Category: Recession

Introduction

Successful management in today’s business environment requires that managers understand that the concept of management involves various function and that these functions are interrelated. As such successful managers need to understand how to combine and apply each of these functions in the organization they are running.

Boddy (2002) explains that management is a wholesome process that incorporates several function such mapping, arranging, directing, controlling and learning in the process.

Mapping a management plan involves the act of clearly establishing the available organization resources and allocating them to achieve the set objectives.

This means that setting desired objectives is part of management (Ghosh and Ghosh 1991). Because managers manage people as well as resources they have to establish the best relationship with this people to establish best support mechanism.

Management is also intended for the achievement of certain objectives and as such there has to a strict monitoring process. The monitoring ensures that there is an established mechanism of control that provides learning opportunities on management.

Ghosh and Ghosh (1991) also add that since not all management is form the benefit of man, then special consideration can be given to this perspective to include the attainment of a prior set objective.

There are various approaches to management each of tem having unique characteristics. Despite the fact that these approaches have varying propositions they all congregate around Quinn et al (2003) Competing Values Framework, CVF (See appendix 1).

This model is frame work that describes the management functions as driven by a number of competing factors. It is quite a difficult task to create employee satisfaction by enhancing cooperation, unity, flexible job roles, team work cohesion amongst is maintained while maintaining rational goals.

This is because setting of rational goals is an individualistic and such destroys team work. Goal setting also involves a lot of instructions thus becoming an unreceptive and demoralizing to employees (Quinn 1988; Quinn et al 2003).

This is because internal control involves a lot of tracking and rationalization of the team as well as employees’ roles and tasks. Internal controls are characterized by skepticism and cynism that may affect employee Morales.

Moreover it also becomes difficult to have an open system in a work place that encourages innovation. Open systems require a lot of negotiated brokerage in problem solving. Internal controls do have the tendency to conflict with open systems.

Diageo Plc

Diageo plc, registered in London is the biggest alcoholic drinks company in the world in terms of sales, market capitalization as well as products range (Diageo 2011a; Wakely 2001).

The company motor is to provide an opportunity to make merry during any of the merry making occasions at any location in the world.

As such the company prides itself in having some of the world’s most famous alcoholic brands. Among many popular brands, the company brand portfolio includes Johnnie Walker, Crown Royal, J&B, Windsor, Smirnoff, Baileys, Captain Morgan, Jose Cuervo, and Guinness among many others.

Some of the company’s brands such as Guinness and Jonnie Walker have been in the market for hundreds of years while others such as Jose Cuervo have been developed in recent past to take care of an emerging market for new tastes in alcoholic drinks (Diageo 2011a).

Diageo management

Diageo is a truly global business and as such has established well grounded operation in 180 countries in all continents. Due to its expansive business the company has established operational offices in 80 countries.

To ease the manufacturing and supply chain logistical hurdles, Diageo has established d manufacturing plants in various countries in Europe, African, Asia and the Americas.

This means that the company has to employ a big number of employees to drive its expansive business. As at the year 2010 the company had managed to gather together a group of about 20000 employees who are mandated to drive the company’s dominance in the alcoholic beverage market (Diageo 2011a).

Despite the fact that the company assets fell to £5,407 from £5,650, the company’s annual profits for the period ended March 31 2011 indicates that there has been a 5% increase in sales buoyed by a 7% increase in organic net sales. In general the growth can be attributed to the company’s model of priority branding (Diageo 2011b).

Diageo SWOT analysis

Market strengths

The company presence in the market is built on a number of strengths. To being with the company has endeavored to create a comfortable working environment for all its employees thus the ensuring satisfaction of employees.

This has lead to high level employee loyalty which further leads to improved business productivity. Furthermore the company also operates on the strength domineering brands.

Diageo aims at strengthening the products brands rather than the company name brand. The company’s pricing criteria also ensures that its products are affordable (Thompson and Martin 2010). This is one of the key factors for improve sale.

Weaknesses and market opportunities

The company does have a number of weaknesses. Diageo operates on a minimal marketing budget which means that its marketing activities are at risk. Furthermore the company has not established itself well in the lucrative wine business.

The poor presence in the wines market thus provides the company with one of the opportunities for growth. This is especially true in the American markets where wines do very well. Diageo’s business is threatened by the continued effects to educate the public about the dangers of alcoholic drinks. This is being driven through aggressive public campaigns (Thach and Matz 2004).

Market threats

The company has number of threats especially due to the efforts by government to turn away from alcohol. Its market is also threatened by its gates rival in the world market SABMiller which retails recognized brands such as Castle. It market for wines is also under threat since the company has not established itself well in this market (Thach and Matz 2004).

Porters Five Forces Analysis

Competing rivalry and alternative brands

Diageo, being the leader of the world in the alcoholic beverage industry has manipulated a very large chunk of this market. The company does this through proper branding and position of its products in the market. However the existing market threats due to its tendency to operate on a modest marketing budget.

As such it faces a considerable competition in the market especially due to the fact that there are a number of companies that are offering drinks that are very similar to its own. Furthermore some of its rivals in the market such as Heineken and Carlsberg engage in aggressive marketing campaigns.

The company is countering this by having a wide range of products that cater for all consumer tastes (McInerney and Barrows 2010). Furthermore it seeks to achieve the best from its limited marketing budget.

Threat of new entry

The threat by new entrants especially in the spirits market is very low. This is because this market requires a tidy some of investment capital as well as proper market positioning, something new competitors have not managed to do. Furthermore due to the fact that there is a very low threat of subsides in the alcoholic beverage market, the company is not facing any significant challenge on that front.

Supplier power

Due to the raising prices and the extreme competition in the commodities supplies market, the company’s supplier’s power is very low. This low power is also influenced by the fact that the company operates depends on agricultural raw material such as barley, wheat and fruits.

These raw materials are produced in diverse location and the production also fluctuates. However the company can take advantage of such fluctuation and suppliers low power and buy high when the supply is high to stock up for low supply season. This will keep the cost of raw material down.

Power of buyer

The buyer power of the company’s products is moderate due to the emphasis that the company puts in maintaining affordable prices. This is further coupled by the wide range of products that the company offers.

The rising prices of beer brands such as Guinness and spirits such Johnnie Walker may not have a big impact on the buyer power due to the loyalty of Diageo consumers. As such the company is relatively safe (Gibbins 2009).

Pestle analysis

Political influence

In most of the countries that the company’s operating there is a lot of political influence in the beer market. This is because politician’s are bowing to pressure and passing laws that limit the advertising of alcohol in public.

Furthermore entry into new market is usually difficult as a result of the politics of wanting to protect already existing brands. In entering the wine market properly the company will have to do a lot of political concessions before being allowed to enter into new market such as North and South America (Diageo 2009).

Diageo business environment

The alcoholic industry environment is increasingly becoming volatile due to a number of factors. This includes the fluctuation in the supplies market occasioned by rising prices of raw materials. The environment is also affected by the ever increasing public campaigns against alcoholic drinks and as such a number of consumers have resulted to light alcoholic drinks such as wines.

The business environment is also facing a significant marketing of both alcoholic and non alcoholic drinks. Suffice to say that the company operates on limited marketing budget with the it’s limited budget

Social factors

One of the most significant challenges facing the company is the changing social preferences and the changing drinking culture in Europe.

A majority of the adult population are shifting allegiance from heavy alcoholic drinks to wines especially after meals. Furthermore, the younger generation is shifting its allegiance to non alcoholic soft drinks as well as mineral water. This is occasioned by an increasingly health conscious population (Diageo 2009).

Economic factors affecting Diageo

The current global economy is characterized by constriction in the capital markets. This means that the debt markets are increasingly becoming less liquid thus affecting the cash flow.

This is creating pressure on Diageo’s business as it is almost impossible to maintain long term strategies without affecting the growth rate targets.

Furthermore a volatile foreign exchange rate market is reducing the company’s returns. On a positive note the company heavily depends on the UK and the US markets which are currently experiencing good times. But should such markets economic experience turbulence then the company’s business is in great risk (Diageo 2009).

Technology at Diageo

The company aims to keeping with the ever changing face of technology. The company has recently improved its information delivery system as a generate business improvement strategy.

Improved information systems is also intended to avoid cyber hacking and as such reduce chances of that its information system will be corrupted from outside. Furthermore the company has acquired the latest financial management software’s to improve its financial systems.

Legal platform

In the recent pat the company has found itself with increased legal liabilities. These include meeting strict manufacture standards, product liability, supply, importation, tagging, marketing, labor related, pensions and environmental matters.

All these issue have dynamic legal requirements as well as government regulations that govern them in respective markets. The company thus esteems to meet all these legal requirements.

As such the company is always incurring extra costs in meeting new regulations in labeling marketing and advertising its alcoholic brands.

Management model at Diageo

Diageo upholds a number of strengths that its sees as the central focus in the success of the management of its global business. The company’s business process, which includes manufacturing as well as marketing, is aimed at creating worthy products brand in the alcoholic beverage industry.

Furthermore the company has bought classis alcoholic brands such as Guinness and Johnnie Walker. Diageo ensures that the brands are not just a marketing gimmick but also meets consumer preferences and taste.

As such the company sees its brands as the best way to enforce good customer relations from loyalty to its brands. Added to this is the company pricing strategies that ensure that its products are relatively affordable (Thompson and Martin 2010).

This makes sure that the consumers of Diageo’s products are not priced out of the alcoholic beverage consumption. To cater for all customers’ preferences the company has also an extensive product range such that consumers of alcoholic beverages are spoilt for choice from its offerings (Gibbins 2009). Again the company sees this as the best way to maintain best practices in human relations.

Coupled with this is the company’s effort to improve its human resource department. From the year 2006 the company has endeavored to improve its human resource management practices so as to make it the employer of choice. The basis of these strategies is two pronged.

To begin with the company endeavors to ensure employee satisfaction throughout its business operation (Thompson and Martin 2010; Ratra 2009). Secondly the company endeavors to crate a client centered human resource service provisiosn mechanism (Ratra 2009).

The company thus develops its management practices around the maintenance of the best relationship with its clients as well as its employees. Therefore from the analyzing the company, it sis evident that the dominant management model at Diageo is the Human Relationship Model

The challenge of CSR

Diageo CSR efforts go beyond philanthropy to incorporating the communities in socially beneficial initiatives that reduce the harmful effects of its business activities (Ratra 2009). Due to the nature of its business the company is presented with unique SCR challenge.

Alcohol consumption is increasingly facing a lot of scrutiny from authorities due to the possible harmful effects. The company has retaken advantage of this challenge and sees it as an asset to portray it as a socially responsible company.

In this regard the company has partner with various companies such as McLaren Mercedes F1 Team in supporting responsible drinking habits. This is an effort to positively add to the well being of the communities and consumers of its products.

Thus its CSR is seen beyond profit making (Diageo 2011c). However this challenge means that the company cannot aggressively market its alcoholic brands, thus limiting the market for its product (Thach and Matz 2004).

Impacts of the CSR challenge

The challenge of the CSR has had a significant effect on the company’s business. Its is usually a tricky affair to have a balance between meeting its CSR pledge to enhancing responsible drinking campaign at the same time realizing high profits.

This is because the company’s has engaged in various partnerships with other companies to educate the community as well as its consumer on the need to adjust the alcohol intake habits. This leads to a reduced level of alcohol intake and as such affects the company’s desired sales target’s (Diageo 2011c). Furthermore the company is against underage drinking. This means that a significant market segment is eliminated (Diageo 2011d).

Recommendations

From the competing forces framework, it is evident that the company management model is modeled along the human relations model (See appendix 1). The company can utilize other opportunities for growth highlighted in the CVF. For the example the company can embrace the open systems of manage that will ensure that its employees innovate creative products and services.

These innovations are essentially useful in the wines market that Diageo is yet to fully utilize. Furthermore the company should reinforce the internal systems control mechanism. This wills enable the company to realize maximum production from its employees.

As such the company’s manager needs to closely monitor and coordinate the company’s business processes to ensure that optimum outcomes are realized. This will ensure that the company takes care of its human relationship function without neglecting other functions of management (Quinn, 1988).

Conclusion

Management of modern organization is a complex activity as it involves a number of related activities. Such activities include planning for the company’s resources including human capital, directing, controlling, and ensuring valuable human relationships are maintained and deriving valuable lesson for future application.

This means that any successful manager must understand how these activities relate to each other to function effectively. At Diageo the company esteems itself to enhancing the best human relationship through various efforts such as strong branding, market positioning as well as its CSR initiatives.

This management model has ensured that the company maintains a leading role in the alcoholic beverage industry. However if the company is to effectively overcome the problems and challenges it faces then it has to embrace other management practices such as open system, as well as establish a more rigid internal control mechanism. This will guarantee the company a safer business environment.

Reference List

Boddy. D. 2002. Management: an introduction. New York: Prentice hall Diageo. 2009. Risk. Web.

Diageo. 2011a. About Us. Web.

Diageo. 2011b. Interim Management Statement for the nine months ended. Web.

Diageo. 2011c. CSR. Web.

Diageo. 2011d. Alcohol in society. Web.

Ghosh,K. and , Ghosh, A. 1991. Introduction to management. New Delhi: Animol Publication Gibbins, C. 2009. Diageo (ADR). Web.

McInerney, R. and Barrows, D. 2010. Management Tools for Creating Government Responsiveness: The Liquor Control Board of Ontario as a Context for Creating Change. Web.

Quinn, R. E. 1988. Beyond Rational Management: Mastering the Paradoxes and Competing Demands of High Performance. San Francisco: Jossey-Bass.

Ratra, A. 2009. Modern Management: Diversity, Quality, Ethics And The Global Environment. New Delhi: Global India Publications.

Thach, L. and Matz, T. 2004. Wine: a global business. Cornell: Miranda Press.

Thompson, J. and Martin, F. 2010. Strategic Management. New Hampshire: South Western Cengage Learning.

Wakely, J. 2001. The International Spirits Industry. Cambridge: Woodhead Publishing.

Appendix 1: Quinn’s CVF

Introduction

Central to all definitions of economic recession is the fact that there is a sudden reduction in economic activities that causes a frightening decrease in the level of spending. The resultant crisis eventually makes life very difficult both for manufacturers and consumers.

Consumers become more careful in spending while manufacturers have no choice but to spend heavily in advertising and marketing so as to retain their clients and even lure more.

According to Jackson (2011), economic recession will occur when two quarters or trimesters of negative economic growth are experienced. During these times, a country will record a substantial drop in the national Gross Domestic Product (GDP). Fear creeps in and both individuals and businesses are forced to considerably cut down their spending due to reduced cash flow.

When this goes on beyond the two year period, it leads to what is called a depression. Although very scary to think about, recession is seen as part of an ordinary business phase and is to be expected (Huey, 2011). Economies will normally go through a slow period and later pick up.

An economic recession will be characterized by among other things; a reduced level of employment opportunities, a slow down in consumer spending, a drastic fall in industrial production, rising cost of food and accommodation and, decreased stock market activities that to a very large extent will affect the stock market performance.

It also has negative effects like driving a country deeper into debt (Jackson, 2011). This situation can bring about very unpleasant consequences for businesses and for some situations; it may even lead to a closure of a business (Davis, 2010). Though it is not easy to precisely point out the real cause of recession, the effect is faced across the entire globe (Borade, 2011) and many are affected.

Effects of a Recession on Consumer Behaviour

According to Krishnan (2009), consumer spending on luxurious commodities is the first culprit that gets affected during periods of economic recession. Given that these are simply desires and not needs, they are mostly purchased based on a consumer’s good judgment.

Consequently, manufacturers and the marketers of such merchandise receive a terrible blow as they are compelled to give discounted offers the may result into horrifying loses. Manufacturers, sellers and consumers of these goods often end up playing games to outsmart one another.

Consumers will keep speculating hoping to see a fall in prices while on the other hand, producers and sellers will make efforts to keep prices lower and give attractive offers to customers with a hope that in due course they will be able to clear any remaining stock. The postponement by the consumers always leaves retailers at a loss as they are sometimes forced to lower prices even further (Krishnan, 2009).

Even though people will do just about anything during hopeless moments to continue existing, most manufacturers as well as marketers will choose to go against this popular belief to survive. They become more creative when it comes to dealing with the consumer.

One survival tactic employed by many businesses in times of economic recession to get consumers to buy their commodities is to create artificial shortages that later have the effect of increasing demand for goods, forcing the consumer to dance to the manufacturer’s tune (Krishnan, 2009). Usually, the retailers will purpose to keep only a small quantity of the luxurious goods in stock and in this way, they are able to greatly influence consumer behaviour.

The fake shortage creates panic among consumers and they are duped to think that there is a real scarcity. They are therefore, coerced to rush for commodities fearing that they might not be able to see them for an indefinite period of time. Using this approach, producers ensure that they are able to sell their products.

Borade (2011) argues that consumers must take a hard line stance when budgeting in the face of economic recession. There is a need for carefulness in planning on the part of the consumer. It is also important that one consolidates assets besides reducing liabilities as much as possible.

Some suggestions that have been fronted when it comes to dealing with economic recession include; exchanging one’s savings for gold or silver, drawing a clear distinction between commodities that one cannot do without and desires or wishes, bulk buying and being able to store items that can stay for much longer durations, changing from the use of fuel guzzlers to much cheaper cars and avoiding the use of plastic money (Borade, 2011).

According to Huey (2011), consumers during economic recession will more often than not, take time to figure out the best way to ensure that they can benefit more from use of their money.

Impact of a Recession on Sellers

Davis (2010) observes that when sales go down, the manufacturer is bound to also go slow on employing new staff or may stop employing altogether. A number of important undertakings such as carrying out research and development, introducing new products into the market or purchasing new equipment to strengthen operations will also suffer.

Expenditures meant to go into advertising and marketing will are subject to huge reductions. These cost cutting measures in the end negatively impact on other businesses that supply big manufacturers with goods and services (Davis, 2010).

Davis (2010) further argues that as revenues decline, and this is reflected in financial reports, the stock price may go down leading to decreased dividends available for shareholders. This development could upset the shareholders and the result will be loss of confidence in the existing team of management.

The advertising agency offering services to the affected company will also be rendered jobless while internally, the advertising and marketing team may face extinction. Valuable shareholder may settle on selling their shares in the company to reinvest in other better performing stocks (Davis, 2010).

According to Huey (2011), manufacturers and consumers cut down spending causing throwing marketers into a panic. With marketing budgets being reduced, it becomes very critical that marketers reconsider their marketing plans so as to continue living even beyond the recession.

The firm may also end up being bankrupt and this will eventually damage its credit rating hence preventing any additional borrowing (Davis, 2010). The business may resolve to lower the number of employees and the result of this may be overloading the remaining small number of employees with work. Fears of more job loses could demoralize the remaining staff (Davis, 2010).

Quality of goods and services during economic recession may suffer greatly due to attempts to cut down costs (Davis, 2010). Spending less money on advertising and marketing means that consumers are not made fully aware of the firm’s products and also advertising firms will face the risk of business loss as there will be no money coming their way.

In the study by Huey (2011), all marketers should be familiar with four major trends that influence the success of marketing activities. If well understood, this will greatly help marketers to engage in marketing operations that work during recession. Rather than respond in an emotional way to situations in times of recession, it is recommended that marketers should be tactful in marketing their commodities (Huey, 2011).

Research undertaken showed that during recession, manufacturers who opted to increase their marketing expenses realized growth in their sales revenue far much higher than those who chose to reduce advertising costs (Huey, 2011). By increasing their marketing activities, these manufacturers also benefited by seeing their market share experience an upward rise.

Conclusion

Without adjusting marketing strategies to address the new market environment during recession, a company is bound to suffer significantly. History has it that those companies that do not shy off from aggressive marketing end up raising both sales and market share leading to high long term profits.

Any company that seeks to cut down spending on either advertising or marketing loses out on opportunities for growth. Such a company may suffer even more after the recession is over. It is therefore very necessary that manufacturers take time to think before resolving to trim down important expenses such as those that support marketing operations (Huey, 2011).

It is also essential for marketers to understand consumer behaviour so as to devise the strategies to battle it out in the market place. Following the traditional approach to marketing will be a sure way to destruction.

References

Borade, G. (2011). How to Survive an Economic Depression. Web.

Davis, M. (2010). The Impact Of Recession On Businesses. Web.

Huey, C. (2011). Recession Marketing – 9 Survival and Growth Strategies. Web.

Jackson, J. (2011). Economic Recession – Impacts of Economic Recession on Employment Nowadays. Web.

Krishnan, R. H. (2009). Influencing Consumer Behaviour – Retailers Respond to Recession. Web.

Introduction

Since its inception, RONA has managed to dominate the Canadian Hardlines market by establishing a comprehensive distribution network. The stores operate under different formats and sizes. RONA focuses on nurturing a high level of flexibility and adapting its stores to the diverse customer needs. The firm witnessed remarkable growth from 2000 to 2006.

One of the factors that enhanced the firm’s growth is the incorporation of a rapid expansion strategy. The firm’s sales revenue increased from $ 1,289 million to $ 4,552 million during this period, which represents a relatively high growth rate.

Problem statement

Despite its strong financial performance, RONA was affected adversely by the 2007 recession. First, the firm experienced a decline in the rate of growth in some of its Canadian markets such as the western region, which was occasioned by a decline in the consumers’ purchasing power. The level of consumer spending on home improvement declined considerably.

Furthermore, the firm’s performance exacerbated after the decline in demand within the automobile industry. The prevailing market trends also presented a major challenge in the firm’s survival. Consumers were increasingly focusing on the service level provided rather than the store format or size. Moreover, consumers were becoming environmental conscious in an effort to minimize the occurrence of climate change.

In a bid to survive in an environment characterized by a high rate of climate change, RONA was required to adjust its operations to align with the changing consumer behaviors. One of the strategies that the firm had to implement entailed integrating the concept of sustainable development.

In addition to the above challenges, the industry experienced a high rate of technological change. Therefore, its ability to achieve competitive advantage amidst the challenges faced depended on the extent to which it adjusted its operational processes.

Analysis

Organizations are exposed to different challenges emanating from the macro and microenvironments. Examples of such challenges arise from market changes such as increase in the intensity of competition and change in consumer purchasing behavior. The challenges might affect the competitiveness of a firm adversely if effective strategies are not implemented.

It is imperative for organizational leaders to develop a comprehensive understanding of the internal and external business environments. Gaining such insight forms a strong foundation in organizations’ effort to deal with external and internal changes. This can be achieved be achieved by integrating different internal and external market analysis models. Below is an analysis of RONA’s internal and external environments.

External analysis

The level of competition in a particular industry is subject to the changes in the competitive environment.

Conducting a structural analysis of a firm’s industry is an important source of insight to organizational managers in their quest to ensure that their organizations achieve the desired competitive advantage (Henry, 2011). The Porter’s five forces is one of the frameworks that an organization can integrate in evaluating the industry.

Threat of new entrants

The Canadian hard-lines industry is characterized by low threat of new entrants courtesy of the high cost of entry. A number of big box companies such as RONA, which have successfully established their operations in the market, dominate the industry. RONA has a strong market position in Ontario and Quebec.

By 2009, the firm was ranked second amongst the big-box stores with regard to sales.

Buyer bargaining power; [low to moderate]

A large number of consumers characterize the Canadian market. Secondly, few big-box retailers pose a threat to RONA’s operation. The few big-box retailers in the market [Home Depot, Canadian Tire Corp., and Home Hardware] do not offer services similar to those offered by RONA.

The large number of customers coupled with the high demand in the Canadian hard-lines market makes it hard for consumers to push the price down (Richard Ivey School of Business, 2009).

Supplier power [low to moderate]

Most suppliers in the Canadian hard-lines market do not have a substantial advantage. Subsequently, their operations do not have a substantial effect on the product prices.

The firm’s large size has significantly diminished suppliers’ power. RONA can easily control the price of its products. RONA has over the years concentrated on developing a strong relationship with the suppliers. Therefore, the firm’s relationship with its suppliers may be affected if it shifts to other suppliers.

Threat of substitutes [low]

There are relatively low substitutes to hard-lines products in Canada due to the few retailers in the industry. In its quest to minimize the threat of substitute, RONA has integrated a comprehensive product differentiation strategy.

Degree of rivalry [medium]

RONA faces competition from a number of big-box stores such as Home Depot, Kent, Canadian Tire Corporation, and Lowe’s Canada. Despite the intense competition, RONA has been in a position to differentiate its product and services successfully. The flow chart below depicts a summary of RONA’s industry structure.

Internal analysis

VRIO Framework

Developing sufficient competitive advantage is critical in an organization’s effort to attain long-term survival. Integrating the resource-based view [RBV] is one of the avenues through which an organization might achieve the desired level of competitive advantage. This goal is attainable by basing the competitive advantage on rare, valuable, organizational, and inimitable resources.

Valuable

Cardeal and Antonio (2012) argue that the ability of an organization’s resources to create value is dependent on their capacity to facilitate the formulation and implementation o operational strategies that will contribute towards attainment of a high level of efficiency and effectiveness.

One of the most evident attributes that give the Canadian hard-lines’ market a high value is that more than 80% of all home in Canada are more than 15 years old. These houses require major renovation in the near future, which indicates a high market potential for hard-lines companies such as RONA.

A large number of baby-boomers, who are nearing their retirement age, currently characterize the Canadian population. A significant proportion of Canadians within the baby-boomers age group consider renovating their homes as a worthy hobby.

Furthermore, a significant proportion of the baby-boomers prefer the Do-It-For-Me model. This aspect presents a perfect opportunity for RONA to increase its sales revenue by offering installation services, which were launched in 2005. Therefore, the market fundamentals are appealing.

The store also creates value by integrating a flexible operational strategy by integrating different formats and ownership structures. Its strategy to pursue the independent dealers has substantially enhanced the firm’s value. The organization has recruited approximately 5,000 dealers in Canada who account for 54.6% of the market (Richard Ivey School of Business, 2009).

In an effort to improve its financial performance, RONA has formulated an effective strategy to enable the dealers improve their performance. This has been achieved through integration of a comprehensive employee training and motivation program. The strategy has played a fundamental role in improving RONA’s operational efficiency and market dominance.

Rare

In an effort to attain differentiate itself, RONA considers its stores distributed in different parts of the country as a product. The decision to adopt this strategy was necessitated by recognition of the view that the store layout plays a critical role in promoting customer experience (Kazmi, 2008).

RONA is ranked as the first Canadian Hardlines retailers to show its commitment towards replacing its big-box store format in an effort to cope with the changing consumer attitude.

RONA focused on improving its store ambience by integrating effective store designs by ensuring that the stores were decorated effectively, well lit, and spacious. Furthermore, the firm also integrated appealing signage in an effort to direct customers within the store.

Adopting eco-initiatives is another strategy that allowed the firm to attract customers. This strategy is in line with the change in the consumers’ perception on the importance of protecting the environment by minimizing greenhouse gases’ emissions.

The firm has also integrated other programs such as the RONA by Design, RONA-certified professionals, and RONA Project Guide, which are aimed at providing optimal level of customer service.

Inimitable

RONA has adopted a comprehensive differentiation strategy in an effort to distinguish itself from competitors. The firm has based its competitive advantage on the services that it offers to its customers. The firm has developed an employee-training program in an effort to ensure that its customers receive high quality customer services. The training program has led to the adoption of best practices within its workforce.

Organization

The firm has based its operational processes on the prevailing market conditions. For example, the firm has exploited the Do-It-For-Me attitude amongst the Net Geners by developing an Installation Service as one of its products. Furthermore, the firm has taken into account the factors that influence the Canadian consumers in their buying process.

RONA has identified the female gender as one of the major determinants in the purchase of household products in Canada. Subsequently, the firm has targeted women by creating a ‘feminine friendly environment’. The firm presents its products in boutiques. Therefore, the firm has successfully influenced the female gender.

SWOT Analysis

The chart below illustrates a summary of the firm’s strengths, weaknesses, threats, and opportunities

Financial analysis

The Canadian Hardlines industry was affected adversely by the recession. Most consumers experienced a decline in their purchasing power due to loss of employment. The recession led to a decline in the level of uncertainty regarding the country’s future economic performance (Grusky & Western, 2011).

The level of confidence amongst the Canadian consumers declined from over 100, in January 2002, to below 70, by January 2009. Despite this decline, RONA was in a position to sustain a relatively high financial performance during the period (Richard Ivey School of Business, 2009).

The chart below illustrates the firm’s performance with respect to sales from 2005 to 2009. From the chart, it is evident that RONA had a relatively strong performance compared to other firms.

The firm is focused towards improving its makret dominanace by increasing its makret share. Subsequently, the firm estimates its desired financial position for a particular year. The recession affected the firms ability to attain the set target. The figures below illustrate the estimated and the actual sales and makret share during the period ranging from 2007 to 2008.

Furthermore, the firm was not able to achieve its sales target in 2007. However, its sales revenue increased to $ 40.3 million because of adoption of an optimal operational and marketing strategy.

RONA had a strong financial performance during its growth phase. Its net income increased from $18 million in 2000 to $190 million in 2006. However, this performance was affected by the recession. Its net income declined to $185 million and $160.2 million in 2007 and 2008 respectively. The graph below illustrates the firm’s performance with regard to net income from 2000 to 2008.

The recession had adverse effects on the firm’s cash flow. For example, its net change in cash flow in 2007 and 2008 was $ 9,480 and $ (55, 620).

Evaluation of alternatives

In its quest to stimulate financial performance during and after the recession, RONA intends to implement two main programs, which include the PEP and the Recovery programs. Re-launching the PEP program will focus on improving the firm’s level of productivity, profitability, and efficiency. In a bid to achieve this goal, RONA will be required to undertake a number of projects, which include

1. Improve the level of profitability in its corporate store network
2. Optimize its supply chain
3. Improve the recruitment of independent dealers
4. Promote customer loyalty

Despite the view that implementing the PEP program would contribute towards development of RONA’s competitive advantage, the firm will incur high cost in the process of implementing the projects.

The financial analysis shows that RONA is experiencing a challenge in its financial performance due to the recession. Thus, the likelihood of the firm facing a challenge in its quest to re-launch the PEP program is high (Richard Ivey School of Business, 2009).

Adopting the recovery program is more effective in enhancing the firm’s ability to deal with the recession. The recovery program would enhance the firm’s ability to stimulate its growth vectors, which had been distracted by the recession.

Furthermore, implementing the recovery program will stimulate the firm’s business model. For example, the firm will be in a position to venture into new markets by establishing independent dealers. Subsequently, RONA will improve its market dominance.

Conclusion

From the case study, it is evident that the 2007 recession had adverse effects on the performance of firms in the Canadian Hardlines industry. Furthermore, the case depicts a high market potential within the Canadian Hardlines market due to the prevailing market dynamics. One of the sources of market potential relates to the attitude of the Canadian consumers towards renovation, gardening, and decoration.

Most Canadians consider decoration, renovation, and gardening of their homes as an important component of their hobbies. This trend is mainly evident amongst the baby-boomer. Furthermore, most Canadians, especially the baby-boomers have adopted the DIFM model, which presents a perfect opportunity for RONA to expand its market with regard to the provision of installation services.

The case study further shows that RONA can improve its competitive advantage by focusing on its internal and external business environments. RONA has optimally positioned itself in the Canadian market. Therefore, the firm should focus on improving its competitive advantage. The firm can improve its competitiveness by focusing on its differentiation strategy.

One of the ways through which the firm can achieve this goal is by integrating the concept of new product development. However, the success with which the new products penetrate the market will depend on the quality of the market research conducted. The product or service developed should align with the customers’ needs, tastes, and preferences.

The VRIO framework shows that RONA has the capability to recover fully from the recession. However, this aspect will depend on the effectiveness with which the firm exploits its internal capabilities and resources.

Recommendations

In order to deal with the recession successfully, RONA should consider the following

Open the recovery program– the firm should mainly focus on implementing the recovery program rather than opening the PEP program. The rationale for selecting this decision is based on the view that the firm has already developed sufficient competitive advantage.

Subsequently, it is imperative for the firm to leverage on its strengths in order to improve its share price. Implementing the recovery program will improve the firm’s sales, which had declined substantially. The case analysis also shows that there is a high probability of an upturn in the Canadian’s economic performance. This projection further diminishes the probability of implementing the PEP program.

Market expansion- the analysis shows that RONA has mainly concentrated its operations in Canada. The firm should consider expanding its operations by integrating the concept of internationalization. However, the firm should conduct a comprehensive market research in order to identify the markets with the highest potential.

Implementation

RONA should adopt the recovery program. However, the program should be implemented in phases. For example, the first phase should have commenced in 2009 to 2011. Secondly, RONA should focus on enhancing its growth vectors.

Recruiting additional dealers and increasing the firm’s comparable sales should be the first stage and should be undertaken concurrently. This process should be undertaken between 2009 and 2010.

Some of the activities that should be undertaken during this phase entail providing customers with value added services and renovating 20% of its store network within one year. This move will contribute towards improving the firm’s operational efficiency and effectiveness.

The second phase of recovery should entail constructing additional stores and seeking more Hardlines firms to acquire within and across the borders. The rationale for implementing these projects in the second phase emanates from the view that the firm will have generated additional revenue to implement them.

Mostly, firms fail in their implementation strategies due to lack of enough resources, but given that the implementation comes in the second phase, RONA will be prepared and readily equipped with the necessary resources.

The firm should conduct a comprehensive market research in order to identify the markets with the highest potential. Furthermore, the firm should consider acquiring firms with a high degree of fit with RONA, which will aid in minimizing integration challenges.

Reference List

Cardeal, N., & Antonio, N. (2012). Valuable, rare, inimitable resources and organizations. African Journal of Business Management, 6(37), 10159-10170.

Grusky, D., & Western, B. (2011). The great recession. New York, NY: Sage.

Henry, A. (2011). Understanding strategic management. New York, NY: Oxford

University Press.

Kazmi, A. (2008). Strategic management and business policy. New Delhi, India: Tata McGraw-Hill.

Richard Ivey School of Business: RONA Inc.-dealing with recession. (2009). London, UK: University of Western Ontario.

The present article dwells upon effectiveness of recession planning. Buhler (2008) notes that contemporary companies are facing numerous issues associated with human resources management. The author stresses that there is a war on hiring talented employees and keeping them working in the company. Buhler (2008) also points out that baby boomers retire at an unprecedented pace and companies are losing key players without having effective successors. Therefore, companies having succession plans have significant advantage as they do not find themselves in situations when they need to find an effective employee within limited period of time. Buhler (2008) stresses that some companies have a recession plan for executive positions, while almost 40% of companies do not have any plan at all.

The researcher admits that development of a recession plan as well as identifying talented employees can be a difficult task for a HR professional. Therefore, businesses can address other companies (e.g. consultants) to help them. Importantly, employees’ knowledge is crucial and it is acquired during years. Thus, retirees need to transfer their knowledge to their future successors. Buhler (2008) provides a couple of strategies to exploit. In the first place, the author emphasizes that employees should get continuous training. HR professionals should also repeatedly monitor talents within the companies. Buhler (2008) also adds that recession plans developed should be comprehensive and consistent. It is possible to provide external development to talented employees.

Finally, retirees should work side by side with their future (or possible) successors transferring their knowledge. Buhler (2008, p. 21) notes that this cooperation is a win-win situation for both retirees and his/her successors as successors get priceless knowledge while retirees “phase in their retirement lifestyles”. The company also benefits from such cooperation as all the positions are occupied by knowledgeable and experienced employees.

1. I totally agree with the article content as I also think companies should have proper succession plans. Effective succession plans enable companies to function efficiently even if/when some employees leave or retire. I also agree that employees should be aware of the plan and understand that there is a career path for them. This will make employees more motivated and committed to remain in the company. Of course, the plan must be structured and it should address peculiarities of each position, at the same time.
2. The information provided is consistent with my prior knowledge as I have already read a number of articles on the matter. Besides, a lot of companies have efficient succession plans. These companies are leaders in their niches, and this proves effectiveness of such planning.
3. I will definitely apply what I learned as this will help me be an effective HR professional. I will develop (or participate in the development/review of) an appropriate recession plan for the company I will work for. I will pay special attention to key position, though I will also make sure other positions are included into the plan.
4. I would recommend reading this article to HR employees, executives, educators and students as all these groups will acquire certain knowledge which will help them be more efficient and successful. The article reveals effectiveness of a succession plan and provides some insights into the plan’s implementation. It also makes managers (or future managers) pay attention to an effective way to address one of the most burning issues in the business world.

Reference List

Buhler, P.M. (2008). Managing in the new millennium. SuperVision, 69(3), 19-22. Web.

Executive Summary

The present report deals with the analysis of competitive strategies employed by market leaders in the period of recession, and aims at establishing the value and significance of competition as an aspect of organizational functioning in the global market. The hypothesis on which the work is based is that competitiveness is one of the most important features that predefine the firm’s survival in the recession period; therefore, the ways competition is conducted, the strategies employed for the sake of achieving a competitive advantage, and the theoretical fundamentals for their evaluation are considered in the framework of the present report. The difference between common competitive strategies and the ones employed during the recession is also seen as a distinct focus of the present report.

The assumption guiding the present work is based on the fact that economic activity during the crisis is conducted differently from the favorable economic environment. There are some specific market characteristics distinguishing the recession market from the normal one; slow market growth, decreasing consumer demand, growing costs and a threat of bankruptcy – all these factors produce their inevitable impact even on the most stable and prosperous companies in any market segment. Therefore, they have to respond to the changing market conditions for the sake of retaining their market share and surviving in the turbulent climate of recession.

The new competitive strategies employed specifically for the sake of survival and growth in the hard economic times represent a different strategic management effort. Hence, their evaluation, as well as the estimate of their success will help identify the potentially favorable ways of conduct for firms finding themselves in a critical economic environment, and will help evaluate the true significance of pursuing a wise and balanced competitive strategy during the recession. Though there is no unified recipe for all companies, the components of a successful competitive blend have to be known for the sake of making one’s strategy sound and unique.

It is very hard to grasp the scope of competitive strategies in the whole global market, so the task of the present paper was to focus on a specific market segment to evaluate the competitive efforts of three companies. The chosen sector is the high-tech industry in which the consumer demand and impact of product innovation reveal themselves to the greatest extent. The companies chosen for the analysis of competitive strategies were IBM, Intel, and Microsoft. The reason for the present choice was dictated by the stable leading position of all of them in the modern global high-tech market, the wide scope of their outreach, and the diversity of their appeal to customers, suppliers, and partners. There is no surprise in the fact that all of them also felt the disastrous impact of the recession; however, each of them employed its own responses to the critical market conditions.

The present work utilizes the framework of Porter’s competitive strategy analysis as the chief way of assessment; the reason for this is that the majority of strategy classifications derives from, or is based on, the Porter’s classification. It has acquired the name of the list of generic strategies, and it is effective to start competitive analysis from it for the sake of identifying the core strategic endeavor. However, some secondary strategies have also been detected, since the modern strategies become more dynamic, diverse, and stratified, which is hard to reveal through Porter’s analysis. On the basis of this comprehensive analysis, the researcher arrives at a set of effective conclusions regarding the implications of competitive strategies as key variables in the market success, and comes up with a set of recommendations on how to employ competitive strategies for the enhancement of the competitive advantage in the market.

Introduction

Business Operations during Recession

The present epoch in terms of economic and business functioning is marled by many specific challenges resulting from the deep, large-scale economic crisis that stroke the world several years ago. Therefore, the new economic conditions dictate innovative operation and management requirements, and business owners, managers, and experts are obsessed by producing a new set of recommendations on how to successfully function in the contemporary business environment. The economic recession evident worldwide, and even the most advanced countries suffer from the slow market growth and falling customer demand. Hence, there is an urgent need to design new strategies for survival and success in the highly competitive and challenging market during the recession.

In order to realize the ways of adjusting to the pressing recession-related issues, one has to acquire a clear idea of what recession is, in which way it influences the market operations and competition, and the role of competition and competitive strategies in the business success. The fluctuations of the economic performance in any country are a normal phenomenon, as every state experiences its rises and falls, and the stable, steady economic growth is a very rare tendency in the global and national economies. Economies develop in a business cycle, and the first signs of a recession may be manifested by two or more consecutive periods of GDP decline instead of growth (Pricle, Hughes, & Kapoor 2011, p. 20). These periods are also characterized by the reduction of buying power and unemployment growth. In addition to these negative processes, the recession also produces an in-depth effect on the population at the psychological level, and recessions are also accompanied with essential reduction in consumer and business spending. The reason for this is that under challenging conditions, stakeholders become value-conscious, and do not frivolously spend their money for useless or insignificant items (Pricle, Hughes, & Kapoor 2011, p. 20).

However, the secret of business success is to realize not only the drawbacks of the recession, but to understand that this period can also provide the firm with additional competitive advantages and possibilities to strengthen its position in the market. Lamb, Hair, and McDaniel (2010) claimed that the recession is an excellent period to build a market share, since competitors are struggling for survival, and are less concerned about strategic choices and plans (p. 327). Some strategies used under the conditions of recession are the value-based pricing (VBP) model and bundling/unbundling. The VBP model suggests that the companies should explicitly explain to their customers that they pay a fair price for the products they buy, while the bundling/unbundling practice refers to uniting products in packages at more favorable prices, and to disjoining the products to make the price of each item more affordable (Lamb, Hair, & McDaniel 2010, p. 327).

These are only a few strategies applied in the period of recession; as well as all other competitive tools, they follow the philosophy of providing lower prices to customers. However, price reduction cannot come without paying a price by the business owner, and this price is usually the reduction of costs. To make it not at the expense of the product quality, businesspeople have to rethink their attitude to business relationships they used to have. Thus, they may reduce costs by renegotiating contracts with suppliers for the sake of more favorable conditions (at least temporarily), offering closer collaboration for suppliers by means of mutual help, and reconsidering the number of suppliers, i.e., choosing few of them for the sake of better and more favorable business relations for both parties (Lamb, Hair, & McDaniel 2010, p. 327).

As one can see, there are multiple approaches to conducting business during a recession; all of them can be individually tailored for the needs of businesspeople, and not all of them fit to every individual situation. The task of prime importance for any business facing tough market conditions during a downturn in the national and global economy is to consider resources, to identify the competitors, to produce a thorough analysis of the market, and to think over a strategy that will help them not only survive, but also retain profitability and business success in the challenging environment.

The hypothesis pursued in the present report is that the competitive strategies play a highly significant role in the survival of companies in the global market during the recession; each successful company has a competitive strategy to outperform its rivals, and a thorough analysis of the ways companies achieve the competitive edge will help identify the core directions for action in case of challenging market conditions. The recession affects all stakeholders of the economic process, including business owners, employees, and customers. Consequently, the competitive strategies employed should consider all aspects of competition, and should combine them effectively in order to make the firm a success. The most popular competitive strategies, principles of their generation, and procedures of their implementation are the topic of the present report.

Competition and Competitive Strategies

The core essence of competition for market participants is to provide products and services to meet the customers’ needs. Therefore, the goal of competitors is to struggle for potential customers with rivals who produce similar products (Pricle, Hughes, & Kapoor 2011, p. 21). As Rhodes and Shelter (2010) noted, the main characteristic trait of the recessive market is slow market growth; hence, the successful management of a company leading to the retention of its position in the market should involve rethinking the managerial strategies in general (p. 151). The battle for the market share is different during the recession, since the competitive rules are completely distinct. The strategic managers have to think about the market share growth for their company, but not for the growth’s sake – it should be a well-thought-over decision aiming at attracting and retaining talented employees in the company for its development and advancement (Rhodes & Shelter 2010, p. 152).

It is essential to consider the market drives that produce their direct impact on the market competition; according to Hitt, Ireland, & Hoskisson (2010), they include market commonalty and resource similarity shaped by awareness, motivation, and ability (p. 135). Awareness of the company refers to body of knowledge possessed by a company and presupposing any competition-related response or action. It denotes the degree to which competitors comprehend their dependence on rivals; it is usually reciprocal, and it shapes the competitive actions in the market and strategies generated by companies (Hitt, Ireland, & Hoskisson 2010, p. 135). It also denotes the extent to which the company is aware of the consequences of its competitive activities; therefore, lack of awareness brings about risky actions that harm all market participants.

As for the motivation for competition, it refers to the firms’ incentive to involve in active competitive activities. It also refers to the possibility of the company to respond to the attacks of competitors, and depends on the prior evaluation of perceived gains and losses that may be the result of competitive struggle (Hitt, Ireland, & Hoskisson 2010, p. 136). Finally, the ability drive denotes the resources and flexibility of the company to compete in the market. The more resources the company has, the more eager it will be to compete actively; the fewer resources it has, the slower the response to the competitive actions of rivals will be (Hitt, Ireland, & Hoskisson 2010, p. 136).

In terms of intra-organizational activities, the core drives for companies during a recession are to achieve sustained differentiation and to involve charismatic leaders in the operation process. The piece of advice that Rhodes and Shelter (2010) gave was that the leaders had to walk the floor and become visible for regular employees, thus strengthening the corporate culture, commitment to corporate goals, and company loyalty in employees (p. 154). Other steps to take are to drive results (ensure constant monitoring of business processes at all stages of their completion, not only their results), to invest in affiliation and retention, and to consider the changing nature of globalization that requires changing the attitude to business on the whole (Rhodes & Shelter 2010, pp. 156-159).

There is no evident recipe for survival for the companies to successfully adjust to the recession conditions; however, there is a set of recommendations that entrepreneurs, managers, and company owners have to consider in the recession period. For example, Bate (2009) advised to involve in education about money, and not only for managers responsible for fund allocation, but also for the regular staff to understand the nature of transformations the firm is likely to suffer. Mate (2009) also suggested that business owners should stop doing deals and involve in the search of real, good customers; should build good relationships with their bank and suppliers; should manage costs effectively, should review their operations carefully to identify and eliminate waste; should access extra funds (loans, leasing opportunities, investment, etc., to keep the business going); and should use the Internet as a powerful and cheap source of eliciting and disseminating information (Bate 2009, p. 8).

Ferrell, Fraedrich, and Ferrell (2010) suggest the business willing to survive to have a look at another side of competitive advantage – the size of the business. It is true that the size gives advantage, and businesses can benefit tremendously in case they involve in economy of scale (Ferrell, Fraedrich, & Ferrell 2010, p. 97). Though there is much effective legislation protecting fair trade and competition in the US market (e.g. antitrust laws – the Sherman Antitrust Law of 1890, the Clayton Act of 1914, etc.), economies of scale, if not overused, represent the sound competitive strategy and promise higher yields, lower costs, and a more stable position for the company in the turbulent recessive market.

One more option to enhance the competitive advantage in the period of recession is to rethink the attitude to rewards and compensation systems; it is evident that companies try to employ cost-saving strategies during hard market times, so they cannot raise salaries of pay more to their employees. However, in case the emphasis in the firm is made on the long-term financial outcomes, the rewards are given for relative performance (outperforming rivals), measurements of performance are conducted in the aspects that workers can influence directly, and focus is made on value creation, there are much higher chances for achieving deeper involvement and stronger commitment of employees even during the recession (Rhodes & Shelter 2010, p. 162). In addition, strong leadership and involvement in experiments and trial runs even under the scarce fund availability contribute to the successful competition in the recession period.

The overall requirement for companies operating in the unstable and slow market is concisely stipulated in the work of Paley (2006) – to strategize, innovate, and act with entrepreneurial will (p. 398). There is no doubt then that the competitive strategy plays a key role in the formation of the advantage of a company in the market at any time. However, the periods when companies struggle not with each other, but for survival, having a strategy may become a clue to the long-term success in the times of commonplace failures and downturns. The advice to innovate directly refers to the competitive advantage as well; the majority of companies attempt to reduce costs, so their innovation, research and development, and risky pilot studies come to a halt for the sake of preserving the assets already in work. Therefore, pursuing innovation may be a highly risky affair, but at the same time it may be a sure way to achieve leadership in a certain market sector.

Finally, the entrepreneurial skills of company management are essential for all times, but they become highly topical for critical periods of slow market growth and demand reduction. The effective entrepreneur will always reconsider the financial assets of the company to adopt thoughtful strategies for funds’ allocation; the entrepreneur should also utilize facts about his or her firm considerably – assessing both money facts and direction facts referring directly to the identification of the strategy for the firm (Bate 2009, p. 18). It is only the entrepreneur who can scale up his or her decisions (taking a holistic view of the organization, neglecting the troublesome trifles that impede effective decision-making), and can balance the present and the future of the firm. Seeking for a combination of logic and intuition is indeed a correct strategy for the entrepreneur, since the entrepreneur is solely responsible for the direction the firm will take in the recession, which is a turbulent and unpredictable period when logic does not always work successfully.

Nonetheless, as Porter (1998) emphasized, the competitive strategy cannot be generated without paying proper attention to the industry analysis, competitive analysis, and strategic positioning of the company (p. ix). Israel (2008) noted the transition to more dynamic theories of competition popular nowadays, which is also essential for the competitive analysis. There is no way to an effective strategic management solution without thorough research, analysis, comparison, contrast, proper account for the role of rivals and customers in the market, and search for effective decisions. The strategy may be defined in theoretical terms, but it is still incomplete. As Vickers (2006) noted, the strategic plan should be translated into action; before the action plain is implemented, there is no use speaking about a strategy at all. Therefore, the present paper will identify both the strategies of three technology market leaders (IBM, Intel, and Microsoft), and the action plans involved in their implementation.

Methods

The present study will deal with the comparison and analysis of competitive strategies employed by three computer and technology companies by means of conducting the case study research. The choice of the present method has initially been determined the breadth of the research question. According to the opinion of Swanborn (2010), the case study approach is appropriate in case the research question is rather broad, and refers to certain social processes. The main groups of variables in concern are people’s thoughts, opinions, perceptions, experiences, and values, which is rather hard to identify through other, more precise methods of scholarly inquiry (Swanborn 2010, p. 25).

The present report focuses on the case study method due to the scope of outreach planned for the present study; it is true that the majority of studies in management, marketing, and strategic planning rely on surveys and quantitative methods more heavily. However, as Woodside (2010) noted, there is a clear observation about 95% of mental processes occurring at the subconscious level of people. Hence, they appear simply unable to assess their attitudes, opinions, competencies about the issue of interest as adequately and fully as the researcher needs. In addition, surveys usually receive less than 20% feedback in the companies to which they are e-mailed, which impairs the internal validity of the sample. Finally, the case study research method enables the researcher to get an in-depth insight into the objective reality of a person, an entity, a group, etc., due to the detached view and comprehensive analysis if rich literary evidence.

Woodside (2010) also justified the usage of case study research because it enabled the researcher to assess the functioning of an entity or an organization at the level of ‘sensemaking’ and ‘meta-sensemaking’ (p. 6). The present inference suggests that the case study approach provides deep understanding of actors, interactions, sentiments, and behaviors that take place within a particular period of time and in the limited special conditions. Therefore, the sensemaking refers to the unconscious drives and decisions, the meanings objects of research attribute to certain concepts, and reasoning they find for their decisions. At the same time, meta-sensemaking refers to the “systems thinking, policy mapping, and systems dynamics modeling” in the process of research (Woodside 2010, p. 6). The present approach facilitates the holistic vision of any phenomenon, process, or entity, since it provides the researcher with the general ideas, values, and perceptions of objects involved in its functioning and development.

It is true that few case study efforts are experimental by nature, which means that the researcher can manipulate the environment he or she studies and observes. However, the strength of case studies is that they rely on contextual evidence and deductive logic of the researcher applied for the construction of inferences within a single case studied (Gerring 2007, p. 172). The distinctive feature of case studies is the process tracing technique applied for the elicitation of findings and results; it suggests that multiple types of evidence are considered, analyzed, compared, and contrasted for the sake of deriving a single inference (Gerring 2007, p. 173). The present technique compensates the limitations of the case study approach, and makes it applicable to a wide array of subjects and fields of scholarly attention.

In addition to the case study as a primary research method, the present report will utilize the comprehensive literature review and analysis of statistics pertaining the economic success or failure of companies subject to research, observation, and discussion. Thus, the findings will be substantiated by multiple sources of information to increase the validity of inferences and findings.

Aims and Objectives

The present research has one primary research aim to be pursued; it is dedicated to the analysis, comparison, contrast, and evaluation of the competitive strategies employed by three leading companies in the field of computer science and technology, namely, IBM, Microsoft, and Intel, for the sake of identifying the key advantages and disadvantages thereof. The competitive strategies will be assessed primarily according to the Porter’s five competitive forces model, but other metrics for assessment will be employed as well for the sake of producing a feasible discussion and to provide guidelines for explicit conclusions on these strategies’ efficiency in the modern market conditions.

Surely, there will be a certain time limit for the consideration of these companies’ competitive strategies, since the major focus of the present study is the current recession. Hence, data for case studies will be chosen within the 5-year time limit, and some resources may be older in order to make a comparative analysis of previous strategies and the ones employed in response to the recession conditions. Literary resources on the assessment and description of competitive strategies, the companies’ official statements, and press releases about the implementation of new strategies, and financial statistics will serve as a sound basis for the holistic assessment of competitive strategies popular in the recession period. The approach to competition in the market IBM, Microsoft, and Intel have adopted in the changing market conditions will be highly valuable for theoretical and practical research in strategic management and planning, and it will enable the researcher to compare the approaches of these three different firms for the sake of producing best practice recommendations.

Judging from the present aim and planned context of the study, one can also derive certain more specific research objectives pursued within the framework of the present study:

• To identify the unique market conditions evident for business owners during a recession.
• To assess the role of competition and competitive strategies in the market both in regular times and during the recession.
• To identify a particular market segment (computer and technology market) to assess the competitive strategies employed by the market leaders to survive and thrive during the complex economic period.
• To identify key market leading firms and to identify the competitive strategies they pursue during the recession.
• To compare and contrast competitive strategies of key market leaders in this particular market segment to identify the key characteristics of successful recession-proof strategic solutions.
• To assess the competitive strategies of the chosen key market players according to the Porter’s five forces model.
• To produce a set of conclusions and recommendations regarding the role of competition and competitive strategies in the conditions of a recession, successful competitive solutions, and specific market conditions dictating the need for competitive strategies’ adjustment and change.

The initial objectives on defining the context of the study will be achieved in the introductory part of the report, while the sector choice, firm choice, and case studies will be represented in the second part of the study. Upon a thorough and detailed assessment, analysis, and comparison of competitive strategies of three key technology and computer market players, the conclusions and recommendations for other market players wishing to succeed in the period of recession will be produced in the final part of the report.

Literature Review, Analysis and Discussion

All business sectors and all companies have always been experienced competitive struggles for superiority. The strategy of every business organization in terms of remaining alive in the particular market segment initially presupposed outperforming other companies. Hence, the basis of competitive struggle is the pursuit of gaining a competitive advantage – having something that rivals do not have, reaching the segment of customers closed for all other firms, doing something in a unique way to ensure the exclusiveness of products, etc.

The high-technology business sector also experiences similar shocks of giants competing for customers; however, the technology boom of 1990s brought about a new consideration of strategy. The modern high-technology market participants gave become aware of the central role of knowledge in their sector, and have felt the rapid changes highly typical for the high-technology markets. Therefore, they now have to take the peculiarities of the high-tech industry into account if they plan to succeed in the market and to achieve their goals, which is extremely important under the conditions of market decline and customer demand reduction (Grant 2005, p. 18).

The main features of competition in the high-tech market are as follows: format wars, disruptive technologies, network economy, and standards wars (Grant 2005, p. 18). Each of these issues produces a strong influence on the high-tech market and all its participants; for example, the format war pertains to the competition among various devices or appliances offering video, music, or computer operation in various formats. They usually occur in case there is no commonly accepted standard in the field, or the products are rather new and have not yet won the favor of customers. The network systems are the main basis for the competitive advantage in the high-tech field, since the services provided, in case the company’s network is unable to sustain the demand for them, will become less popular, and will fade out in case the network is not expanded (as in cases with wire-based phones or local internet network) (Grant, 2005).

The disruptive technologies are particularly dangerous in the field of high-tech since they may bring about the death of popular and common products just because there will be no necessity in them in the light of the coming innovation. Some of such examples may include audio tapes versus mp3-players, and VHS video tapes versus CD and DVD video. Disruptive technologies bring a change in the perception of how things may be done in a particular field; they are usually economically sustainable, and represent the superior customer value. Hence, all successful market participants should remain alert about all innovations and breakthroughs in the field, invest in them, and take an active interest in all issues related to them. The precaution is reasonable, since the new entrants to the high-tech market usually leverage from the disruptive technologies, being aware of the hardships emerging from competition in the field of well-established products (Hill & Jones 2009, p. 237).

There is much attention to all new technologies emerging in the high-tech sector, no one can be confident in which technology will become disruptive. Thus, Hill and Jones (2009) recommended thinking about how serious the impact of disruptive technologies can be on them, which paradigm shifts are occurring or are likely to occur in the high-tech market in the near future, and what strategic implications these tendencies bring for their course of action in the market (p. 231, 236). As in case of IBM, the companies may struggle for survival for years in case their products become irrelevant and outdated one day. When the focus from mainframes shifted to minicomputers, IBM had nearly a decade of problematic operation in an effort to shift to modern technologies and to regain the leading position in the market (Hill & Jones 2009, p. 231).

One more factor to focus on during the consideration of building the competitive strategy in the high-tech market is the standard-setting capability of the company. The technical standard in the technology field, according to Hill and Jones (2009), is the “set of technical specifications that producers adhere to” (p. 211). There is a confident path to product differentiation in setting standards for the overall industry, since compliance with standards guarantees compatibility of equipment, and ultimately results in stable consumer demand. The companies that set standards will always remain at the cutting edge of the high-tech market until their products are commonly recognized as standards. The standard-setting procedure may occur among companies that set strategic alliances, may be initiated by the governmental initiative, or may be established competitively, which means that the customer demand helps identify the standard used for further production of supplementary products (Hill & Jones 2009).

However, even taking into account the specificity of high-tech markets, one has to remember that this market sector, as well as any other, is subject to the impact of factors common for all markets worldwide, especially in terms of recession. The recession period is usually accompanied by the substantial decrease in consumer spending, which will inevitably affect the technological businesses in terms of refocusing their competitive strategies, hiring fewer workers, and not increasing salaries (Lee, 2011). On the one hand, technological enterprises seem quite immune to the grave disadvantages of recession such as massive layoffs, since they can increase their output even under the condition of having fewer workers (e.g. production of software does not involve much human effort). Nonetheless, as Schiffman (2008) noted, the decrease of consumer spending will still negatively influence the revenues of technology firms, since they are heavily dependent on the consumer demand. Companies usually invest heavily in IT during the recession to automatize their key processes and to fire people who used to perform them. Advertising during recession also takes not long, which reduces the revenues of ad-based web businesses; companies outperform their rivals as long as they can afford investments in advertising; however, as soon as the funds for advertising come to an end, the challenge for technology businesses rises to catastrophic heights (Schiffman, 2008).

The overall mode of competition changes during the recession; however, it still has some particular features characteristic for the competition modes inherent in the business models of the 21^st century. For example, Anton, Silberglitt, and Schneider (2001) noted that the pace of technological advancement and change have accelerated the development of this particular market segment. The authors claimed that the popularity of high-tech industry might be further illustrated by intense applied research and investment in it, which in their turn fuel new product innovation and approaches, especially in the USA (p. 38). Porter (1986) also noted the immense development of technology in the 1950s, and assumed that it was the main indicator of international trade boom (p. 15).

Judging from these data, one can infer that there are many variables to consider on the way to successful competitive strategies, and high-tech industries have many problems similar to other sectors on that way, too. According to the opinion of Grant (2005), a competitive strategy in any business sector should have long-term, simple, and agreed objectives, should involve the profound understanding of competitive environment, and should be based on the adequate appraisal of resources at the company’s disposal (p. 7). However, these features alone do not guarantee the competitive advantage; they should also be effectively implemented, which is also not an easy task.

The strategic analysis effort should always precede the formulation of the competitive strategy (Grant 2005, p. 12). The present analysis should refer to two entities – the internal environment of the firm (including its goals and values, resources and capabilities, and organizational structure and systems) and the external environment of the firm including competitors, customers, and suppliers (Grant 2005, p. 12). Considering all these issues will contribute immensely to the understanding of the key positive and negative variables affecting the firm and shaping its position in the market. It is also essential to understand that the core of core of the external environment is the industry in which the company functions, and the success deriving only from finding the strategic fit between the firm and its environment. Realizing its specificity is the clue to finding the right strategic steps for effective competition (Grant 2005, pp. 12-14).

It is true that the nature of the designed strategy depends on the stability and predictability of the environment in which the firm functions (Grant 2005, p. 20). Nonetheless, one cannot say confidently that the strategic approaches applied by companies with the outbreak of the global recession differ tremendously from those applied before; following the idea of Nilsson and Ripp (2005), there are deliberate and emergent strategies. The former refer to the specifically designed strategies resultant from the thorough analysis, consideration, and strategic thinking process. However, the emergent strategies are more typical under the turbulent conditions of a recession; they are not planned, and emerge as a natural, nearly intuitive, response to the challenging situations.

The present finding of Nilsson and Ripp (2005) fully corresponds to their account of the contingency theory often applied to explaining the strategic measures taken by companies. The authors stated that according to the contingency theory, firms represent an open environment, the uncertainty of which impacts the internal structures of the firm, resulting in the mechanistic strategies in the stable environment, and organic strategies in the turbulent environment (Nilsson & Ripp 2005, p. 19). Following the present argument, one can assume that the competitive strategy is not a static notion, and it changes with the changing environment. In case this is true, competitive strategies should take into account the ‘technical core’ that has to remain stable for the sake of retaining the authentic company profile. It is the notion introduced by Thompson in 1967, and it refers to all activities comprising top strategic significance for the organization (as cited in Nilsson & Ripp 2005, p. 20).

Once the specificity of competitive strategies and the high-technology sector have been delineated, one should also acquire a better idea of the competitive strategies popular nowadays, and the variants of their usage, potential threats and drawbacks thereof, etc., to acquire the inventory for practical competitive strategy analysis. The first issue to consider when looking at a competitive strategy of a company operating in the high-tech industry is to examine the ways it allocates costs. The prime issue characterizing the high-tech firms is the tremendous difference between fixed costs and marginal costs.

Fixed costs for the development of a new product can be immense; e.g., the Microsoft company has invested about $5 billion in the generation of the new operating system Windows Vista; however, having installed it on all computers of their partner, Dell, the Microsoft company receives considerable license fees without spending extra money for producing new items of the operating system) (Grant 2005, p. 222). The fixed costs are very high, while the marginal costs are usually about zero; however, as soon as the company decides to develop, hires new personnel and buys new inventory, the marginal costs start to rise, and the revenue goes down. These financial intricacies of high-tech market called the comparative cost economy have to be considered in the process of choosing the proper scale of production, which should be correlated with the expected revenues (Grant 2005, p. 222).

Coming to the choice of the strategy itself, one has to remember that there are many classifications for strategies, and they all pertain to the specific objects at which they are targeted, and to specific measures taken to achieve these objects and objectives connected with them. The most popular and commonly accepted classification of market strategies is the one of Michael Porter; Porter assumed that companies entering the global market pursued strategies similar to the national scale, focusing either on differentiation or on cost leadership (Porter 1986, p. 20). The essence of cost leadership is to offer an attractive price for customers; it will usually be the lowest price in the sector, and the task of producers pursuing this strategy is to show that the customers will get the same value as with buying products of other companies, but at a lower price. Once companies pursue the differentiation strategy, their prime goal is to create an authentic image of their product, to increase brand loyalty, and to ensure that customers choose their product due to its unique qualities, even in case it costs more than substitutes.

The third strategy that Porter offered was the focus strategy; it could be applied to both differentiation and cost leadership, or applied in an isolated way, which meant focusing on a particular product or a particular customer group for the achievement of competitive advantage. There is no unified view on the Porter’s classification, since some researchers distinguish only three strategies, but Hoskisson, Hitt, and Ireland (2008) distinguished five strategies of Porter – in addition to the four described, they noted the fifth variant of the blend, the integrated strategy of cost leadership and differentiation (p. 130). The reason for lack of agreement seems to be the ambiguity created by the multitude of actions companies take to remain competitive; it may not even be at once clear what strategy some market participant pursues. The secret of success lies in the skillful combination of the strategic inventory offered by current research; therefore, companies may utilize a number of issues to remain competitive.

As it has already been noted, the differentiation strategy is quite beneficial in the field of high technology, since it suits the standard-setting firms in the industry. However, there are some risks associated with it as well; for example, the strategy will fail in case the customers consider the price differential too high (Hoskisson, Hitt, & Ireland 2008, p. 144). This consideration is particularly topical for the current period of recession, since many companies shift to the price-cutting strategies to boost the demand for their products. Therefore, the brand loyalty may become a less influential factor, especially under the conditions of salary cuts or job losses.

Secondly, the differentiation strategy may be a failure in the high-tech field in case the means of differentiation seize to provide superior customer value (Hoskisson, Hitt, & Ireland 2008, p. 144). The present threat is extremely serious in the periods of paradigm shifts or disruptive technologies’ emergence, since the companies confident in their superiority may find their product irrelevant and forgotten within a short period. The present situation might have occurred with producers of plasma TVs in the light of coming LCD TV-sets that proved more durable, and more sustainable in usage.

Finally, the differentiation strategy is non-durable in terms of technological devices. As Hoskisson, Hitt, and Ireland (2008) claimed, the experience of users may narrow the customers’ perceptions about the differentiation features. Once alternative devices, alternative technologies, and alternative techniques evolve, people exchange views, try other products, and may ultimately find some products unsuitable for their needs (p. 145). For the sake of not losing loyal customers, the company has to involve in continuous improvement, addition of particular features, and enhancement of its product line to keep its customers surprised and intrigued.

Involvement in the cost leadership strategy obviously promises more success for the company, since there is more confidence in the retention or even increase of demand for the product in case its price falls. However, there is also a threat for sustainability of the business; the strategic management team has to consider the price cut very thoroughly, and should calculate the maximum acceptable price decrease for the business to remain profitable. Therefore, all strategies, no matter how critical the situation in the market is, should remain balanced and thoughtful.

Some additional tips for a sound implementation of the competitive strategy may be found in the involvement of strategic leadership in the struggle for competitiveness. Strategic leadership involves developing a vision for the company, designing strategic actions to achieve this vision, and empowering others to carry out those strategic actions (Ireland, Hoskisson, & Hitt 2005, p. 30). The key advantage of this approach to strategic management is that it helps involve the employees throughout the firm in the design of strategic activities, which increases commitment to the company, alignment with company’s goals, and comprehension thereof. As well as in the management of change, management in the period of recession faces quite challenging tasks, and fighting the spreading depression and pessimism among employees is also a task of utmost strategic importance for managers. The reason for this is that human resources represent the backbone of any enterprise, and in case their productivity and motivation reduces, the firm will never survive in the challenging environment. Hence, it is the role of strategic leaders to involve employees in the comprehensive strategic planning, thinking, and implementation of their ideas in the practical settings.

The key strategic leadership activities that possess the capability of affecting the competitive position of the company are as follows: the leaders have to establish a feasible, inspiring mission and vision of the company, develop a managerial team that would work and plan for succession, manage the resource portfolio wisely, build and support the entrepreneurial culture among employees, promote integrity and ethical behavior (which is rare and thus valuable under critical market conditions), and use effective organizational control tools (Ireland, Hoskisson, & Hitt 2005, p. 31). All these issues pertain directly to the control and strengthening of organizational components that appear rather vulnerable during a recession. People should be joined by a common mission, and should preserve dignity and respect towards customers; these techniques ensure success of companies during hard economic times.

Finally, speaking about the respect and care about customers, one has to note that it is valuable and necessary at all times of the market operation, but it has acquired exceptional importance in the period of the recession. Thus, Mohr, Sengupta, and Slater (2009) noted that the social corporate responsibility (SCR) concerns have become the central issue for the majority of market leaders recently. The recession is the period when firms, no matter how hard it is, have to think about not only bringing financial profits, but also achieving social benefits. Companies wishing to succeed and survive through a recession need to take an active interest in addressing social and global problems (Mohr, Sengupta, & Slater 2009, p. 7). This is one of the competitive advantages hard to exceed by other companies in the same sector – the resources of market leaders should be rare, valuable, and durable. Customer trust and a positive reputation may be considered one of such unique resources not easily obtained, but highly valued by all stakeholders.

Taking into account all these considerations about the components of a successful competitive strategy, one has to realize that there are many rules, policies, procedures, and pieces of advice, but each company follows its unique path to remain competitive. The present paper concerns not only the theoretical overview of existing competitive strategies, but the evaluation of their practical application results. The hypothesis studied in the present paper is whether competitive strategies are decisive in the issue of survival during a recession. Hence, a more applied, empirical insight into the topic of competitive strategies will be taken by means of conducting case studies in the sector of high-tech industry. Three key competitive players in the market, i.e., IBM, Intel, and Microsoft will be considered in terms of strategies adopted by their management for the period of recession. Deriving the argumentation from the classification of Porter, one will also deal with additional, innovative features of the strategies applied by these companies nowadays to remain competitive. The present analysis will enable the researcher to produce a set of feasible conclusions on the subject of competitive strategies’ success, and will give way to a set of useful implications for other companies willing to succeed in the challenging business environment during the recession.

Analysis of Competitive Strategies of Three Companies

The Competitive Strategy of IBM

The present case study is dedicated to the business success of one of the most dominant companies in the IT world industry owing to its effective competitive strategies. International Business Machines (or IBM) is the leading multinational technology and consulting corporation. Today, this company established in New York (at the beginning of XX century), goes on with the manufacture, sales, and distribution of computer software and hardware. In addition, it offers Internet hosting and consulting services in different areas (including nanotechnology) (Watson 2003). The corporation has four main divisions (hardware, financing, services, software), and great numbers of staff employed worldwide (more than 400,000 people). Nowadays, its revenue exceeds US$ 100 billion (‘IBM Profile’ n.d.). IBM is the largest firm in the USA, and its network is located globally in more than 70 countries, serving millions of people and companies with its goods and services.

Owing to the company’s competent policy in the global high-technology market, product quality, well-organized management, creative leaders and employees, and other assets, the company achieved tremendous success. As Pugh (1995) noted, “no company of the twentieth century achieved greater success and engendered more admiration, respect, envy, fear, and hatred than IBM” (Pugh 1995, p. xv). Nevertheless, hard times come even for the most successful giants of the world computer industry. The case study is focused on the survival of IBM in the complex economic period, i.e., recession. In 2008, the company considered the changing needs of the market, and embarked on the new competitive strategy generation

Naturally, the recent financial crisis and recession following it had a negative impact on the company. According to Arthur’s (2009) article published in The Guardian, “IBM is cutting 2,800 people from its sales and software side” (Arthur 2009, para. 1). The company’s cash balances leave much to be desired as well. Unfortunately, even such a stable technology giant as IBM has insufficient financial resources. Arthur (2009) also noted, “IBM has “only” $3.3bn of net cash and short-term investments (once you subtract debt)” (Arthur 2009, para. 7). Therefore, it is obvious that IBM had to generate a new competitive strategy that would help it recover from this financial situation.

With the beginning of the recession, the IBM administration became aware of the need to face it rigidly. Therefore, IBM had to find some effective strategy that would “act as a cure for their company in this unsteady market” (‘IBM Strategic Analysis’ 2009, p. 13). IBM needed not only to maintain its core businesses, but also to be aware of the future market, and to take action to enter it at the right time. The company needed to shift its focus to the Internet-based platform generation, and to make it cost-effective and accessible for the customer. To accomplish the current strategic mission, the major focus of IBM was on the differentiation strategy; however, there are some elements of the cost leadership strategy as well (Porter 1996).

The competitive strategy chosen for IBM in response to recession is aimed to propel business through the economic crisis and the subsequent recession. Differentiation strategy “is a viable strategy for earning above-average returns in an industry because it creates a defensible position for coping with the five competitive forces” presented below (Porter 1998a, p. 37). For IBM, this strategy is a key to survival in the complex economic period full of disruptive and transformative changes.

The company’s leaders believe in the following evidence: in order to excel, the company should focus on the value in their operations, exploit its opportunities, and act quickly to retain competitive advantage (Competitive advantages n. d.). To increase value, the company should reduce costs and increase returns. However, the differentiation strategy allows such monopolistic market participants as IBM to sell their products at a wide range of prices. At the same time, some elements of a cost leadership strategy will help IBM to cut prices, and not to lose profitability (Porter 1998a).

Porter’s model

Since it is necessary to analyze and evaluate the current strategy of IBM to understand its effectiveness, the Porter’s (2008) model of five competitive forces will be helpful in this issue. Michael Porter (1998a) designed the generic competitive strategies, and forces influencing their execution; hence, the differentiation strategy of IBM can be effectively evaluated through this framework will help to evaluate the effectiveness of the IBM differentiation strategy. According to this researcher, industries compete under the influence of five forces: rivalry, threat of substitutes, buyer power, threat to new entrants (barriers to entry), and supplier power (Porter 1998a, p. 86). Naturally, all companies are influenced by these forces in their own way, and the IBM Corporation is not an exception.

Rivalry

In 2003, the world server market showed signs of the intense competitive rivalry between the five leading server vendors in the world: IBM, Hewlett-Packard (HP), Sun Microsystems, Fujitsu, and Dell (‘IBM Strategic Analysis’ 2009, p. 10). Even today, IBM continues to provide quality and reliable IT services regardless of current economic recession pressures; the company’s current revenue (about US$ 100 billion) is one of the most considerable among the IT leaders (‘IBM Profile’ n.d.). Nowadays, in order to remain a strong market participant, the company successfully utilizes its competitive advantages: business diversification, continuity, and growth; effective cost management; reasonable HR management (including a nondiscrimination internal policy aimed to create diversity and equality in the workplace), etc. (Competitive advantages n. d.).

It is possible to say that business diversification contributed to the success of IBM during the 2008-2009 recession, and helped the company to cope with the crisis more effectively than other IT giants (for example, Intel and Dell) did. Business diversification still goes on, as the company develops new business models (like Google), purchases new software companies, and expands its businesses (Sidhu 2010). The IBM brand loyalty plays a key role in the company’s retention of customers. It is due to brand loyalty that IBM remains successful and competitive in the high-tech industry during the recession (Cattaneo et al. 2010).

The threat of substitutes

The main threat of substitutes for IBM comes from the web hosting business that is mostly dangerous to server products manufactured by the company. It is believed that “the advantages of web hosting include low cost, tech-support, easy to manage and low switching costs” (‘IBM Strategic Analysis’ 2009, p. 10). The advanced personal computer (APC) is another threat for IBM server products. According to the recent observations, IBM begins losing its ground in the PC market, as Intel and Microsoft continue gaining dominance in the market (Hartley 2010). Nevertheless, as one can see, professional IBM servers have no equal substitutes in the server-manufacturing sector.

To cope with the described problems and threats, the IBM Corporation takes advantage of business model innovations that are “vital to creating new and differentiating value” (‘IBM Corporation’ 2006, p. 2). This continuous quality and product line improvement contributes to increasing customer loyalty, and preserving customer interest. Nowadays, the IBM customers are extremely loyal to the manufacturer, as they see the notable attributes and advantages of its products. Hence, the current IBM strategy is successful in customer retention, thus reducing the threat of substitutes in the high-tech market (Cattaneo et al. 2010).

Buyer power

In 2008-2009, buyer power was relatively low because of job cuts and complex economic conditions. Since many market players involved in the price reduction strategies, IBM also introduced the diversification and cost leadership strategies to face the challenge of low switching costs, and lack of customer loyalty (‘IBM Strategic Analysis’ 2009). IBM specifically focused on customer satisfaction, offering flexible communication options to provide users with the freedom of choice. The user could chose the communication mode according to his or her preference (instant messaging, VoIP, Web conferencing, etc.), which provided an additional competitive advantage for IBM even under the conditions of low buyer power.

The IBM differentiation strategy targeted both retailers and wholesalers effectively, taking into account their diminished buyer power. Trade customer pricing has become the effective way to attract retail and wholesale customers, and price transformation has ensured the competitive advantage of the company. The price transformation was exceptionally effective in mitigation of commercial risks from pricing exposure and margin erosion (‘A progressive strategy for trade customer pricing’ n.d.). As noted by the IBM experts, trade customer pricing enhanced trade customer cooperation, and positively influenced buyer power. In terms of buyer power, price cutting and price optimization, and trade customer pricing strategies appeared effective, and helped IBM to secure its competitive advantage (‘A progressive strategy for trade customer pricing’ n.d.).

The threat of new market entries

Owing to the specificity of the high-tech market, the threat of new market entrants is low. IBM is an established leader in production of servers and microprocessors; the company’s differentiating value in these market segments proves their high competitive advantage. New entrants (for example, AMD) are not likely to appear in the IBM market, as they will hardly outperform the company (Sidhu 2010). An additional entry barrier for the rivals is IMB customer loyalty. It discourages potential entrants, and creates risk conditions for the new markets (Cattaneo et al. 2010).

Supplier power

The IBM supplier power is high as the company’s main suppliers are Intel and Advanced Micro Devices (AMD) (‘IBM Strategic Analysis’ 2009, p. 9). These two biggest suppliers provide the company with processors. Being the giants of the IT world market, Intel and AMD are powerful and stable chip suppliers. Although the position of the both companies was weakened due to their competition, they remained the main suppliers of IBM (‘IBM Strategic Analysis’ 2009, p. 9). The suppliers’ input for IBM is great: other companies of the processor market cannot substitute Intel and AMD, since the success of the IBM production partially depends on these two high-tech giants.

Other strategies

Outsourcing

In the framework of struggling with recession, IBM took advantage of outsourcing services that helped it to increase its revenue. For example, according to the statistics, IBM entered the 2008 crisis as a top vendor with the revenue equaling more than US$ 8 million from application management service (at the same time, the revenue of HP was about US$ 5 million) (Shushat 2009, p. 4). The present data indicate that the company was flexible in the evolving advanced management (AM) practice that supported embedded and discrete AM solutions (Shushat 2009, p. 4).

In general, the company wanted to achieve a competitive advantage through global outsourcing as IBM has achieved a respected status of the multinational and globally integrated IT company, and continues its market expansion. The experience of the company shows that IBM is interested in the global high-growth emerging markets. For example, by 2009, the company involved the emerging high-tech markets of Brazil and Russia in its strategic outsourcing process (IBM Corporation 2008, p. 8).

Nowadays, the company focuses on the Asian IT markets (namely, Chinese and Indian ones) that promise to enhance its strategic advantage tremendously. According to the IMB Corporation’s data, “By 2009, IBM’s investment in India will reach $6 billion” (IBM Corporation 2008, p. 8). The emerging Asian markets have a potential to bring a considerable profit to IBM. The advantages of outsourcing transform into the business benefits: improvement of product quality, focus on high-value activities, lower internal cost pressure, etc. (IBM Corporation 2008, p. 6).

Dynamic strategy

The dynamic strategy contributes to the company’s transformation process, as it brings IBM’s dynamic capabilities into action, and connects “knowing to doing” (Harreld et al. 2006, p. 2). The company has been pursuing this strategy for many years before the 2008 crisis. Owing to the application of the dynamic strategy, IBM could enhance its opportunities, and reconfigured assets and competencies to face new economic challenges quite rigidly. The strategy gives the company an opportunity to exploit mature markets (for example, Asian-Pacific Region) and products (for example, middleware and mainframe computers), and to explore new technologies (for example, pervasive computing or life sciences) (Harreld et al. 2006, p. 7).

In general, the introduction of dynamic features can improve any strategy pursued by the company. These capabilities are not abstract notions but real mechanisms. For example, the main driving mechanism of IBM is line management based on the marketplace realities. In addition, roles of the company’s IBM Business Leadership Model and the specially created strategy group in the strategy-making process cannot be underestimated. The implementation of the dynamic strategy has brought feasible results: today, IBM has already made a remarkable transformation from a struggling hardware seller to a successful IT solutions provider (Harreld et al. 2006, p. 33).

Operational strategy

The operational strategy presents the basis for the IBM competitive advantage: staff management and talent retention. The company has made “efforts to increase the skills of the workforce by investing in local secondary schools” (Kleinman 2004, p. 19). The IBM high-quality educational programs have been aimed to create math and engineering backgrounds required to survive in hard times. In addition, the company’s “ThinkFridays” have given an opportunity to IBM programmers to research new technologies, and to make projects that would adopt these technologies to meet the company’s business objectives (Kleinman 2004, p. 26). In general, HR management plays an exceptionally significant role for the IBM Company that concerns organizational culture, ethics, and the staff’s behavior. Moreover, implementing special HR management strategies and social programs, the company wants to meet the need of Thomas Watson (the IBM founder): to transform the staff into so-called “World Citizens” (Petz 2007, p. 5).

The current competitive strategy (the differentiation strategy) helps IBM to preserve its strengths: flexible marketing management; strategic outsourcing, mergers and acquisition; advanced business performance management; good organization culture; creative services, etc. Nevertheless, it is not clear whether the chosen strategy will help the company to overcome its main weakness: “high costs in the value chain” (‘IBM Strategic Analysis’ 2009, p. 10). Although the competitive strategy of IBM cannot fill in the company’s gaps stemming from hard recession conditions, it proves fairly effective in the period of current economic crisis. In addition, it assists IBM in remaining the top IT vendor in the changing world. The operational strategy (with its people and information management) has played a supportive role in forming the current competitive strategy of IBM, and laying a sound and stable basis for its implementation. One also needs to take into account such valuable company’s strategic steps as price-cutting and optimization, logistics, talent retention, etc. that helped to increase the company’s potential.

Intel’s Competitive Strategy in the Recession Period

Intel Corporation (Integrated Electronics) founded in California (the USA) in the middle of XX century is the worldwide-famous multinational semiconductor chipmaker. Intel is the inventor of the series of commercial microprocessor chips found in the majority of modern PCs (Anderson 1997). It manufactures different devices related to computing and communications, for example, motherboard chipsets, flash memory, integrated circuits, network interface controllers, etc. The annual revenue is more that US$ 40 billion. As it is a large multinational corporation with a respected brand, it employs about 100, 000 people (‘Intel Profile’ n.d., para. 1).

For many years, the Intel Company has been dominating a growth market with a share of more than 90 % for its semiconductors – the chips that act as “computer brains” (Anderson 1997, p. 46). Intel possesses a considerable global network, and provides its customers with high-quality products almost in all countries. The Intel product line brings satisfaction to the company’s customers. Another asset is the customer focus aimed to meet the current needs of the company’s clients. Customer orientation is highly valuable for the company, as Intel goes on providing them with the next generation of products able to optimize IT-solutions (Intel 2010 Annual Report 2011, para. 14).

However, even for Intel, the global economic crisis and the subsequent recession were painful. When the crisis came in 2008, the company was forced to resort to undesirable changes in terms of staff and facilities. Arthur (2009) reported, “Intel is closing factories in the Far East and two production facilities in the US” (Arthur 2009, para. 1). Intel’s chip plants located around the world have always been giving the company an opportunity for enrichment, but it was a reasonable measure aimed to survive during the crisis.

Nevertheless, partial production cuts have not diminished Intel’s “chip industry dominance” (Brown & Linden 2009, p. 81). The main power of the Intel Company is in its standard-setting status. For many years, an Intel’s chip has been a standard in high-tech and IT industries. Intel’s chips are the most widespread microprocessor chips in the world. Nowadays, Intel remains one of the most demanded microprocessor companies in the world (Chistensen & Donovan n.d.).

In the current recession period, Intel brings all its competitive advantages into play: standard setting status, narrow segment focus, advanced chip design, leading-edge manufacturing capability, continuous investment in innovations, etc. Preserving its advantages, Intel is the brightest representative of “an industry that thrives on speed of innovation to remain competitive” (Martinez 1993, para. 2). The current strategy used by the company helps Intel to remain competitive and profitable in the global market.

According to Porter (2008), the focus strategy gives companies an opportunity to niche themselves in a narrow market segment, and to remain successful even in the recession period (Porter 2008). Hence, there is not surprising that Intel has chosen the focus strategy to achieve a competitive advantage.

The main aim of the focus strategy is to “identify a segment of the declining industry that will either maintain stable demand or decay slowly, and that has structural characteristics allowing high returns” (Porter 1998b, p. 110). In case of Intel, it operates in the niche of semiconductors, namely microchip. The chosen strategy helps the company to gain a strong position in this segment. As one may see, Intel focuses on a particular buyer group, PC produces, including Digital Equipment Corporation, Compaq Computer Corporation, etc. (Lemos 1998, para. 5).

In contrast to the other IT companies that compete more broadly, Intel serves its narrow strategic target – to innovate semiconductor products. According to the 2010 data, the company’s mission is “to be the preeminent computing solutions company that powers the worldwide digital economy” (Intel 2010 Annual Report 2011, para. 1). However, to accomplish it, Intel should retain its focus on its particular niche. To evaluate and assess the effectiveness of this current competitive strategy of Intel in the complex recession period, one should analyze it according to its key features.

Porter’s model

Rivalry

Gordon Moor, one of Intel founders, once said: “you cannot save your way out of a recession” (Economist intelligence Unit 2009, p. 4). As the company lives by this motto, it cannot but remain a competitive rival for other semiconductor giants: Advanced Micro Devices (AMD), Toshiba, Texas Instruments, Samsung, etc. Nevertheless, even in this tense rivalry, Intel manages to have the highest market cap: nearly US$ 130 billion (‘Intel Corporation (INTC): Competitors’ n.d.). It remains successful mainly due to investments in the R&D sphere during downturns and recessions (‘Economic Intelligence Unit’ 2009).

In addition, Intel’s competitive advantages have become a powerful instrument in the struggle with the semiconductor rivals. Owing to successful R&D investments, the company goes on manufacturing innovative products. In the 2008 crisis the company presented their outstanding innovation – the “Tick and Tock” chip. Its design and manufacturing method are believed to be one of the latest “Intel’s key competitive advantages” (‘Competitive advantage brings innovation with every Tick and Tock’ n.d., para. 1).

The “Tick and Tock” chip is the bright example of the next-generation silicon process technology. The manufacturers enhanced “overall computer chip performance and energy efficiency into an ever smaller, more refined version of existing micro architecture available on the market” (‘Competitive advantage brings innovation with every Tick and Tock’ n.d., para. 3). Thus, as one may see, the focus strategy proves its effectiveness; Intel continues manufacturing the product of a narrow market segment, and advancing its semiconductor rivals.

The threat of substitutes

In the Intel’s narrow segment (microchips), the company cannot be fully substituted. As it was mentioned, Intel is still a leader in the semiconductor industry. The company’s specialization in the target market and standard-setting status in relation to microchips are Intel’s main assets. AMD and NXP Semiconductors N.V. are the equal participants of the semiconductor market as well.

However, even the new products of the Intel’s rivals cannot substitute the company in the market for two reasons. First, Intel has powerful strategic alliances with other companies (for example, Apple); second, Intel has a recognized standard-setting status in the narrow market segment (Lemos 1998). For these reasons, the threat of substitutes for Intel is low.

Buyer power

Although the focus strategy limits the company’s buyer power owing to its narrow segment, Intel reconsiders its place in the current world, and tends to expand the area of professional interests. In most cases, Intel’s buyers have been the computing using its microchips and other products in their PCs, for example, Apple. The partnership with Apple has been lasting for five years, and it still goes on. In 2009, Apple released its new version of desktop and server operating system based on Intel’s microprocessors – Mac OS X Snow Leopard (Pogue 2009, p. 1). It is a high-quality, technically refined product with improved performance and greater efficiency (Pogue 2009). In order to increase buyer power, Intel continues establishing strategic partnerships that relate to other markets.

For example, since 2009, Intel has collaborated with LG – even nowadays they continue releasing mobile Internet devices – a new class of devices that represents the latest generation technology (Reardon, 2009, para. 1). Both Apple and LG experienced negative influence of the crisis; naturally, it affected their buyer power. However, as these companies are interested in the strategic alliance with Intel, their power is relatively high even in the current recession period.

The threat of new market entries

Intel’s dominance in the microchip market indicates its focus on the narrow segment. In its turn, it creates high barriers for new market participants. Owing to the focus strategy, Intel takes advantage of its differentiation, and preserves the image of a high-quality microchip maker. Intel needs to continue developing new architectures and platforms.

Today, the company is engaged in the innovation process to reduce the threat of new market entries: “we are expanding our platform capabilities with connectivity solutions, new types of user interfaces, new features and capabilities, and complementary software” (‘Intel 2010 Annual Report’ 2011, para. 12). Intel realizes that new technology is a potential opportunity for new market participants, so it continuously invests in research, and strives for innovational development.

Supplier power

Despite the fact that Intel is recognized as a dominant supplier in the area of microprocessors and chips, the company relies on its suppliers that provide it with certain products and services. The company’s focus strategy allows having powerful suppliers interested in the mutually beneficial collaboration. According to the 2008 data, Intel was engaged in the Supplier Continuous Quality Improvement program that attracted reliable suppliers. For example, Nordson Co. and Asymtek are still suppliers of automated dispense equipment; ICOS Vision Systems supplies automated visual inspection equipment. These and many other suppliers contribute to Intel’s high-quality performance (Selko 2008, para. 2). This factor did not experience the impact of the recession, since the material input is not high. The Intel’s considerable expenditures are directed not to the raw materials, but equipment and research that allow the company to manufacture high-quality products.

Other Strategies

Leadership strategy

Targeting market leadership has been characteristic for Intel for many years. The creative differentiation and distinctive capabilities of the company’s products continue providing Intel with customers. Nowadays, the Intel Company sees its role during the economic recession not in survival, but in leadership. According to the 2010 data, the company is planning to use its current core assets (brand recognition, existing architecture and platforms, global presence, strong relationships across the industry, etc.) to build “silicon and manufacturing technology leadership” (Intel 2010 Annual Report 2011, para. 11).

Although Intel has been a leader in manufacturing and silicon process technology, it aims to enhance its leadership through innovation and investment in this area. For example, their “tick tock” technology mentioned above presents the next generation of silicon process technology. Indeed, Intel has the potential of becoming a market leader, since one of its key competitive advantages is ownership of production facilities. Few semiconductor production companies have their own factories; in case of Intel, it reduces the time of delivering the product on the market, optimizes the company’s performance, and scales new products more rapidly (‘Intel 2010 Annual Report’ 2011).

Countercyclical business strategy

All products get cheaper especially in the high-tech market during the recession, and “there is an oversupply of services” in the market (Economic Intelligence Unit 2009, p. 5). Strategic thinking allows companies to use favorable moments of the economic cycle, and to develop themselves in the recession period. Construction of plants has become cheaper owing to high labor availability. For this reason, according to the opinion of Economist Intelligence Unit (2009) experts, Intel embraces the countercyclical business strategy. This strategy enhances the company’s opportunities to remain profitable in this complex economic period (Economic Intelligence Unit 2009).

In the book of Navarro (2009), one may find the opinion of Moore, “recession always ends and innovation allows some companies to emerge from them stronger than before” (as cited in Navarro 2009, p. 28). For this reason, the company has always invested in the R&D sphere that has been focused on innovational technologies. During the current recession, Intel also keeps investing in innovative technologies, as it is their current strategic advantage.

The aggressive countercyclical capital expenditure strategy forms Intel’s company’s corporate culture and philosophy. Even in the recession period, this giant chipmaker prefers expanding its product line and facilities. Today, there are two principal targets for Intel – “jumbo” and “microscopic” development areas: the “jumbo” area presents Intel’s manufacturing of the advanced semiconductors; the “microscopic” aspect embraces manufacturing of transistors of a new generation (Navarro 2009, p. 29). Thus, the countercyclical business strategy allows the company to accelerate their capital investments into profitable counterintuitive products.

Intel has chosen an effective competitive strategy that helps it to recover from the current economic recession with low risks and high results. Today, Intel is expanding to the desktop market, and mastering the products of new technological generation. Thus, the company is broadening its focus and gradually becoming the multifaceted IT Corporation. It steadily maintains its leadership even in the complex economic times, following its leadership strategy. The Intel’s countercyclical business strategy contributes to the overall success of the company involved in the dynamic and creative innovation process.

Microsoft’s Competitive Struggle in the Recession

Microsoft is a multinational corporation founded in the second half of XX century by Bill Gates. The company develops, manufacturers, and distributes its high-quality products and services within the broad segment of high-tech industry that embraces numerous areas: computer software and hardware, video games, etc. (‘MCTF Profile’ n.d).

In addition, Microsoft provides IT consulting, and supports numerous computing products. Today, Microsoft is one of the most known IT brands in computer industry. Its worldwide network expands, and brings high profit to “the software giant” (Navarro 2009, p. 118). Nowadays, the company’s revenue is about US$ 70, 000 billion. The divisions of this multinational IT company hire many people around the world; its staff equals nearly 90,000 employees (‘MCTF Profile’ n.d.).

Microsoft is a recognized leader in the high-tech industry. Nowadays, Microsoft products and services are believed to be standard-setting. Microsoft dominates several global markets: home computer operating system market, office suite market (with its Microsoft Office software package), consumer electronics, digital service market, etc. (Withee 2010, p. 304). The company’s domination in some markets and its standard-setting status prove its differentiation value and competitive advantage.

The scale of Microsoft outreach makes it nearly a monopolist in the field of IT business can be criticized for aggressiveness, but the Microsoft’s excellence and huge potential cannot be underestimated. The company follows Bill Gates’ pieces of advice: “Concentrate your effort on a market with huge potential but few competitors”; “set the industry standard to become the industry leader”; “establish a proprietary position – own what you sell – and protect this position”, etc. (Kotelnikov n.d., para. 1, 4, 5). These and other secrets of business lead Microsoft to perfection in their professional high-tech areas. However, even such IT giant cannot avoid risks and dangers in the recession period.

The 2008 crisis and recession period forced the company to make certain unexpected changes. Arthur (2009) noted, “Microsoft is slimming down by 5,000 permanent and 5,000 temporary staff – though it is going to be hiring, too” (Arthur 2009, para. 1). Owing to this fact, one may see that even such a powerful technological company had to take corresponding measures to remain more or less stable and prosperous in the current economic period. When the crisis came, Microsoft needed the strategy that would help the company to preserve its status as a market leader, and to gain big profit regardless of unfavorable economic conditions.

The company’s leaders chose a differentiation strategy in terms of competition, and focused on the basic components of this strategy. As Porter noted, “the role of a company and its product in the buyer’s value chain is the key determinant of differentiation” (1998b, p. 91). The Microsoft Corporation enhanced the differentiation of its products and services, and made them more valuable, accessible, and attractive for customers. However, to understand in what way they enhanced differentiation, and how effective their strategy was, one should analyze the company’s strategy following the Porter’s model.

Porter’s model

Rivalry

In its rivalry, the Microsoft Corporation heavily relies on their differentiating value – a standard-setting status that makes the company an extremely competitive market player. Most of PCs run on their product – Windows OS. Like any other IT giant, the Microsoft Corporation has its rivals. According to the recent statistics, “the top 5 vendors in 2010 based on worldwide revenue were SAP, IBM, SAS, Oracle, and Microsoft, accounting for 64.9% of the market total” (Vesset 2011, p. 1). However, there are other essential rivals as well: Apple and Google. Microsoft struggles with them in providing a modern smart phone OS.

As the company wants to keep up with Apple and Google in the smart phone industry, in 2010, Microsoft released an updated mobile OS – Windows Phone OS. It is aimed at the consumer market, and provides the users with the updated hardware components, new interface, and services that make the product more attractive (Shelly & Vermaat 2011, p. 149). In addition, the company provided the market with the newest version of Office – Microsoft Office 2010 with a great variety of improved programs, better functionality, and easier ways for working with it (Shelly & Vermaat 2011, p. 7).

Although the Microsoft Corporation occupies a high position in the tense market competition, Apple and other PC production companies start releasing the tablet PCs and other devices that are not based on Microsoft Windows OS. The products of the new technology generation are incompatible with the Microsoft OS platform. In this context, one may see that the growth of tablet PCs and other related products is a competitive challenge for Microsoft that forces it to expand its outreach. For this reason, following the differentiation strategy, the company wants to diversify its production, and to become an equal competitor in the post-PC world (Riley 2010).

The threat of substitutes

Owing to the Microsoft’s differentiating value (namely, a standard-setting feature of its products and services), the company may not be afraid of being fully substituted, “as there are simply no practical substitutes for their products” (Kaiser 2008, p. 11). In addition, nowadays, one of the main Microsoft’s strengths is its focus on the low-end market. It means that the company’s products are low-priced and thus more accessible for customers. This price policy approximates the differentiation strategy with the cost leadership strategy (Kaiser 2008).

However, it is necessary to say that new products in the OS field threaten the status of Microsoft as a market leader. To a certain degree, Microsoft Windows loses its positions. For example, Linux and Unix operating systems show better characteristics for a range of modern high-tech devices. In contrast to Windows, Unix and Linux are multitasking and multi-user OSs; moreover, Unix is a free software system that may potentially lower Windows customer loyalty (Clercq & Grillenmeier 2006, p. 477). As one may see, despite the evident differentiating value of Microsoft in the market, there are some threats for it to be substituted.

Buyer power

The company’s “aggressive new pricing strategy” expresses the desire of the company’s leaders “to accept lower margins in exchange for higher overall profits” (Burrows 2009, para. 1). In the current conditions of rising competition and a considerable downturn, the price-cutting policy seems to be reasonable. The company wanted to lower the prices for the Office software to satisfy its customers. According to the recent news, since 2010, “Microsoft’s new Windows 7 PC operating system would go on sale in stores for $40 less than the $240 it charged when it launched its Vista program in 2007” (Burrows 2009, para. 3).

The price reduction effort was successful, and it made the Microsoft product more attractive and accessible for people. This policy can be explained by the company’s engagement in corporate social responsibility (CSR) activities. Thus, the company’s standard-setting status and their new price policy considerably reduce the threat of being substituted.

Although the company has been showing high sales rates during the last three years (namely, in relation to Microsoft Office software package) owing to the low-end market focus, the autumn of 2011 proved to be challenging for Microsoft (Burrows 2009). Microsoft’s OS platform appeared to be incompatible with the innovative technologies. Being a disruptive technology, tablet PCs not based on the Windows platform decrease buyer power despite the CSR efforts and the company’s differentiation value (Riley 2010).

The threat of new market entries

Although the Microsoft Corporation is a dominant market leader, and there are certain barriers for other competitive market participants, the company should focus on the development of new technologies. As it was mentioned, one of the Microsoft gaps related to the new generation of high-tech products are tablet computers. Tablet computers and devices do not need the Microsoft OS platform. It is the brightest example of a disruptive technology that makes Windows OS irrelevant and incompatible with new appliances successfully entering the modern high-tech market (Riley 2010).

Thus, there is a threat of new market entries for the company, as innovative technologies spread. Microsoft has successfully targeted it by making the alliance with HP, and investing heavily in cloud computing research to become a leader in this developing, emerging market as well.

Supplier power

The success of Microsoft partially depends on its suppliers interested in profitable and strategic relationships. As the company wants to succeed in the other markets, it is supported by Nokia that use Windows OS as a basis for their smart phones. Together, they struggle to challenge Apple in the smart phone market (Hingley 2011, para. 1).

In general, the supplier power of the company is high as Microsoft has developed a reliable and productive supply chain that includes hardware (for example, IBM and Intel), manufacturing (for example, Nokia), and other suppliers making its business profitable (Yong 2009). The company’s strong competitive position in the high-tech industry does not decrease the power of its suppliers.

Other strategies

Leadership strategy

Microsoft uses its leadership strategy to remain the best high-tech industry leader in different markets. The company’s market leadership objectives are expressed in Microsoft’s technologically innovative products and services. Its distinctive capabilities and creative differentiation make customers loyal to the Microsoft brand, which provides them with reliability, security, accessibility, and flexibility of design. The company’s radical innovations (for example, the mentioned Windows Office and Windows Phone OS 2010) may guarantee the success of the company even in the period of the economic recession.

One of the company’s principles is to “do business differently, smarter, and faster” (Kotelnikov n.d. a, para. 1). Microsoft is one of the few companies that may both survive and grow even during the recession. Bill Gates once said, “if you possess the market, you eventually possess the profits” (Kotelnikov n.d. b). Today, the company preserves its standard-setting status in the operating system and office suite markets.

Strategic alliances

Forming strategic alliances is one of the most essential company’s strategies based on partnerships and collaboration with other high-tech companies. The company expands its partnership network, and goes on releasing new products; Microsoft develops its strategic relationships with other IT giants based on collaboration: IBM, Nokia, HP, Dell, etc. For example, the Microsoft-HP partnership proves to be fruitful as the companies “push cloud computing forward by speeding up application implementation” (Roe 2011, para. 3).

Based on business intelligence and data warehousing, the new high-quality products, namely HP appliances, provide the customers with intelligent IT solutions. Microsoft has collaborated with Dell as well: most of Dell computers have been “bundled” with Microsoft Windows OS (Kunitzky 2010, p. 78). The IT companies engaged in Microsoft partnership network are interested in the strategic alliance with this IT giant; this can partly be explained by its high leadership status in the high-tech market, too.

As one may see, Microsoft is a standard-setting company with a huge potential. Its status is successfully maintained by means of implementing the current competitive strategy. The differentiation strategy accompanied with some elements of cost leadership strategy contributes to the profitability of the company even under unfavorable economic conditions.

Moreover, the chosen strategy helps Microsoft to grow in the market of innovative technologies, and to retain loyal customers. The effectiveness of the current Microsoft strategy is feasible as the company goes on prospering and developing its new high-quality products during the recession period. Nevertheless, as many other companies, even Microsoft should be highly flexible and forward-looking to respond to all challenges of the modern changing IT and software market.

Discussion

The present case studies show how important it is to have a sound competitive strategy, and to rely on the construction of a sound competitive advantage even for such high-tech giants as IBM, Intel, and Microsoft. The choice of these three companies was not occasional, since they cannot be called rivals – in some terms, they are even partners in the high-tech market.

IBM mostly produces powerful professional servers, while Intel specializes in microchips and processors used as a part of any computer, laptop, server, or other technological device. Microsoft makes its major emphasis on the software and operating system production; it is true that Bill Gates managed to build his tremendously powerful empire in the world of technology due to the innovation and high quality emphasis in his competitive path.

Therefore, one can assume that these three companies are not competitors, but examples of how a company should conduct its competitive affairs in order to succeed, remain competitive, and grow under any market conditions. The activities in which they used to be involved, and their successful survival during the past recession periods show that these companies are more rigid than their competitors, and they have many more chances to retain their market share mainly due to their reputation, long-term customer loyalty, and brand stability.

However, as it has already been shown in the introduction and case study sections, disruptive technologies can bring about the unexpected turns in the development of the high-tech markets, and all companies have to stay alert to the slightest changes in it, as they may have unexpected consequences even for the strongest players.

What should be noted by all active market players (even recognized market leaders) is that they can benefit greatly from establishing difference between them and rivals (English 2011, p. 92). It is not enough to do everything similarly to all market players, even though the present practice may be profitable, and may secure a stable place for the company within its competitive environment. The changes are risky, as they require costly differentiation; however, the benefits they bring will be sustainable, long-term, and truly feasible.

As English (2001) noted, there are several types of competitiveness a company can experience in regard to its resources; in case the company’s resources are valuable, but not rare, one can speak about the competitive parity, and not advantage. In case the sources are valuable and rare, but easy to imitate, the company will surely sustain a competitive advantage, but it will be temporary. It is possible to sustain a competitive advantage only in case when the company has valuable, rare, and exclusive resources hard to imitate for competitors. In addition, the resources should be properly utilized for the sake of keeping the company at the competitive edge (English, 2001).

The problem for the modern competitors is that the advantage in the market is a highly temporary phenomenon; the competitors quickly imitate a new popular product or service, and neutralize the advantage the firm has generated. Therefore, the genuine advantage and the ability to remain one step ahead of the competitors is to break out of the iterative cycle of typical operations in a particular market segment, and to do something in a truly different way. The present tactic requires a great risk since it involves designing one’s own rules for the game in the market, and doing something completely differently from others. However, the rewards of such risk are usually great, since they provide the company with authenticity and a great level of differentiation that can be supported in the long run.

The present view is dynamic; it ensures the flow of resources, assets, and strategies within the firm to react to the competitive activities of their rival consciously. However, this is the aspect of the firms’ functioning in the competitive environment missed out in the classical theory of Michael Porter.

The work of Porter was a genuine breakthrough in the 1980s when the only approach to corporate success and growth was corporate planning (Fiskud 2009). Porter introduced an alternative view of the organizational development, and focused on the strategy planning; it was a pioneer work in the field of business strategy, and it introduced a fundamental change in the perceptions about how firms compete, and why some of them enjoy sustained market leadership, while others are at the edge of survival.

It was due to the work of Porter on competitive strategies that the concept of a sustainable strategy came into play in strategic management; it included the distinct position of the company in the market resulting from its performance differentiated from that of the rivals, and the concept of control of incoming market participants and existing market players in terms of precluding them from taking the competitive advantage from the company (Fiskud 2009, p. 93).

As one can see, the present work of Porter was a move towards understanding the core processes and changes within an organization in the complex market environment; however, it was only the beginning towards the full awareness of competitive struggle in its full complexity. Therefore, the 1980s and 1990s went through under the manifesto of in-depth strategy research. However, the focus was made not only on the firm’s positioning and the competitive environment in which it was urged to function; the internal resources and capabilities of a company as a business entity were recognized as well (Fiskud 2009, p. 95). The main incentive for such reconsiderations in the field of strategic struggle analysis was the growing awareness of market instability and unpredictability.

Huggins and Izushi (2011) also stressed the fact that Porter’s model of competitive strategies emphasized the role of resources and capabilities within a company (p. 124). Indeed, the work of Porter was fully compliant with the research conducted by Barney (1986), Dierckx and Cool (1989) and Rumelt (1984) (as cited in Huggins & Izushi, 2011). These researchers, together with Michael Porter, introduced a resource-based view of the firm in the traditional competitive research and examination. The main assumption of this novelty in the competitive strategies’ field was that the company’s profitability stemmed mainly from the differences between the firms, not the environments in which they operated (Fiskud 2009, p. 95).

Hence, the focus was shifted from the external competitive analysis of the external environment of the firm to the peculiarities of managing the company’s resources as elements in the system with a multitude of stakeholders. It was also important to take the interactions among resources into account, since it is their intricate interconnection that finally results in the formation of a unique, competitive profile of a company operating in a hostile competitive environment.

The present view acquired the name of a resource-based view, and it also gained importance and popularity alongside with the classical Porter’s model of generic strategies including differentiation, cost leadership, and focus. However, the resource-based view allowed an additional insight into the mechanics of the firm’s operations, and showed it as a homogeneous living organism rather than a machine that fulfilled the will of management and stakeholders. It was indisputably a breakthrough in the field of competitiveness research, but still it was not the end of the way for analysts of organizational competitiveness.

The dynamic view of the company’s strategy in competition came to become dominant in the modern competitive analysis. It possesses a set of indisputable advantages that distinguish it from a more static and more categorical view of competition introduced by Porter. The dynamic view of the company shows the turbulence and changeability of the market in which various firms operate, and emphasizes the affluent nature of all events in the competitive environment, which is undoubtedly the positive feature thereof.

The dynamic perspective, in the opinion of Fiskud (2009), combines the resource-based view of the firm with the leading-edge strategic tools and concepts (p. 95). The main challenge for the firm, according to the dynamic competitive perspective, is to build the competitive advantage through time, which is extremely hard in the active competitive advantage. The underlying assumption of this view on competition is that all advantages, breakthroughs, and novelties guaranteeing a competitive advantage for the firm are quickly copied by rivals; thus, the firm can lose its advantage at any moment of time. Consequently, the proponents of the dynamic perspective regarding competition assume that in order to sustain a competitive advantage, companies should be able to accumulate and combine resources more effectively and faster than rivals (Fiskud 2009, p. 95).

It is the main source of advantage that does not depend on the availability of resources and the situation in the market. Therefore, one can make a conclusion that the inherent capability to compete depends on the strategic wisdom and considerations of the company’s management that deals with allocation of resources, search for new opportunities, and evaluation of risks awaiting the company in case it engages in this or that action. This finding has changed the vision of a company in the competitive environment tremendously, since the resource-based view only did not provide the complete image of the mechanisms employed both within and outside the firm in the process of market competition.

As it comes from the dynamic view of the company with the whole multitude of resources, the company can support the sustainable advantage in the long-run only in case it realizes that it is the iterative placing demands on for investment, management energy, and foresight (English 2001, p. 98). This sound strategy has secured its firm place in the competition-related research, as it takes into account the whole complexity of internal and external resources: superior assets, resources, and capabilities as prime sources of the competitive advantage.

However, there have been many changes in the view of competitiveness as a superior feature of any market player. One of the major developments in the field of competition research is the growing awareness that Porter’s strategy is not the clue to analysis and description of all companies, since they rarely pursue one strategy and remain a fully cost leader-focused or a differentiation-focused enterprise. The majority of companies combine various features of different competitive strategies to achieve the unique competitive advantage. Hence, more attention to hybrid strategies has been recently paid as a way to grasp the competitiveness concept in its whole complexity.

Hybrid competitive strategies are seen as the way to analyze, evaluate, and describe the majority of companies in the modern competitive environment; there are rarely pure differentiation or cost leadership efforts met in the real-life competitive settings. The example of IBM, Microsoft, and Intel has clearly shown that in addition to the resource-based and dynamic view of their competitive strategies, the companies should also be perceived in the whole complex of their competitive strategies that cross the boundaries of the regular Porter’s model. Therefore, proper attention should be paid to the ways companies combine the popular strategies for achieving authenticity and uniqueness of their approach to customers, suppliers, partners, and rivals.

Each company finds its own secret of success that can hardly be duplicated by rivals, since it is only with its unique sources, assets, and management that the blend really works. Thus, for example, Intel has incorporated a countercyclical strategy for a successful competition in the specific conditions of a recession, while IBM has been following the heavy emphasis on the operational resources instead of the business strategy focus. Each of these solutions shows that people who make their decisions and try to achieve a feasible difference that would contribute to the establishment of differentiation and recognition of their company lead the company; it is the role of strategic management to make the firm recognized, popular, and successful. Even under the condition of possessing a strong resource base and a set of valuable assets, the company can fail the competition in the market because it allocates them inconsiderably. Therefore, management and planning are the main variables playing a role in the competitive success.

The countercyclical strategy employed by Intel is a good example of how companies target the recession in an unusual, unexpected, risky, and therefore successful and effective way. Few companies would indeed succeed in pursuing a countercyclical strategy, since it presupposes developing structural growth at the beginning of a structural crisis recovery (Belohlavek 2011, p. 75). The present strategy presupposes implementing reactive growth actions, new corporate ethics, and an expectancy that something is going to happen now (Belohlavek 2011, p. 75).

In fact, the countercyclical strategy is a sure way to success for those who have the potential for implementing it fully. The main contribution to the success of Intel in the present strategy is that the company occupies a very narrow niche, i.e., production of microchips and processors.

Therefore, it managed to sustain the present strategy, as countercyclical effort may be embodied only for the firms that work by niches. The company should work hard on the search of niches that require expansion. As a result, only the strong and considerate competitors dare to involve in the countercyclical strategy, since many market players feel they require expansion, but only few know that they can afford it (Belohlavek 2011, p. 75).

The employment of a strategic alliance model for ensuring competitiveness by Microsoft is also one of the examples of how firms act wisely instead of trying hard to remain the only key market players in a particular sector. Microsoft, IBM, and Intel have had instances of building strategic alliances with some companies, and have even worked with one another to ensure the success and profitability of a certain service or product.

Therefore, the strategic alliance strategy is also a novelty in the field of fierce competitive struggle for superiority. Its popularity nowadays stems from the awareness of the comparative cost-effectiveness of such alliances; for example, IBBM has no need to invest heavily in software or microchips in case it can buy them from Intel and Microsoft. The same considerations guide the narrow focus of Intel – instead of expanding their product line, the company focuses on the continuous quality improvement, and achieves a high level of differentiation in the global market.

As it comes from the present discussion, competitive strategies remain at the forefront of evaluating the organizational success in a certain market, sector, or business niche. Being informed about classical competitive strategies, the majority of companies follows the traditional approach, but diversifies it with the help of individual novelties to remain authentic and popular with customers. Care about the product quality, considerations about corporate responsibility, continuous investment in research and improvement, as well as a proper effort towards the differentiation of their products remain the key variables influencing the competitive success of many players in the national and international competitive scale.

Conclusions

The present report shows that companies have become fully aware of the whole complexity of competitive strategies existing up to date, and they employ a wide range of strategies to compete successfully in the market. The recession works as a critical period for all companies, and only the quick and adequate response to the customer needs, to the actions of other companies, and to the changes in the turbulent recession environment can secure a stable and profitable position even for market leaders enjoying popularity and customer loyalty. It is true that the recession is a period when absolutely different market rules come into play; therefore, it is essential for the company to grasp the unique market environment, the interplay of market participants influenced by their reconsideration of competitiveness under new conditions, and to respond to these changes adequately.

As it comes from the present analysis of the competitive strategies three market players have employed during the recession, the struggle for the customer may appear quite fierce, especially in the high-tech market. All three companies, despite the fact that they have a stable position secured by many years of dedicated work for their customers, still employed specific strategies for the survival in the recession period. Intel, IBM, and Microsoft have taken proper account of the decrease of customer demand for all products, and have employed a set of actions to ensure the popularity and accessibility of their products.

Even despite the fact that all three companies have a sufficient level of differentiation in the market and have stable and popular brand names, they all actively engaged in the cost reduction and price reduction efforts for the sake of strengthening their positions in terms of cost leadership. Therefore, one may see that even a firm position in the market does not presuppose stability and confidence in the period of recession, which presupposes additional action, additional care for loyal customers, and additional considerations about cutting costs for production at the background of falling demand and rising prices. Here one can see the overwhelming role of a competitive strategy in all times, for all companies, and under all market conditions; sometimes not customers but the pressing macroeconomic conditions play a role in the definition of a strong competitive approach.

The companies taken for analysis in the present work showed their recession-proof strategies due to the stable market position before a recession. All three companies used to experience high customer demand before the critical market period, and their wise treatment of resources, reasonable choice of the market niche, as well as the proper choice of partners to work with have contributed to the competitive advantage of all of them. However, one should not forget that not all companies entered the recession period with a strong and stable position, and a clearly defined strategy for competing with their rivals.

There are some instances of companies stuck in the middle between the competitive strategies commonly employed in the struggle for a market share. The present situation becomes critical for companies that cannot decide on the strategy that fits them most, or that are unwilling to make decisions about competition. As De Wit and Meyer (2010) noted, the present situation will always end up in a competitive disadvantage of a company, and serves as a manifestation of a failure with all known strategies. The present conclusion serves as additional evidence of the importance of competitive strategies in the market activity of any kind.

One more finding of the present study is that companies often mix price-cutting strategies with the overall pursuit of cost leadership; many companies get involved in large-scale price reduction efforts for the sake of retaining the market advantage, but it is only one aspect of competition under complicated market conditions. In fact, cost leadership can be achieved only under the comprehensive effort on production costs reduction, cuts in expenditures for advertising and transportation, as well as reduction of operational costs usually reflected in massive layoffs and a transition to automation of major organizational processes.

As the present study has shown, the initial effort was made by the companies towards cost leadership; all companies discussed in the present study involved in layoffs and closed some production facilities for the sake of economizing costs. The price reduction strategy was employed additionally to the main competitive effort, and served as a supportive action for retention of customers and preservation of customer loyalty.

One more important observation clarifying the essence of a competitive advantage during a recession is the difference between cost reduction and cost advantage. According to the opinion of De Wit and Meyer (2010), the cost advantage is achieved not only through cost reduction measures, while reducing costs does not always presuppose the sacrifice of differentiation. All three companies discussed in the present paper have executed some price reduction for their products to assist their customers in the period of falling customer demand; however, the products of all of them remained highly differentiated due to the stable brand name and measures favorable for customers above all.

The situation when companies have to sacrifice their differentiation for the sake of retaining demand is observed only in cases when many competitors reduce prices considerably to compete for the customers, and further price reduction involves loss of differentiation. However, the fact that Microsoft, Intel, and IBM are indisputable leaders in their market niches helped them retain the differentiation advantage, and to reduce costs to a reasonable extent to achieve a consensus between customers’ buying potential and the individual corporate profile.

One more issue to be noted in the present study is that the hybrid strategies are gaining much more popularity in the modern business environment. In order to remain competitive, companies employ a variety of methods and do not pursue one strategy in isolation. The main reason for this approach is the unpredictability of the modern market conditions, the appearance of many new competitors in the high-tech field, and the evolution of strategic tools that demands constant attention, research, and innovation for the sake of competing successfully.

Therefore, Intel, Microsoft, and IBM have configured their own competitive strategies that mostly follow the classical guidelines of Porter, but have some individual peculiarities inherent in these particular companies. The most popular approach nowadays is the pursuit of simultaneous hybrid strategies, which means achieving both cost leadership and differentiation in the market (Abdelkafi 2008, p. 12).

Both differentiation and cost leadership provide companies with individual benefits; as it has been repeatedly noted, the pursuit of both strategies simultaneously is quite complex, but it promises large-scale benefits for the companies succeeding in both of them. The most probable positive outcome for companies engaging in both strategies is the stability and popularity of their brand alongside with the continuous investment in research, optimization of processes, and quality improvement.

As one can see from the case studies, Microsoft, Intel, and IBM all pose sufficient value on the introduction of cutting-edge IT technologies in their operations, cut costs by large-scale outsourcing, and continuously improve their supply chain by enhancement of logistics solutions in their businesses. The present measures show the focus on cost leadership simultaneously with the efforts for retaining the differentiation they have achieved before the recession.

Therefore, one may see that competition is not an issue taken for granted even by such IT, software, hardware, and technology giants as IBM, Intel, and Microsoft. The peculiarities of competition in the high-tech market have a contribution to the formation of the unique competitive strategies for market players as well; as it has already been stated, the high-tech market can experience the shift of paradigms and the impact of disruptive technologies that turn the leadership in the market upside down.

Therefore, even Microsoft, Intel, and IBM cannot enjoy a sufficient amount of leadership benefits in the high-tech market because of the rapid technological progress evident nowadays, and because of the new technology development that may diminish their overall significance in the market.

Consequently, continuous research, investment in innovation, and attention to their customers’ needs help IBM, Intel, and Microsoft remain sound competitors and strong rivals for all other market participants. Being alert to new technological achievements, participating in investment and research of potentially disruptive technologies, and sustaining operational efficiency in the long run – all these factors play a role in the successful operation in the market under the conditions of recession.

Recommendations

The present study has offered an in-depth insight into the ways market leaders choose to compete in the hard times of the recession; their market success can be partly explained by the hard and long-term work on the construction of a positive company profile for decades of their existence, and by the thorough and wise choice of a narrow niche in the market, making it hard for new market entrants to defeat them in the market. However, the success in the high-tech market is a highly temporary phenomenon. Therefore, the competitive strategies the companies applied during the recession have also contributed greatly to their competitive position in the market at the present moment.

Surely, one may see that Intel, Microsoft, and IBM remain indisputable leaders in their fields of operation. They have nearly monopolized their market niches, and other market entrants prefer to build strategic alliances with them instead of trying to compete with these software, hardware, and IT giants. Therefore, the question arises on how these companies have managed to secure such strong competitive positions that cannot be shuttered even under the complex economic times.

The answer is not unanimous, as there are several observations about these companies that can serve as a helpful piece of advice for aspiring beginners in the high-tech industry. These are the mass customization tools, the ability to filter the company’s needs and not to pursue every possibility without discrimination, investment in potentially disruptive technologies, continuous research and innovation, and the focus on competencies of the company. Each of them, multiplied by the wise attitude to the consensus between the cost leadership and differentiation strategies, allows these companies to remain at the top of the competitive multitude of market players in the high-tech industry.

The first issue that may help any company to remain competitive under the complex economic conditions is the location of its customer appeal within the framework of mass customization. It is a relatively new phenomenon that implies customization features applicable to a large number of customers. Abdelkafi (2008) noted that the main way to mass customization is in answering the question about what differentiation it wants to achieve; it may be the product or service differentiation, or differentiation through marketing (p. 14-15). There are five subcategories within the notion of mass customization; each of them presupposes a different measure of customer involvement in the production process, and the extent to which customers can influence the production, design, and individualization process.

The present classification has been generated by Lampel and Mintzberg in 1996; it names the pure standardization subcategory as the one devoid of customization features; under pure standardization, customers do not influence the process of production and design of the product they consume (Abdelkafi 2008, p. 22). The segmented standardization subcategory implies that the customers influence the product features, but only at the distribution stage, which is the final one.

If the company chooses to pursue customized standardization, then the customers will be involved in the process of design, but not at the production stage – they will be allowed to customize the product by choosing the set of features from the standardized range thereof offered by the provider. The tailored customization variant implies that customers are involved in the fabrication stage, while the pure customization variant involves the full participation of customers in the production and design from the initial stages of product creation (Abdelkafi 2008, p. 22).

Judging from this analysis of customization strategies, one can infer that companies wishing to get closer to their customers and to place much more customer value in their market strategies should raise the level of customization. In case customers feel they are not only passive consumers, but are active co-creators, they will become much more attached to the brand, and will also help the company shape the customer demand in response to the customer needs. Customers appreciate attention companies pay to their wishes; in case they are actively engaged in the production and design, in innovation and improvement, they will surely remain with the company in case of critical economic conditions.

This is exactly the level of differentiation customers are ready to pay for. Consequently, customization is the goal all producers should focus on for the sake of customer retention. Moreover, as one can see, customization has become not the costly privilege of companies ready to invest extra funds in the achievement of customization; it may be partial, but still valuable for the customers, and it is up to the company management on what level of customization to focus in order to achieve the maximum results with the available resources.

Secondly, a recommendation for the companies discussed in the present report and for all other companies competing for survival, success, and leadership in the market under the conditions of a recession is to pay proper attention to differentiation. Though the customer demand is falling in the recession period, and customers become more considerate about what to buy and what cost to pay, they are still subject to the impact of differentiation. While all companies engage in price reduction to a certain extent, the customers get an opportunity to get the products of their favorite brand at a considerably lower price, which means they do not have to switch to other brands for the sake of economizing their funds.

Therefore, it is not easy to compete successfully only following the cost leadership and price reduction strategies. Differentiation is essential even under the hardest economic conditions, since many customers connect it with status, prestige, and luxury. There are many stereotypes based on differentiation only, and a considerable portion of any competitor’s success is in the ability to create a valuable differential for its products. As Terrill and Middlebrooks (2000) noted, companies have to dare to be really different, which is quite risky, but rewarding at the same time. The authors claimed that market leaders dominate in their niches mainly because they have managed to establish their own rules for the game which all market participants play; therefore, only breaking the cycle and making something distinct can grant a genuinely feasible differential for the products and for the brand on the whole.

In addition to customer loyalty and employee innovation as intangible rewards from the achievement of sustainable differentiation, the company will also achieve accelerated growth, which is a fully tangible reward utilizable in the period of recession. As it has already been noted, accelerated growth in the hard economic times is a necessity for all companies, but only few of them can accomplish that goal in reality. Therefore, sound differentiation is a direct way to a countercyclical strategy (as in case of Intel).

Making proper choices is also a distinguishing peculiarity of genuine market leaders domed to success. As Terrill and Middlebrooks (2000) noted, the market leaders are the companies that learned to say ‘no’. They noted that companies have to decide what markets are not worth their effort, what categories of service offerings are too costly and time-consuming to initiate, and what service levels will not correspond to the investment or the company outreach. There is also a need to decide what geographies the company will focus on, what target customers it will address, and what growth opportunities it will utilize (Terrill & Middlebrooks 2000, p. 47). The reason for such a scope of attention offered by the authors is that companies sometimes get overwhelmed by the multitude of opportunities they obtain in some markets or with some customers.

Initial success may create unreasonable expectations and ambitions for overall market leadership; however, truly wise management has to identify the scope of action that will be indeed profitable, and will not tear the company apart in the effort to become superb in all fields and for all consumers. The differentiation principle will never be achieved this way, as only companies offering a narrow range of products for a specific category of customers can become truly valuable, recognizable, and popular.

Focus on competencies has always distinguished successful companies from those enjoying a short-term success in comparison with long years of empty efforts. The companies may be conscious and unconscious, and they represent a sound basis for the company’s improvement and change (Thompson & Martin 2010, p. 314). Therefore, companies that strive to surprising and satisfying their customers for a long period of time and not only with a one-day novelty, have to keep track of customer needs, to improve quality, to advance their product lines, and to innovate the technologies they use.

Thompson and Martin (2010) assumed that companies can be successful if they satisfy the needs of their stakeholders; the present assumption is valid for all market sectors, and for all competitors, since corporate stability, cost-efficiency, innovation, and differentiation, and other variables contributing to the establishment of a competitive advantage play their role in the company’s reputation, popularity, and success. In case of high-tech companies, they have to innovate and introduce new devices, technologies, and appliances for their customers to retain their interest.

The technological progress moves at a quick pace right now, and companies cannot be confident in their competitive advantage even in case they occupy a monopolistic position in a certain narrow market niche. There are disruptive technologies that appear to move older ones away from the market, making them irrelevant and useless. Therefore, the capability to innovate is the core competency of any high-tech company. Wise and considerate management teams have to increase their awareness of the organizational potential arising from its key competencies, and should utilize them as much as possible to achieve a unique blend of technology, innovation, and individual customer appeal.

Finally, one can assume that the major recommendation for all companies competing in the harsh recession market is to strive to an optimal combination of cost leadership and differentiation. Stahl and Grigsby (1997) noted that the way to achieving this perfect state of the company’s competitive profile is to focus on the flawless quality and the systems used to produce it. the cost leadership strategy is commonly associated with the reduction of costs spent for production of high-quality goods, the increase of workplace productivity, and the formation of flat organizational structures.

Finally, the company should also reveal short response times, while the differentiation principle involves providing flawless quality and a unique, authentic value for the customers (Stahl & Grigsby 1997, p. 151). A proper account of these characteristics shows that the achievement of both competitive advantages, since the internal strength will be reflected in the enhanced productivity and external competencies will be manifested in the individualized approach to customers.

As one can see from the present account, there are many ways to achieve a competitive advantage, but the fact that it plays the key importance in the market success is evident. Firms that compete reasonably remain in the market and retain customers, achieve employee commitment, and expand to other markets. Firms that cannot decide on what competitive strategies to employ usually stuck in the middle of competition and fail to achieve any advantage.

There is no unified recipe for companies to compete successfully, but the common guidelines to keep in mind, and the major success paths have to be considered in the process of tailoring every unique competitive strategy to the resources of the company, to the position it occupies, the products it produces, to the individual goals it poses in its market niche, and to the customers it addresses.

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Introduction

The article, titled “How to Keep Morale High When Business Is Down”, written by Adriana Loeff was published in Forbes magazine. The article was published on 16^th 2008.

As the article demonstrates, the article talks about the motivation techniques that should be and can be employed to keep employees happy when there is looming fear of stagnation in business. Clearly this deals with non-pecuniary motivation techniques in employee relationship management. The area of Human Resource Management that the article concentrates upon is Employee Relations.

The article describes the current situation of employee relationship management at the time of economic recession. The article exemplifies the use of pecuniary means used by Wall Street giants being inadequate means to motivate employees. As recession threatens of looming mass layoffs it has become extremely difficult to attract talent and keep them motivated to produce the desired result.

Main body

The article relates that even though Wall Street has the legend of hiring the best brains talent pool and providing them with exorbitant bonuses, perks, and salaries as the recession makes profitability low. Further promotions too are no longer available to motivate these employees. The article tries to gauge what strategies should be taken during this time of recessionary pressure.

During the initial days of recession, a study of employee motivation and satisfaction level in the Wall Street big houses like the Merrill Lynch, Lehman Brothers, Credit Suisse, Citigroup, Goldman Sachs, and Moody’s was conducted among the senior executives of the company. The study showed that there was an excessive level of disappointment and anxiety among them. The article states that they these senior executives were “angry, anxious and deeply stressed.” The study also found that there was a downfall in the employees’ loyalty, engagement and trust during the beginning year of recession. The survey showed that more than 60 percent of the participants were considering switching their jobs and 25 percent of the participants were actually looking for an alternative option actively.

The article suggests that the only option of keeping employees and make them work in such stressful times is to make them like their work. The idea is to induce a sense of empowerment. Conducting senior executives meetings and informing the employees about the company’s current situation is a way to handle panic of a recessionary business. The trick is to let the employees know about the problems before the media does. This will keep them motivated and informed and avoid panic of the unknown debacle.

Insecurity of employees is common when there are incidents of massive lay-offs. This can be avoided if the company conveys to the employees that there are more jobs to be done due to the lay-offs. This would help in maintaining their motivation level and keep away the fear of inclusion in the next list of lay-off. To quote the author: “Managers should also show that they are there to stay, says Perez. “Most of the times, when a company has a problem in a downturn, people are afraid that the person they report to or the leader in their area is going to leave them. It’s just human nature.”

Due to the stress that recession ahs on business and the anxiety that employees face due to a slowdown causes several medical problems to the employees which actually is a problem as this reduces their productivity: “During this financial meltdown, workers have had less sleep, more anxiety and shown a wide range of physical and psychological problems: ulcers, memory loss, high blood pressure, fertility complications and depression.” What the managers need to do is to counter the sentiments expressed by the employees. As the company is not in a situation to commit it is hard to expect the employees to commit too. So the only available option is to counter their expectations.

In this time of recession, when financial strength of the companies is low it is essential to make the employees feel as a family inculcating team spirit. This can be done by taking “the team out to lunch, a drink after work or a workout in the park” and engage in activities that strengthen bond among employees, and the company.

Due to recession and excessive work load that falls upon employees due to layoffs, the level of stress goes up. So relaxation, physical exercises, and taking time out of work is a good idea and should be encouraged by the company. The reason to provide this levy is to ensure that employees do not take up physically harmful alternatives like “turning to caffeine, cigarettes, alcohol, food, painkillers and sleeping pills to cope with the stress.” Some other alternative suggested by HR mangers is to help employees take a half day off on Fridays on alternate basis or take a minor sabbatical to refresh their mind.

One important suggestion that the article provides is that if a lay-off is essential then it should be done fast. Otherwise all the employees would keep guessing if he/she is on the list and if when this would occur. Such unavailability of information and atmosphere of uncertainty breeds insecurity. So it is essential to treat the employees leaving the company properly and helping them to find an alternate job is essential.

For those losing their jobs, chances to rebound or find another one may shrink. For survivors, crisis is opportunity. Senior ranks are trimmed during reductions. That may open opportunities for employees to climb the ladder.

The article primarily details as to what are the alternative means that a company experiencing recessionary pressure to treat its employees. It deal with the motivational factors that work during this period and the stress that builds up due to recession is portrayed in the article. The article shows what the manager and employer should do in order to help the stressed and disappointed employees and what alternatives can be used instead of pecuniary benefits that would keep the employees motivated even when the business is not going that fine.

The article provides important insight into the area of human resource management and how employee relations have become highly important in a time of high financial crisis. With the downfall of the financial giants like Lehman Brothers and Merrill Lynch, it is feared that the US economy as well as the global economy will undergo a recessionary period. The question that becomes of utmost importance is the condition human resource management in the time when there are massive layoffs and how employees who are still employed, how they can be treated and kept motivated at a time that demands stress and uncertainty.

Motivating employees is always a key issue for every manager. A motivated team will only make their manager’s job easier. Even during a recession, a manager still needs to motivate his or her employees. Keeping ones employees motivated will help the team keep a positive attitude during the tough times and will help the company when the recession has ended.

Motivation usually suffers during a recession; employees become concerned with staying employed and the current state of the company rather then keeping them motivated and focusing on their goals. There are some warning signs that managers should look for during difficult economic times. Employees will take more sick days that they will use for job interviews and Internet usage increases as employees look for employment elsewhere. Also, some employees will take advantage of medical leave. Generally, long vacations are not taken as employees fear that it will only give management an excuse to let them go. Finely, some employees become very interested in company financial performance.

During a recession, managers must continue to provide motivation to their employees and not let their attention wonder towards employment elsewhere. Fully motivated employees are a company’s greatest asset. This is usually forgotten during a recession when self preservation becomes the greatest priority for everyone including management. The teams become individuals; what was once a single minded team becomes many minded individuals (Waldo 2004).

Motivation is also an import aspect to continue engaging employees with during recessions. Monetary rewards are no longer available during recessions which makes keeping employees motivated a more difficult task. The best possible tools to achieve motivation are communication, education, and delegation (Wandenhoe Consultancy 2008).

Simple communication is the most effective motivational tool. Senior leaders should have taken the time to communicate the current situation of the company to their employees. They should also convey the current strategy of the company and the challenges that they are facing. Also, employees need to know just how they are contributing to the company’s performance (Wandenhoe Consultancy 2008). Communication from management will also give employees a sense that management cares about them.

Training budgets are usually the first causality during hard economic times but a recession is possibly the best time to receive the best training. The first thing that when one member of the team fails in a single task, it will affect the entire team.

Discipline and respect for authority is an important aspect that a leader must instill in their employees. This can most effectively be accomplished by direct communication on a regular basis and being honest. Above all, the team needs to know that the discipline to tell the truth will be expected. This discipline can be instilled by always telling the truth to the team. Discipline will give the leaders’ team the foundation to performing their jobs in the most effective manner (Krzyzewski and Phillips 2000).

Leadership affirmation is an ideal tool to inculcate employee motivation. A simple thank you can be the most effective form of motivation a leader can use. It is most effective when it is given as soon as possible after the employee’s action takes place and is also most effective when it is sincere. Most importantly, it becomes ineffective if it is given too often. When used in the most effective situations, sincere praise can be the most effective form of affirmation and motivation.

Combining these thee traits together is the difference between an average and a great leader. The best leaders will let their people gain from past leaning experiences and let them make their own decisions. Letting your employees make their own decision will instill confidence in their own abilities. Leaders need to spend their time making sure that the team has the resources that they need. Also, they need to make sure that they praising their people at the appropriate time. Above all, leaders need to make sure their employees are taking breaks when necessary to reduce stress and encouraging their teams to think for themselves (Blanchard and Muchnick 2003).

Empowerment is one of the best forms of motivation although it is not highly used. This is true because many managers believe that they need to keep control of their workers. One field that offers many examples of empowerment is engineering. However, one common them theme is present in all of them; there is a culture of control and a culture of empowerment.

The Chinese first used empowerment during the California Gold Rush in 1850. They brought a new idea that was foreign to the Americans: empower the workers in order to increase productivity. The Chinese management gave their front line workers the authority to make changes the authority to make changes that were required to increase productivity. At that time, the current accepted management style in the United States was control of the workforce. In addition, the public in the United States created laws that limited the industries that the Chinese could enter. Even though they were restricted, they still reopened gold mines abandoned by the Americans and made them profitable (Boone and Bowen 1987).

Meeting the needs of their employees is an important task to an organization. Workers have top job performance when they are engaged. Because their needs are satisfied, the workers will not look outside the organization for there needs satisfaction and will be motivated to improve their job performance.

Another tool to engage people is to let people know that you need them. To motivate them towards being on the team, let them know that they can actively contribute towards the success of the team. Compliments are an easy way of motivation people, it is the most fundamental and straightforward method towards inspiring people. These compliments are most effective when given in a public setting. Inspire people by 29 showing them as who they could be in the future. This will only encourage and motivate them to strive to be their best.

Encourage others to strive to achieve their dreams and never critique another persons dream. Instead offer them specific help towards making their dream a reality. All people desire to be praised, because of this fact it is important to pass on credit to coworkers. Doing so will instill trust and give others the desire to achieve. Also, active listening will make others feel like what they are saying is important. The best way to achieve this type of listening is to believe that what the other person is saying is gold. Completely eliminate outside distractions and focus on the other’s person’s point of view.

Another technique towards motivation others is to have genuine concern for them. People will be motivated when others take the time to get to know then and have a genuine concern for them. However, this concern is more than a one time method; it will only succeed when it is used continually. A written word of encouragement is generally perceived to be more genuine than spoken words. Simple words of encouragement have the power to motivate the receiver long after the writer has forgotten about them.

Helping people win is perhaps the greatest measure and motivational tool that any leader possesses. Hope is the one of the greatest and most powerful thing that helps a person though the toughest of times. It was hope instilled by Winston Churchill that helped England get through World War II and defeat the Nazis. When a leader provides help and support to one of his coworkers, that coworker will never forget him (Maxwell and Parrott, 2005).

Conclusion

Recession is a time that brings about stress, uncertainty and distrust among employees. Even though there are severe financial crunches during a recessionary phase, it is important to tackle the employee relationship in order to keep them loyal towards the organization so that when the cycle moves up, the employees can be attracted. Further retention of talent even during recession assumes importance for the shortage of talent today. Hence this article through insightful light on the recessionary times and management of employee relations and keeping them motivated during this phase.

Works Cited

Blanchard, Ken, and Marc Muchnick. The Leadership Pill: The Missin Ingredient in Motivating People Today. Free Press, 2003.

Boone, Louis E, and Donald D Bowen. The Great Writings in Management and Organizational Behavior (2nd Eds). Irwin/ McGraw Hill , 1987.

Krzyzewski, Mike, and Donald T Phillips. Leading with the Heart: Coach K’s Successful Strategies for Basketball, Business, and Life. Warner Books, 2000.

Loeff, Adriana. “How to Keep Morale High When Business Is Down.” Forbes Magazine, 2008.

Maxwell, John C, and Les Parrott. 25 Ways to Win with People: How to make Others Feel Like a Million Bucks. Nelson Books , 2005.

Waldo, Dr. Douglas. “Recession-Proofing Employee Motivation.” 2004. Web.

Wandenhoe Consultancy. “Retaining and Motivating Staff in the Recession.” 2008. Web.

Introduction

Babyshop is one of the leading retailers of children items in the GCC countries. Founded in 1973 in Bahrain, the company retails a wide range of baby items and children, up to 16 years. Items range from baby clothes, toys, baby’s accessories such as car seats, bathing accessories (for example, towels, baths suits, baby feeding tools and equipment), and school equipments such as desks, among others. Babyshop has experienced tremendous growth in its distribution network and now boasts of 133 stores in 11 countries world wide. The company also plans to add more than 77 retail stores in new market by 2015. According to the company’s CEO, Mr. Vinod Talreja, the company’s global market expansion strategy is in line with the company’s efforts to maintain its 20% annual growth rate (Rizvi para. 4).

Choice of Overseas Market

The company has embarked on an ambitious plan to expand to new markets. This will cost the company an estimated Dh1 billion for the next five years. This strategy will see the company roll out retail stores outside the GCC countries. The company’s immediate expansion plans targets countries in North Africa, with Libya, Kenya and Sudan as the primary targets. The reason for targeting these countries is due to the accessibility via major sea routes, especially along the Indian Ocean, as well as via air transport. Strategically, the company aims to use Kenya’s sea port as the main entry point for its goods from Dubai. Coupled with the regions inland connectivity through roads, transporting its merchandise to Sudan and Libya will be easier. The three countries are among the fastest growing economies in the region. Coupled with the fact that there are no major competitors from recognized international brands, venturing into these markets is a worthy investment. The company also plans to venture into Asia with countries such as Pakistan, India and Bangladesh on its radar (Rizvi para. 5).It is imperative to state that some of these markets are unexplored by major brands which deal with children items. As such, the rationale for the company expansion strategy seems to be aligned to exploiting untested markets.

Market analysis

Market analysis reveals a peculiar trend. All the targeted countries have experienced political turmoil in the recent past, most notably the political upheavals in Libya and Kenya. However, according to the company’s CEO, the company is unfazed by the political situations in these countries. Mr. Talreja says that the political scenarios in these countries are not as volatile as it seems and that they stability will be achieved soon (Rizvi para. 5). This confidence seems to emanate from the fact that the company growth and expansion strategy will be supervised from Dubai, a politically stable country. As such, the political uncertainties do not hinder the company’s growth plans. The company also seems to have considered the geographical location of these new markets. All the target countries lie along major sea routes, especially along the Indian Ocean. Additionally, each of these countries is served by a major airport connecting to the rest of the world. As such, their accessibility is made easier via sea and air. The economic analysis of the Asian and the North African retail market reveals positive prospects for Babyshop’s future growth. According to a survey done by Price Water House Coopers, the entire Asian region seems to have overcome the effects of global recession and much of its growth is experienced in the retail industry (Yu 2).

Furthermore, the retail industries in both Asian and North African markets are expected to grow by 4 % by the year 2014. This creates a favorable economic condition for the company’s expansion strategies. Demographically, the company targets the urban population. Even though most people live in rural areas, those who live in urban areas are relatively wealthy. This presents a ready market for the company’s goods. Moreover, the population growth rates of countries in North Africa and the Middle East are on the increase. According to a survey done by Credit Suisse, populations in these countries grow at an average rate of 0.39% (Roy, Sonali and Liyan 4). This can be linked to increasing rates of fertility and implies that children constitute a large part of the population. As such, Babyshop will find a ready market for its goods. In addition, the labor force in these countries is growing at an average rate of 0.5 % (Roy et al 4). This implies that the population is economically productive and as such can afford the products offered by the company.

Market Entry Strategies

Babyshop plans to explore markets beyond the Gulf Community Countries, into the North of African and Asia. Kenya, Sudan and Libya are the primary target markets for Babyshop’s expansion program. Estimated to cost Dh 1 billion, the expansion strategy is to see the company open more than 77 new retail outlets, which will increase its retail outlets to more than 200. This indicates that the company chooses to operate its own retail outlets instead of using agents, mergers, acquisitions or partnerships. As such, the company prefers to have a direct market entry strategy, where it has complete control and ownership of local retails outlets. To show its commitment towards the direct market entry strategy, the company has already opened two outlets in Nairobi, Kenya (Rizvi para.6).

This is to act as the launching pad for further expansion into the region. Additionally, the company plans to use price as one of the market penetrations tools. In its previous markets, the company has offered quality products at very competitive prices. As such, it clients are guaranteed “value for money spent” (Rizvi para. 6). This is expected to endear itself to consumers in these markets who are relatively sensitive to prices of consumer goods. The company also plans to continue offering a wide range of products and fashions styles. Currently, the company is offering more than 30000 different products ranging from children play items, all types of clothing wear, school wears, winter and summer wear, among others. Babyshop also plans to enter the market as an all stop shopping destination. Therefore, the company will offer a wide variety of price competitive products through direct investment.

Conclusion

To be successful in the new markets, the company has to adopt the latest marketing techniques. To survive competition, the company will have to market aggressively to penetrate the new markets. This calls for the company to look beyond the traditional marketing methods and explore more interactive e-marketing tools such as social media, blogs and internet marketing. This will not only enable the company to establish relationships with clients but also do e-commerce.

Works Cited

Rizvi, Muzaffar. “Babyshop Bucking Recession”. Khaleej Times, 2011. Print.

Roy, Amlan, Sonali Punhani, Liyan Shi. “Middle East and North Africa: Demographic Highlights”. 2011. Web.

Yu, Carrie. “Strong and Steady 2011 Outlook for the Retail and Consumer Products Sector in Asia”. 2011. Web.