STRENGTHENING A COMPANY'S COMPETITIVE POSITION: STRATEGIC MOVES, TIMING, AND SCOPE OF OPERATIONS

Alhamdulillah, this is the sixth lecture for Strategic Management subject. This week Miss Ummi taught us about how to strengthening a company's competitive position. This chapter discussed about which strategy that good time to implement and also what scope that best to use. To maximizing the power of particular strategy, there are three choices that complement a competitive approach which is:

1. Offensive and defensive competitive actions
2. Competitive dynamics an the timing of strategic moves
3. Scope of operations along the industry's value chain

 Offensive competitive strategy is one of the corporate strategy consisting of attempting to pursue changes within its industry. The companies involved in offensive competitive strategies typically invest in technology and research & development R&D in hopes of staying head of their competition. Companies also use this type of strategy when acquire other companies. Strategic offensive principals focus on building a competitive advantage and later convert the advantage to form a sustainable advantage. Sometimes a company's best strategic is to seize the initiative, go on the attack, and launch a strategic offensive to improve its market position.

Before start the offensive competitive action, the company need to make sure that at the time of attack, the competitor is in their weak state. The company also need to attack the competitor weakness not their strength, because if they attack the strength, then it is a waste action, it will not effect anything.

There are several options to act in offensive strategy which is:

• offer a good or better product at a lower cost to attack competitor
• make use the research and development to make a new innovation on the company product
• observe others firm improvement and adopt or adapt the good improvement

A blue-ocean strategy also an offensive competitive action that offers growth in revenues and profits by discovering or inventing new industry segments that create altogether new demand. A term coined from the 2005 book, The Blue Ocean Strategy, by W. Chan Kim and Renee Mauborgne that describes the opportunities of vast untapped market spaces, or "Blue Oceans", that can be developed by expanding market boundaries or launching new industries.

Defensive competitive action define as a management approach designed to reduce the risk of loss. For example, even a relative aggressive business might employ a defensive strategy when it comes to investing its extra liquid funds in certificates of deposit or relatively stable bonds and stocks. The purpose of defensive competitive action is:

• lower the firm's risk of being attacked
• weaken the impact of an attack that does occur
• influence challengers to aim their efforts at other rivals

Horizontal scope define as growth of a company based on expanding existing methods of business including expansion into other locations, addition of more stores, building more outlets for distributions, or enlarging a territory geographically. On the other hand, vertical scope means a merge of companies at different stage of production and/or distribution in the same industry. When a company acquires its input supplier it is called backward integration. When it acquires companies in its distribution chain it is called forward integration. Fro example, a vertically integrated oil company may end up owning oilfields, refineries, tankers, trucks, and gas (petrol) filling stations. Also called vertical merger.

THE FIVE GENERIC COMPETITIVE STRATEGIES: WHICH ONE TO EMPLOY?

Miss Ummi started the lecture by asking the student who ever get on a plane or travel by plane before. She ask about which airlines that give an affordable ticket price. In my opinion and also my other members in the lecture hall agree that Air Asia provided the lowest airline ticket price. So, what does this airlines story related to our lecture? Actually it really related because Miss Ummi would like to introduce us with competitive strategies company use to compete with other rivals. 

Competitive strategy means an action plan that is devised to help a company gain a competitive advantage over its rival. This type of strategy is often use in advertising campaigns by somehow discrediting the competition's product or service. Competitive strategies are essential to companies competing in markets that are heavily saturated with alternatives for consumers.

There is five generic competitive strategies which is:

1. Low-cost provider
2. Broad differentiation
3. Best-cost provider
4. Focused low cost provider
5. Focused differentiation

Lower-cost provider means a pricing strategy in which a company offers a relatively low price to stimulate demand and gain market share. It is one of the high demand strategy used by many companies. It is usually employed where the product has few or no competitive advantage or where economies of scale are achievable with higher production volumes. Also called low price strategy. Example of company that use this strategy is Air Asia, Mydin, KFC, MCD.

Broad differentiation means a product that offer a unique product attributes that a wide range of buyers find appealing and worth paying for. A unique product will make the costumer happy to use it and they will repurchase it again. A unique product means that the product should have a value that there is no other rivals have. The value or element that only your company have. Example of company that use this strategy is Louis Vuitton, Apple, Sony, Rolex, Rado.

Best cos provider means a hybrid of low-cost provider and differentiation strategies that aim at providing desired quality/features/performance/services attributes while beating rivals on price. Best cost provider combine the low-cost provider which provided a product with a little or low cost and differentiation which provided a unique attributes product.

Focused low cost provider means a strategy that only focused fully to low cost operations or activities. This strategy did not put much effort on the rivals, it only pay full attention to the market niche or market segmentation. It just concentrating on a narrow buyer segment.

Focused differentiation means the strategy only concentrating on a narrow buyer segment and outcompeting rivals by offering niche members customized attributes that meet their tastes and requirements better than rival's product.

EVALUATING COMPANY'S RESOURCES, CAPABILITIEAS, AND COMPETITIVENESS

           In this chapter we learn about company resources, capabilities, and competitiveness. This three element is very important for every company because this element is a main thing to have before we can start our business. Before we proceed to the main discussion, let me give the definition of resources, capabilities and competitiveness. 

          Resource means an economic or productive factor required to accomplish an activity, or as means to undertake an enterprise and achieve desired outcome. Three most basic resources are land, labor and capital. Other resources include energy. entrepreneurship, information, expertise, management and time. Capability means a measure of the ability of an entity (department, organization, person, system) to achieve its objectives, specially in relation to its overall mission. last but not least, competitive means good, service, or offer that can hold its own against competing product because its offer an attractive value for money proposition to its buyer. This three element need to be evaluate so that we can form a good and excellent business strategy. Starting a business by evaluating the firm's internal situation which include resources, capabilities and competitiveness as stated below:

1. How well is the firm's present strategy working?
2. What are the firm's competitively important resources and capabilities?
3. Is the firm able to take advantage of market opportunities and overcome external threats to its external well-being?
4. Are the firm's prices and cost competitive with those of key rivals, and does it have appealing customer value proposition?
5. Is the firm competitively stronger or weaker than key rivals?
6. What strategic issues and problems merit front burner managerial attention?

A success strategy comes from an excellent planning. How do we find out that our planning is success? there are specific indicators of strategic success which is growth in firm's sales and market share, increasing profit margins, net profits, ROI, growing financial strength and credit rating and many more.

In this chapter also we learnt about SWOT analysis which is powerful tool for sizing up a firm's. SWOT analysis stand for Strength Weakness Opportunity and Threats. Strengths and weaknesses analyze the internal factor of the company, for the external factor we analyze the threats that occur. An opportunities come from the business market.

Beside SWOT analysis, Miss Ummi also taught us about value chain. This is another way to analyze the company strategic management but in terms of internal activities happened. Value chain analysis examine the value chain of an enterprise to ascertain how much and at which stage value is added to its goods and/or services, and how it can be increased to enhance the product differentiation (competitive advantage).

Company Value Chain

Beside SWOT and value chain analysis, benchmarking also tools that we can use to evaluate the internal activities of company. Benchmarking is a measurement of the quality of an organization's policies, products, programs, strategies and their comparison with standard measurement or similar measurement of its peers. The objectives of benchmarking are:

1. to determine what and where the improvement
2. to analyze how other organizations achieve their high performance levels
3. to use this information to improve performance.