1.0 INTRODUCTION
“Firm success” is defined as the ability to achieve a competitive advantage through business strategy that allows them to stand out from its competitors, which results in sustainable and greater financial position (Teece et al., 1997). This eventually leads to the question on how can a company achieve success. A business strategy is also known as a solution to resolve agency problem that happens whereby the top management fails to maintain the consistency of the work of the large number of employees in the company (Porter, 1991). For example, as mentioned by McKinsey’s managing consultant, Tom Peters, whereby strategy plays a very important role in building McKinsey’s success (Peters, 2001), it stresses the need for this paper to explore on how business strategies can improve a company’s performance as well as the importance of reviewing a business strategy.
2.0 IMPORTANCE OF DEVELOPING BUSINESS STRATEGY
Resource-based view (RBV) analyses how to strategise resources and capabilities to improve a firm’s performance (Barney, 1991). RBV discusses that firms can exploit market opportunities or minimise market threats, using its “unique” resources or capabilities that are valuable, rare, difficult to imitate and non-substitutable by other resources or capabilities, which enhances the firm’s value and competitive advantage (Barney, 1986; Barney, 1991; Conner, 1991). According to Mata et al. (1995), Information Technology (IT) skills are one example of rare and firm-specific resource. Therefore, by complementing IT skills (human capital) with a reusable technology plant (technical resource) and partnering relationships that a firm possesses, a firm can achieve a sustained competitive advantage, as well as able to earn superior sales, which enhances the firm’s financial value (Barney, 1986; Bharadwaj, 2000). As an illustration, General Motors (GM) was the first to develop hands-free calling vehicles in 1995 using its physical capital resources (technology, plant and equipment), as well as collaboration with Electronic Data Systems and Hughes Electronics Corporation to share IT expertise (human capabilities), which allows GM to grow profitably and also able to be a leader in its industry (Appendix A) (Kisiel, 2008; GM Heritage Center, 2013).
Besides that, supply chain management (SCM) strategy plays a vital role in generating a sustainable competitive advantage (Dyer and Singh, 1998). There are four main levels of SCM – suppliers, producers, distributors and customers. Strategic purchasing helps firms to develop close and long-term strategic working relationships with only a few selected suppliers (Chen et al., 2004). In return, the firm saves costs (inventory management costs) as the number of suppliers is reduced, yet the remaining committed relationships allow firms to enjoy lower negotiated prices (economies of scale on order volume), thus highlighting a better financial performance of the firm (Carr and Pearson, 1999). In addition, more reliable suppliers in terms of quality rather than quantity, and delivery time can also be attained through this strong buyer-supplier relationship. A firm with good SCM will also be able to provide better customer service and market penetration (St. John and Heriot, 1993). As an example, since 1955, McDonald’s philosophy has been delivering reliable and consistent product and service through its supplier/buyer relationship, which lead to the success of McDonald’s supply chain in cost mitigation and quality (Byrne, 2016). The founder of McDonald’s, Ray Kroc also emphasises that: “If McDonalds’ operators and suppliers do well, the company and its shareholders will too”, whereby its success is proven through its establishments in 100 countries serving 68 million people every day (Hollingsworth, 2017).
3.0 IMPORTANCE OF REVIEWING BUSINESS STRATEGY
As there is always uncertainty in the environment in terms of products, markets, and competitive behaviour, it is important to assess business strategy in order to minimise those uncertainties (Li and Atuahene-Gima, 2002). A strategy must never be viewed as a one-time-off approach, but instead, should be regarded as learning and evolutionary adaptation in terms of ability to identify any environmental demand changes (Prahalad and Hamel, 1994). Since no industry (including local industries) can escape from global competition, companies from worldwide are alerted because it is more difficult to remain unique when the boundary of competition is broadened (Porter, 1986). The “silent industrial revolution” has been changing the foundation of competition drastically and if the company is reluctant to revise its strategy, it will risk losing market opportunities as competitors will follow its footstep and surpass it. Subsequently, the company will no longer be unique. This is explained through the dynamic capabilities, in which companies need to respond strategically, and modify, integrate, as well as re-configuring its internal and external organisational skills, resources, and operational competencies to adapt to the environmental changes (Teece and Pisano, 1994). The perfect depiction is shown through IBM, a multinational technology company. IBM’s success in advancing from tabulating machines to mainframe computers is because of its ability to avoid the path dependence (Helfat, 2013). IBM realises that the world is changing and if its strategy remains unchanged, it will lose its strong position in the market. Thus, IBM develops dynamic capabilities as an improvement of its existing strategy to stay competitive in the global market.
In addition, continuous business strategy review is important as customer needs and expectations evolve (Sok and O'Cass, 2011). Some companies find that focusing on serving customers’ needs is more profitable than on competition. Companies can gather valuable feedback from its customers to understand the market needs and trends, and this will enhance the companies’ core competences (Prahalad and Hamel, 1990; Calantone et al., 2002). Companies can better understand what products or services that the customers want, so that companies can revise their strategy to ensure that customers’ needs are not diverged from the strategy because company will lose out if the products do not meet their customers’ expectation. As reported by Church and Klein (2017), retail stores in the United States like BCBG Max Azria and Macy’s face bankruptcy due to their unawareness on the changing market trends. Satell (2017) has reported that convenience has been a determining factor of a firm’s success and Melissa Gonzalez, the CEO of The Lionesque Group believes that BCBG Max Azria and Macy’s could have sustained if they were willing to revise their current business strategy on physical store. This is because there are plenty other similar businesses that succeed today because they adapt to the customers’ preference of purchasing online. For example, Dell, who traditionally depends on distributors to deliver its products, now serve its consumers directly through its official online shop as Dell senses that the market is moving towards a digitalised era (Prahalad and Hamel, 1994).
4.0 CONCLUSION
To conclude with, an effective business strategy is the underlying factor of successful businesses. The various business failures clearly show the importance for companies to be consistent with their strategies, and at the same time, continuously assessing their business performance. Companies must not take the short way out by only focusing on developing a one-time-off strategy.
Looking at General Motors’ case, while it was reaping its success before 2008 with is “hands-free” technology, it did not review its strategy to innovate and invest further in new technologies and did not adapt to the evolving customers’ preference. Also, due to its negligence for not understanding its competition, GM was on the verge of bankruptcy before it was repurchased in 2009 to recover its previous success (Goh, 2017). This proves further that a company must not only develop a good strategy, but also to continue reviewing it.
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