Strategic Management used
to establish values, goals, mission, vision, roles, objective, timelines and
responsibilities of an organization. You have to do some strategies by which
you can achieve the goals of an organization. There are different types of directions and
you have followed that direction as per your organization goal to achieve the
highest value and update the present status of the organization.
It has been observed that
the use of differentiation strategy and cost leadership strategy are trying to
attract more and more customers to their business. But in the long run they
could not sustain because of their mistake. A focused cost leadership strategy
needs competing a narrow market based on price to target. They are not charged
lower cost in the market.
In the focused
differentiation, unique features are required for best offer that must be
fulfilled the present demands of the narrow market. It also focused on low cost
strategy in the narrow market. An important channel is to sell through internet
which is a unique and essential feature of the focused low cost strategy. To
enter into the industry you have to choose the suitable strategy as a cost
leader or differentiation strategy.
Porter’s Generic Strategies
has three different parts such as cost leadership, differentiation and focused
strategy. If you choose the focus strategy then you have to concentrate on the
particular limited products in the market for example PepsiCo.
However, if you go with
cost leadership strategy then you have to have select products which are
comparatively lower price in the market. You will get superior profits by doing
lower product price. Therefore, you will get some opportunities to get more
profit such as WalMart and Tesco. On the contrary, differentiation strategy has
shown that they are maintaining high quality product with unique features as
per the requirements of the customers to add value in their market for example
Mcdonald and FedEx. Moreover, their customer service is excellent. Hence you
will get the opportunities like extraordinary product and services to run you
business more robust.
If your target scope is industry wide or broad
then you may choose the cost leadership strategy for lower cost in the market
and other strength is the best quality product with best service for
differentiation strategy.
Focus strategy is the best
for narrow market but this strategy will not be sustained in the long run
because naturally business expands after 5 years. And it may be expand more
after 11 years. So you have to select sustainable strategy to exist in the
market. However, Focus strategy is working with only single product in a narrow
business area like Pepsico. So, if you want to wide you business then you will definitely
get some threats by using focus strategy.
In case of competition, you
will get some strength through cost leadership strategy because it is very
difficult for other companies to compete with you in the current market. So,
lower product cost is your company’s strength in the modern era. However, if
you think about only quality but not price, differentiation strategy is the
best fit for you and you may run you business for a long period year after
year. Though it has some treats because the product price may be higher. In the
cost leadership strategy, your aim is to become lower cost in the market. So
you are not thinking about product quality. Therefore again a treat may arise
because you competitor may be created higher quality product than you. So
customer may not attract to you. But it has an opportunity for the price
sensitive market. And you will become a market leader regarding product
cost. Hence, you will get an opportunity
from cost leadership strategy.
There are some threats in
the cost leadership strategy such as:
a.
Another company may be given lower cost on
some products;
b.
Price war may be created;
c.
Cost
leadership sustainability may be damaged in the long run for other competitors;
In the differentiation
strategy, you have to think about unique attributes of the products which are
valued by the customers. The target customers are getting their suitable
products and services from these strategies. Also you have to work for the
image of the products, after sale services, durability of the product, quality
and other additional features. It also requires research capabilities, flair
and strong marketing for example McDonald’s. In the SWOT analysis we can get
the following information:
Strengths:
More profit by doing cost
leadership is the Strength of the organization. Also maintaining quality of the
product is definitely strength of the organization which you will see in the
differentiation strategy. When you are starting to maintain standard quality
then automatically you brand recognition will be strong enough to reach the
ultimate goal.
Weaknesses: You product
cost is higher. So your competitors are getting benefits because their cost of
product is lower than you. This is your weakness. Moreover, you product quality
is low is another weakness of the organization. To overcome the weakness you
can follow cost leadership strategy and differentiation strategy.
Opportunities:
Customers are demanding
your product in the market. So your product has higher value and you will get
more profit is an opportunities. You have an opportunity to market growth so
you have to maintain product quality and you can select differentiation
strategy.
Threats: Some negative
factors which are external might be created treats of the organization. If you
face new competitor for your running products then you might face treat because
customers are sometimes choose new product from your competitors. To avoid threat you may use cost leadership
strategy to sustain your running business with maintaining quality product.
1st Year:
In the first year you have
to select focus strategy because your business just started like narrow market
with some specific products. But focus strategy has some limitations.
2nd Year:
In the second year, you
think that your business needs to expand more. So you have to change the
strategy and select cost leadership strategy. You get some threats and weakness
in the focus strategy like your product was specified not expanded but you have
seen that your competitors are already doing business with different products.
3rd Year:
Again you will find some
threats and weakness in the cost leadership strategy because your competitors
are started to lower the price of the product. Therefore, you have to change the strategy and
select the differentiation strategy to become market leader. In the
differentiation strategy you can expand your business rapidly because you are
maintaining product quality and services. Consequently, you are fulfilling the
demand of the customer in the long period.
4th Year:
You should apply the growth
strategy for growing core business and growing the sub-segmenting customers and
finally growing to the adjacent opportunities. There are different components
of growth strategy such as horizontal integration, diversification, vertical
integration, franchises, mergers and acquisitions, organic growth and joint
venture. You have to apply diversification is a must because it is the demand
of the customer.
5th Year:
In this year, you have to
think more business expands. So, you have to think about mergers and
acquisitions to more growth of the business and sustain. Hence, you have to
choose your partner company. If you can choose multinational or multicultural
company then you will get more opportunities and your treats will be minimized
and also your profit rate will be growth rapidly.
Next year you have to
thinks about both diversification of the product and joint venture company.
After that your business will be sustain for a long run.
Threats can be overcome by
more profit.
In conclusion, it can be
easy to say that to get more profit in the market you have change your strategy
time to time because all the time season is changing simultaneously. You have
to understand the present situation in the market to get more benefits.
Sometimes cost leadership strategy is important but not for all the time.
Another time, differentiation strategy is playing a vital role to get maximum
outputs. Growth strategy is also important for business growth because you have
to understand business and also you have to know clearly about your
competitors. You have to know what they are doing and campaigning for their
business growth. In few case, business alliance is acting crucial role.
No comments:
Post a Comment