Concept of Business Strategy and Strategic Management
The purpose of this literature review is to present an in depth analysis of the concepts pertaining to business strategy and competitive analysis. Business strategy in an enterprise may be defined as the strategy which strives to fulfill the goals and objectives and abides by the vision of the organization as a whole (Eaton & Kilby, 2015). In simpler terms, one may refer to business strategy as business planning for long term objectives. These are high level plans which would help the organization attain specific business goals (DaSilva & Trkman, 2014).
Competitor analysis or competitive analysis in strategic marketing may be defined as the assessment and evaluation of the strengths and weaknesses of the potential competitors of the firm (Gamble, Thompson & Peteraf, 2013). The purpose of such analysis is to evaluate the current standing of the firm in question with respect to its competitors. The search strategy for the literature review would be to search for relevant journals and databases and analyze the concepts presented in them (See Appendix). The themes for the literature review would be business strategy and competitive analysis in strategic management.
A strategic plan in an organization can be called successful only when it leads the firm towards growth, provides it with a competitive edge and ensures financial performance (Bryson, 2018). It may also be described as the working plan in a firm which helps it in achieving the vision, prioritizing its objectives, maximizing financial performance and competing successfully in the market. The main purpose of a business strategy is to achieve effectiveness, utilizing and perceiving of opportunities, mobilizing resources, eliminating threats and challenges and ensuring an advantageous position.
Literature review:
The concept of business strategy and strategic management
The business strategy of a company would refer to a plan or policy that would be characterized by a specific positioning in the market, business approaches and competitive moves which would be imperative for smooth functioning of the company and yielding desirable results (Rothaermel, 2015). It would represent the managerial commitment which ensures that certain actions would be taken in an organization in order to optimize financial performance and achieve better performance levels. On a basic level, a business strategy should be customer centric and take into account the expectations and demands of the customer.
After all, it is the customer and the satisfaction levels of the customer that would help in evaluating the success of the organization as a whole (Wheelen et al., 2017). It would also help the organization gain a competitive edge over other organizations in the same industry. A robust business strategy would ensure that the company is effectively able to compete against its rivals (Grant, 2016). Additionally, a business strategy would position the company in the market in an optimum manner, with respect to its rivals; it would also present attractive and lucrative opportunities which would help the business flourish and grow. In addition, a business strategy is an all encompassing policy which takes into account the functional aspects as well, like production, sales, marketing and finance, human resources, distribution, supply chain activities and R&D.
Importance of a Customer-Centric Approach
The thought process that goes behind crafting a suitable business strategy would involve an analysis of various operational and competitive approaches which can help the organization meet its performance objectives, propel it towards a path of progress and strengthen brand positioning in the market. There is no fixed theory or roadmap which asserts that a certain strategy would work for all companies (Guerras-Martín, Madhok & Montoro-Sánchez, 2014). As a matter of fact, business strategy is quite versatile, since no two businesses can have a similar strategy. Every business or organization has its own set of requirements and objectives, and methods of attaining the same would depend on a large number of internal and external factors, including its capabilities and resources, which vary from company to company (David, 2011).
However, the purpose of any business strategy is to promote more durability, personalized customer services, enhanced performance and more features to the customers, thus improving satisfaction and retention levels. The concept of business model is intricately linked with that of a business model, which may be defined as a kind of blueprint that a company must follow while delivering a service or a product to the customer (Wirtz et al., 2016). Following the two integral aspects of a business model, namely profit formula and customer value proposition would ensure that the company yields profits and revenue outcome is increased.
Competitive analysis and strategic management
While devising a business strategy for any firm or organization, it is pertinent for managers to have a sound knowledge of the situation of the company, with special focus on two aspects – one, the competitive environment and the external factors affecting the company’s market positioning and two, the internal environment of the company, its competitiveness, resources, capabilities, strengths and weaknesses and future scope (Slater, Olson & Finnegan, 2011). The first step in competitive analysis would be to understand the present strategy of the company and the progress. For example,
it would be imperative to study the measures taken by the company with respect to competitive approach, or the moves made by the company to improve its position in the market. Examples of changes would include modifications in the product or pricing strategies, advertising and marketing campaigns, expansion into newer markets or even mergers. Moreover, it would be important to analyze the competitive strategy adopted by the company, which has been discussed in details below. To carry out a competitive analysis of an organization, the manager would need to know the following:
- Competitive forces affecting the various members of the industry and their potency
- The prevalent trends and the expected changes within the industry, which may have an effect on the company’s profitability and competitive intensity
- Market positions occupied by the rivals of the company
- Expected strategic moves of these rivals and potential ways to counter them
One of the most popular tools for analyzing the competitive environment of an organization is Michael Porter’s Five Forces Theory. The theory has its foundations in the industrial organization or IO economics and is an analytic tool which evaluates and studies the competition existing within an industry, and the factors affecting it (Dälken, 2014). They are:
- Threat from new entrants planning to penetrate the market
- Rival sellers within the industry who might utilize marketing maneuvering techniques to win over customers
- The threat of substitute products
- Supplier bargaining power, where suppliers of raw materials have greater hold over the company
- Buyer bargaining power.
- The concept of competitive strategy
There are several approaches to competitive strategy that may be adopted by a company to ensure that superior value services are delivered to the customers as compared to the quality of services and products delivered by other companies (Hsieh & Chen, 2011). A low cost strategy may be followed. This means that the company in question would be providing same quality products at lower prices than the rival firms. It is obvious that a customer would prefer to purchase products that guarantee good quality products at lower prices (Madsen & Walker, 2015). Such a strategy would increase the market share and the sales of the company and also improve its profitability. A focused low cost strategy is one that would target its service towards a specific, narrow niche market.
Business Models
A broad differentiation strategy may also be used by the company; in such a strategy, there would be a clear demarcation in the type of product or service sold by the company with that of its rivals (Freng Svendsen et al., 2011). A focused differentiation strategy is one that would attempt to outdo its rivals by offering a specific section of the market certain customized services which would cater to their unique needs and tastes. A best cost provider strategy may also be used by the company in order to incorporate certain upscale attributes to the product at lower costs thus giving the customer more value as compared to other companies.
Conclusion:
To conclude, it can be said that business strategy refers to that aspect of strategic management which takes into consideration each aspect of the organization that would cater to its goals and objectives. In strategic management, strategy would mean a plan or a policy that has been devised by the management of a firm in order to implement some changes or enhance the productivity levels of the organization as a whole. A business strategy, in compliance with the values and mission of the organization, would strive to increase sales, enhance productivity, improve performance levels and overall boost the profitability of said organization.
As such, competitive analysis is also one of the major facets of strategic management for it determines the position of the company with respect to other companies in the same industry. It would take into consideration the various internal and external factors that contribute to the competitiveness of an organization, like the market position of rivals, threat of new entrants and so on. Therefore, it would be imperative for any organization to have a robust competitive strategy in place which gives it an advantage over other companies.
References
Bryson, J. M. (2018). Strategic planning for public and nonprofit organizations: A guide to strengthening and sustaining organizational achievement. John Wiley & Sons.
Dälken, F. (2014). Are porter’s five competitive forces still applicable? a critical examination concerning the relevance for today’s business (Bachelor’s thesis, University of Twente).
DaSilva, C. M., & Trkman, P. (2014). Business model: What it is and what it is not. Long range planning, 47(6), 379-389.
David, F. R. (2011). Strategic management: Concepts and cases. Peaeson/Prentice Hall.
Eaton, D., & Kilby, G. (2015). Does Your Organizational Culture Support Your Business Strategy?. The Journal for Quality and Participation, 37(4), 4.
Freng Svendsen, M., Haugland, S. A., Grønhaug, K., & Hammervoll, T. (2011). Marketing strategy and customer involvement in product development. European Journal of Marketing, 45(4), 513-530.
Gamble, J. E., Thompson, A. A., & Peteraf, M. A. (2013). Essentials of strategic management: The quest for competitive advantage. McGraw-Hill/Irwin.
Grant, R. M. (2016). Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.
Guerras-Martín, L. Á., Madhok, A., & Montoro-Sánchez, Á. (2014). The evolution of strategic management research: Recent trends and current directions. BRQ Business Research Quarterly, 17(2), 69-76.
Hsieh, Y. H., & Chen, H. M. (2011). Strategic fit among business competitive strategy, human resource strategy, and reward system. Academy of Strategic Management Journal, 10(2), 11.
Madsen, T. L., & Walker, G. (2015). Modern competitive strategy. McGraw Hill.
Rothaermel, F. T. (2015). Strategic management. McGraw-Hill Education.
Slater, S. F., Olson, E. M., & Finnegan, C. (2011). Business strategy, marketing organization culture, and performance. Marketing letters, 22(3), 227-242.
Wheelen, T. L., Hunger, J. D., Hoffman, A. N., & Bamford, C. E. (2017). Strategic management and business policy. pearson.
Wirtz, B. W., Pistoia, A., Ullrich, S., & Göttel, V. (2016). Business models: Origin, development and future research perspectives. Long range planning, 49(1), 36-54.
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