Competitive Strategy
A competitive strategy is holistically defined as the long-term plan of a company in the bid to gain or acquire a competitive advantage over its competitors in the industry. The strategy is aimed at creating a defensive position of strength in the industry thereby generating superior Return on Investment (ROI). The concept, therefore, incorporates certain components including cost leadership, focus and differentiation. Cost leadership generally refers to a company or entity that aims at gaining a competitive advantage by lowering costs while maintaining prices at the same levels as the competitors. The act of lowering costs, in this case, is what is referred to as the competitive strategy.
Focus on the other hand as described by Martin (2014) is a competitive strategy used by entities to select a niche market and subsequently determining the scope of the focus. This is achieved by adding value to the products and offering them to a specific group of consumers thus developing loyal relationships. Differentiation as a component of the competitive strategy sets the entity apart from the rest since it allows for the development of products that are unique from the rest. Differentiation is particularly used for products that consumers are eager to pay a premium price. A perfect example of a company utilizing differentiation to gain a competitive edge is Apple Inc.
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Fundamentally, the relevance of the value-change framework is based on the fact that it supports and bolsters competitive strategic components such as differentiation. A value change framework under the scope of differentiation hinges on the development of better products in the market that transcend those offered by the competitors and at the same time consumers are willing to pay a premium price for them. Moreover, the framework ensures that all the necessary steps towards value addition are followed thereby eliminating increased overhead costs from compensatory efforts and strategies. Regardless of the implications pertaining to the shift in the market share due to the change in value and price, the value change framework still has a remarkable competitive edge. However, for the consumer, the price will increase and thus could be unaffordable for some. Nevertheless, the focus of the framework is to target a specific niche market that can reward the high-end value with increased payments. Ultimately, the competitors could lose a share of the top-notch consumers leading them to innovate and create similar or advanced products thereby increasing their overhead costs.
Strategic Alliance
The strategic alliance is a phenomenon based on a rudimental principle of ‘give and take.’ One fundamental consideration to take into account when planning an alliance is what stake each partner brings to the table. In essence, each party has to dedicate resources, money, and time to the alliance which translate to the stake of the partner. Another consideration is the level of communication of each partner. It goes without saying that good communication skills ensure a successful alliance. Good communication skills essentially refer to listening more than talking. In addition, developing proper communication channels as well as providing practical resolution methodologies in the case of disagreements are essential considerations as well. Perhaps the most fundamental aspects for consideration are the risks involved with the alliance. Indeed, if the risks outweigh the potential benefits, then the alliance is unnecessary, and this has to be discussed and agreed upon unanimously (Colgate, 2018).
Critical Factors Essential for the Success of an Alliance
An important factor for the success of an alliance involves the selection of partners. The selected partners must have similar or common goals as well as a vision not only in terms of operation but also strategic planning. However, selfish partners and those who lack a common mindset and ethics will lead to a poor alliance that could be costly to both sides. Another essential factor is risk and benefit analysis as alluded to earlier. An alliance without risk and benefit alliance is a recipe for failure. Analysis holistically helps determine new markets and whether to venture into them or not. However, the benefits have to outweigh the perils. As noted by Segil (2002), mutual and flexible commitment regarding what is appropriate to change, measure, and share parallel to the cultures of all partners is essential. An example of such an alliance is that between Pioneer Hybrid International, Des Moines, Iowa, and Division of DuPont that jointly develop and implement agricultural research as well as development that has substantially contributed to the global food resources and the well-being of people. The alliance has largely been sustained by the 20-year employee tenure of Pioneer and its culture that fosters loyalty, flexibility, persistence, and customization.
References
Colgate, A. (2018). What to Consider When Forming a Strategic Alliance. Web Finance . Retrieved from http://www.businessdictionary.com/article/472/what-to-consider-when-forming-a-strategic-alliance/
Martin. (2014). Major Strategy Frameworks | Generic Competitive Strategy. Cleverism . Retrieved from https://www.cleverism.com/generic-competitive-strategy/
Segil, L. (2002). 5 Keys to Creating Successful Strategic Alliances. Forbes . Retrieved from https://www.forbes.com/2002/07/18/0719alliance.html#3f289c7811f4
