How does an organization competes in their business (es) is represented here with competitive strategy. For any type of smaller organization, that are not diversified to different markets the competitive strategy shows their primary business goals. For different organization engaged in multiple role or businesses, all businesses will have their self competitive strategy and this will determine their level of competition within markets and the services they will offer customers with. The French company LVMH has built different strategies of competitive for the betterment of businesses. They developed products like Louis Vuitton leather goods, Dom Perignon champagne, including other luxurious goods. In an organization it may happen that they work for different businesses but the single businesses which work independently and have their self corporate strategy are genuinely referred to SBU’s (strategic business units).
Advantage of Competitive role:
For creating superior radial form of tires Michelin has made complex technological procedures. With specialized market strategy and merchandise capability Coca-Cola has developed to be world’s best product. Companies like Ritz Carlton have attained a unique feature of serving customer service in a personalized manner. This has made a base for competitive advantage.
For developing any type of competitive strategies you will require a better understanding the competitive advantages. This helps to keep organization apart at its distinct edges. This distinct edge comes from inner of organization competencies by performing better than others or else doing something what others cannot do. For instance, the South West Airlines has an added advantage as they could serve their clients with what they actually are in need of that too in a convenient manner. Competitive advantages come easily from organizations resources as the other organizations do not possess to have those resources. The Walmart, the art of information system asks their team to operate profitably upon their inventories and other supplier relations. Other competitors do not posses this thus Walmart turns out to be profitable.
Quality in a competitive advantage:
Kellogg started selling their top brand cornflakes in the 1906 their major aim was to serve their clients with all high quality product that can be enjoyable and also nutritious. Today each employee has the responsibility of keeping the Kellogg’s quality intact and maintained. Emphasis is mainly upon the quality. If properly implemented then quality comes up on competitive advantages. This is the reason why companies make competitive advantage to continuously get their business improved.
Sustaining the competitive advantage:
What makes an organization successful even after having enormous of resources that is assets and capability to do something new? Why are some professional teams of baseball seen winning matches or championships consistently? Some organizations are seen growing faster at a consistent rate but why? In fact, some colleges, departments and universities, are seen with vast enrolments each time. Have you ever wondered why did this happen? Not only this rather have some companies ranking at topped of lists regularly also turns a point of question. The only reason behind all is simple. All organization wouldn’t be able to make use of their resources properly. This can be done with competitive advantage but using them is not so easy. In order to achieve success the organization should be able to keep their resources intact even after thousands of attack by their rivalries. But overall it’s not so easy! Challenges may arise like instability of markets, new technological development, and many more for a short or long term competitive advantage. Thus use of strategy management is another best solution for managers.
One of the contributions being showed by Michael Porter in return of strategic management is the explanation of how their managers could make use of competitive advantages. Why is this done? This is done analyze the industry with the model of five forces.
Total of five forces forms the basis of competition for any organization. This can be understood better with the help of Exhibit 9-5. These five forces determine profits of industry and their attractiveness through manager’s help.
- Threat of new entrants– Entrance of new competitor to the same industry.
- Threat of substitutes– it is likely to find that other organizations products similar or rather a substitute for your industry.
- Bargaining power of buyers– What type of bargaining capacity your buyers have?
- Bargaining power of suppliers– Power of bargaining for suppliers.
- Current rivalry– Of what intense your rivalry is within the market.
How to choose a competitive type strategy?
As per the thoughts of Porter no company could success if they try serving all customers with all things. Thus if your manager follows this five forces with a perfect SWOT analysis then they are ready to face the competitive strategy easily. This means that it would fit easily to your organizations strength. Porter even proposed a concept that will serve organization with higher competitive advantage by having lesser costs than other rivalries or significantly different.
In case if any of the organization is following the concept of having lowest cost than other organization then definitely they are beneath cost of leadership strategy, whereas, a leader with low cost is more efficient. A firm can do anything to keep their costs lower to a minimum range. This fact can be understood better when you visit any low cost leader’s office. They usually do not use expensive interior for office. For instance, Wal-Mart’s headquarter at the Bentonville, Arkansas, are just simple and not with great elaborations. All furnishings are operable and also with less complications that you won’t ever image for a largest retailer. Though such low costing leaders do not expend more upon their frills but this doesn’t mean their product quality must degrade. They deliver products that are accepted to all customers.
Differentiation strategy is being followed by those companies that compete by delivery best quality but unique products to their customers. But the products should be valued by the customers. Their might differences in between the product and this may arise either by extraordinarily high quality products, innovative designing, capability of technology, exceptional services, or even by the brand images. It is with this differentiation strategy that will help you identify successful consumer’s item in a go. Just for example take the case of customer service of Nordstrom, product as well as innovative designs of 3M Corporation, brand image and designing of Coach, and product designing for Apple.
The two categories of competitive strategy are broader at the market following with a second category strategy named focus strategy. This strategy genuinely includes cost advantage/ focus and differentiation focus/advantage in a niche. These segments could be based upon distribution channels, type of customers, variety of products, and also geographical locations. Denmark’s bang and Olufsen generates revenue of about $527 million. It also focuses on higher audio equipments sale. Is this focus strategy feasible? It completely depends upon the capacity of each segment and how can that organization make cash depends upon serving those segments.
If any organization doesn’t develops any cost or differentiation advantage, what happens then? According to Porter getting stuck in middle is not good at all. When an organization does get stuck in middle? This happen especially when costs of the organization is too higher than those of its rivalry leaders low cost or else when the products are not differentiable with others. But if they get unstuck than this would mean as if they will make proper use of competitive advantages and then making use of capabilities, resource alignment, and competencies.
Ultimately Porter suggested organizations to pursue low costs or else differentiation advantage for prevention from getting stuck in middle. Various researches being done recently reveal how efficiently organizations could make use of both the advantages together. This is done in order to achieve higher performance. These are not necessarily needed but you require keeping lower costs to make them differentiable in a true sense. Companies like Hewlett-Packard, Coca-Cola, FedEx, and many more have been successful in doing so.
After having done such a huge section talk, now it’s time to point the ultimate organizational strategy type, functional strategy. This is used mostly by functional department of different organization for competitive strategy development. When a Chicago based company by R.R Donnelley and Sons invested for more competitive results through the high technological based printers. The marketing department has to create new plans for their sales and promotional policies in fact the production team has to make use of digital techniques for more printing plans. In fact human resource departments have also updated their selection along with training perspective. Some specific function strategy will be covered in different business course apart from this book.