The Positioning School - Essay Example

The Positioning School       The positioning school examines strategy formation as an analytical process placing business inside the environment within which it operates (Demougin & Fluet, 2001). Proponents of this school stipulate that certain key strategies are quite vital in any organization, especially those organizations with many competitors. The positioning school deals with organizational strategies, marketplace, locations and recommendations that can be implemented to help improve a company. Leaders at F. X. Pounds, Inc. have been working within the community providing energy and heating equipment for many years. Through positioning school, the leaders of the organization will be in a position to know which business environment it is supposed to operate in and help in its growth by providing the necessary requirements (Demougin & Fluet, 2001). The market drive and the positional school of the organization shape the organization’s structure .When an organization gets into the market and doesn’t find the right market environment; there are possibility of it collapsing as it does not get to have its own structure it can operate through. Five Forces       Many concepts in competitive advantage in an organizational environment can be described in the five forces identified and described by Porter (1996). First, Porter (1996) discussed the threat of entrants. New organizations face some barriers to entry. These barriers may include capital problems and customer problems. F. X. Pounds, Inc. leaders did not experience these barriers because the company had a widely set client base so they did not have capital problems (Mulcaster, 2009). As a result of providing quality services, F. X. Pounds, Inc. leaders obtained loyal customers.       The bargaining power of suppliers is the second force in Porter’s model (Porter, 1996). The strength of a supplier depends on the options has available to the customers. When there are many suppliers in the market and fewer customers, there emerges bargaining power. On the other hand, if there are few suppliers and many customers, bargaining power lies on the suppliers end.This bargaining power enhances tensions between the supplier and the customer. These companies; F. X. Pounds Inc, Miller Fuel, and A&F Group, in this case study have many sources of suppliers. As a result, the suppliers have little bargaining power.       Bargaining power of customers is the third force discussed by Porter (1996) in his model. Customers can pay low prices for a high quality goods or services. This is enhanced by the volume of purchases the customer wants and the willingness of the supplier to accept the financial terms for those purchases. Information from other suppliers is another determinant of the bargaining power of customers to the suppliers .If customers get information form sources with prices that are lesser, they may change their suppliers. The bargaining power of customers enhances tension between the supplier and the customer. In this situation whereby the customers have the bargaining power, the customers have an added advantage over their suppliers as they dictate on their prices. The suppliers have no choice may be due to competition form other firms. F. X. Pounds, Inc. has had steady customers who come for goods and services. Because of this reliability, very little bargaining occurs as the customers have a good relationship with the organization. This has helped in growth of F.X. Pounds in that they have provided with quality products and hence their customers are satisfied and they keep coming back for more products and services enhancing growth of the company.       The fourth force is the threat of substitute service/product. Innovation in one marketplace affects other marketplaces. For example, the use of email and fax has affected the business of the U. S. Postal Service. As a result USPS has been forced to offer other services at cheaper costs like dropping their rate of shipping and even some services for free like delivery, In the case of F. X. Pounds, Inc., innovations have been developed by other companies such as Miller Fuel and A & F Group; this has led to stiff competition between Miller Fuel, A & F Group and F.X Pounds (Porter, 1996). The innovations that have had an impact of F.X. Pounds include getting new heating equipments into the market, starting of mulch as a source of energy. This has added other sources of income to the firm.       The fifth force of Porter’s model is intensity of rivalry among competing firms (Porter, 1996). When trying to attain an advantage in the market, organizational leaders put in place a variety of strategies and tactics. All organizations have competition in one way or another. Competition is healthy in any market place; this is because it provides a customer with choices of where to do their purchasing ,it makes the suppliers equip their firms with quality products and it helps in price regulation; in that prices can be compares form one organization to another and regulation be done without overcharging the customers. Competition also enhances improved services, and processes used in through which services are rendered. F. X. Pounds, Inc. leadership has experienced competition from Miller Fuel, and A&F Group, both companies that supply the same product and services as F. X. Pounds, Inc. Generic Strategies       There are four generic strategies that F. X. Pounds, Inc. leaders should apply to assist in running and management of the firm. To start with, the organization should employ the cost leadership strategy. The use of the cost leadership strategy would help in lowering the cost of production at F. X. Pounds, Inc. Lowering the cost of production could occur by leveraging experiences, monitoring quality and employing economies of scale. F. X. Pounds, Inc. leaders have done this by employing family members who have reduced the cost of managing the organization; by having members of the family in the organization, they were paid less and they also invested the same money in the company when it was in crisis. The leaders at F. X. Pounds, Inc. do not do a great deal of advertising because they only target their existing customers and hence they expend little on advertising; However this affects them in a way that they don’t extend their market and get new customers.       Differentiation is another strategy that Porter (1996) introduced. Differentiation helps in manufacturing unique products and services (Porter, 1996). When a company offers high quality, unique products and excellent performance, they are justified to charge higher prices. F. X. Pounds, Inc. leaders have initiated new products in the market to show differentiation in the marketplace.  For example, the leaders introduced new heating equipments and new fuel such as mulch. Miller Fuel leaders added natural gas has a way to diversify their market to customers who use natural gas as a source of energy.       The third strategy discussed by Porter (1996) is focus. Developing focus helps in serving specific market niches and segment. F. X. Pounds, Inc. leaders have put their main focus on provision of energy, lighting and heating services and products. This sets a specific market for their organization (Porter, 1996). Entrepreneur School       The entrepreneur school views formation of strategy as a visionary procedure/process (Mintzberg, Ahlstand, & Lampel, 1998). It relates to the organization having leaders with a vision. Vision involves following the traces of the founder of the organization: Vision formation sets its base on the intuition, experiences, wisdom, insight, and judgment of the organization’s founder. In this case study, F.X. Pounds, Inc. is owned, managed, and operated by the family. Even after the death of the founder, the company has operated by the founder’s descendants. This makes it easier to maintain the policies and the visions of the founder as the members of management have a base of commonality. The use of the entrepreneur school enhances this kind of a strategy and assures that the vision and mission of the organization is not lost. Leadership of the organization has been inherited from generation to generation which has maintained the original mission and vision of the organization. Market Structure       Market structure refers to the number of organizations and firms producing identical products (Carmichael, 2000). To assist in improving the market for their products, F. X. Pounds, Inc. leaders introduced new products such as mulch and new heating equipments. The market structure based on this case study revolves around energy generating services and products. The use of market structure helps improve the potential strategy option by providing the necessities required in any marketplace. Market structure enhances competition which is essential for any organization (Borodzicz, 2005). Market structure also acts as a force to pull customers. Market structure encourages the organizational leaders to have high quality products and services at reasonable prices. F. X. Pounds, Inc. leaders’ market structure has enhanced their ability to retain their customers and expand their business through their support. However, some company leaders choose the strategies of providing the cheapest, or the best products or services or by dominating the market. To be the cheapest, leaders offer their goods and services at the lowest prices without considering the quality. To be the best, leaders offer high quality without considering the price. To dominate the market, leaders offer high quality goods and services at the lowest prices. F. X. Pounds, Inc. leaders offer the best goods and services at the lowest price and hence they have dominated their market (Mintzberg et al., 1998). Risk and Uncertainty Management       Risks are concerns of the future which may have negative or positive effects on an organization. Uncertainty is the situation of being unsure about a certain outcome Mulcaster, 2009). Risks can well be managed by use of various strategies such as shifting the risk to another party, avoiding risk, reducing the negative effect of risks, and even accepting the consequences of risk.  F. X. Pounds Inc. leaders face losing their customers because of competition and poor management (Mintzberg et al., 1998). F. X. Pounds, Inc. leaders should have more trained personnel to help in operating the organization. As a result of new young personnel, more young and aging customers will be attracted to the shop. However, F.X .Pounds can never be out of customers as the aging customers are very loyal to their organization.       The organization is at risk of losing income because the Pennsylvania officials have proposed regulations to limit the use of coal. The best way F.X. Pounds, Inc. leaders can manage this risk is by looking for another form of energy to replace coal for them to prevent loss of their current market. The uncertainty if the organization is going to remain firm in the next few years exists because the current descendants have no knowledge in management. It is also uncertain who is going to manage the organization when Pam leaves. Risks and uncertainty affect the vision of any organization. Risks interfere with the vision and the mission by posing a threat to the future plans of the organization.    Recommendations       I would recommend that Pam employ more trained personnel who are knowledgeable on operating the organization. The new personnel will help bring in new skills and knowledge and will help improve the productivity of the company. To help improve on the land products, I would recommend that Pam get substitute for products that harm the environment to products that are environmentally friendly such as substituting coal energy with solar energy. To help overcome the competition, F. X. Pounds, Inc. leaders should introduce more products to enhance differentiation (Borodzicz, 2005). F.X .Pounds, they should reduce their fuel prices to boost their market share. This is due to competition from other companies including Miller Fuel who are the closest competitor. To assist the elderly workers in the organization, Pam should bring in young leaders to infuse new ideas with the ideas of the elderly people. By doing this, the company will be in a position to maintain its aging customers and it could attract younger. Conclusion       F. X. Pounds, Inc. has been a successful company due to the good relationship with the leaders and workers have with customers. However for the future of the company to be promising and avoid the problems of risks and uncertainties in the industry, Pam needs to introduce the recommendations above. The goal is to reduce the risks and the level of uncertainty in the organization introduced by the economy, the environment, the competition, and the customer base. By Pam adapting and implementing the recommendation above, F.X. Pounds will remain reputable organization offering quality products and services.   References Borodzicz, E. (2005). Risk, crisis and security management. New York, NY: Wiley. Carmichael, H. L., & MacLeod, W. B. (2000). Worker cooperation and the ratchet  effect. Journal of Labor Economics, 18, 1-19. Chicago, IL: University of Chicago Press. Demougin, D., & Fluet, C. (2001). Monitoring versus incentives. European Economic Review, 45(9), 1741-1764. Maryland Heights, MO: Elsevier. Mintzberg, H., Ahlstrand, B., & Lampel, J. (1998). Strategy safari: A guided tour through the wilds of strategic management, (pp. 81-120). New York, NY: The Free Press. Mulcaster, W. R. (2009). Three strategic frameworks. Business Strategy Series, 10(1), 68-75. Porter, M. (1996). What is strategy? Harvard Business Review, 74(6), 61.  Read More