Business Level Strategy of Strategic Management
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Added on 2020-04-07
Business Level Strategy of Strategic Management
Added on 2020-04-07
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Running Head: Strategic ManagementStrategic Management
Strategic Management 1“Literature review on Business level strategy of strategic management”Appleyard, and Chesbrough (2017) defined management as the action plan for running andconduction managerial activities in a business. It has been stated by many authors that strategiesin an organization are lacking its efficiency due to which the competitive advantage to acompany is not received in the global market. However, to analyze the reason behind the non-performance of competitive advantage, business performance shall also be reviewed. Further, thebusiness level strategies in the strategic management of an organization help the company toperceive uncertainty present in the market, firm's resources, competitive advantage andperformance of the organization (Hill, Jones, and Schilling, 2014). Michael Porter being the first writer to discuss this concept said that strategic discipline can leadto competitive advantage in an organization. Further, an organization's core objective shouldinitiate to provide better level of satisfaction to the customers of the company and this process isinitiated through the use of business level strategies in an organization. They provide detailedaction and form plan with the aid of which the company gains the competitive edge in the targetmarket. The process and initiates exploitation of core competencies of the business so as to makefuller utilization of resources and drive profit for business (Peppard, and Ward 2016). Accordingto the type of organization and their objectives, the organization shall adopt the business levelstrategies which are listed below.Cost leadership is the strategy which mainly focuses on the strategies implemented in anorganization to cut the cost of the product and differentiate it in the market on the basis of theirlow prices. Price of the product is based on the internal productivity on the basis of which profitmargin is decided by the management of the company (Bettis, et. al., 2014). In order to createsustainability in the market, the company needs to implement some strategies which create a
Strategic Management 2differential position of their product in the target market. so, which the use of cost leadershipstrategy the company places such a price of the product which is not offered by any othercompetitor in the market; due to this feature of the business strategy they gain competitiveadvantage in the target market (Jannesson, Nilsson, and Rapp 2016). Under this processstandardized products are offered with lowest prices due to which customers are intensified tobuy the product from the market, this also cuts competition in the market. Some, ways throughwhich the company can apply this strategy in their management is by implementing the complexorganizational system (this will make it difficult for competitors to imitate them), or bymaintaining strict control over the cost of production, or by minimizing the expense on researchand development (Buller, and McEvoy 2016). The porter's forces model better explains the costleadership method in an organization in different circumstances as well. The components of fiveforces are discussed below (appendices 1).Rivalry explains the competitors of the organization, in this type of business strategy companies,do not prefer to initiate price war since with this effect the low-cost firms still get to earn profiteven after the competitors compete away their profits. One such example of this is the airline'sindustry under which firms having low-cost carriers still get to earn profit even after the pricewar. The customers' aspect of Porter's model explains the power of customers who force thefirms to produce goods and services at low profits, due to most of the firm exit from the marketdue to having below average profit (Chen, Delmas, and Lieberman 2015). This result in creatingmonopoly for companies having cost leadership and creating identified place in the market. Incase of suppliers, the cost leader companies get to absorb more price increase even before theyraise the price to the customers (appendices 2). Entry is although open it becomes difficult fornew and emerging companies to sustain their growth in the market by optimizing minimum
Strategic Management 3profits along with low cost. The cost leaders lower their cost of the product so that the customerspresent in the market stay with them only, thus this process initiates less substitution of theproduct (Andersen, and Andersson, 2017).Another mode of business strategy is the differentiation which provides value to customers in themarket initiating product differentiation in the market. This business strategy prefers in creatingproduct differentiation in the market rather than lowering the cost and initiating cost leadership.The value of this strategy is can be created by lowering cost of buyers and raising the buyer'sperformance. Also, differentiation in an organization can be created through creating high-quality product and uniqueness in them, due to which take the high cost for the companies toenter the market. The Porter's five forces model identifies that under this strategy effective differentiators can leadto gain leadership in the market. The companies which sell unique products which differentiatedquality in-build within them can gain market capitalization (appendices 3). In the aspect ofrivalry, there are fewer chances of other competitors to cease the market share, as the productmanufactured by the company is highly specialized in the market. Further, according to Peppard,and Ward (2016) in case of suppliers, it shall be known that as the differentiators enjoy chargingdifferential prices of the product in the market due to which they can tend to absorb higher costs,to which the customers are also willing to pay more for the product. In the entrants' aspect of theporter's model, it becomes hard for the entrants to enter in such market, a loyalty maintained onthe part of customers as once the brand loyalty is maintained it becomes difficult to anothercompany which sells differentiated products.
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