Business Strategy

A business strategy is the process that identifies the product market, the level of investment, the functional area strategies needed to compete in the selected product market and the strategic assets that underlie the strategy and provide the sustainable competitive advantage (SCA).

In the Multiple Businesses business strategy may include the development of synergistic effects across the businesses—the creation of value by having business units that support and com­plement each other and the allocation of resources over the business units.

Differentiation versus Low-Cost Strategies

A differentiation strategy is one in which the product offering is differentiated from the competition by providing value to the customer, perhaps by enhancing the performance, quality, prestige, features, service backup, reliability, or con­venience of the product.

A low-cost strategy is based on achieving a sustainable cost advan­tage in some important element of the product or service.

I think the differentiation strategy is more efficient in the high sector of the society and it loses its efficient by moving down to reach the low sector.

But the low cost strategy is more efficient in the low sector of the society and it loses its efficient by moving up to reach the high sector.

Focus strategy

It is involves focusing the business on either a relatively small buyer group or a restricted portion of the product line.

Preemptive move

You take "first-mover advantages", so competitors must be inhibited or prevented from duplicating or countering it

Synergy

It is linked to another business within the same firm or division. The two businesses may be able to share a sales force, office, or warehouse and thus reduce costs or investment.

A STRATEGIC BUSINESS UNIT

SBU is any organizational unit that has a defined business strategy and a manager with sales and profit responsibility. The concept was formulated by firms as a way to help develop an entrepreneurial thrust in a diversified firm by making business units more autonomous and strategy development less centralized.

Strategic Market Management

Process of developing and implementing strategies:

·        Budgeting: The basic assumption is that the past will repeat itself.

·        Long-Range Planning: Past trends will continue

·        Strategic Planning: New trends and discontinuities are predictable

·        Strategic Market Management: Planning cycles are inadequate to deal with rapid changes

Now we are going to talk about the strategic market management which contains several distinct characteristics and trends.

External, Market Orientation

Organizations need to be oriented externally—toward customers, competitors, the market, and the market's environment.

Proactive Strategies

A proactive strategy attempts to influence events in the environment rather than simply react to environmental forces as they occur

Importance of the Information System

The determination of what information is needed, how it can be obtained efficiently and effectively, and how it should best be analyzed, processed, and stored can be 1cey to an effective strategy development process.

On-Line Analysis and Decision Making

It is the system must be structured enough to provide assistance in an inherently complex decision context, sensitive enough to detect the need to precipitate a strategic choice, and flexible enough to be applied in a variety of situations.

Entrepreneurial Thrust

There is a need for the development of organizational forms and strategic market management support systems that allow the firm to be responsive to opportunities

Implementation

Implementation of strategy is critical. There needs to be concern about whether the strategy fits the organization—its structure, systems, people, and culture—or whether the organization can be changed to make the strategy fit

Global Realities

Global markets are ex­tremely relevant to many businesses, and it is a rare firm that is not affected by competitors either based in or with operations in other countries.

Marketing

Marketing is by its very nature concerned with the interaction between the firm and the marketplace. 

Tools and concepts such as product positioning, the product life cycle, brand equity, brand loyalty, and customer-need analysis all have the potential to improve strategic decision making.

Organizational Behavior

It is the link between strategy and other elements of the organization, such as systems and the management of people.

Finance and Accounting

It is a rich research tradition relating to diversification efforts, acquisitions, and mergers.

Finance has also con­tributed to an understanding of the concept of risk and its management.

Economics

The concept of transaction costs has been developed and applied to the issue of vertical integration. Economists have contributed to the experience curve concept, which has considerable strategic implications.

Business Strategy

Before discussing the process of developing sound business strategies, it is fair to ask what a business strategy is in the first place. A business strategy, sometimes termed competitive strategy or simply strategy, is here defined by six elements or dimensions. The first four apply to any business, even if it exists by itself. The remaining two are introduced when the business exists in an organization with other business units. A business strategy specification includes a determination of

1.     The product market in which the business is to compete. The scope of a business is defined by the products it offers and chooses not to offer, by the markets it seeks to serve and not serve, by the competitors it chooses to compete with and to avoid, and by its level of vertical integration. Sometimes the most important business scope decision is what products or segments to avoid because such a decision, if followed by discipline, can conserve resources needed to compete successfully elsewhere.

2. The level of investment. Although there are obvious variations and refinements, it is useful to conceptualize the alternatives as

* Invest to grow (or enter the product market).

* Invest only to maintain the existing position.

* Milk the business by minimizing investment.

* Recover as much of the assets as possible by liquidating or divesting the business.

3. The functional area strategies needed to compete in the selected product market. The specific way to compete will usually be characterized by one or more functional area strategies, such as a

           * Product line strategy.

* Positioning strategy.

* Pricing strategy.

* Distribution strategy.

* Manufacturing strategy.

* Information technology strategy.

* Segmentation strategy.

* Global strategy.

4. The strategic assets or competencies that underlie the strategy and provide the sustainable competitive advantage (SCA). A strategic competency is something a business unit does exceptionally well, such as manufacturing or promotion, that has strategic importance to that business. A strategic asset is a resource, such as a brand name or installed customer base, that is strong relative to that of competitors. Strategy formulation must consider the cost arid feasibility of generating or maintaining assets or competencies that will provide the basis for a sustainable competitive advantage.

The concept of a business strategy for a group of business units is introduced, and two additional components of strategy are needed:

5. The allocation of resources over the business units. Financial resources, generated either internally or externally, plus non-financial resources such as plant, equipment, and people, all need to be allocated. Even for a small organization, the allocation decision is key to strategy.

6. The development of synergistic effects across the businesses—the creation of value by having business units that support and complement each other. It is only logical that multiple business organizations that can achieve synergistic effects will have an advantage over those that ignore or fail to achieve synergy.

All six elements of the strategy concept can be capsuled into three core elements as shown in