Chapter 4: Evaluating a Company’s Resources and Competitive Position Question 1. How Well is the Company’s Present Strategy Working?
In evaluating how well a company’s present strategy is working, a manager has to start with what the strategy is; A low-cost leader strategy, A broad differentiation strategy, A best-cost provider strategy, A focused, or market-niche, strategy based on lower cost, A focused, or market-niche, strategy based on differentiation. 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.g 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.e 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).
4. 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).
5. 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.e 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...
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