the long term and the competitive position the company aims to build giving a focused direction to head towards.
A sense of discovery of unexplored competitive territories would be the aim (Hamel & Prahalad, 1989). Employees would be promised exploration of completely new arenas in terms of competition. Furthermore employees will be provided with the sense of destiny because of strategic intent as the goal aim towards is to be perceived worthwhile to them. For the general managers their role is to make sure the attributes of strategic intents are set appropriately into the future planning.
The general manager will communicate to the work force the challenges that would be faced and need to be over come in order to reach towards the goal with strategic intent being used as the tool. Lastly and the most major role of the general managers here would be breaking the traditional downward vertical communication in organizations to ideas coming upward to the top management from all the employees in the organization. With strategic intent the management needs to involve everyone in the organization for desired aim. 3) Strategy formulation is when current and future key objectives are considered.
Strategic alternatives are sought and decisions on their implementations are made hence this process of formulation is imperative in the interests of an organization or company (R. L. Daft, 2010). Strategies are of two main types; first is the corporate strategy in which the company decides which businesses to look into which line will they be focusing towards. Second is the competitive strategy in which the company builds a framework which is to be worked upon in order to achieve successful, desired results for a particular business targeted.
Strategy formulations requires goal setting in accordance to not only the analysis of the industry and the market but also the resources and corporate competencies. Resources need to be converted into value. For this the formulation should be such that maximum value can be derived out of the resources being bought by the company so that at the end probability is achieved. Resources are a significant factor in building of strategy formulation because they enable an organization to analyze not what they want instead what they can do.
So in order to convert resources valuably the resources must not have substitutes, should not be easily imitated and should be synergetic. Resources would not be of competitive advantage if they are transient in nature. Corporate competencies enable the firm to analyze what they are good at. how do they have an edge over others. They’re advantages that they enjoy, how to use them as a weapon against the fierce competitors who are also working for the bigger market share, attracting larger number of customers. Capabilities and availability of appropriate resources to operate hence to play a major role in strategy formulation.
WORD COUNT 903 words References Daft, R. L. (2010) Management. Mason, OH, South-Western Cengage Learning. ISBN: B003RHBNCC Hamel, G. & Prahalad, C. K. (1990) “The Core Competence of the Corporation”, Harvard Business Review. May- June. Michael E. Porter, (2005). Harvard Business School Faculty Biography. Available from <http://dor. hbs. edu/fi_redirect. jhtml? facInfo=bio&facEmId=mporte Torgovicky, R. , A. Goldberg, S. Shvarts, Y. Bar Dayan, (2005) “Application of Porter’s Generic Strategies in Ambulatory Health Care: A Comparison of Managerial Perceptions in Two Israeli Sick Funds. “Health Care Management Review30, no. 1: 17–23