Business Strategies and Models

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Table of Contents

Multi Country Strategy Compared to Global Strategy
Models of Business Level Strategies
References

Multi Country Strategy Compared to Global Strategy

Any business entity requires expanding its territory and especially venturing into international markets to increase its market share. In entering new markets, a firm has to choose the best strategy to use in order to win the confidence of customers. In this regard, a firm can choose to use either global strategy or multi country strategy. Global strategy means that a firm uses one single strategy for every country that it ventures into.

This strategy is based on the assumption that the world is a global village and demand trends are more or less similar (Porter & Kramer, 2006). On the other hand, a firm may also decide to implement a multi country strategy which means that a firm comes up with a new and unique strategy for each country in which it operates.

The strategy is based on the principle that each country has a unique cultural background and therefore demand trends cannot be the same in every part. Airasia is one such company that implements multi country strategy where it partners with local investors whenever it ventures into a new market (Ko, 2009).

Implementing a global strategy gives a firm chance to benefit from economies of scale since it does not have to set up new factories and production as well as other operations can be centralized. On the contrary, production in a multi country strategy has to be customized which means that a firm implementing this strategy has to set up new production units and headquarters in every location.

Evergreen natural markets apply a more or less multi country strategy a reason as to why it maintains management of any shop it acquires (Kanter & Myres, 2012). In global strategy, a company produces standardized commodities while in multi county strategy products are produced according to the local demand specifications. In this regard, Apple Inc uses global strategy given that its products are standardized (Yoffie & Rossano, 2012).

Global strategy is applicable in cases where goods have a high global demand thus making customers less stringent on specifications. Moreover, this strategy works well in markets that are globally competitive. On the other hand, multi country strategy is applicable where local responsiveness to a product is essential (Bingham & Davis, 2012). In this scenario, multi country competition is intense and therefore each firm has to struggle and meet customer specifications as accurately as possible to remain in business.

Models of Business Level Strategies

When a firm enters into any market, it has to decide which strategy to use in driving its sales. In this regard, a firm can choose to use cost leadership strategy, differentiation strategy or integrate the two strategies. In cost leadership strategy, price is the main weapon that is used to woo customers to buy a firm’s products (Greer & Van Kleef, 2010).

In this regard, internal firm efficiency is crucial to ensure that the costs of production are as low as possible. Firms applying this strategy will have to constantly improve their efficiency not only in production, but also in research and development as well as marketing. In its initial years of entering the market, Airasia aimed at providing low cost services to its customers and it was thus applying the cost leadership strategy.

A firm has to produce at the industry’s lowest cost to survive (Ko, 2009). On the other hand, differentiation strategy involves customization of products that are produced. This means that a firm can produce goods at a slightly higher price. Value addition is vital and customers usually do not mind paying a higher amount for this.

This was the strategy that Palm used in production of its PDA and captured the market (Yoffie & Kim, 2010). In restructuring its services away from the traditional medical and surgical departments and structuring its services around organs and diseases, Cleveland clinic was applying differentiation strategy (Porter & Teisberg, 2013).

An integration of the two strategies means that a firm aims at producing specified products at the lowest cost in the market. All these strategies are meant at gaining and maintaining market share and they therefore have some similarities. To begin with, all these strategies make a firm to absorb huge costs before increasing prices to customers albeit for different reasons.

In cost leadership, firms cannot raise their prices as this will drive them out of business. On the other hand, differentiation strategy charges a higher price which makes it possible for a firm to absorb some increase in costs (Arjoon, 2005). Nevertheless, the strategies are slightly different.

While brand loyalty makes customers insensitive to price thus keeping rivals at bay in differentiation, competitors are kept at bay by price wars in cost leadership. Similarly, increase in efficiency and ability of firms to quickly come up with substitutes inhibits entrance in cost leadership while this is inhibited by loyalty in differentiation.

Communication between Upper-Level Management and Lower-Level Managers using Strategy Maps

In recent years, strategy maps have gained a lot of importance in strategy enhancement for many firms. These maps are based on the fact that pictures usually send messages better than words. In this regard, strategic maps can be defined as diagrammatic expression of the primary goals that a firm’s strategy aims at achieving. They provide a visual representation of organizational strategy and the way this will be achieved.

Therefore, strategic maps show each objective as a text and usually contain very few objectives (Amit & Zott, 2012). Moreover, strategic maps are formulated in a manner that they can easily be understood by all employees. Upper level management can use the strategic maps to organize and show which objectives should be met first and which ones can wait.

It is important to note that strategic maps aim at objectives from which measures can be derived (Edelman & Eisenmann, 2011). The objectives should be divided into various categories, those that show the desired outcomes and those that depict the means to achieve the outcomes.

Therefore, upper level management will have to give the financial objectives priority and ensure that each person in the organization understands what needs to be done (Busse & Swinkels, 2012). On the same note, upper level management can use the strategic maps to monitor the process of strategy implementation and advice lower-level management and other employees accordingly.

Similarly, upper level management can use strategic maps to focus on the objectives of the firm (Wolcott & Sawhney, 2006). Since they are easy to understand, every employee will be committed towards achieving this objectives and this will lead to good financial performance.

The Link between Structure and Strategy

There has been great debate as whether it is structure that is more important in a firm or it is strategy. Let’s take some time and define the two aspects of business. Structure of a firm incorporates all the people, procedures, processes, culture, technology and other related components of a firm (Bingham, Eisenhardt & Furr, 2011). Structure is the organization of a firm’s resources into various departments for easy and efficient production.

In a nutshell, structure forms what can be referred to as organizational business environment. On the other hand, Strategy is the general plan how resources and other inputs will be organized in order to achieve company’s goals (Yoffie & Kim, 2010). Therefore, strategy refers to the procedures that are put in place by a firm to achieve production.

In this regard, structure and strategy cannot work in isolation. Each and every new strategy will require reorganization of structure in order to achieve its aims. This was the case in Kellogg when it was designing its supply chain system (Prajogo & Sohal, 2006). In this regard, before a firm implements or even comes up with any new strategy, it should be aware of the existing structures.

In Apple incorporation, Jobs realized that the hitherto existing structures could not support his strategy and he therefore had to change the structures (Yoffie & Rossano, 2012). Strategy determines the structures that can be used while at the same time structures are crucial for formulation of strategy.

In coming up with a good strategy, a firm has to consider the structural conditions as well as the resources and capabilities. Each department of a firm should support its strategy for enhanced success. However, the departments are controlled by the firm’s structures (Kachra & Melhuish, 2011). Consequently, structure is actually an important component of every strategy. Cleveland clinic was compelled to reorganize its structures so that they could work in tandem with its new strategy.

Balancing between demands for Control and the need for Coordination

While demand differs from place to place due to various factors thus calling for product differentiation, there is need for the services of an organization to be integrated. It should be noted that this has been a problem in many organizations. However, it is crucial to highlight that balancing between the two is possible.

To begin with, the organization can come up with an organizational culture that will be the same in all branches of the organization (Porter & Kramer, 2006). This means that the organization can be able to have a uniform way of doing things in all its branches. It is important to note that organizational behavior help a lot in boosting teamwork and integration among employees (Wolcott & sawhney, 2012).

A firm can also use office management strategy where some functions of the firm are centralized. It has been noted that for organizational strategy to be achieved, it has to be coordinated from a central unit. This is why the evergreen natural markets have a centralized marketing system as well as other functions to ensure that all goals of the firm are advanced (Kanter & Myres, 2012).

It is also crucial for a firm to carry out strategy evaluation regularly to ensure that implementation of organizational strategy is as expected. Furthermore, a company can have a single training unit for all employees to ensure that they get to know what is required of them. This will also enable management to get the employees committed to enhancing organizational vision and goals.

On the same note, organizational alignment is crucial in ensuring that there is balance between differentiation and integration. Organizational alignment ensures consistence of vision among employees (Edelman & Eisenmann, 2011). Moreover, it promotes linkage between unit strategies and corporate strategy as well as objectives. Similarly, organizational alignment ensures that there is connection between customers, suppliers, joint ventures and organizational management.

References

Amit, R. & Zott, C. (2012). Creating Value through Business Model Innovation. MITSloan Management Review, 53(3), 40-49.

Arjoon, S. (2005). A Communication Model of Business: A Natural-Law Perspective. Journal of Markets and Morality, 8(2), 455-478.

Bingham, C. & Davis, J. (2012). Learning How to Grow Globally. MITSloan Management Review, 53(3), 15-18.

Bingham, C., Eisenhardt, K. M. & Furr, N. R. (2011). Which Strategy When? MITSloan Management Review, 53(1), 70-78.

Busse, M. & Swinkels, J. (2012). Enterprise Rent-A-Car. Evanston: Kellogg School of Management.

Edelman, B. & Eisenmann, T. R. (2011). Google Inc. Boston: Harvard Business School.

Greer, L. L. & Van Kleef, G. A. 2010. Equality versus differentiation: The effects of power dispersion on group interaction. Journal of Applied Psychology, 95: 1032-1044.

Kachra, A. & Melhuish, K. (2011). Rodgers Communications Inc. London: Richard Ivey Scholl of Business.

Kanter, R. M. & Myres, P (2012). Evergreen Natural Markets 2012. Boston: Harvard Business School.

Ko, S. (2009). Airasia: Flying Low-Cost with high Hopes. Hong Kong: The University of Hong Kong.

Porter, M. E. & Kramer, M. R. (2006). Strategy and Society: The Link between Competitive Advantage and Corporate Social Responsibility. Harvard Business Review, 84(12), 78-92.

Porter, M. E. & Teisberg, E. O. (2013). Cleveland Clinic: Growth Strategy 2012. Boston: Harvard Business School.

Prajogo, D. I. and Sohal, A. S. (2006). The relationship between organization strategy, total quality management (TQM), and organization performance – the mediating role of TQM. European Journal of Operational Research, 168(1), 35-50.

Wolcott, R. C. & Sawhney, M. (2006). Thomson Financial: Building the Customer-Centric Firm. Evanston: Kellogg School of Management.

Yoffie, D. B. & Kim, R. (2010). HTC Corp in 2009. Boston: Harvard Business School.

Yoffie, D. B. & Rossano, P. (2012). Apple Inc. in 2012. Boston: Harvard Business School.

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