Business leaders all over the world must develop strategic business plans on running their business at local and international levels given the necessity for operational dynamism of markets structures. There is local market saturation and potential international market that is important for business growth. Most companies that depend on the existing local markets miss out on economic opportunities available abroad and for those businesses currently in the global scene, proper management of business organizations and understanding how culture affect consumer demand have remained a challenge. The process of classifying cultural needs of consumers helps in understanding what commodities are regarded inferior or superior by a given locality, (Sassatelli, 2007) Customers have different tastes and preferences; therefore, product variation will definitely create an opportunity for a business organization. This essay focuses on good strategies that can be employed by firms in a bid to remain relevant given the modern business challenges; for instance, the innovations in Information and Communication Technology (ICT) sector. This will be done by focusing in market theoretical strategies and how effective they are by sampling how IT industry employs their usage.
Information and Computer Industry in UK
The information sector in the UK is today a constituent of the total UK job market. More that half of the UK population has incorporated the use of IT in their job roles. The IT sector is one of the sectors that are influenced by Life Cycle Trends. This can be demonstrated by the past technologies that were used to run the sector; for instance the use of mainframe computers that were as big as the size of building. Today there are developed portable devices with bigger memories than the mainframe computers of the early ages. The IT system life cycle still undergoes significant inventions with the latest being the iPad device that is able to run other computer software. This is the industry where future inventions are bound to bring replacement of systems with other better and more efficient technologies. The use of IT has tremendous influence is the running of business enterprises by increasing the level of competitiveness. This is because it has created opportunities and threats in the business environment as firms become smarter in systems designs, analytical program management, and business process analysis among other IT related activities. IT industry is a very dynamic sector with possibility of driving a 24hours working economy given the nature of job requirements of the sector. The dynamism of the sector calls for constant changes which are brought about by a number of business challenges. All industrial players in the IT sector need to remain relevant to the changing market needs and this makes investment in R&D a major priority.
The main industrial players in the IT sector are computer software and hardware engineering firms which are mainly responsible in scaling up development in the sector. Such firms include IBM, Apple, Microsoft Corporation among other company. In addition, the products they design are further used by almost all business sectors and this has been the driving factor in enhanced business processes. Most employees in the IT sector are male and women seem to have taken a sit back in IT industry as it is stipulated that they only constitute 18% of total employment in the industry. This concept has to be addressed in order to reverse the trend; a role that has been played by significantly by the British Computer Society (BCS). The body achieves its goals by carrying out workshops, career development in learning institutions, and other avenues of networking. The IT industry in UK is really big, “There are just under 900,000 people working in the IT sector in the UK and almost 600,000 working as IT or telecoms professionals in other industries.” This translates to a ratio of 1 to 20 employed workers in the UK’s IT and telecoms sectors,” (AGCAS & Graduate Prospects Ltd, 2008).
Tools, Strategies, and Techniques of Marketing
“Classical school of strategy has evolved a number of sophisticated financial techniques for supporting the strategic decision making process, including break-through analysis,” (Whittington, 2001). There are a number of marketing strategies that can be applied by business leaders in realizing goals of a firm are achieved: SWOT analysis, Porter’s Five Forces design, first and second mover strategies, and strategic window are some of the strategies that can be adopted by business organizations. The aims of employing the use of these strategies are basically to create a competitive edge for a given company by shielding away potential new market entrants and making it hard for competitors to duplicate its products, (Pride and Ferrell, (2008). This move will result to sustainable market dominance as customers will not find better options elsewhere.
Porter’s Five Forces
Porter’s five forces model was created by the renowned business strategist Michael E. Porter. This model identifies five competitive forces that are responsible for influencing business planning. This model is relevant in modern day given the business opportunities created by development of Information and Communication Technology, ICT. ICT development is the main facilitator that has led to rapid globalization and that has brought about new business opportunities. Today’s global connection is speedy, operates on large scale, and has instantaneous effects even in the most remote parts of the world, (United Nations Human Settlements Program, 2004). The five forces are: suppliers’ bargaining power, threat of substitute goods and services, competitors’ rivalry, consumers’ bargaining power, and new entrants in market.
The threat of potential new entrant has been highly motivated by increase use of internet; though, it still remains difficult for a competitor to enter market that requires substantial amount of capital. Customers with considerable bargaining will greatly influence a business strategy. The use of internet enables a customer to carry out price comparison for a product from various outlets before making that informed choice regarding best prices and quality. The number of suppliers that are willing to supply a firm’s manufacturing or retail needs affect suppliers’ bargaining power. In case of supply dominance by more entities, the bargaining power of the supplier(s) will be lower and vice versa. Consequently, if the market situation allows for substitutability of goods and services from another company in the industry, then the management of on given company must find alternative measures to curb the threat. Among the ways of meeting that obligation are through finding new markets, lowering current market price, among other measures that will make the company maintain its market share.
The second important tool for international marketing management strategy is SWOT (strength, weaknesses, opportunities and threats) analysis. This strategy helps business management in comparing organizational strengths and weaknesses within a given industrial environment with the external business opportunities and threats. As a result, managers are able to review the internal and external business environment with the aim of establishing operational activities of a given company in line with the realization of a company’s mission, (European Commission, TRC, 2006). SWOT analysis is an important aspect of restoring the glory of an underperforming business entity back to economic success. A company’s strength is the core to maintaining competitiveness and that is what consumer values. Competitiveness also makes products fabrication by other firms difficult. Value is created by both the producer and consumer according to co-production literature. Leverage is a condition resulting from marching the internal strength against external opportunities, (Belk and Sherry, 2007). Planning managers expect operational constraints when internal weaknesses prevail as it is likely to limit a company’s enjoyed advantages and opportunities. Internal weaknesses are a threat to organizational strengths as they create environmental vulnerability for a firm.
The possible strengths for a performing business include: skilled manpower, high cash flow, company’s trade name and logo, latest equipment installation, lack of competition, own premises, among others. A pool of a skilled manpower cuts the cost of training hence reducing annual rate of overhead, (Thompson and Martin, 2005). A sound financial health implies few debts and increased accessibility to financial services like loans. Own premises reduces expenses incurred as the cost of renting is eliminated. Infrastructural development is an indicator of mass consumption and this depicts availability of market at local and international spheres, (Mooij, 2004). All these cost reduction avenues act as a pull of resources that can be used to adjust to a potential market need; for example, price reduction which will not necessarily affect normal running of the business activities. On the other hand, it is crucial to know a company’s weaknesses in a bid to minimize them in future life of the business. Weaknesses include; unskilled staffs, ineffective machines, poor financial positions, stock imbalance, rented premises, and strange business name among others.
In the year 2008, the world woke up to shocking news of financial crisis that hit all major economic power houses following financial down turns in Wall Street, (Grigora and Salikhov, 2009). The effects of the financial turmoil affected both citizen and companies (locally and internationally). It is reported that IBM; an international company was to consult its UK staff on a possible move to close down its final-salary pension program to cushion the organization from the aftermaths of the financial crisis, (Espiner, 2009). The aim of taking such a measure was instigated by the need to remain competitiveness and command market share; despite, the company posting strong international results for the first quarter of 2009. The report also notes that BT made a proposal that would make their employees retire after 65 year of service. These two scenarios present measures of SWOT analysis as applied in real market situation to maintain market competencies.
IBM fronted the closure of its final-pension salary as a measure of cost reduction; hence, more financial reserves. On the other hand, BT proposed to increase the retirement age of its employees to 65 years so as to reduce the cost of training new staffs. Therefore, it is practical to argue that most international companies can undertake SWOT measures to adjust to environment needs of business; for instance, opportunity created through open borders that make it easy to access overseas market, (Hitt, Ireland, & Hoskisson, 2008)
First and Second Mover Strategies
In the world of business, there are companies that attempt to capture greatest market share by virtue of being the first to enter into the market. They develop long term relationship with the venture of a new product or service under the strategy called first mover, (Dacko, 2008). Being the first to enter the market would mean plunging existing products into the new market or creation of new products via invention. This kind of strategy is risky given that potential competitors can enter the market with newer ideas that capitalize on first mover’s mistakes. Apple is a first entrant with its iTunes online music base and has been able to hold on to market due to its technological invention.
This made the firm generate a total purchase of 1 billion in form of music downloads. It is also noted that Apple led the market with its initial market launch of digital music players; iPod and currently the firm dominate the market (about 50% market share worldwide), (Kurtz, MacKenzie and Snow, 2009). The company has continued to expand with the success of iTunes necessitating its venture into hardware and service sector. This has rendered the efforts by other competitors to enter the market very hard. Contrarily, Apple failed with its first mover idea of Newton handheld computer because other competitors had entered the market with the idea and dominated at the expense of Apple.
Despite the success of Apple via the implementation of first mover strategy, most business enterprises generally exercise the second mover strategy. Under this strategy, companies observe the creation of a first mover then they enter the market improved innovation of the first mover’s inventions. The power of second mover strategy also regarded as “the second fast” by can be illustrated by monitoring the successes of Microsoft, Heinz, Amazon, and JVC among others. The advantages that second movers have are that they are better placed in creating a complete product from the advances of a first mover. Charles Stack made the first sales transacted over the internet with ‘Books.com’ but his follower; Jeff Bezos opened ‘Amazon.com’ later and went ahead to capture and dominate this market. I would therefore recommend this approach for those firms that employ high level of technical skills and capital.
Technological invention is one of the main sources of First Mover Advantage (FMA). Through Research and Development (R&D), a firm can enter the market with a superior demand that at the same time gives potential competitors no immediate strategy, (Reid and Bojanic, 2009). If the invention is patented, product duplicators will be rendered ineffective and dominance of market by a single firm will present it with an advantage comparable to that enjoyed by a monopoly. A good example of FMA is that enjoyed by Apple as discussed above.
Resource-Based Theory and Competitiveness
Resource-based theory, also known as resource-based view has been developed on the ideals of economic rent. This model has been adequately developed through integration of a number of mechanisms that places this strategy way above the rest. The use of Porter’s five forces as a strategy is not effective at some instances especially if an industry is in downturn. Moreover, the strategy is not based on how resources of a company may be used but dwells on the reactive analysis of an industry. Also, the strategy is coined on the basis of enhancing a firm’s competitive advantage and leaves out the threat poised by its market rivals and other driving factors that motivate its operations. On the other hand, the adoption of resource-based theory is effective as it eliminates the shortcomings of Porter’s five forces. Resource-based strategy outlines how a business entity could fit in the external business environment having analyzed its internal competitiveness.
If resource-based model is compared to Input / Output (I/O) strategy, resource-based theory is limited in handling internal assets/resources and capabilities. “Instead of focusing on the accumulation of resources necessary to implement the strategy dictated by conditions and constraints in the external environment (I/O model), the resource-based view suggests that a firm’s unique resources and capabilities provide the basis for a strategy,” (Kotelnikov, 2001). Before a strategy is chosen, a company has to exhaust all its competitive strengths in relation to available opportunities in the external environment.
Sustainable Competitive Advantage
It is vital for business enterprises to have a sustained competitive advantage as it is what defines the long term financial accruals for a firm. Building a sustainable competitive advantage calls for adoption of unique production processes to drive resources and capabilities that are hard to duplicate by potential competitors. Sustainable Competitive Advantage (SCA) aims at developing, improving and maintaining a firm’s competitive advantage in the market for a sustainably longer period. Economic modernity has created hypercompetition as consumers now want quick and cheap goods and services delivery a feat that has been met via e-marketing and e-Bay. These basic requirements in market needs ahs led to paradigm shift in organizational structure built upon corporate capabilities. Capabilities is a term referring to a firm’s strength in utilizing resources most appropriately; for instance, the ability to satisfy market needs faster than other competitors.
Resource-based theory has identified distinctive capabilities as the cornerstone upon which sustainable competitive advantage is built. In the modern world, the new economy knowledge has been identified as the most significant value creation of assets. On the other hand, the determination of economic opportunities of a company is arrived at via the use of two aspects of capabilities; reproducible capabilities and distinctive capabilities. The combinative use of the two kinds results into synergic advantages enjoyed by firms that completely cushion business operations and financial strength against other competitors. Distinctive capabilities include patents, company name and logo, horizontal management, and exclusive license among others.
The second factor that is driven by SCA as a resource-based strategy is leadership/management. The leadership has to give constant motivation to its staffs. Besides, management has to adopt modern leadership models; for example, moving from vertical management/top-to-bottom leadership to horizontal model. Horizontal model is effective as it gives opportunity to junior staffs to make decisions concerning how business activities should be run. Horizontal leadership gives a variety of options in running business operations and these options are bound to reflect the needs of market environment. “Harnessing your abilities to lead through the power of intellect, will, persistence, and vision creates synergies that propel successful companies in the quest for, and achievement of, competitive advantage,” (Kotelnikov, 2001).
Another factor that is driven by SCA as a resource-based strategy is the level of innovation that a company partakes. In the traditional ways of doing business, linear trajectory was used to move from new knowledge to new products. However, modern business concepts call for innovations that are inclusive of a number of interactions necessitated by the above mentioned leadership style. The use of cutting edge technology has help realize the power of innovation in all the production processes leading to creation of superior goods and services.
Resource-based theory also laid a lot of emphasis on the creation of economic rent also known as Economic Value Added (EVA) achieved through analysis of capabilities. EVA is term used to refer to what a firm earns after deducting the cost of capital that is over the total earning. It is used to measure SCA and the level of SCA is the only way firms in a competitive market environment can tap economic rent. The main obligation of a firm in a competitive environment is to make sure the level of economic rent increases rather than the profit. Value of investment is lost if a company indulges in an activity that will not meet the cost of capital; hence Economic Value Addition = Net Profit – cost of capital. Net profit is the value of profit before interest and after taxes is deducted. Capital employed is the value of capital after addition of both equity and debts.
The Design School Model (The Harvard School Model)
This business strategy was coined back in the 1920s in the Harvard Business School and it used to be a course taught in the institution. What this strategy seeks to find is a balance between the market environment and a company as its main obligation. It aims at developing the best market strategy for a given firm through creation of appropriate line policies and redefining the purposes of a business entity. The success of the model; however, depends on the identification and implementation of business plans. That aim is achieved more meaningfully in analyzing the internal strengths and weaknesses; taking into account the role of business leadership against external opportunities and threats and corporate social responsibilities of a business entity.
The model is applicable at the level of strategic business unit and that is its single most important advantage. However, the strategy fails in give definite avenues of developing the same strategies. “The main weaknesses of the Harvard model is that it does not offer specific advice on how to develop strategies, except to note that effective strategies will build on strengths, take advantage of opportunities, and overcome or minimize weaknesses and threats,” (Barnat, 2005). This has necessitated the need to develop the extended design school; a strategy that now involves the use of IT in the operation of business activities that has opened up other avenues for doing business. The phenomenon of extended design school has been inevitable due to the window of opportunities created by globalization of world economy. In addition, the new design seems to give remedies to the weaknesses of the design school.
Weaknesses of Design School
One of the greatest weakness of the design school is that is has fail to adapt in marketing as a strategy for management. It does not use data to base any meaningful argument about the theory; but, depends upon external cases in finding out possible ways of developing a strategy. In other words, the model depends on external factors in assessment of its internal capabilities. In addition to this, the model slightly bends the market environment in favoring its organization and management. Another problem is that the design school is not conscious in factoring in the importance of distinctive application and distinctive time; while these two are the fundamentals of empirically testing a company’s strengths and weaknesses.
The design school seems to encourage dictum that the model should follow a strategy that is determined by the model itself. Analysis of strengths and weaknesses of a business entity is the core of the design school. This may include coining business strategy which is the basic avenue to determination of a company’s capabilities. The structure indeed should be the guiding factor in the determination of a strategy. However, the design school does not have a bigger outlook which is the key to determining strategies. In business, the actions of the past must count for the future operations of a business entity of which structure plays an important role. “Claiming that strategy must take precedence over structure amounts to claiming that strategy must take precedence over the established capabilities of the organization, clearly an untenable proposition,” (Faulkner, 2002). The design school puts a lot of emphasis on development of strategy and the management to act as free as possible and this makes it falter in regard to both the organization structure and the market environment. This is because at times, a structure could be malleable but does not call for any alterations whatsoever even though the management may have in mind a newly conceived idea. Structure should follow strategy in making any managerial decision as they both aid in business organization. Unless they move together, each should precede the other when a firm seeks to move its organization to new heights, (Dyck and Neubert, 2008).
Upon creation of business strategies through informed strengths and weaknesses assessments, design school then calls for the concept of articulation. The school’s thought in regard to articulation points out at unwillingness of strategizing as a result of either political interference or fuzzy thinking. On the other hand, there are a number of other issues to consider when articulating a strategy and these other avenues dwarfs the design school’s ideals. Reason behind articulation is that a definite strategy is the only one that can be tabled to discussion, investigation and finally subjected to debate. Secondly, a definite articulation of strategy is the only way to bringing heads together in working towards realization of a firm’s organizational duties. Lastly, an articulation has to generate a foundation upon which the external environment can support the ideas developed under the strategy. The above given reasons for articulation are good but the there is a concern especially that their conditions assume a predictable and stable environment. The real conditions of the external environment are not always as assumed; predictable and stable, because at times there are uncertainties in the market environment. The management of any given company has to rise to the challenge of shifting environmental conditions through promotions of just changes that will adapt to the new system. It is therefore in order that business organizations run their operations with a strategy that allows for future reformulation. “It is virtually not impossible for a manager to orchestrate all internal decisions, external environmental events, behavioral and power relationships, technical and informational needs, and actions of intelligent opponents so that they come together at a precise moment,” (Faulkner, 2002).
At times it may make sense to articulate strategies because in the future they may be viable. Extra caution has to be taken though, to combat future uncertainties. External factors as implied in articulation act as blinders towards blocking the ultimate company’s missions and goals. Therefore, external factors are impedance to strategic change. In other words, the uncertainties of articulation may make business strategists to be quite sure at present but not in the future, (Proctor, 2000). Business organization should clearly articulate strategies that are bound to become the building blocks to forming a company’s culture and way of operation. “There is, in fact, evidence from the laboratories that of cognitive psychology that the explication of a strategy-even having someone articulate what he or she is about to do anyway-locks it in,” (Faulkner, 2002).
Strategy, business information and analysis call for adequate understanding of consumer culture. All the strategies discussed above require the understanding of the consumer culture before adopting any one of them. It is also significant to note that adoption of a strategy will vary depending on the form of business, available opportunities, and policies that are in place to monitor market environment both locally and internationally. Globalization and information technology has created enormous market and a company with good strategies will eventually carry the day. The concepts of resource-based theory and Harvard School models give further insights of how relevant the adoption of market strategies are to effective and competitive running of business enterprises. It is not possible to single out one strategy as the best in giving a firm competitive advantage; but, a high breed of a number of strategies as long as they adapt to the changing business environment.
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