Today, businesses operate in environments that are intensely competitive. The stiff competition has forced some businesses out of the market. To stay relevant, the remaining businesses have been forced to develop strategies. These strategies range from product differentiation to innovation. LEGO is among the companies that have managed to remain competitive thanks to creative strategies (Harrison & St. John, 2013). As the fifth chapter makes it clear, any business that wishes to stay relevant and competitive must adopt effective strategies. A summary of this chapter is offered below.
There are various strategic approaches that firms that wish to stay competitive may adopt. These approaches include innovation, product promotion, attractive pricing and product differentiation (Harrison & St. John, 2013). These strategies yield different results and before selecting the approach to use, a company must begin by assessing its needs and market. It is also important for companies to understand that while they enhance the competitiveness of a company, these strategies can also be costly and disastrous if not implemented properly. The strategies are very flexible as they can be implemented at different levels of business.
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Some of the business strategies, which exist, are rather generic. Businesses can apply these strategies since no unique approach is required. Differentiation, best cost, and low cost leadership are among these strategies (Harrison & St. John, 2013). These three strategies are primarily concerned with making a company’s products stand out from those produced by competitors. Through differentiation, a firm is able to offer its products qualities that set them apart from similar products. Cost leadership and best cost are concerned with attractive pricing. These strategies enable companies to offer quality products at very low prices. As they do this, they are able to win over consumers. The low costs do not necessary expose the companies to the threat of losses. Even as they offer their products at low prices, these strategies allow companies to remain profitable. The three strategies can be combined for maximum impact.
The strategies that companies can adopt as they seek to develop competitive advantage are not limited to the ones mentioned above. There are other unique approaches that may be employed. Economies of scale, technological advances and high capacity production are the other factors that enhance the competitiveness of a company (Harrison & St. John, 2013). Economies of scale allow large firms to enjoy benefits that enable them to attract consumers. These benefits include low production costs that result in lower product prices. Firms that embrace modern technology and those that fully exploit their production capacity are also able to gain an edge over their competitors. They are able to reduce their costs of operating and to offer their products at lower price points.
Instead of attending to the needs of the entire market, it is common practice for firms to focus on a certain market segment. This is a deliberate strategy that has been shown to be effective. Focus strategy enables firms to channel all their energies and resources to serving a certain client base (Harrison & St. John, 2013). While this strategy is largely effective, it has a few drawbacks. One of its weaknesses is that a firm may focus on a given market segment and lose out on opportunities that other market segments present. To ensure that this does not occur, it is important for companies to widen their focus even as they zero in on particular market segments.
Strategies play an important role in driving business success. However, they are not solely responsible for business growth. To maximize their impact, firms need to combine strategies with well-laid out business models (Harrison & St. John, 2013). These models determine how a business will operate and how it intends to make money. The typical model is comprised of four issues: markets, assets, value creation and value capture (Harrison & St. John, 2013). Any business model must enable a firm to target certain market segments. The business model should also identify the assets that a company can use to create value and generate revenue. As they adopt business models, it is advised that companies must ensure that the models will spark demand while ensuring that there is adequate supply.
There are various tactics that companies rely on to stay ahead of the competition. These competitive tactics enable companies to remain relevant in a market that is defined by cut-throat competition. Growth strategies and offensive strategies are among these tactics (Harrison & St. John, 2013). Essentially, growth strategies are the approaches that companies use to extend their influence while the offensive strategies are the tactics that are employed with the aim of undercutting the competition. Companies may also implement defensive tactics (Harrison & St. John, 2013). These tactics are activated when a company needs to retaliate following an offensive move by the competition. Lowering product prices and running smear campaigns are some of the defensive tactics that a firm can use. While these tactics are usually effective, caution must be exercised since their impact may be negative.
In conclusion, strategies hold the key to sustainable growth. However, unless they are properly implemented, strategies may fail to deliver the desired outcomes. It is advised that firms should be flexible in their implementation of strategies. They should also understand that they operate in a globalized world. Therefore, they should adopt strategies that make considerations for the international context. Focus should be given to product differentiation and sustainable growth. This is because these areas hold the greatest potential. Companies should also embrace strategies that build their competitiveness while eroding the appeal of the competition. Defensive and offensive tactics may also be implemented. It is advised that companies should exercise deep insight, wisdom and caution in their implementation of these strategies.
Reference
Harrison, J. S. & St. John, C. H. (2013). Business Level Strategies . In Foundations in Strategic Management. 6 th Edition. Boston: Cengage Learning.
