Principles of Corporate Strategy, Product Life Cycle Concept - Assignment Example

PRINCIPLE OF CORPORATE STRATEGY PART A 1. Briefly describe the potential value of having an effective mission statement and the features of an ineffective mission statement. If an organization lives up to the values expressed in its mission statement, act in accordance with the principles derived from it and meets the standards it generates, and the organization will be securing its morale and strengthening its reputation. However, if it fails to live up to theses values it leaves itself open to charges of hypocrisy, weakness and ignorance from inside and outside the organization. A mission statement must be central, enduring, constraining, and visionary. This is because a mission statement is there to communicate ideas to company employees, managers, and stakeholders. When organizational values and values of employees are similar, it creates a sensitive and meaningful relationship between the company and its employees. In contrast, an ineffective mission statement which is too narrow or too broad, the supported mission does match operational realities. The statement seems to make people just to feel good without any possibility of realization. 2. Briefly explain the Product Life Cycle concept and why firms use it to plan for the future. In a Product Life Cycle, the average product can be divided into distinct sales stages (introductory, rapid growth, maturation, and decline) each characterized by differing marketing, investment, and distribution requirements. The concept of Product Life Cycle is being use by firms to plan for the future because of the underlying principle that products have a limited life. This is because changes in taste and technology influences the customers demand for the product thus no product will remain in demand by customers indefinitely. 3. Briefly describe the concept of competitive advantage and why firms strive to achieve it. Marketers who succeed do not have any intention of defeating their competitors but to make them completely irrelevant to their customers. In other words, firms want to establish a close and satisfying long-term relationship with their customers to the extent that they will no longer seek an alternative. Firms wants to achieve competitive advantage over their competitors because it can greatly increased their ROI (Return on Investment and ROS (Return on Sales). 4. Briefly describe the ways in which an industry may be defined and the influence on competitive strategy. The first step of strategic analysis is definition of business. The company can be defined by the reason it exist – the purpose, values, strategy, and behavioural standards. This can be in terms of what the customer needs, which are the customer groups, and how technologies will be utilized. Defining a business can influence competitive strategy as the distinctiveness of the company’s position can enhance competitive advantage. This is because a firm’s competitive strategy should seek to distinguish its product from those of competitors, generate values for its buyers, and guides operational decision making across an organization. 5. Briefly explain the term vertical integration and the benefits a company could gain from this form of development. Vertical integration normally happens when a company combines several operations together. It is a point to which a lone business entity carries on consecutive steps in the processing and distribution of a product. There are numerous reasons why a company would use vertical integration and one of them is to avoid sales taxes by substituting taxable market transaction by internal transactions. Another is to strengthen their capacity to engage in price discrimination or to realize technological cost savings. Some may use it to enlarge their monopoly by eradicating wasteful increase of markups at different stages of production and distribution. PART B 1. “The different directions of corporate strategy carry varying degrees of risk. The nervous manager may decide doing nothing is the best option”. Discuss. Particularly when a manager feels that uncertainty is high, he may proceed cautiously and do not intervene immediately. For him, it may be better to further conduct an exploration to collect some more facts because this would help to decide accurately. However, if the manager finds that the opportunity is very small to justify the expenses or it may be too risky to attempt such move, the manager sometimes think that the best course of action is to do nothing. Since doing nothing goes against the principle of managerial instincts, some executives may however find it embarrassing, the manager tend to seek the best kind of corporate intervention. 2. “Analysis of the external environment represents focusing on a moving target”. Is this true, and what can firms do to appreciate the impact of future environmental conditions. The statement is apparently for strategist, who uses the traditional definitions of their industry and the static nature of SWOT. The statement is true if one would consider the fact that in a SWOT analysis, companies are focusing on one moment in time. It does not consider the dynamics of the competitive environment. These are changes that may trigger the need to redefine industry boundaries and identify a whole new set of competitive relationships. If these changes are to be considered, then analysis of the external environment based on SWOT is indeed focusing on a moving target. The firms therefore must view the concept in its broadest context, disregarding the boundaries of the organization and become aware of how value is created with other organizations. Changes are inevitable and therefore a firm should be ready to redefine its position in the industry. 3. What are the strengths and weaknesses of the rational strategic planning approach to formulating and implementing strategy? A position-based strategy like the rational strategic planning approach considers the objectives of the organization, looks at the environment to identify threats and opportunities and assess the organization’s current position in order to develop a strategic plan. It therefore includes defining the direction, mission, and objectives. One of the strength of rational strategic planning is the inclusion of environmental analysis where key success factors are identified and opportunities and threats are established. Another is achieving competitive effectiveness through operational effectiveness and positioning approaches. Rational approach is useful as it collects relevant data that can give direction to the firm. However, this kind of approach which is normally based on SWOT has its weakness. One is the fact that this approach is based on the assumption that information is readily available to the strategies and an accurate assessment can be made of its likely impact on the firm. In reality, this assumption may be imperfect. Moreover, assessment of opportunities may be difficult since the environment of modern business is often highly complex and dynamic. Read More