Understanding a business’s external and internal environments

Understanding a business’s external and internal environments

Discussion Reply: Strategy Development, Strategy Decisions, and Decision Models

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Competitive Approach, Competitive Scope, and Decision ModelsRon BedardLiberty University

Competitive Approach, Competitive Scope, and Decision Models

Introduction

In addition to understanding a business’s external and internal environments, one of the organizational elements that need to be ironed out when formulating the organizational strategy is the competitive approach.  There are multiple basic approaches that an organization can employ to compete effectively and gain a competitive advantage.  That said, all the approaches entail affording buyers perceived superior value compared to offerings from rivals.  The different ways of offering superior value include offering good products at a lower price than competitors or a superior product that is worth a premium (Gamble et al., 2021).  That is, a product must offer the best value by combining price, features, and quality in addition to other appealing features.  There is plenty to consider when determining a specific competitive strategy that a business should adopt.  In taking the decision, one must understand the various generic competitive strategies.Process: Deciding on a Competitive ApproachA competitive strategy primarily deals with the relevant points related to the gameplan of management in ensuring that the company remains competitive.  It entails the various efforts that a company makes to ensure it pleases its customers, strengthens its position within the marketplace, and actively counters actions by rivals that would threaten the company\’s position.  In addition, it instills the agility needed to respond promptly to shifting conditions within the industry (Gamble et al., 2021).  Crucially, there is an exceptionally low likelihood that companies, even those operating in the same industry, will employ similar competitive strategies.  That said, deep down, despite the different competitive strategies among organizations, the two principal distinguishing factors are whether the target market is broad or narrow and whether a company pursues a competitive advantage based on cost or differentiation.  These two distinguishing factors result in five competitive strategies that companies can opt for in formulating the organizational strategy.The first competitive strategy is a low-cost provider strategy that entails striving to be the lowest-cost provider within an industry.  The strategy is a compelling one, especially in markets where there are many price-sensitive buyers.  Ordinarily, a company would achieve a low-cost leadership by being the lowest-cost provider within an industry.  When striving for a cost advantage, management teams must include features and services that customers consider essential within their offerings.  This is because a product perceived to be too frills-free could be perceived by consumers as being of little value, despite its competitive pricing (Gamble et al., 2021).  The second approach is a broad differentiation strategy, in which a company seeks to differentiate its products or services from those of its rivals in a way that will appeal to a wide range of buyers.  Chiefly, differentiation strategies are ideal in instances where buyers\’ needs are vastly diverse, so they cannot be fully met using a standardized product or service.  Vitally, a successful differentiation strategy offers a company the opportunity to command a premium price for its products, increase unit sales, and obtain consumer loyalty for its brand.The next competitive strategy is a focused low-cost approach.  A company focuses on a narrow buyer segment and out-competes its rivals in that particular segment through low costs, thus serving a niche market.  The factor that sets the focused low-cost strategy apart from the conventional low-cost strategy is the concentration on a narrow section of the broader market (Gamble et al., 2021).  The targeted segment could be defined by the geographic uniqueness of the particular product attributes that appeal to that segment only.  Similar to the focused low-cost strategy, there is also a focused differentiation strategy based on offering products that are carefully designed to appeal to the particular preferences and requirements of a narrow and well-defined group of buyers, in contrast to the broad differentiation strategy focused on buyers from different consumer groups and segments in the marketplace (Gamble et al., 2021).  Finally, the best-cost provider strategy entails giving customers more value for their money by satisfying their expectations on essential quality, features, performance, and service attributes of the offerings, which beat their expectations in terms of pricing.  As a hybrid strategy, this approach blends the aspects of a low-cost provider with differentiation strategies (Gamble et al., 2021).  Figure 1 below presents an outline of the competitive strategies that an organization can adopt.Figure 1: Types of Competitive Advantages Pursued (Gamble et al., 2015)The decision on the right generic strategy for an organization stands out as one of the essential commitments that a company makes.  That is the case since the generic strategy often drives the rest of the strategic actions that a company opts to undertake since it sets the direction and tone to achieve a competitive advantage over a company\’s rivals.Strategic Thinking: Deciding on Competitive ScopeOver the past few decades, organizational and managerial studies have pointed to the absence of strategic thinking within organizations as a critical detractor of organizational performance.  Had strategic thinking been the norm within organizations, then better corporate decisions would be made, resulting in better performance outcomes for organizations.  Significantly, strategic thinking has been determined as an individual activity whose influences include the context within which it is exercised (Goldman, 2012).  With conceptualizations being an essential component for the development of an organizational strategy, it is clear that the desired outcomes of strategic thinking are in developing novel strategies.  To that effect, strategic thinking features characteristics such as a focus on the longer-term success of an organization, which means the adoption of the organization\’s scope is an essential undertaking that results from strategic thought.Determining how an organization will compete successfully within an industry and obtain competitive advantages is hinged on strategic thinking.  Such a determination involves settling on a superior value proposition to attract buyers, such as by offering a high-quality product at a low price or by offering a superior product worth paying more for (Steptoe?Warren et al., 2011). Crucially, the decision on which generic strategy to employ within an organization stands out as one of the main strategic commitments that an organization can make since it tends to be the driver of other strategic actions within the company. It also sets the direction for the pursuit of a competitive advantage over rivals. Thus, strategic thinking is essential in determining the competitive scope that an organization will prioritize in its quest to carve out a competitive niche in the marketplace.Decision ModelDecision-making is a crucial part of management functions within organizations since there is a constant need to develop action plans to ensure that the organization succeeds. That has instituted the understanding that the decision-making process is not random. Instead, it follows a set pattern based on the individual\’s decision model. Understanding decision models, as far as organizations are concerned, acts as a guide on the kind of decisions one is likely to make and how such decisions would impact an organization (Uzonwanne, 2016). Crucially, determining the appropriate competitive scope of an organization is an incredibly strategic process fuelled by strategic thinking. As I am a rational thinker, the approach to making decisions that applies to me is the rational decision-making model.That means, before settling on a decision, I first identify the problem at hand, for which I need to find a solution, following which I determine the scenario of solutions, followed by conducting a gap analysis. I then gather the facts, opinions, and alternatives and choose the possible outcomes from the different available options. That is followed by the selection of the best option based on the prevailing conditions and implementing it. The appeal of my approach to decision-making is that it allows me to objectively arrive at a decision using facts, which is essential in making informed decisions.  Such an approach is what one would require when determining the competitive scope of an organization since the approach would call on one to weigh multiple options and consider various factors before deciding.  In settling on a competitive scope for an organization, the rational decision-making model stands out as the most appropriate.ConclusionFor an organization, strategy can be viewed as a pattern of actions and the allocation of resources in a way that is meant to achieve the goals of an organization (Goldman & Casey, 2010).  Crucially, different factors need to be considered when embarking on the formulation of strategies for an organization.  One of the critical decisions that need to be made to that effect is the organization\’s genetic strategy since it is the driver of the rest of the strategic actions that a company undertakes.Annotated BibliographySteptoe?Warren, G., Howat, D., & Hume, I. (2011). Strategic Thinking and Decision Making: Literature Review. Journal of Strategy and Management, 4(3), 238–250. https://doi.org/10.1108/17554251111152261.The article delves into the subject of strategic thinking and its elements in the decision-making process, based on the available literature on the subject.  The report asserts that strategic thinking and decision-making are grounded on the view of where an organization is, where it has been in the past, and where it is possibly headed in the future.  The article also suggests that managerial cognition, corporate values, and individuals\’ beliefs and values directly influence the strategic choices made within an organization.The article is a quality source considering that its arguments are based on relevant and credible scholarly sources ranging from academic papers and books.  Moreover, the article is peer-reviewed and published in a journal, which further institutes its credibility.  The authors are academicians with a proven track record in strategic management, specifically within organizational strategies.Within the discussion, the article\’s relevance is in instituting the dynamics of strategic thinking and its roles in sound judgment and decisions within organizations. The paper presents the perception of strategic thinking from the management approach, which comprises two essential decision processes: processing and thinking. According to the article, the planning process encompasses making decisions on the appropriate systems and procedures. Conversely, the thinking process features a synthesis that encourages an intuitive, innovative, and creative thinking approach at all levels of an organization.Goldman, E. (2012). Leadership Practices That Encourage Strategic Thinking. Journal Of Strategy and Management, 5(1), 25–40. https://doi.org/10.1108/17554251211200437.The article delves into the incidence of organizational leadership practices within companies and how they encourage a culture of strategic thinking. According to the article, several factors determine an individual\’s capacity for strategic thought, including an organizational culture that champions strategic thinking. This works in tandem with organizational topology and the composition of teams at the workplace. The study\’s findings detailed in the article are that the two mainly used leadership practices entailed reaction to crises. Furthermore, there are numerous opportunities for business executives to bolster their utilization of leadership practices to entrench a culture of strategic thinking within their organizations.The source is a peer-reviewed journal article published by Emerald Insight, indicating its authenticity. Further, the source details a research study involving a sizeable sample size of 400 business executives to understand strategic thinking, primarily how leadership practices act as a catalyst for strategic thought within organizations. In addition, the author is an acclaimed academic in human and organizational learning, a field of study that aligns with the current interests in strategic thinking within organizations.The article\’s relevance in the discussion is in entrenching the importance of strategic thinking in formulating business strategies. Specifically, conceptualizations of strategic thinking, such as being an essential component for the development of organizational strategy, make it crucial for developing novel strategies in organizations. Hence comes the need to harness it, especially when settling on the competitive strategy of an organization.ReferencesGamble, J., Thompson, A., & Peteraf, M. (2021). Essentials of strategic management: The Quest for Competitive Advantage (7th ed.). McGraw-Hill Education.Gamble, J., Thompson, A., & Peteraf, M. (2015). Essentials of strategic management: The Quest for Competitive Advantage (4th ed.). McGraw-Hill Education.Goldman, E. (2012). Leadership Practices That Encourage Strategic Thinking. Journal Of Strategy and Management, 5(1), 25–40. https://doi.org/10.1108/17554251211200437Goldman, E., & Casey, A. (2010). Building a Culture That Encourages Strategic Thinking. Journal Of Leadership & Organizational Studies, 17(2), 119–128. https://doi.org/10.1177/1548051810369677Steptoe?Warren, G., Howat, D., & Hume, I. (2011). Strategic Thinking and Decision Making: Literature Review. Journal of Strategy and Management, 4(3), 238–250. https://doi.org/10.1108/17554251111152261Uzonwanne, F. (2016). Rational Model of Decision Making. Global Encyclopedia of Public Administration, Public Policy, And Governance, 1–6. https://doi.org/10.1007/978-3-319-31816-5_2474-1.