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Chapter 3 : Business Strategy and Competitive Advantage

Organizational Change

   Business Strategy
   Organizational Restructuring

Competitive Advantage

   Obtaining Competitive Advantage
   Analysis of Competitive Position
   Developing a Sustainable Competitive Advantage
   Market Entry Barriers

Business Strategy

   Corporate Mission
   Core Competence
   Corporate Development Alternatives
   Composition of a Business
   Strategy Analysis and Choice
   Strategic Analysis in an SBU

Chapter Summary

Structure and strategy are inter-dependent. Once the marketing strategies and plans are formulated, the top management has to focus on developing a supportive organizational structure. A business strategy is the action plan for achieving the objective of the business. However, globalization has resulted in increased competition and has thrown open many markets. While this has led to increased opportunities, it has also resulted in immense competition. The global market environment requires an organizational structure, which is unlike the traditional hierarchical structure that has many layers and redundant positions. The new organizational structure should focus on the requirements of the customer and the changes in the market environment. The structure of the organization should be in harmony with the business strategy. While restructuring an organization, the top management must focus on disaggregation, internal restructuring, and the forming of networks.

Competitive advantage helps a business to gain market share and profitability. A business can gain a competitive advantage by providing superior value or lowering the relative costs.

The components for obtaining competitive advantage are bases of competitive advantage, the advantageous position, and the results. The bases of competitive advantage are enhanced resources, improved skills, and better controls. The advantageous position can be attained by providing superior value to the customers or by lowering costs. The results of competitive advantage are generally measured in terms of profitability or market share. The competitive position of a company can be measured using competitor-centered methods or customer-centered methods. Rather than depend too much on either of these methods, a business should make use of both, depending on the situation. After achieving a competitive advantage, a business must make efforts to sustain it. The company should develop advantages that cannot be easily imitated. Competitive advantage can be sustained in three major areas namely, size in the target market, accessibility, and the market entry barriers.

The strategy should define the mission statement, core competence, and the corporate objectives. The mission statement should define the purpose of the business and what business one is in. It should be different from the mission statement of the competitors and should also provide a competitive advantage. The core competence is the one thing that a company can do better than others. The competitive advantage of a company is built around one of its core competencies. Core competence is the root of competitive advantage. The process of obtaining core competence involves defining the needs of the customer, preparing a plan for the product, developing a prototype, manufacturing, distributing/selling and providing after-sales service. The corporate objectives act as a yardstick to measure the performance of a business. These objectives can be in terms of gaining market share, making profits, etc. A company can plan to expand its business either by introducing new products in existing markets or existing products in new markets or by diversifying. It is easier for a company to formulate a business strategy if the composition of a business is well defined. A company can be divided into business units based on the industry in which it operates. However, the business units work together to achieve the strategic vision of the company.

The strategic choices play a vital role in the performance of a business. The generic strategies formulated by Herbert and Deresky will help a business in making strategic choices. These generic strategies include the develop strategy, the stabilize strategy, the turnaround strategy, and the harvest strategy. The capabilities approach and the comparative advantage theory also help a business in making strategic choices.

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