While there’s merit in evaluating the strategy from a qualitative standpoint (its completeness, internal consistency, rationale, and relevance), the best quantitative evidence of how well a company’s strategy is working comes from its result. The stronger a company’s current overall performance, the less likely the need for radical changes in strategy. The weaker a company’s financial performance and market standing, the more its current strategy must be questioned. Organizations succeed in a competitive marketplace over the long run because they can do certain things their customers value better than their competitors e. offering better quality products with cheaper prices. First we must understand what is the current strategy the company is implementing now; 1. A low-cost leader strategy: striving to be the overall low-cost provider of a product or service that appeals to a broad range of customers ie;focus on being the lowest cost provider e. g Lidyl, and tal- Lira. 2.
A broad differentiation strategy: seeking to differentiate the company’s product offerings from rivals’ in ways that will appeal to a broad range of buyers i. they want to differentiate from their rivals ie by offering something different eg, Apple and Rolex as a prestige brand, Dr. Pepper with a different taste, Wal-Mart with value and more for your money. 3. A best-cost provider strategy: giving customers more value for the money by emphasizing both low cost and upscale difference, the goal being to keep costs and prices lower than those of other providers of comparable quality and features (a couple of examples are the Honda and Toyota car companies with customer satisfaction ratings that rival those of much more expensive cars). . A focused, or market-niche, strategy based on lower cost: concentrating on a narrow buyer segment and outcompeting rivals on the basis of lower cost (The Gap is a good example).
A focused, or market-niche, strategy based on differentiation: offering niche members a product or service customized to their tastes and requirements [examples are Rolls-Royce (sells limited number of high-end, custom-built cars) and men’s big and tall shops (sell mainstream styles to a limited market with specific requirements) i. they aim to focus on a particular target market eg constructions at madliena targeting high class people, or do they try to be the best cost provider ie providing value for money products. Approaches to assessing how well the present strategy is working Qualitative assessement – Is the strategy well conceived, is it well thought ie The strategy should be consistent with the vision and mission of the company, it should be in line with the current market trends.
Quantitative assessement – It is the measure of return on total investment, Is the strategy being implemented resulting in higher profits for the company? This means that a good strategy should result in an above industry performance. Key Indicators of How Well the Strategy is Working See the trend in sales/market share Acquiring/retaining new customers Detecting how well is your image and reputation and overall financial strenghth Question 2. What Are the Company’s Resource Strength and Weaknesses and Its External Opportunities and Threats?
SWOT analysis provides a good overview of whether the company’s overall situation is fundamentally healthy or unhealthy. A first-rate SWOT analysis provides the basis for crafting a strategy that capitalizes on the company’s resources, aims squarely at capturing the company’s best opportunities, and defends against the threats to its wll-being. A resource strengths is something a company is good at doing or an attribute that enhances its competitiveness in the marketplace.
Resource strengths can take any of these forms: a skill-an area of specialized expertise, or a competitively important capability, valuable physical assets, valuable human assets and intellectual capital, valuable organizational assets, valuable intangible assets, an achievement or attribute that puts the company in a position of market advantage. A competence(abilta li jaghmlu xi haga ahjar minn kumpaniji ohra) is an activity that a company has learned to perform well. It is nearly always the product of experience, representing an accumulation of learning and the buildup of proficiency in performing an internal activity.
A core competence is a competitively important activity that a company performs better than other internal activities. A distinctive competence is a competitively important activity that a company perfoms better than its rivals – it thus represents a competitively superior resource strength. The competitive power of a resource strength is measured by these four tests: is the resource really competitively valuable? Is the resource strength rare? Is the resource strength hard to copy? Can the resource strength be trumped by substitute resource strengths and competitive capabilities?
Competitively valuable resource strengths and competencies call for the use of a resource based strategy. Core concept of Resource-based strategy is that it uses a company’s valuable resources strengths and competitive capabilities to deliver value to customers in ways rivals find it difficult to match, advised to pass on a particular industry opportunity unless the company has or can acquire the resources to capture it. It is management’s job to identify the threats to the company’s prospects and to evaluate what strategic actions can be taken to neutralize or lessen their impact.
SWOT analysis are drawing conslusions from the SWOT listings about the company’s overall situation, and translating these conslusions into strategic actions to better match the company’s strategy to its resource strengths and market opportunities, to correct the important weaknesses, and to defend against external threats. The final piece of SWOT analysis is to translate the diagnosis of the company’s situation into actions for improving the company’s strategy and business prospects. What are the company’s resource strengths and weaknesses, and its external opportunities and threats?
A SWOT analysis provides an overview of a firm’s situation and is an essential component of crafting a strategy tightly matched to the company’s situation. The two most important parts of SWOT analysis are (1) drawing conclusions about what story the compilation of strengths, weaknesses, opportunities, and threats tells about the company’s overall situation, and (2) acting on those conclusions to better match the company’s strategy, to its resource strengths and market opportunities, to correct the important weaknesses, and to defend against external threats.
A company’s resource strengths, competencies, and competitive capabilities are strategically relevant because they are the most logical and appealing building blocks for strategy; resource weaknesses are important because they may represent vulnerabilities that need correction. External opportunities and threats come into play because a good strategy necessarily aims at capturing a company’s most attractive opportunities and at defending against threats to its well-being.
A strength is something a firm does well that enhances its competitiveness eg alliancing. Company Competencies and Capabilities Competencies are assumed to be the company’s valuable resources Competency – A competency is anything a business does well. A business may have numerous competencies. For example a manufacturing company might be extremely successful in keeping its number of defects per thousand units produced extremely low. The Companies Competencies and Capabilities stem from skills, expertise, and experience (esperjenza li kibbret maz-zmien usually representing an accumulation of learning over time and gradual buildup of real proficiency in performing an activity. i. e il-kumpetenza ta kumpanija tigi through the buildup of performing the activity ghax taghmel l-istess attivita kontinwament u l-esperjenzi li jkollha matul l-operations taghha) Core Competency – A core competency is a competency of the business that is essential to its overall performance and success.
If this company held itself out to the market as a reliable manufacturer of quality products, this could easily be a core competency, because the ability to consistently provide quality products is a key to its business model. (Core competence tfisser l kompetenza ta xi kumpanija li hija centrali ghall-kumpanija, fejn permezz ta din ilkompetenza se tikkumbatti tajjeb lil competitors l ohra u se tiddistingwixxi ruhha minn ma kumpaniji ohrajn. Importanti li din il kompetenza tkun giet through l-esperjenza tal haddiema eg.
Jien immur ghand Toni & Guy ghax jogghobni il-way kif jaqta’ x-xaghar, immure ghand dak ir-restaurant ghax jaghmel ricetti tajbin tal-hut, expertise in integrating multiple technologies to create new products. ) Distinctive Competency eg Toyota (low cost high quality manufacturing of motor vehicles and Starbucks – innovative coffee drinks and store ambience A distinctive competency is any competency that distinguishes a company from its competitors.
A distinctive competency is typically a core competency that truly distinguishes a company from the rest of the competition. For example, one of Google’s distinctive competencies is its name recognition and status as the most famous search engine. This competency is hard for competitors to imitate and sets Google apart from the rest of the market (Distinctive competence of a firm refers to a set of activities or capabilities that a company is able to perform better than its competitors and which gives it an advantage over them.
Distinctive competence can lie in different area such as technology, marketing. They provide sustainable competitive advantage because these are hard to copy. ) Identifying Resource Weaknesses and Competitve Deficiencies After identifying the Company’s strengths we will now identify the company’s weaknesses. * A weakness is something a firm lacks, does poorly, or a condition placing it at a disadvantage. Resource weaknesses relate to Inferior skills, expertise. * Missing capabilities in key areas Identifying a Company’s Market Opportunities.
Opportunities most relevant to a company are those offering enticing prospects which reflect financial growth, is a good resource to outcompete your rivals, good match with its financial and organizational resource capabilities jigifiri li l-opportunitajiet ikunu addatati ghall-kumpanija e,g taghraf li tista tidhol ghall xi sistema gdida eg xetra trading system fejn tista ggib new listings. Identofying External Threats Some possibilities are that other competitors will * Emerg cheaper/better technologies * Introduce better products * Entry of lower-cost foreign competitors * Onerous regulations Rise in interest rates * Unfavorable demographic shifts changes fit-tastes tan nies * Adverse shifts in foreign exchange rates * Political turmoil and/or burdensome government policies Question 3 : Are the Company’s Prices and Costs Competitive The intent of a company is to do things that ultimately create value for buyers. Assessing whether a firm’s costs are competitive with those of rivals is a crucial part of company situation analysis. One can assess whether a firm’s costs are competitive through 2 Key analytical tools: * Value chain analysis * Benchmarking
Value Chain Analysis describes the activities that take place in a business and relates them to an analysis of the competitive strength of the business. * The value chain (A value chain is a chain of activities that a firm operating in a specific industry performs in order to deliver something valuable (product or service), Value Chain Analysis is one way of identifying which activities are best undertaken by a business and which are best provided by others (“out sourced”). It contains two types of activities: * Primary activities – those that are directly concerned with creating and elivering a product.