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Generic Strategies for Competitive Advantage
Rodrick Fields
Capella University
Business Strategy
John Horne
August 14, 2021
Generic Strategies for Competitive Advantage
Generic strategies are the three methods used by a firm or an organization to take part in a competitive way within an industry. The concept of the generic strategy is defined first in the book competitive advantage by Michael Porter. Two types of competitive advantage consist of various activities that a firm or an organization tries to achieve. They lead the generic strategies for achieving the best performance in an industry. The two types are cost leadership, differentiation, and focus. There are types of strategies used in marketing, namely: competitive strategy, corporate strategy, operating strategy, business strategy, and functional strategy. This essay aims to state and elaborate the SWOT analysis of a company and the strategic business plans.
Generic business strategies for the company inclusive of cost, differentiation and focus
Every business must develop a strategy that leads it into achieving a competitive advantage within the marketplace. On choosing these, the company products’ strengths and weaknesses and the company’s position in customers’ minds have to be considered(Lorenzo,2018). The best strategy is the one that influences the strengths of the company to the highest profits and a huge investment return. Companies may try a competitive advantage in so many ways. A company might offer their consumers something valuable of their money, maybe by offering a low price in the market and having the most beneficial products to the consumers in justification of the high prices. Cost leadership strategy is one of the generic business strategies that work to produce its products with the lowest cost. This applies mostly to closely similar products and is mostly purchased and accepted by many consumers. For a company to be a cost leader, it has to ensure that it has the lowest production and distribution cost. It also should have the lowest price in the market, and by doing so, it is easier to attract most buyers, become the market leader and drive the competitors out. A successful cost leadership strategy needs an improvement in all ways of the operations of the company. For the company to be the lowest-cost producer, the following has to be followed:
Improving productivity
Having the bargaining power
Improvement of technology
Catching up with the distribution methods and changes
Improving the production methods
A differentiation strategy needs the company to produce unique products so that the consumers could believe in the product’s value and be willing o pay more for them. If the consumers approve that the products are worth the market, the company could be at peace to charge the first-rate prices. The prices will be enough equalizer, and the company would be able to make reasonable profits. Companies that use the differentiation generic market strategy and succeed need to have the most skilled and creative product development staff. The staff should have the ability to do a market survey and get to know the expectations of potential buyers, know the features that would attract the consumers for them to be implemented. After implementing and having a unique product, the company should get the best sales team with skills to talk and convince customers that they are receiving a product worth their money and market the company as the one that produces the high-quality products. A differentiation strategy has several risks: the competitors will not remain silent while losing their market, and they will come up with their differentiation product and campaign. Secondly, while doing the differentiation strategy, it might change consumers’ taste as competitors improve and come up with unique products, thus capturing the eyes of the buyers.
Cost focus strategy requires the company to understand the features of the market and the basic unique needs that the specific consumers have, which applies to a chosen market segment. The companies using the cost focus strategy take the risk of leaving out the largest market target(Lorenzo,2018). When the company concentrates on that particular target group, it might gain some or more loyal customers. The features that are attractive to this position market may not be of interest to the entire market. Like the focus strategy, the differentiation focus approach also aims at a particular small group in the market. The company finds and gets unique feature for its product that gets the attention and attraction to a specific group of customers. However, the company’s profit is dependent on the spending of the small group of consumers. If the taste of the target consumers changes, the company will have difficulties changing its direction to target the wider market. A successful differentiation focus strategy relies on creating a very strong brand in which the consumers are loyal to get ready for the awaiting competition.
Company’s business model
The company uses the differentiation strategy to produce its unique products to stand and run smoothly in the competitive market. For example, the company makes candy unique by improving its taste and using healthier ingredients to make it stand out since there are s many competitors on the same product (Saputra,2020). The business model refers to the plan that the company has in making a profit. It points out the products that the company or business intends to sell, its pinpointed target market, and any expenses incurred. The core product is as well defined as the benefits that that product brings to the customer. The company’s core product, in this case, is candy. The organization makes money in various ways to maintain and pay their dues: through the sale of their goods and services, by receiving grants from the locals, from the state and federal agencies, sector for-profit companies, and getting some private donations. A value proposition is a statement that answers why a person should do business with your brand(Lorenzo,2018). The value proposition for this company is that they produce the most unique and legit products, which are good and accepted by most consumers in the competitive market. A customer value proposition is the total benefits that the vendor promises the customer to receive in return for a payment. Profit preposition is the revenue generated by the company minus the cost of production and delivering it.
Corporate strategy of the company inclusive of product, geographical and vertical scope in which it operates.
Some of the products and services offered by a virgin group of companies, which are leisure, travel, holidays, media, and many more. For that group of companies to be in a position to attain such a huge success in the commercial world, they must have achieved an effective marketing mix through the four key elements of marketing: product, promotion, price, and placement. This has made the firm able to improve and expand the initial products in the field as per the operation. By implementing the well-researched and decided strategies, the group of companies is in a position to gain customers’ trust mostly by its name and the quality of services offered to the customers. The firm is therefore situated in different parts of the world and has various branches in different areas. The distribution channel of the group is so expansive due to its pure size because it has to extend operations to meet customers’ expectations and create awareness of its products and their value. The firm still owns several related ventures globally, and that has been its main source of strength through mergers and acquisitions compared to other businesses
Corporate structure of the company
Corporate structure in a company refers to how the organization is divided into different departments and units of business. The corporate structure of different companies may differ depending on the goals of each specific company since each company has its set goals to achieve. The key management system controls the different locations in which the assets in an organization can be accessed, who can access them, and when to. There are two types of key management which are private key and public key(Daulay, 2020). The company uses the diversification method to manage the risks by minimizing the harm that may arise during economic downturns. Diversification occurs when a business expands into the market or comes up with a new product to the market. The important and basic idea why the company uses this method is to get exposure into the market without a negative reaction to the economic downtowns; thus, the company uses diversification as a growth strategy. Global Alliance is part of the corporate strategy since its purpose is to share ownership of the newly formed ventures and maximize the competitive advantages in the joined territories.
Strategy formulation distinguishes corporate and business strategy. The general distinction is that corporate strategy is concerned with the business to be completed while business strategy addresses how the business should be completed(Saputra,2020). To be precise, business strategy is how a firm organizes and plans how to achieve its objectives in a business. The corporate strategies include downsizing, stability, and expansion, whereas business-level strategies include differentiation, focus, and cost leadership. SWOT analysis is used to identify the key external and internal environmental factors that are considered important in achieving the goals of an organization. A good SWOT analysis helps the company take advantage of the strengths and opportunities and minimize the threats and weaknesses. The internal environment is the inner forces and conditions present within the company and can affect the company’s functionality.For a company to have a good and unique opportunity has to be willing and able to communicate and interact with customers, get their reviews and settle if there are complaints, partner with bigger companies to benchmark on the tactics they use to be able to maintain standard in the competitive market, be willing to do research and read more for opportunities, learn customer needs and lastly know the trends and the most consumed kinds of stuff where very minimal companies produce. The external environment is the outside forces that can affect a company’s performance, profitability, and performance. There are six external environment forces: legal environment, social environment, global environment, technological environment, economic environment, and competitive environment. On the other hand, several internal environmental factors are plans and policies, human resources, labor management, inter-personal relationship with the employees, physical assets, value proposition, financial and marketing resources inclusive of many more factors.
Key management system of the company
A management structure describes the organization of the management hierarchy. There is a hierarchy in management in almost all organizations. The hierarchy in every organization determines the lines of authority, communications, duties, and rights of the organization. A decentralized structure is followed in every organization that runs from the senior authority to the juniors(Lorenzo,2018). There are six organizational structure elements: designation of jobs, distribution of authority, activities coordination, position differentiation, department division, and establishment of reporting relationships(Daulay, 2020). A functional organizational structure has taken the initiative to divide the firms’ major functions into subgroups. For example, the finance department, production department, marketing department information department and many more. This company has a functional organizational structure and has taken the initiative to divide the different groups in the organization. Some of these subgroups are the information technology department, production department, marketing department, finance department, and human resource department.
There are some key strategies that the company needs, and which most of them revolve just around customers. They are partnering maybe with other companies for benchmarking, operational improvement, development of a new product or service, management of technology and information, and naturing people’s talents for the sake of the company’s benefits(Daulay, 2020). There are four ways in which the company can identify opportunities in the competitive market. These are: looking at the competitors and get to know what new they have or the strategies they use, listening to customers, and getting the reviews of the customer to know if there is any improvement that is needed for the products, listening to potential clients to get leads and looking at the industry trends and insights for more leads. For the company to improve opportunity seeking, the following aspects should be followed:
Look for an opportunity.
Have time and passion for reading and researching about it.
Be passionate and go for the identified opportunity, and lastly.
Make contacts.
In conclusion, a generic strategy method should be followed in an organization to boost the company’s performance. The several strategies used by an organization, like the cost leadership strategy, differentiation strategy, and focus strategy, are key to any organization or a company. For this company, I would say that differentiation strategy is the most suitable since it enables the company to produce and put on unique market products, thus uniquely enabling its growth. Following the orders and the hierarchy of the company enables a smooth run. Thus, the development of the company arises. For a company to have a good and unique opportunity has to be willing and able to communicate and interact with customers, get their reviews and settle if there are complaints, partner with bigger companies to benchmark on the tactics they use to be able to maintain standard in the competitive market, be willing to do research and read more for opportunities, learn customer needs and lastly know the trends and the most consumed kinds of stuff where very minimal companies produce. For a company to be in a position to attain such a huge success in the commercial world, they must have achieved an effective marketing mix through the four key elements of marketing: product, promotion, price, and placement. The company should use the diversification method to manage the risks by minimizing the harm that may arise during economic downturns. Diversification occurs when a business expands into the market or comes up with a new product to the market. The important and basic idea why the company uses this method is to get exposure into the market without a negative reaction to the economic downtowns; thus, the company uses diversification as a growth strategy.
References
Lorenzo, J. R. F., Rubio, M. T. M., &Garcés, S. A. (2018). The competitive advantage in business, capabilities and strategy. What general performance factors are found in the Spanish wine industry? Wine Economics and Policy, 7(2), 94-108.
Daulay, R., &Saputra, R. (2020). Analysis Of Customer Relationship Management and Marketing Strategies Against Competitive Advantage on The Company’s Distributor in Medan City. 2019.
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