Competitive advantage can be defined as a
supremacy achieved by an organization when it can provide same quality products
as its competitors at lower price or for premium price by providing greater
quality output through product differentiation. A company can be a market
leader now, but to maintain that position it should have strategy planning, sharp
vision to reach targets and very good business operations. All these are
required to build sustainable competitive advantage. In other words, a company
seeking competitive advantage must target larger markets, differentiate its
offerings from others to increase market value and establish brand reputation. For example, if we consider Honda (automobile
manufacturer) it has gained competitive advantage, strong brand name and
customer satisfaction by offering reliable vehicles which provide high fuel
efficiency, quality and excellent value for money in terms of features and
specs for the offered price and have good re-sale value for the same reasons.
Strategy planning is a process implemented by an
organization to develop a strategic plan for achieving long term goals. Each organization
will have its own approach for strategic planning model based on the
situational analysis. An organization can adopt multiple strategic planning
models in different iterations to reach the goal. There is no single strategic
planning model that fits for all organizations. An organization must:
Analyze its strengths and weaknesses in internal
and external environments.
Identify opportunities and threats.
A mission statement will be developed
by gathering all the facts which projects the organizational vision. Based on
the mission, long-term and short-term solutions will be proposed to minimize
the potential risks and to overcome the weaknesses. Strategic planning helps to
come up with set of objectives, which will be useful as building blocks to
reach the goals. Stakeholders, Managers
and Key Resources will be involved in the strategy making process. The focus is
to ensure that organization’s goals are achieved by coming up with a plan to
ensure necessary adjustments are made to increase market share. Stakeholders
will review and approve the existing and new innovative approaches to achieve organizational
SWOT analysis is a strategic planning tool useful
to analyze Strengths, Weaknesses, Opportunities and Threats. SWOT analysis will
help organization in any specific business situation. To compete successfully
in market this tool can be used to uncover opportunities and threats which are
external to the organization. Strengths and weaknesses are internal to the
organization, which can be corrected over the time with proper utilization of
SWOT analysis. It’s recommended for new businesses to use SWOT analysis as part
of the initial business planning whereas existing business can use it at any
time. Organizing a SWOT analysis meeting at least once a year will help
organizations to stay on right track and avoid risks. For example, if we
consider an American Media Broadcasting Company, they might have been in the
industry for 40 years and have a very good customer base, reputation – this is
a strength. Same company might not have enough reporters deployed in all parts
of the country and miss few exclusive coverages – this is a weakness. Same company can tie-up with independent news
service agencies like IANS to provide most up-to-date information from all over
the world (which is out of their reach) – this is an opportunity. If there is
another media company with equal strengths and power, which has taken an
initiative to start a live YouTube channel for free of cost – it is a threat.
Depending on the size of the organization, the
number of levels in management changes. The level of management determines a chain
of command. In most organizations levels of management are classified in three categories:
Roles: CEO, CFO, CTO, COO, VP
Upper level management consists of top executives in the company. This
level depends on the input from mid-level management to determine the direction
in which the company is heading. Upper level management can make any changes at
any time to improve the performance of the company.
Roles: Mid-Level Managers, Regional Managers, General Managers
Mid-level management is responsible to the Upper level management for the
functioning of their regional departments. This level of management will depend
on input from low-level or first level managers and will act as a bridge
between low-level management and upper level management. Managers from this
level of management will also be involved in everyday operations of the
Roles: Low level Managers, Team/Track leads
management is a supervisory and operational level of management. This level of
management will usually take care of day-to-day operations of the company,
human resource, supervise & guide sub-ordinates.
Based on the SWOT analysis, upper level
management will develop and provide a strategic plan to mid-level management. Decisions
made by upper level management will lead the company in the right direction to
achieve strategic objectives. Tactical decisions are made by the mid-level
management. Decisions made by mid-level management include: divisional plans,
workflows, acquisition of resources etc., Operational decisions are made by low
level management. There are no business judgements made in this level. These
decisions directly relate to day-to-day operations of the company.
Industry is the term used to refer a group of
companies operating similar (primary) businesses. Business is to produce,
market (marketing/advertising) and sell products. Sector is a part of the economy.
Industry is a sub group of the sector. Sector is a large group that consists of
industries. Industry is a group of distinct types of similar businesses.
Porters five-forces model acts as a strategy
tool that is used to understand opportunities and threats in external environment.
During the strategic decision making, five-forces model will help to overcome
the negative impact to the organization. Porters forces model will provide us below
information to make better decisions in the process of strategic planning.
Competitors who are newly entered in the market
can be a potential threat.
Competitive rivalry within the market
Threat of substitute products
Bargaining power of customers
Bargaining power of suppliers
Considering the five competitive
forces as mentioned above, upper level management make strategic decisions to
fight with the competitors, sustain in the market, differentiation and focus
towards increasing the market share. This five-force model is useful in
strategic decision making as the pace of change in market is more rapid these days.