The primary purpose of the strategic management process is to enable companies to achieve strategic competitiveness and earn above-average returns. AAR or above average return means returns in excess of what an investor anticipates to earn from other investments with a similar amount of risk. To earn above average returns, a business must have a competitive advantage over its competitors. This competitive advantage can be in the form of a company ability to produce goods or services at a lower cost than its competitors. For instances, a company can produce a product with higher quality than its competitors and charge at premium price, for example, Mercedez Benz and Jaguar. Alternately, a company could also source for a substitute of local made products at other region, China for example, which is selling at lower costs and sell with higher profits locally. For example, Toyota, a Japan motor vehicle company, which decided to have local assembly product line at Thailand due to cheaper cost which ultimately, gives a higher profit.
Strategic competitiveness is a strategy where a firm plans to achieve their organizational goals despite there is a lot of competitors in the marketplace. It can be attained when a company successfully generates and implementing a value-creating strategy which is able to help create wealth to its organization when it is implemented. A strategy is an incorporated and aligned into a set of commitments and actions designed to exploit core competencies and a competitive advantage. When defining a strategy, firms make competing alternatives as the pathway for determining how they will engage strategic competitiveness. In this case, the selected strategy defined what the firm will do and will not do. For instances, Ford Motor Company had recently committed an efforts to go greener and more technology advanced that its competitors, such as General Motors.
A firm is said to have competitive advantage when it enforces a strategy which its competitors are not able to duplicate or too costly for them to replicate. However, a firm can only be sure or confident when its strategy has caused one or more competitive advantages only after competitors failed to duplicate its strategy. In addition, a firm must understand that not one competitive advantage is permanent. Example, Apple Inc, has built a strong and sustainable competitive advantage which is definitely worth the current valuation premium. By introducing its latest iPhone 4S come as a bundle with iCloud and iTune; it allows user to download song at only USD 0.99 each. Up to today, none if its competitors are able or afford to replicate its competitive advantage.
Strategic management process is complete set of commitments, decisions and actions required for a firm to achieve strategic competitiveness and earn above average returns. Firm needs to start with analyzing its external environment and internal organization to determine its capabilities, resources and core competencies, a SWOT analysis (refer to figure 1:1) can be leveraged in performing the external environment and internal organization scan. By collecting this information, firm then develops its vision and mission and develop one or more strategies. To implement its strategies, the firm needs to take action towards achieving strategic competitiveness and above average returns. Effective strategic actions that implement in the circumstance of cautiously integrated strategy conceptualization and implementation efforts result in positive results. This process must be kept as ever-changing markets and competitiveness structures are organized with a firm’s continuously evolving strategic inputs. In contrast, a poor implementation of strategic management process will cause a big fall towards a firm. For instance, Circuit City’s failure in March 2009 where all electronics retailer’s stores were closed and more than 30,000 workers got laid off. The key factor...
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