Today’s markets and technologies are dynamic and to sustain today and survive tomorrow companies need to build competitive advantage. Under market pressure to improve productivity, quality, and speed, managers have embraced tools such as TQM, benchmarking, and re-engineering. Operational excellence can not be treated as competitive advantage as it can be copied. E.g. CAT’s spare part availability is easily copied by Komatsu. Strategy is choosing a unique and valuable position rooted in systems of activities that are much more difficult to match. E.g. Simplicity and Innovation of Apple Inc.
Strategy is all about four dimensions:
- Product -market investment strategy
- Customer value proposition
- Assets and competencies
- Functional strategies and programs
First part is all about where you will compete and other three talk about how you will compete.
Product -market investment strategy
This starts from defining vision, mission and values of your companies. It also involves defining business scope and assessing market dynamics. What markets will be entered or exited should be predicted for the future.
This can be called as corporate strategy:
- Turnaround (Marks and Spenser’s)
- or combination of above (General electric strategy)
We also have to do macro and micro level analysis of environment.
This can be done through environmental scan using
1. Porters five forces model
2. TOWS matrix
3. PEST analysis
- Internal analysis (SWOT analysis)
- Competency mapping
Customer value proposition
Its all about perceived, emotional, social and self expressed benefits that one gets from company offering. One or more value propositions should be associated with your company. Those values should be
- Credible (BMW is known and credited for innovation and driving pleasure)
- Deliverable (Google always delivers fastest search results)
- Differentiated (Infosys differentiates its offerings in terms of Integrity, Reliability and Performance)
- Relevant (Economy is relevant when we think of Maruti cars)
If company do not do positioning then customers do. That is why brand and image building is very important for companies.
Companies can do it through:
- Perceptual mapping
- Extensive Advertising and PR
- CSR initiatives
- Delivering what offered and exceed it
Assets and competencies is what resource company has that provides competitive advantage. E.g. Avaya has huge installed customer base, CocaCola has strongest brand name.
Strategic competencies are what companies do best that provides competitive advantage. E.g. 3M’s strategic competency is innovation, Walmart’s strategic competency is supply chain.
Companies need to have more than one source of each of these to sustain today and survive tomorrow in this competitive world. More and more resources should be applied behind creating strategic competencies. Strategic competency has to be sustainable and substantial to make use of it. Often synergy between two companies and can create competitive advantage. E.g. Avaya when acquired Nortel got huge data business of US government which it could easily utilize to promote its other offerings.
Functional strategies and programs
Strategic competencies has to be developed with support of functional strategies and programs. Where these strategies will be implemented with host of short term tactics.
Functional strategies can be like
- Manufacturing strategy (Go green, Implement Six sigma)
- Communication strategy
- Distribution strategy
All these parts come together to form the strategy of the company.