Strategic Management for Competitive Advantage in Business

Classified in Other subjects

Written at on English with a size of 4.09 KB.

1. Definition and Importance of Strategy

  • Definition: Strategy is a firm’s theory on how to gain a competitive advantage by creating value that differentiates them from competitors.
  • Importance for Small Businesses:
    • Enables navigation in competitive markets.
    • Encourages innovation and long-term growth.
    • Helps achieve profitability and economic diversification.
  • Example:
    Eisner's Strategy: Focused on extraordinary entertainment to attract premium-paying customers.

2. Strategic Management Process

The strategic management process is a systematic approach to achieve organizational goals.
Key Steps:

  1. External and Internal Analysis:
    • External: Identify opportunities and threats (e.g., social trends, technology, and demographics).
    • Internal: Assess strengths and weaknesses (e.g., human resources, capabilities).
  2. Strategic Choice:
    • Decide which strategies best align with organizational goals.
  3. Strategy Implementation:
    • Assign roles, create structures, and execute the chosen strategy.
  4. Performance Evaluation:
    • Monitor results and adapt strategies as needed.
  • Example:
    Facebook: Leveraged its resources to create a user-friendly platform, adapting to trends like mobile technology.

3. Competitive Advantage

  • Definition: The ability of a firm to create more economic value than competitors by doing something different or better.
  • Types:
    1. Preference-Based: Customers prefer the product due to quality or uniqueness.
      • Example: Nordstrom's superior customer service.
    2. Cost-Based: Offering goods/services at a lower cost.
      • Example: Walmart's efficient supply chain.
  • Sustainability:
    • Temporary: Competitors eventually imitate or innovate better offerings.
    • Sustainable: Built on hard-to-imitate resources like unique tech or brand reputation.
  • Example:
    Apple: Maintains a preference-based advantage through innovation and strong brand identity.

4. Measurement of Competitive Advantage

Competitive advantage is assessed through two primary methods:

  1. Accounting Measures:
    • Metrics: Return on Assets (ROA), Return on Equity (ROE), Return on Sales (ROS).
    • Comparison: Performance versus industry averages.
  2. Economic Measures:
    • Focus: Long-term returns exceeding the cost of capital.
    • Indicates true value creation.
  • Example:
    Google: Consistently surpasses competitors by innovating in advertising and diversifying revenue streams.

5. Emergent vs. Intended Strategies

  • Intended Strategies: Planned based on systematic analysis and decision-making.
  • Emergent Strategies: Adapted strategies in response to unexpected changes or new information.
  • Example:
    Honda: Initially intended to sell small motorcycles for leisure but pivoted to target commuters in the U.S., creating an emergent strategy.

6. Practical Applications

  • Applying strategic management concepts to small businesses includes:
    • Identifying competitive advantages.
    • Innovating products or services to stand out.
    • Adapting strategies based on market feedback.
  • Case Study:
    Steelcon: Defined specific, measurable objectives aligned with its mission to ensure competitive growth.

Entradas relacionadas: