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  • Subject area(s): Marketing
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  • Published on: 14th September 2019
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...Chapter 2

Literature Review

'Sound strategy start with having the right goals' Michael Porters.

Introduction

In this chapter theory surrounding the term strategy that is a very complex term. This chapter will describe as all the theories about the competitive strategy that are used in organizations. Strategy is a word very often used in different field such as politics, the military, sports, fashion, and business so on. (a re faire apre)

Definition of Strategy

There are different authors that had defined the word strategy in different field; B.H Liddell Hart define the military strategy as 'the art of distributing and applying military means to fulfil the end of policy'.

In the business world there are also several authors have defined the term strategy, Johnson and Scholes had said that 'strategy is the direction and the scope of an organisation over the long term: which achieves advantages for the organisation through its configuration of resources within challenging environment, to meet the needs of market and to fulfil stakeholder expectation.'

A famous historian economy in the person of Alfred Chandler (1962) has defined the term strategy as 'the determination of the basic long term goal of an enterprise, and the adoption of courses of action and the allocation of resources necessary to carry out these goals.'

Among the other authors who defined the word strategy there also Koonts and O'Donnells who said that 'strategy is a decision about how to use available resources to secure a major objective in the face of possible obstruction' such as competitors, public opinion, legal status, taboo and similar forces.'

Corporate Strategy

Kenneth Andrews has defined corporate strategy as 'the pattern of decision in a company that determine and reveals its objectives, purposes or goal, produces the principal policies and pans for achieving those goals, and defines the range of business the company is to pursue, the kind of economic and human organisation it is or intends to be, and the nature of the economic and non-economic contribution it intends to make its shareholders, employees, customer and communities.'

CORPORATE PLANNING

According to Fayol to make a proper corporate planning, the planning must have an objective and be must guide by specific guidelines. The different steps are linked together to make a good corporate planning. There are several different methods and techniques method that can be used to simplify the planning. Planning for short term is much easier to do than to schedule long term.

Corporate planning is essentially developed on top of the management in the organisation.  The corporate planning is something short, without much detail, it is also used in the longer term that the operational plan. Corporate planning must be also more flexible in order to make change in the environment of the organisation at any time.

 It is important to analyse the factors affecting the extern environment, such as the extended market and the next change in the market, and the current analysis of the behaviour and potential customers to find out their current applications and future. It is also important to examine the strengths and weaknesses of competitors. We must also take into account the efficiency of the distribution system.

ENVIRONMENTAL ANALYSIS

Analysis of external factors that can had an effect on the well going of an organisation and growth strategies. Organisation had to identify these factors and try to anticipate them even if managers cannot control them.

There are different types of environments, the first is the simple/ static environment there is no change in this environment thus it is not difficult to analyse. The dynamic environment is other types of environment, where there are frequent changes which affect the organisation, to analyse this environment managers must use the 'scenario building' that is they focus more on the future than in the past. Finally there is the complex environment; this is the environment in which we do business now, where thanks to technology the world of business is globalising.

Tom peters said that organisation must cope with this increasing uncertainty in their environment and he emphasises the need for flexibility as organisation set out to cope with their environments.

To put a strategy in place should the organization makes auditing and forecasts the environment. The audit allows the managers to take decision in the short and mid-term. A forecast allows the manager to anticipate future problems and find a solution so that they can take action on time. The forecasts can be done at different levels at the international, national, industrial or segments each product has a specific forecasts.

All companies shall protect them against concurrent, that's why the organization often must analyses the environment in which they operate and the keys indicators. It is also very important for the organization to know the strategies used by the concurrent; to know which position is their company, managers must consider the position of their concurrent.  

For Porters 'the competitor analysis is the analysis of who the competition is, and how they perform, what strategies they are using and how successful these are.' and this concern analysis both the potential concurrent and the current concurrent.  Porter argues that we can also analyse the competitiveness in a market using Porter's five forces and Strategic Group Model Analysis.

How to carry out Competitor Analysis

After identifying our competitor, we must now analyse the strategy he uses, and for this we must know what is waiting in the future and the objective they want to achieve in terms of profit, product quality, price and the quality of customer service.... We must also know what type of customers are their marketing strategy, as well as their strengths and weakness.

By analysis of any such information, managers can better understand the strategy of the competitors and will deals with them in the future.

Competitors ' Based Strategies

Internal and external factors which can influence the organisation strategy.

External Factors Internal factors

' Types of competitor on the market and existing product already available on the market.

' Political, economic, social and technological pressures.

' Buyer needs and wants.

' The stability of the environment in which the organisation operates.

' Corporate objectives.

' Resources available.

' The expectation of the shareholders.

' The size and the power of the organisation on the market.

' Whether the management is aggressive or not.

To know which strategy an organisation uses, you must first know in which category it is. Companies can be classified into four different categories.

I. Leaders

This type of company is those that innovate by bringing new product, service or technology, they are the first to offer a product type. It is the most powerful organization with a wider market and more resource. These companies need to develop strategies to protect their market, to encourage existing customers to increase their demands, attract new customers and introduce new products on new markets.

II. Followers

Organisations tend to copy the leaders. They never have the majority of the market and not expenditure of money on research as they benefit from the search made by the leaders. The error that was committed by the leaders of the benefits they derive. They often refers to the "me too" market.

III. Challengers

They want to take the place of the market leader. They refuse prices, improve the quality of customer services, distribute more and more. Such competition is more frequent between the supermarkets.

IV. Niche Marketer

They are often referred to as unique service proposition. They do not have a very large market but can be very profitable.

Often organisations can change the category when the environment in which they are evolved. So the organisation often must attack the market leader or defend themselves from followers.

Strategies used by market

There are two type of strategy:

i. Attack Strategy consists of several strategies that allow the organisation to attack competitors, such as, direct challenge (differential advantage) which is defined as a very risky strategy, which costs very expensive and this is especially the market leader that uses it. Another strategy that is part of this category is the direct attack (distinctive Competence) this strategy is designed to dethrone the leader by placing on the market a new product. Attack strategy also consists of flank attack, by pass strategy or guerrilla that allows small organizations to attack big Competitors in areas where they will be slower to defend themselves and this allows the small organization to take advantage of market.

ii. Defence Strategy allows the organization to defend against the attacks of their competitors. One of the first strategy is that the defence strategy is the defence position that has consist still has the same position by continuing to Produce more and more innovative products. Another defence strategy is the pre-emptive defence which aims to attack the concurrent, it is a means of defence which function very well, and there are many companies that use this type of defence. There is not that these two strategies constitutes a strategy of defence, there are other strategy such as counter- offensive which has the objective to protect the market share by responding to attacks by competitors; mobile defence is a strategy which has strategist that the organization continues to innovate, diversify and bring them on new markets.

For any company it is difficult to make the decision of what strategy they will use to defend themselves from their competitors and for attack because of the time error can cause huge losses.

Strategic Group Analysis

To better determine which organisation is the direct competitor a strategic group analysis is a better method. This analysis is made to analyse the organisations that have the same characteristic strategy.  Porter has argued that these groups can be identified by considering just two or three sets of key characteristics and Porter suggests some characteristics:

' Diversity of product and service offered

' Quality of product and service

' Technological leadership

' Pricing policy

' Organisation size, etc.'

Competitive Advantage

There are two level strategies company wide and competitive strategy.

A competitive strategy aims to increase the number of customers compared to competitor. The competitive strategy aims to provide a competitive advantage in an organization. Another is the bear's models of generic competitive strategies.

INTERPRETING ENVIRONMENTAL ANALYSIS

The organizational environment changes over time and sometimes it's beneficial for the company but for its time turns into a nightmare, and the organization has no alternative but to rethink their strategy.  The changes in the market can be expected, which will change the strategy to be able to take maximum advantage of the changes.

When the change happens suddenly organisation has no choice to try to survive.

PESTL Analysis

An organization can be influenced by several factors that cannot be controlling. The organisation can control some parties of the environment through to the marketing department. The organization can also influence current and potential customers by creating a product or service and at the same time created a demand among customers. To better understand how the environment can affect the organisation, there are four main elements that compose the environment.

' Political

A company can be influenced by the laws imposed by the government such as the regulation concerning the tax, political orientation, legislative structure, trade union power and so on.

' Economic

The organization must continue to function even if the economic situation varies from boom to bust, reduction or increase of investment, and the exchange rate that does not affect only a market but the entire world.

' Social

Culture has an important impact on the organization. The lifestyle greatly influences customer demand and the market. Social mobility, democracy, family size all this affect the human resource and organisation.

' Technological

The technology moves at the speed of light which creates each time a change in the environment and influencing the organization and its technology.

' Legal

The strategies the organization will set up must comply with hundreds of laws and regulation in place to protect the market for business.

TOOLS FOR COMPETITOR AND MARKET ANALYSIS

Porter's Five Forces Model

Porter has suggested that it is the collective strength of these forces which determines the ultimate profit potential of an industry. The aim of corporate strategy is to find the exact position of the organization on the market and so that it can defend it these forces or even better to draw benefits.

   

Figure 2.1: Five Environmental Forces (Porter)

Strategic Group Analysis

In some sectors the strategic group analysis provides information on the opportunity available and that problem facing competitor in the same sector.

Strategic Competitor Groups

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