1. Explain why a company’s strategy cannot be completely planned out in advance and why crafting a company’s strategy cannot be a one-time, once-and-for-all managerial exercise. Identify at least 3 factors that account for why company strategies evolve.
A company’s strategy cannot be completely planned out in advance and crafting a company’s strategy cannot be on-time, once-and-for-all managerial exercise because of the various factors involved in the process and they are as follows:
Changing market conditions: It includes changing interest rate and exchange rate that puts a direct impact on the strategies of the company. Changing of the foreign exchange rates makes an impact on the business outside the country.
Advanced Technology: As technology is changing rapidly, introduction of the new products and services are making old products and services useless and hence makes an impact on strategies of the company made for the older products and services.
Unexpected moves by competitors: Competitors are also increasing in the markets and all have their strengths and weaknesses. In order to stay a head from others in the market, competitors also make strategies and those strategies might affect your business and your strategies.
Shifting Buyer’s need: With the technology advancement, the needs of the buyer is also changing. So in order to make customers happy, a company needs to change its strategies with the time.
The three factors that account for evolvement of the companies strategies are as follows:
Changing customer needs
2. What is the analytical value of studying competitors and trying to predict what moves rivals will make next?
It gives a company a better idea of what their rivals will do next. It gives them a chance to prepare countermoves. It also gives them a chance to take advantage of any openings that arise from a competitors missteps. Competition is one of the major forces in the company’s external environment which companies use to base their marketing strategies. It is important that the companies understand the competition and develop strategies to counter the competition. Competitor analysis is essential for the survival of the firm and the development of the corporate strategies. It is through the study of the competition and making predictions about their future behaviours that the organizations create their various strategies. Based on the prediction of the next move of the competitors the companies are able to create strategies which can help them to develop a competitive advantage. Hence the study of the competitors has a significant analytical value for the companies as it provides a basis for the development of the competitive and other strategies inside the firms. It helps the organizations in understanding the threats they face and establish the strategic options which are available for them.
3) Explain how the strategic target of a low-cost provider differs from the strategic target of a best-cost provider.?
• Low cost provider – targets broad cross-section of the market offering lower overall cost than competitors. Ex. Wal MartThe objective of a company using a low-cost provider strategy is to sell its products at the lowest possible price to attract customers. This is known as a price advantage. Companies using this strategy will typically earn low margins but achieve high sales volumes. Low-cost providers aim their products at the broad market, making them appeal to as many consumers aspossible to achieve high sales volume.• Best-cost provider strategy- target value conscious buyers in a middle market range; offers better goods at attractive prices.• Works best in markets where product differentiation is the norm and large number of value-conscious buyers can be induced to purchase midrange products rather than cheap or expensive top of the line products. The strategic target of a low-cost provider are buyers looking for a basic product with few frills and thus at a low cost, while the target of best-cost providers are the value-conscious buyers willing to pay for additional attractive attributes, appealing extras and functionalities, at a comparatively low price. Value-hunting buyers (as distinct from price-conscious buyers looking for a basic product at a bargain-basement price) often constitute a very sizable part of the overall market for a product or service.
4. What are the merits of outsourcing the performance of certain value chain activities as opposed to performing them in-house? Under what circumstances does outsourcing make good strategic sense?
Outsourcing over in-house allows for the entire assembly process to manufacturing specialists, which can operate more efficiently due to their greater scale, experience, and bargaining power over components makers. ( p. 162)
Strategic sense when:
1. activities can be performed better or more cheaply by outside specialists.
2. activity is not crucial to the firm’s ability to achieve sustainable competitive advantage.
3. outsourcing improves organizational flexibility and speeds time to market.
4. reduces the company’s risk exposure to changing technology and buyer preferences.
5. allows a company to concentrate on its core business, leverage its key resources, and do even better what it already does best.
5. Under what circumstances is it advantageous for a company competing in foreign markets to concentrate its value chain activities in a select few locations?
If the competing firm wants to further increase its profits as well as strengthen its position in market . As we know that transportation cost are major part of total cost . So by having value chains in few areas in close proximity to market the firm can increase its competitiveness and it’s profits. If despite repeated trying competing firm couldn’t withstand the domestic industries competition then firm must close its certain value chain activities across many countries. Some countries heavily subsidies it’s domestic industries to compete against the foreign firm making staying in business for foreign firm very difficult.
The circumstances under which the company should concentrate its value chain activities in a select few locations are:
a) Low-cost advantage- if the company can manufacture the product in some country at low cost then it will definitely prefer to concentrate its value chain in the location itself.
b) Preference of taste- If the target customer prefers to include specific taste of the country in the foreign product
c) If the company can enjoy tax benefit in the host country
d) Lower wage rate
e) The productivity is higher internationally
f) Proximity to suppliers and customers
g) Availability of raw materials or natural resources
The circumstances when it is advantageous for a company competing in foreign markets to disperse certain value chain activities across many countries are;
a) Transportation cost may be high
b) When you don’t enjoy economies of scale for large size
c) There are trade barriers which are making the central location expensive
d) To reduce the risk of exchange rate
e) Help in preventing the disruption in supply chain
f) Helps in adopting the local technology
6. What is the essence of the business case for why a company should engage in socially responsible actions and environmentally sustainable business practices?
With the transformation of the business and the industry which has one through a lot of changes recently, organizations today cannot just succeed with doing effective business and generating revenue only, instead they have to effective and socially responsible as well because customers and consumers generally prefer organizations who are responsible socially and believe that as a business organization they have some responsibility towards the environment as well. This provides the organization with a competitive advantage over the competitors as they are doing things differently. If we take the example of Starbucks, we will notice that Starbucks have initiatives towards the society like providing proper drinking water to areas which lack such facilities and this provides a competitive advantage to the organization and make it better everyday.
7. Identify and discuss the purpose and benefits of closely aligning the corporate culture with the requirements for proficient strategy execution?