DIRECTIONS : Please reword this and elaborate more on this discussion from my previous post. This is meant to be an update of a weekly learning. So please Phrase it as a learning subject and reword.
I learned some new and valuable information that expanded my knowledge on strategic management. The new material for this week pertained to the economic drivers of strategy positioning, threats to successful competitive positioning, and the industry life cycle. In regards to the economic drivers of strategy positioning, there are 2 different strategies for business: low-cost and differentiation. Within the drivers of low-cost advantage, there are 5 aspects that are important sources of potential cost advantage. According to Carpenter & Sanders (2008), “a successful low-cost strategy means that a firm is proficient at exploiting some of these drivers” (p. 140). The 5 factors are: economies of scale, diseconomy of scale, minimum efficient scale (MES), learning curve, and economy of scope. Within drivers of differentiation advantages, it involves one or more of the following product offerings: brand image, customization, unique styling, speed, more convenient access, and unusually high quality. The main goal of differentiation is to demand a price sufficient to do two things: 1) recoup the added costs of delivering the value added feature and 2) generate enough to profit to make the strategy worthwhile (Carpenter & Sanders, 2008).
Strategies are a vital component to finding success, however there are threats that occur when a firm is trying to find a successful competitive position in the industry. Under most circumstances, a successful strategic position must meet and satisfy two requirements: 1) It must be based on the firm’s resources and capabilities, and 2) it must achieve some level of consistency with the condition that prevails in the industry (Carpenter & Sanders, 2008). In regards to my learning on threats to successful competitive positioning, there are 4 different areas that firms must look at: low-cost, differentiation, focus, and integrated. Within the low-cost position, firms can face threats on new technology, inferior quality, social, political, and economic risk of outsourcing. In regards to differentiation positions, the threats that firms must look out for are: failing to increase buyers’ willingness to pay higher prices, underestimating costs of differentiation, over fulfilling buyers’ needs, and lower-cost imitation. . “A firm relying on a focus strategy may lose its advantage by attempting to grow and consequently attempt to meet the needs of too many customers. If that happens, a competitor or new entrant may then more successfully target the needs of the original focused group of customers” (Carpenter & Sanders, 2008, p. 150-151). ). Firms that try both to differentiate and to achieve a low-cost position will end up straddling two inconsistent positions. Although firms have succeeded in pursuing integrated strategies, it is still important for mangers to fully understand and know the tradeoffs they make when they opt for one position over the other.
The last aspect of my learning curve this week was on the industry life cycle. Conditions at different phases of an industry life cycle provide differential opportunities and constraints. There are 4 different stages of the industry life cycle: embryonic, growth, mature, and decline. In the embryonic phase it’s all about establishing a strong foundation of information for the customer. Within the growth stage, firms can increase their market share by taking advantage of footholds that were established early in the embryonic stage. The new technologies and changing industry competitive structure are the two main threats within the growth stage. As a firm, it is vital to make decisions about how the firm intends to grow. They determine the strategic vehicles that they’ll use to implement their preferred strategies (Carpenter & Sanders, 2008). ). In the maturity stage, products become more familiar to the customer. Product information is available for the customer to see, so that is why it’s important to have the right quality and services for the consumer. A mature market will increase the ability for firms to reap premium prices from differentiation stages. In regards to the decline stage, price competition can be intense, so containing costs is vital and firms with low-cost positions have an advantage. It is during this stage that firms need to consider the strategy of exiting the industry. According to Carpenter & Sanders (2008), exiting means “selling the company or certain divisions to competing firms” (p. 153). Although exiting signifies failure, it can be the best use of shareholders’ resources.
Carpenter, M., Sanders, Wm. (2008). Strategic Management: A Dynamic Perspective. Upper Saddle River, N.J: Prentice Hall.