The Concepts of Business and Corporate Level Strategy - Assignment Example

Assignment Introduction This paper addresses the theme of analyzing strategies to the business level, but also to the corporate level. In order to provide the bigger picture in this matter, two companies would be considered: Hy-Vee and Fareway. The sections which will be presented overlook concepts such as diversification, synergies, integration, and most importantly the competitive advantage concept, which is considered very important nowadays. 2. Hy-Vee 2.1. Business Level Strategy Hy-Vee is situated in the top 20 supermarket chains in the United States, and has a long history as a company (Hy-Vee). The strategy of this company is to differentiate because usually the supermarkets operate in a mature market. So, in order to succeed with its business, Hy-Vee has a tangible diversification approach for the following reasons. Firstly, it is clearly from the stated objectives and goals of the company, that it is a company customer oriented, and also has an employee-owned approach. These features can be considered as an approach of this company to differentiate from the other competitors, because in most cases a mature market is also very competitive. Secondly, it has a focus on organic food, diet considerations and most importantly on health and environment. Their approach can be seen also on the services and information provided on their web page, which offers a range of ideas for meals, diet, and makes a vital connection between food and health. Nowadays, when there are so many diseases and in the entire world there is an issue related to eating disorders and obese persons, the linkage to health plays an important role. Moreover, it has gained an award related to promotion of healthy lifestyle, so this is an important point of this company compared with its competitors. This strategy, which is long-term oriented, would be important for the company, in order to maintain its market share on the United States Market. Hy-Vee’s strategy is focusing on the entire market, but also on specific markets such as the one of organic food. Although, in recent years have been observed an increase orientation for organic food, the market is not entirely developed, so Hy-Vee has a competitive advantage, and it should also develop more on this field. Furthermore, in gaining market share a strategy that this company uses is related to its reputation. This company has an image of having sincere business practices and also is a provider of high-quality products. In this way it maintains a good relationship with its customers and suppliers. The high-quality of the products is well determined by Hy-Vee mostly when selects it from suppliers. The company has the advantage to benefit from experience in research and development, and therefore sound expertise in the area of products quality (Jones 57). Also, as a proof of the reputation of Hy-Vee, the standards for selecting products quality are used by other companies as a reference. 2.2. Corporate Level Strategy In the next figure can be seen the value created by Hey-Vee. Figure no. 1 Value created by Hey-Vee Source: Own processing. The core competences of the organization that give it a competitive advantage are represented in the next figure. Figure no. 2 Core competences Source: Own processing. Experience was considered because Hy-Vee is a very old company in industry and it has developed a loyal consumer group. Also, flexibility is important because it is a company that has very many initiatives and tries to be as close as it can to its customers, so it can satisfy their needs in a very complete manner. Maybe the most important competence is organic focus – it is oriented on delivering healthy products. Hy-Vee is managing its hierarchy of authority, and is characterized by: It uses decentralization in its hierarchy of authority. Relies on mutual adjustment, but it has its rules and SOPs. It is structured on specialized functions. Because this company operates in a highly competitive market, a strategy to follow would be to enter joint ventures or even to acquire other chains of stores in order to expand its operation, and to create more value. 3. Fareway 3.1. Business Level Strategy Fareway has as the previous company analyzed a long history on the food market (Fareway), and as will be discussed later in the paper some similarities in the followed strategy as Hy-Vee. The strategy followed by Fareway is also diversification, and their main consideration is health. So, it focuses on providing organic food, and promotes healthy and appropriate meals. This company has an organic structure, because it is a very flexible organization that is always looking for new ways to improve its products and to satisfy the customer needs, always introducing new programs for students or other people interested to share their ideas in this domain. Also, the employees of the company have a very important role because they are making a lot of suggestions in respect with their work and many of them are used by the company. Another similarity with Hy-Vee is its orientation on the entire market, but also on specific markets such as the one of organic food (Forbes). The focus towards organic food its providing the company with a competitive advantage, compared with other chain of stores. The company faces a high level of uncertainty because it operates in a very complex and dynamic environment because of the competitors and also the changes in customer preferences, so it must develop its competitive advantage at maximum. 3.2. Corporate Level Strategy In order to measure the profitability and the larger picture of Fareway’s corporate level strategy, an external and also internal overview was considered, of which main point can be seen in the following table. Table no. 3 Measuring Effectiveness Approach Goals Indicators External increase the market share by achieving qualitative growth expand the earnings base EBIT margin = EBIT/Sales Return on capital = EBIT/ Net operating capital Internal Increase innovation Increase coordination and motivation of employees The percent of sales attributable to innovative products The variable long term incentive (LTI) component of the payment of the employees considers the company’s performance compared with the competition over a period of three consecutive calendar years. Technical Improve customer service Reduce costs Number of employees working Surveys Operating expenses Source: Own processing. The corporate level strategy is appropriate for the industry where this company operates because diversification and synergies are necessary for the company to succeed in such a competitive industry. In what concerns the external implication of the company, it is ensuring that environmental standards are observed at all the production locations of the organization worldwide. As it concerns the society, the company develops projects aimed at helping young people around the world and creating real opportunities for them – such as promoting equal opportunities in order to advance social development. Horizontal differentiation helps the company not to increase its levels and to become taller. In what concerns centralization, the company applies more a decentralize approach in order to not have communication problems (Brigham and Ehrhardt 133), and in this way the employees are encouraged to act independently and responsibly because their creative ideas help advance the organization by leading to qualitative improvements. About standardization, what we could say it is that this company relies more on mutual adjustment. In the following picture can be seen the factors that can cause uncertainty for the environment in which Fareware operates. Figure no. 4 The factors causing uncertainty Source: Own processing. Conclusion Throughout this paper, there were analyzed two major companies: Hy-Vee and Fareway. Aspects mainly related to diversification and competitive advantages were considered. Both companies are characterized by a focus on diversification, and by developing its competitive advantage on the market. This paper provided an overview over the environment in which these companies operate, and how well the company faces the changes in this environment. Also, it was presented a short description of core competences, and competitive advantage. References Hy-Vee (2012). Retrived from www.hy-vee.com. Fareway (2012). Retrived from www.fareway.com. Forbes (2012). Retrived from www.forbes.com. Brigham, E., and Ehrhardt, M. (2010). Financial Management: Theory & Practice. 13th ed. Boston: South-Western College Pub, 2010. Print. Jones, G. Organizational Theory, Design and Change. 6th ed. New York: Pearson Prentice Hall Publishing, 2010. Print. Read More