Basic Strategic Options

Topics: Strategic management, Organization, Management Pages: 3 (676 words) Published: August 29, 2011
DB Unit 4 HR485
There are three basic strategic options available to organizations for gaining competitive advantage. These are: Cost Leadership, Differentiation and Focus. Organizations that achieve Cost Leadership can benefit either by gaining market share through lowering prices (whilst maintaining profitability) or by maintaining average prices and therefore increasing profits. All of this is achieved by reducing costs to a level below those of the organization's competitors. Companies that pursue a Differentiation strategy win market share by offering unique features that are valued by their customers. Focus strategies involve achieving Cost Leadership or Differentiation within niche markets in ways that are not available to more broadly-focused players.

Basically, strategy is about two things: deciding where you want your business to go, and deciding how to get there. A more complete definition is based on competitive advantage, the object of most corporate strategy:

Competitive advantage grows out of value a firm is able to create for its buyers that exceeds the firm's cost of creating it. Value is what buyers are willing to pay, and superior value stems from offering lower prices than competitors for equivalent benefits or providing unique benefits that more than offset a higher price. There are two basic types of competitive advantage: cost leadership and differentiation.

-- Michael Porter, Competitive Advantage, 1985, p.3

People strategy was once the art of creating a work force to execute an already defined business strategy. That is no longer true. If employee surveys are poorly designed and implemented, they can do unintended damage.

Kearns, P. (2010). 2nd Edition HR Strategy Creating Business Strategy with Human Capital. Burlington: Butterworth-Heinemann

Compensation is an important motivator when you reward achievement of the desired organizational results. It is said "that money is a powerful source of motivation:"....
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