Strategic Management 1 Part A Porter’s Generic Strategies Porter generic strategies define how a company pursues competitive advantage across its target market. There are three strategies that are given under this framework that includes cost leadership strategy, differentiation strategy and focus strategy.A company use one of these strategies for getting competitive advantage that includes getting advantage via lowering the costs, or by differentiating valued by customers to command a higher price (Cavaleri and Shabana,2018). Cost leadership strategy: This strategy focus on the cost concern of products, this include lowering cost of products in comparison to other competitors. The competitive advantage with this strategy can be achieved by offering the lowest prices to the target customers.The companies can lower its cost by focusing on controlling the indirect and direct operating costs and on the other side control over value chain helps in reducing the cost of production with that companies gain competitive advantage (Johnson,2016). Differentiation strategy:This strategy includes differentiation of services and products in a way that help in to create a unique value proposition this leads to a competitive advantage. This strategy is used by companies whose target markets are not price concern and appreciate innovation and premium products. This strategy is mainly used by big organizations in order to compete in the market (Viltard,2017).
Strategic Management 2 Focus Strategy:This strategy includes both cost differentiation and product differentiation strategy. The focus strategy includes targeting small group or niched target market with its cost strategy or differentiation strategy. This strategy is suitable for organizations that operate and have narrow market segments. Source: (Cavaleri and Shabana, 2018) Strategy Clock The Bowman’s strategy clock was introduced by David and Bowman, the main focus of this model is to make company aware about the level of competition in the market as compared to their competitors. According to Bowman, “the factor of competitive advantage is then the factor of cost advantage” and impact the strategic positioning of the company and position of the product in the market.
Strategic Management 3 Source: (Desai,2019). This model is based on the aspect of position of products of the company in the market on the basis of two dimensions that are perceived value of products and price of products of services. This modelhighlights eight strategies that the company can adopt in order to gain competitive advantage.These strategies are divided into four quadrants, as the company can choose the current position from the strategy model and on the basis can develop competitive advantage as compare to their competitors. The key strategies that are highlighted in this model are low price, differentiation, monopoly pricing and focus differentiation.The above diagram illustrates that if the company has high price and high perceived value of products and services it opts focus differentiation strategy. Differences and Evaluation Generic strategies model is applicable to narrow market but strategy clock model is the extension of generic strategies model and applicable to the big organization and broader target market. On
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Strategic Management 4 the other side, the concept of generic strategies is based on two aspects that are cost and differentiation but strategy clock model includes two other aspects that are price and perceived value. Due to that the reliability is more on strategy clock model as it gives overview on both that means cost and differentiation with that pressure on perceive valued (Echchakoui,2018). On the other side, purpose of both the model is to help the companies to understand their competitive advantage and position in the market. Base on two dimensions that are cost or price and differentiation the company gets to know its current position and can choose better strategies for strengthen and make this competitive advantage sustainable (Desai,2019).Hence, both the models have differences but are based on the same concept and aspects that are cost and differentiation. Hence, the extended model of strategy clock is based on the generic strategies but include broader concept and main focus on perceived value. Part B Strategy Clock Model by IKEA From considering strategy clock model for IKEA, the company is using hybrid strategy. Hybrid strategy includes both cost leadership strategy and differentiation strategy.Hybrid strategy focuses on low cost of products and high perceived value. IKEA positioned itself in the market as the company that sell high value products at the low cost (Baroto et.al,2012). This strategy helps the company to gain competitive advantage and to compete in the market because it is difficult to imitate IKEA low cost model by other competitors with that the company established a strong customer base that five first mover advantage to IKEA as compared to itscompetitors in the market (Rexhepi and Srhoj,2018).
Strategic Management 5 The company is successfully able to gain aggressive market share in the UK with the help of its hybrid strategy that includes providing products to customers at low cost than other competitors in the market. Further, differentiation of products help the company to provide high value products to its customers and this set the strong image of brand in the mind of customers. With that the company is able to build and sustain its competitive advantage that helps IKEA to remain in the competition with other players in the market (Ou and Su,2017). This strategy help IKEA to be profitable in the industry because of its low cost strategy and with that the company is able to retain its quality that help the company to attract more customers and leads to broader target market (Bilsland and Cumbers,2018). This resultant in increasing sales of the company as compare to other players in the market.The most important advantages that the company can gain from this strategy includes strong customer base, customer loyalty, and economies of scale. Hence, IKEA is using hybrid strategy effectively and gaining advantage from it for longer run that helps the company to gain competitive advantage for longer run. Recommendations It is recommended that IKEA can maintain its hybrid strategy by focusing on innovative technology and ensuring strong managerial control. The company can improve its market share by focusing on product differentiation for that the company should invest huge amount on innovation and research and development. With that the company can sustain its competitive advantage for longer run.This strategy is suitable because of increasing competition from international players; the only way to compete with these international players is in term of quality and innovation.Hence, focus on innovation and quality helps IKEA to compete in the market with other players and to sustain its competitive advantage.
Strategic Management 6 References Baroto, M.B., Abdullah, M.M.B. and Wan, H.L., 2012. Hybrid strategy: A new strategy for competitive advantage.International Journal of Business and Management,7(20), p.120. Bilsland, K. and Cumbers, A., 2018. Managerial control and the limits to employee participation inretailworkspaces:evidencefromaUKIKEAstore.NewTechnology,Workand Employment,33(2), pp.130-148. Cavaleri, S. and Shabana, K., 2018. Rethinking sustainability strategies.Journal of Strategy and Management. Desai, C. (2019). Strategy and Strategic Management'.Management for Scientists. Emerald Publishing Limited, 65-84. Echchakoui, S., 2018. An analytical model that links customer-perceived value and competitive strategies.Journal of Marketing Analytics,6(4), pp.138-149. Johnson, G., 2016.Exploring strategy: text and cases. Pearson Education. Ou, S.H. and Su, H.T., 2017. Hybrid business model innovation: the cross-boundary mechanism for over-the-top organizations.Management Review,36(4), pp.1-15. Rexhepi, G. and Srhoj, S., 2018. Strategy as an ever evolving road to success of growing enterprises.WorldReviewofEntrepreneurship,ManagementandSustainable Development,14(3), pp.333-347. Viltard, L.A., 2017. Strategic mistakes (AVOIDABLE): the topicality of Michel Porter’s generic strategies.Independent Journal of Management & Production,8(2), pp.474-497.