The strategy should get altered based on the change in the context thus altered. Strategies are worked out using various tools. One of the oldest methods involved using the SWOT analysis for bringing out the strengths, weaknesses, opportunities and the Threats perceived by the company and the business2. The strategy would primarily enhance and capitalise on the strengths of the company for tapping the opportunities and to counter the threats perceived while at the same time would offset the weaknesses perceived. This would help the company to realise its objectives of enhancing the profitability of the company.
Porter's Five Forces helped the strategists to model the environment and the business is positioned in it to understand the effect of the environment. This was perceived to have been made up of the five forces that Porter projected. He further qualifies some of the approaches to strategy as generic. There are three types of generic strategies that are used by companies, employing the common economic forces that are in play in the market. These are: Cost Leadership by providing the best cost for a product or a service, product differentiation and thereby commanding higher prices and finally, identifying its own niche products for a specific product-segment thereby monopolising the entire business for that product or at least dominating it. While these strategies help the company to move forward, without a basic strategy the company stutters.
Sector Matrix Framework
It is found that the three strategies discussed earlier takes care of specific market advantages and realises the company's targets.
Figure 2: Segmentation as a strategy
As can be seen from the figure 2, the markets are created by companies which fall under any one of the strategies depicted in it, either consciously or otherwise. The perfect competition would produce low returns but would also require only low skill position since there is no new factors that have been brought in by the company in that square. Typical companies are the Chinese companies that make low priced watches. They do not aim at selling their products at a premium but selling large quantities since the contribution done by each one of them is small. Whereas, companies who have higher skill levels generally a high niche market to them and are able to segment the market for them. This creates a safe market but might not really give them the returns since these may not be a high return zone and the skills will be available elsewhere too. This fits into to some of the Swiss watch makers who did not move the times and are still reliant on their skills. This is not an unknown skill position. In contrast, the monopolistic companies tend to capitalise on their products though the skills are low. But this cannot exist forever, since there will be soon burgeoning competition that would eat out the profits of the company. Companies like Intel, IBM capitalised on such things earlier on. However, they lost on their market presence as competition started eating out into their profits.
Therefore, most companies try to achieve the fourth