Management strategies - Assignment Example

 Management strategies What is a strategy? The framework provided on page two shows that Porter’s definition of a strategy entails staying in power. This is because he describes a strategy as the means through which a company achieves its ends. Porter (2008) explains a strategy as building defenses against competitors. It is finding the position in the industry where forces are weakest and exploiting this weakness. It is combining skills, resources and competence to gain a competitive advantage. Strategies are developed to cope with the competition. Management strategies, however, are coming more quickly than ever. They are also fading at the same pace at which they are coming. Management strategies have become fashion trends. The reasons for the fading of management trends are listed in the work frame above Porter argues that elimination of competition is not necessarily the right strategy to increase the profitability and value of a company. Management is the way to enhance sustainability and put the company at a competitive advantage. The management is the leadership of a company. It is the one that makes decisions on strategies that will propel the growth of the company. The essence of strategy is to have a unique position in the industry that has been created through uniqueness (Porter, 2008). Provision of unique and valuable products and services will enable a company compete effectively with its rivals for a long time. Porter urges companies to reconnect with effective strategies have long faded rather than being carried away with trending ineffective strategies. Competitive forces that shape strategies The competitive forces that shape strategies ensure that the strategy stays in power. Competitive forces mould strategies to effectiveness and as such the strategy stays in power. According to Porter (2008), there are five forces that shape strategies. These forces determine the profitability of an industry in the long run by influencing how the economic value it creates is apportioned. These forces are: supplier power, buyer power, competitive rivalry, threat of substitution and the threat of new entry. Supplier power can determine the profitability of a company. Suppliers are the providers of raw materials, labor or other materials used in production. Suppliers have the power to drive up the prices of the inputs used in production. When the suppliers raise the prices of the input used in production, the company ends up having high production costs and this in turn reduces profit. The fewer the suppliers a company has, the more the power they have on the company and the more they determine the profitability of the business. The buyers are the consumers of a company’s product. The buyer has the power to determine the profitability of a company because they influence sales. When the buyers cease from consuming a company’s products sales will be low hence low profits. Buyers also have the power to determine the prices of a product. When a company deals with few powerful buyers, they have the power to dictate various terms of doing business such as the prices of the product. This will definitely have an impact on the profitability of the business. The business environment is very competitive in nature. Competitors can influence the profitability and value of a business. When a company is the sole provider of a certain product, they are able to sell their products at high price. The buyer is forced to acquire the product at whichever price the company sets because they have no alternative. The suppliers will also be forced to comply with the purchasing terms of the company because they have no alternative (Magretta, 2012). In a competitive environment, however, there are other companies that provide equally attractive or even better products. Suppliers and buyers can easily shift from one company’s products to another in search of a better deal. In a competitive environment the company has little or no power. Substitution may also be a threat to the profitability and value of a company. The threat of substitution is where the consumers have the ability to shift to an alternative product. When the buyers have the ability to substitute a product it weakens the power of the producer. The power of a company is also weakened by the entry of new competitors into the market. When it cost little money and time to enter and compete successfully in a market, the market is bound to be flocked with producers (Porter, 2008). This in turn reduces the value of all companies in the market as well as their profitability. Building your company vision Building a company vision is a management strategy that stays in power. This is because a vision gives a company a sense of direction. According to Collins & Porras (2002), a vision is a guide that directs a company on when to be conservative and when to change. The vision of a company must have two fundamental parts: the core ideology and the envisioned future. The core ideologies are the core values and the purpose of a company. They are what a company stands for. A company is bound to undergo numerous changes and growth with time but what holds it together is its core ideologies. A business is supposed to hold its core ideologies even when they put it at a competitive disadvantage. Core ideologies give a company purpose and values. Changing them would mean a company has no value or purpose, the company, therefore, ceases to exist. The envisioned future is what a company wants to achieve over time. It is the goal of a company. The goals of a company should be clearly described. Resources and strategies that are to be used in implementing these goals should also be available. The goals should also be time bound meaning that the company should have a targeted time frame in which the goals are expected to be achieved. Goals represent the place which a business hopes to be in the future. It is important for a company to build a vision if it wants to grow and be successful (Griffin, 2007). Reinventing your business model Reinventing your business model not only helps a company to succeed but it is also a strategy that stays in power. According to Johnson (2010), a business model may suit or hinder new opportunities for a company. It is, therefore, important for a company to reinvent its business model. This will ensure that the model is up to date with the new technologies and other factors that have emerged in the market, for example; a business that has not reinvented its model to be in line with the emerging technologies may be at a disadvantage when clients shift to its more digital competitors. The company may also loose deals or contracts because of this reason. Companies that reinvent their business models should ensure that the model has a customer value proposition. This ensures that the products and services that a company provides are better than those of the competitors. Providing quality products and services ensures customer satisfaction. The customer will also feel valued because the company has given him/her the best deal, services and products in the market. Customer value proposition also results to customer loyalty. A good business model should also have a profit formula. This shows how the company makes money as well as its value proposition, key resources and the processes used in delivering the value proposition (Johnson, 2010). Ways in which porter’s generic strategies are reflected in Capsim simulations. Porter’s generic strategies entails: cost leadership, differentiation and focus (Porter, 2008). Example 1 Cost leadership is where a company has a low production cost but still provides quality products to the consumers. Cost leadership entails providing the cheapest goods and services in the market. This can be done when a company reduces its production costs and passes on its savings to the customer (Porter, 2008). The company may implement this by sourcing for production inputs from domestic suppliers and low wage foreign markets. This reduces the amount of money used in buying the supplies needed for production. Companies that do not need highly skilled employees can implement cost leadership by hiring inexperienced employees and training them. This allows the company to reduce the resources used in payment of wages and transfer this savings to consumers. Cost leadership enables the company to sell their products at a cheap price consistently and get thin margin profits that are of high volumes. Capsim simulation shows cost leadership where its services can be afforded by both students and fortune companies. The services of Capsim simulation are affordable to all. The prices of the products are cheap making the profit margins thin but the large number of consumers increases the profit volumes (Kossowski, 2007). Example 2 Porter (2008) explains differentiation as providing products that are of high quality and that are unique. Differentiation helps a company stand out from its competitors enabling it to have a competitive advantage. A company can adopt differentiation through pricing, sales offers, research and development and in outstanding customer service. Capsim supports this strategy in all ways. Capsim simulations show differentiation where the services it provides are delivered by its employees in person, online or in both ways. This ensures that the level of customer service is outstanding because their services can be attained in any place and at any time. Capsim education also shows differentiation in that it provides business education through interactive learning. This ensures that the learners fully understand; hence, customer satisfaction. Example 3 The generic strategies of Porter (2008) explain focus as specializing in providing a certain product in the market. People are most productive when the work they do is based on their talents, strengths and passion. Focus is about a company specializing in production that is based on its strength. Specializing in production of a certain commodity helps a company build a brand as well as reduce its cost of production. Specialization also helps a company gain global recognition and as such the company can penetrate and compete successfully in any market in the world. Capsim simulation shows focus by specializing in business learning. It is known for its provision of its business education teachings from the introductory level to the cooperate level. Its specialization in business education has helped it create a brand so that each time a person hears of Capsin simulation they think about business education. Provision of online services has also helped Capsim simulation reach markets all around the world. References Collins, J. C., & Porras, J. I. (2002). Built to last: Successful habits of visionary companies. New York: Collins Business Essentials. Griffin, R. W. (2007). Fundamentals of management: Core concepts and applications. Boston,Mass: Houghton Mifflin. Johnson, M. W. (2010). Seizing the white space: Business model innovation for growth and renewal. Kossowski, A. (2007). Strategic management: Porter's model of generic competitive strategies - theory and analysis. München: GRIN Verlag GmbH. Magretta, J. (2012). Understanding Michael Porter: The essential guide to competition and strategy. Porter, M. E. (2008). On competition. Read More