Changes in the Competitive Environment - Essay Example

Q1: What kind of changes occurs in the competitive environment when an industry begins to mature? (List changes as bullet points following with shortexplanation) 1. When an industry starts to mature, the following are the changes in the external competitive environment: Niche markets: Competitors scramble to find niches, because in this stage most of the consumers have already tried the product. So the competitors try to find new niches that can create new opportunities and thereby markets. Increase in advertising and promotion budgets: The competitors try to out beat others by increasing the thrust on the promotion and consumer relations. Product improvements: Increase in the R & D budgets to develop product improvements and line extensions, because the industry is already mature with the existing products. Some companies even trim down their product line up. Strategic changes: The competitors reestablish their competitive strategy to be more specific so that advantage is achieved in cost, quality/ technology or service leadership. Q2. When and why is liquidation a last-resort strategic option 2. Liquidation is a last resort strategic option for any organization because there are many other defensive strategies such as the retrenchment and divestiture other than integration and diversification strategies. When an organization is in trouble the management can first think about retrenchment. Retrenchment is about making specific changes through cost and asset reduction to reverse declining profits. When an organization is specifically weak in a strong industry then the management can think about regrouping the strengths and evaluating the strategy at present to make specific changes. This process will highlight the areas that are weak and needs restructuring. Retrenchment helps in slowing down the decline in profits in the short run and in the long run when combined with other proactive strategies helps in the reversal of the profitability position. When the retrenchment strategy does not work, the management can try divestiture. Divestiture means selling off a weaker decision or a part of the organization. When it is distinct that a particular division is responsible for the overall loss of the organization the management can think about divestiture. When both the above said strategies do not work then the last option is the liquidation. Liquidation is recognition of defeat and is a very emotionally challenging strategy. When the damage can be controlled through alternative strategy, liquidation can be the last option. Q3. How does internet technology impact company and industry value chain? (list impacts as bullet point following with short explanation) 3. Internet technology has changed the way in which business is done in many ways, such as : Change in relationships: The relationships within the organizations and with the external environment have changed because of disappearing levels of management. An organization depends on information technology, the internet, organizations are becoming flatter and leadership from top down has become obsolete. E-retailing: Internet technology is enabled transactions between the buyers and sellers to be completed online, rather face to face. By having a website products can be sold across the world. Disappearance of geographic distance: Resources are outsourced from companies across the world and formation of strategic partnerships has been enabled only because of internet connectivity. By outsourcing of services and procurement of the resources from the point of origin, cost is saved for the companies. Q4. Identify different ways that traditional businesses can incorporate use of the internet in their basic competitive strategy? (again use bullet point for different ways) 4. By incorporating the following ways, a business can incorporate internet technology to boost their competitive position: Quality website: By having an attractive, user friendly and quality website the company can increase the number of visitors to the website, e-marketing can be enabled. Customer satisfaction: By getting quick information about the profile of the customers and their opinions, the company can improve their products and services to suit the needs of the customers and thereby enabling better satisfaction. It helps to gather more information and learn more about our customers at large. Online promotion: By placing banner ads and popup advertisements the company can remain in the customer shopping radar easily. Also online promotion should be handled carefully, as it can also backfire because if the online promotion is done without thought, then customers may also try to avoid the promotion information. Q5. When does it make good strategic sense for a company to consider diversification? (list reasons as bullet points following with short explanation) 5. Diversification is a good option in the following cases: Unattractive industry: When a company is operating in an unattractive industry which is declining as a whole, for example the airlines industry which is slumping as a whole. When the industry as a whole is mature and sales are getting stagnant the company has to seriously explore new avenues. Attractive opportunity: When a new opportunity is available when an organization can enter into a new industry without much of hassles and investment, it can try new them. Synergy: When the organization is expecting to have a synergy by diversifying into a new business which will be very advantageous to consolidate its investments and competitive position, then it is very much advisable to diversify. Q6. What are the disadvantages of strategy of unrelated diversification? (bullets and short explanation) 6. Disadvantages of unrelated diversification are as follows: Managing competencies: The Company can sometimes stretch more by venturing into industries in which it does not have competency to compete. Lack of focus: It is proven many a time that focus and unrelated diversification are mutually exclusive. There are many examples of companies that have trimmed down their products as they cannot focus on each business individually. Image confusion: When a company which is successful in an industry, enters a new industry, there is confusion whether it is going to be a leader or a follower or just a mere presence. Huge investment: It requires huge investment of resources when a company is going to enter into an unrelated industry as it cannot gain advantage of the existing business model. Bargaining power: When a company enters into a already crowded industry its bargaining power in the supply chain can be weak. This can create unnecessary cost burdens which can affect the profitability in the long run. Q7. What are the traits of core competence? What is involved in building and strengthening a core competence? (bullets and short explanation) 7. Core competencies also called as the distinctive competencies are the strengths that a company hs which is very unique compared to its competitors. When a strength is difficult to imitate by competitors, rare to find and costly to copy, then it is called a core competency of the company. the ways to develop the core competencies of a company are : Systematic evaluation: The company has to evaluate its internal environment by carefully analyzing its strengths and weaknesses. A core competence can be developed only by having a realistic estimation of the strengths and weakness. Development of appropriate strategy: the management has to develop effective strategies to leverage the competency and reducing the effect of organizational weaknesses at the same time. Development of resources: When the company identifies a strength, the resources that create that strength should be further developed so that it becomes a unique strength. By adopting better R & D, training and development of staff the organization should be ready to effectively utilize the core strength. Q8. What is meant by empowerment? How does it differ from delegation of authority? 8. Empowerment: Empowerment is to help people a sense of self confidence; it means to help people to overcome the feeling of powerlessness by energizing them to take action. Empowerment is finding the motivation to achieve from within a person, but delegation of authority is the power to get things done and hence, ti is related to the external environment of the person. Empowerment makes people to identify the capacity to do things what they want but the latter is about making others do what you want. More empowerment does not mean others are less empowered, but when a person has more authority that means the others in the team have less authority. Hence, the former leads to cooperation and the latter leads to competition. Q9. How do policies and procedures aid the task of implementing and executing strategy? 9. Polices and procedures help in implantation for strategy by giving the general guidelines and courses of action that have to be adopted by the team to achieve the objective. They give a consistency in operations and thereby reducing the loss of resources in conflicts. Repeated analysis of same issue is avoided and thereby gives the management more time to concentrate on other areas of concern. It helps in implementation of strategy because it helps better team work. When more than two teams come together to achieve a goal, well set policies and procedures can cause less friction and thereby can produce better results. When the policies and procedures are formulated clearly without leaving any loopholes, the management can make decisions with more precision. Policies and procedures are types of plans an organization makes to have a desired outcome. The management can predict the outcomes more easily and plan ahead with well defined policies and procedures. Also it helps in the effective use of the factors of production. Wastage is reduced by avoiding managerial errors if the polices are sound. Q10. Why does it make sense to create some job anxiety, insecurity, and stress as a part of a company’s motivational and reward scheme for promoting competent strategy execution? (bullets and short explanation) 10. Anxiety and job stress can be used in the positive way to follow the strategy and to achieve the results as follows: Challenging goals: Effective motivation programs in an organization have to focus on the motivation and the performance link. The goal that has to be achieved has to be appropriately challenging. It is identified that hard goals are more motivating than easy goals. Significance of the task: The employees analyze the new tasks in terms of their chances for success and the significance of the anticipated accomplishment. Team members often understand the significance of achieving a difficult task. The relationship between the target, performance, achievement and satisfaction from the rewards should be appropriately balanced to motivate the employees. Challenging goals which offer a certain degree of job stress and anxiety, when balanced with appropriate satisfying rewards can be the best motivators. References: 1. David R. Fred (2007) Strategic Management – Concepts and Cases, New Jersey, Prentice Hall 2. Drucker, Peter (1974) Management: Tasks, Responsibilities and Practices, New York, Harper & Row 3. George, R. Terry (1988) Principles of Management, Richard D Irwin: Homewood, III 4. Whetten, D. A and Cameron, k.S (2005) Developing Management Skills, (6th ed), New Jersey, Prentice Hall Read More