Deck 6: Strategy Formulation: Business Strategy

Question 1

Why are many strategic alliances temporary

Answer 1

A strategic alliance is a long-term co-operative arrangement between two or more independent firms or business units that engage in business activities for mutual gains.
The temporary nature of the strategic alliances is clear from their purpose of becoming established. Firms enter into an alliance in order to seek solution of its weakness or to acquire new strengths. Firms get involved in an alliance as they are unable to achieve an objective by their own. An alliance may be formed to learn new technologies, to obtain access to specific markets, to reduce financial or political risk or to gain a competitive advantage. It is thus clear that the primary goal of any alliance is to learn how to overcome an identified weakness or how to gain competitive advantage from the alliance partner. Once a firm understands what it needs, an alliance is discontinued as no firm wants to share its profit, making the strategic alliance to dissolve.

Question 2

How does a hypercompetitive environment change the strategic approach for a company

Answer 2

A hypercompetitive environment means that the market is highly dynamic and the various parameters determining one's position in the market are evolving almost on a daily basis. It has been seen that whatever maybe be one's strategy it can be impacted in a hypercompetitive market environment.
For instance if one had a cost leadership strategy, it is inevitable that the competitors will over a period of time find ways to reduce their costs to erode into one's market. In a differentiation strategy, the other firms in the market would soon develop their products to have the same features that differentiated one's product and soon elimainate that advantage. Even if one had a focus strategy, the copetitors would soon try and enter that market niche, unless it was too small for others to bother about it.
Therefore in a hypercompetitive environment a company has to have a strategy of being alert and agile and to be constalyevolving so that it maintains its leadership position in the market.

Question 3

Select an industry to analyze. Identify companies for each of Porter's four competitive strategies. How many different kinds of differentiation strategies can you find
INDUSTRY:__________________________________________________________________________
Cost Leadership: __________________________________________________________________________
Differentiation: __________________________________________________________________________
Cost Focus: __________________________________________________________________________
Differentiation Focus: __________________________________________________________________________

Answer 3

Auto industry is chosen to analyze the implementation of the Porters' four competitive strategies. Auto industry is one of the fastest growing industries globally. Also, this is one of the economic sectors that bring revenue to the nation.
Cost leadership:
Asi-n countries are the destination place for the small car productions, the companies in etc., focuses more on producing small cars with cheaper prices in order to target the major populated middle class consumers. Even the top branded companies are also showing more interest to launch the cheaper cars in these countries.
Differentiation:
Among two wheeler companies Hon-a produces two wheelers by applying the differentiation strategy. The company is known for the quality in the engine and remaining spare parts. This leaves a good impression in the customers and induces them to purchase the same brand. It produces different types of two wheelers on a variety on the basis on gender.
Cost focus:
The companies implement cost focus strategy in order to satisfy the unique needs of the specific segment group by providing them with low cost vehicles. The TTA Company N-no cars would be the best example for providing the small cars with reasonable prices that are affordable by the middle class Indi-n customers.
Differentiation focus:
Very rare companies look for the differentiation in its targeted market and Fer-ri would be the first one to implement differentiation focus strategy. It grabs the attention of the high end users by providing luxury sports cars by providing special features and design.
Some of the differentiation strategies most auto companies follow include:
• Recruiting specially trained or unique technical skill workforce
• Owning the patents or intellectual property
• Introducing the advanced technology for the first time in the nation
• Finding innovative processes to increase the quality and quantity of the production
To stay ahead of the competitors and increase the market share, companies focus more on implementing different kinds of differentiation strategies whether it might be the technology, process or technical crew.

Question 4

Explain how our understanding of the three generic strategic approaches available to companies can be used to direct the efforts of all employees at those companies.

Question 5

What industry forces might cause a propitious niche to appear or disappear

Question 6

What does a business have to consider when trying to follow a cost leadership strategy and a differentiation strategy simultaneouslyCan you name a company doing this

Question 7

How can a company achieve a sustainable competitive advantage when its industry becomes hypercompetitive