Business Strategy
Business strategy, also called Competitive Strategy
Competitive Advantage
Generic Strategy
Cost Leadership
Differentiation
Executive Coaching and Guidance
We guide and assist the CEO and Business Owners. We help them focus beyond day-to-day operations through strategic planning, business initiatives and execution, and the budgeting and forecasting process.
Objective
We assist you in making informed decisions and developing effective business strategies for organic growth. We achieve this by evaluating your business design, competitive position, and advantages. We use market research, competitive analysis, and scenario planning tools to guide you in making strategic decisions.
What Challenge(s) do Our Clients Face?
Market Penetration:
- Do we deeply understand our customers’ evolving needs and how they learn about and buy our products?
- Is our marketing function a strong and effective driver of our business, and are we keeping up with the changing digital environment?
- Are our sales force and channels effectively driving the maximum possible revenue and growth?
- Are our pricing models precise and our pricing capabilities sophisticated?
- Do our commercial functions leverage the best available data, analytics, and tools to support decision-making?
- Do we exploit opportunities for cross-selling and bundling our products and services across SBUs?
Market Development:
- What is the best way to segment the market?
- Are there emerging customer segments that we currently do not serve?
- Where else could we apply our current technologies, products, or services?
- Do we have a clearly defined global strategy with explicit geographical growth targets?
- Do we have strong local market and customer knowledge in our target markets?
- Do we have an empowered and capable local management in our target markets?
Product Development:
- Do we have a clear innovation strategy and know which customers and markets to innovate for?
- Is our innovation pipeline continuously filled with high-potential ideas?
- Is our time to market a competitive strength that allows us to win market share?
- Do we launch good ideas into new products and services that are successful versus competition?
- Do we have a balanced portfolio of innovation projects (regarding the three horizons, technologies, degree of innovation, and time to market)?
- What is our share of revenues from less than three years old products?
Business Model innovation:
- What are the typical frustrations of our customers when they use our product or service?
- Which compromises do our customers need to make when they use our product or service?
- What untapped needs can we not serve with our current business model?
- Which business models from other industries could be transferred to our markets?
- What is our value proposition to our customers? Is it a cost focus? How do you differentiate, and how do you choose to be different?
- Where are you going to compete? How will we outperform our key competitors?
- How will you make the business grow?
- What is your business's core strength? What are its foundational elements? Is the status quo being challenged? How can you improve it?
- What are the disruptions your business could face?
Strategy about Making Choices
- A company’s overall success depends on its ability to compete.
- Creating a unique and valuable position through various activities is at the core of strategy.
- Unique Competitive position • Activities tailored to the strategy.
- Clear trade-offs and choices vis-à-vis competitors
- Strategic fit across activities
- Sustainability comes from the activity System, i.e., the Value Chain
- Operational Effectiveness is given.
Business Strategy
- Ability to compete- Cost leadership, Differentiation (Product)
- Business strategy concerns a competitive advantage: How to outperform the competitor.
- New Business Models, customer Segments, Products, offerings, Geographic Expansion, and New Capabilities
- Competitive advantage, positions, and capabilities
- Managing resources, constraints, capital
Operational Excellence (OE)
- OE is not a strategy.
- OE is necessary to compete but not sufficient to win. The more benchmarking they do, the more they look alike.
- OE means doing things better than competitors. Competitors quickly imitate OE.
- Most Japanese companies imitate and emulate one other.
- Japanese companies, after decades of impressive gains in OE, are facing diminishing returns.
- Operational effectiveness is achieving excellence in each activity; the strategy combines activities.
Corporate Strategy
A diversified company has two levels of strategy.
- Business (Competitive) strategy creates a competitive advantage in each company's business segment.
- Corporate strategy (Companywide) concerns: Decide which businesses the company should be involved in and determine how the central office should oversee the different business units.
Triggers for a Corporate Strategy Review
Strategy reviews are related to external trends shaping the organization’s industry, the performance of the business, slowing market growth, or investor-related concerns. In addition, a change in leadership, particularly at the senior level, can trigger a review of the portfolio of business units. Business units -Defines what set of businesses to compete in, supported by a clear competitive advantage of business units. Ensure appropriate synergies by resource allocation.
Business Strategy (Competitive Strategy)
Many promising business initiatives fail to come to fruition because the company needs to build its strategy around value creation. Creativity is essential in business, but a company will only last by prioritizing value. A business strategy is crucial for a company’s success. It aids leaders in setting organizational goals and provides a competitive edge.
What are the Benefits to Our Client?
Distinct Strategy
Why are Some Companies More Profitable than others? How Do They Create Value?
Having a competitive advantage means having sustainably higher profitability than the industry average. This can be achieved by commanding a higher relative price, operating at a lower relative cost, or both. Conversely, lower profitability than rivals can be attributed to having lower relative prices, higher relative costs, or both.
Why are some companies more profitable than others? A company’s relative position within its industry
A company’s performance has two sources: price and cost.
Relative Price
A company can maintain a higher price only if it provides something unique and valuable to its customers. Apple’s popular gadgets have been sold at premium prices. By increasing the value for the buyers, a company can raise their willingness to pay (WTP), which enables them to charge a higher price than competing offerings.
Relative Cost
The second key to achieving superior profitability is relative cost, meaning you find a way to produce at a lower price than your competitors. The best approach is discovering more efficient methods of creating, producing, delivering, selling, and supporting your product or service. Your cost advantage could be derived from lower operating costs, more efficient use of capital (including working capital), or both.
Customer Satisfaction Drives Company Margin.
The value created for a company is determined by the difference between the price of an item and its production cost. This difference is known as the firm’s margin and reflects the financial success of the business strategy. One way to measure this margin is through the return on invested capital (ROIC), which compares a company’s operating income with the capital required to generate it. ROIC provides insight into how effectively a company can turn its investments into profits.
We help you evaluate your Current Business Design.
1. Customer Selection
Which customers should we serve?
- To which customers can we add real value?
- Which customers will allow us to profit?
- Which customers do we want to serve?
2. Unique Value Proposition
What specific value do customers seek, and how do we choose between competing offerings when purchasing?
- Which customers are you going to serve?
- Which needs are you going to meet?
- What price will result in satisfactory customer value and acceptable profitability for the company?
3. Value Capture
How do you make profits?
- How can we capture a portion of the value we created for customers as profit?
- What is my profit model?
4. Differentiation/ Strategic Control Point
How can the profit stream be protected? A strategic control point refers to customer lock-in or switching costs. The objective is to safeguard the revenue stream created by the business model against the erosive impact of competition and customer influence.
- Each control point is crucial for a company’s profitability, preventing competitors from stealing profits and ensuring consistent growth.
- What makes my value proposition unique/ differentiated vs. other competitors?
- What strategic control points can offset the power of customers or competitors?
5. Scope
What activities should be performed? The critical question for business designers is: What changes in scope do we need to make to remain relevant to customers (Value Proposition), generate high profits (Profit Model), and maintain strategic control (Lock-in)?
- Which customers will help me turn a profit?
- Differentiation and strategic control rely on the customer base and the firm’s capabilities.
- Which activities or functions do we want to keep in-house, and which do we want to outsource?
Generic Strategy
Generic Strategies answers one of two central questions underlying companies’ choices about
competitive strategy.
- The first question concerns the attractiveness of industries for long-term profitability and how a company should choose which industry to enter.
- The second question concerns the determinants of a company’s relative competitive position after a particular industry is chosen.
Low-Cost Strategy
Differentiation Strategy
Focused Strategy
Companies can sometimes effectively use both focused strategies to command higher prices and lower costs. This can occur when a company has a dominant market share and significant scale-sensitive costs. However, as markets evolve, companies pursuing low-cost and differentiation will eventually have to choose one strategy. Pursuing cost leadership and differentiation simultaneously is challenging because each requires a different approach to the market.
All successful strategies typically involve one of two approaches: cost leadership or differentiation. Both can help a company achieve a more significant margin between revenue and costs compared to its competitors, ultimately leading to a sustainable competitive advantage, which is the ultimate goal of any strategy.
In other words, the experience of a cost leader is vastly different from that of a differentiator.
To succeed in the long run, make thoughtful, creative decisions to provide better value than competitors and create a competitive advantage. Competitive advantage provides the only protection a company can have. A company with a competitive advantage earns a more significant margin between revenue and cost than other companies for engaging in the same activity.
How Does it Work?
Understanding the external environment is crucial.
Industry Analysis can help you understand the competitive forces that impact the industry environment.
Industry Structure: A Powerful Tool. The five forces framework helps you identify your competitors and sets a baseline for measuring superior performance. It allows you to understand the industry’s average prices, costs, and profitability that you are trying to surpass. It tackles the economic fundamentals of competition, highlighting how external forces constrain or create strategic opportunities for your company.
Using the five forces analysis, you can answer critical questions like What is happening in your industry? Which factors are significant for competition? And what should you pay attention to? Industry structure is a more powerful tool for understanding competition dynamics.
The Fundamental Equation is profit = Price – Cost. Business competition is about capturing the
value an industry creates.
If an industry creates much value, its structure becomes critical to understanding who gets to capture it. The industry’s profit potential is determined by the relative strength of the five forces and their specific configuration. Therefore, thinking clearly about the industry’s structure is essential before focusing on your and your rivals’ positions.
The Five Forces- Competing for Profits. Companies face competition from direct rivals, customers, suppliers, potential new entrants, and substitutes in the business world. By analyzing these five forces, businesses can gain valuable insights to make strategic decisions about where and how to compete. Note that anticipating and adapting to structural changes is critical to success.
We assist you in determining the critical role of your functions. Internal analysis and capability evaluation help strengthen your competitive advantage.
Functional Strategy
Functional-level strategy is essential because it aligns specific organizational activities with the overall corporate strategy, ensuring that each department works towards common organizational goals and improving overall performance. How can Functional Strategy contribute to the generic strategy?
| Functional Strategy | Low-Cost | Differentiation | Focused |
|---|---|---|---|
| Marketing | Emphasize the low-cost distribution, advertising, and promotion | Emphasize differentiated distribution, advertising, and promotion on a large scale | Emphasize differentiated distribution advertising and promotion on a large scale at the lowest cost possible. |
| Finance | Lower financial costs by borrowing when credit costs are low and issuing stocks when the market is strong | Emphasize obtaining resources and funding output improvements or innovations even when financial costs may be high. | Emphasize obtaining resources and funding output improvements or innovation at the lowest possible cost. |
| Production | Emphasize operation efficiencies through learning, economies of scale, and capital substitution possibilities. | Emphasize quality in operation even when the cost of doing so is so high. | Emphasize quality in operations when the cost of doing so is relatively low. |
| Purchasing | Purchase at low costs through quantity discounts. Operate storage warehouse facilities and control inventory efficiently. | Procuring high-quality inputs, even if expensive, and taking care of storage and inventory at higher costs. | Purchase high-quality inputs only if costs are low. Conducted storage, warehouse, and inventory activities with care only if costs were relatively low. |
| R & D | Emphasize process research and development (R&D) to lower operations and distribution costs. | Emphasize product/service R&D aimed at enhancing the outputs of the business. | Emphasize both product/ service, R&D, and process R&D. |
| Human Resource | Emphasize reward systems that encourage cost reduction. | Emphasize reward systems that promote innovation. | Emphasize a reward system that fosters cost reductions and innovation. |
| Information System | Emphasize timely and pertinent information on the cost of operations. | Emphasize relevant and timely information on the ongoing processes that yield unique products/ services. | Emphasize timely and relevant information on costs of operations and innovation processes meant to yield unique products/ services. |
Coaching and Competence Focus
We have developed a module that considers business needs and executive working styles.
- We begin with Fundamental training in Strategic planning and management. The planning framework is a foundational one. For ex. The organization's sales target will be broken down into products and regions. Then, it further aligns with the salespeople's target. Any gap in target setting will eventually fail to achieve the result. Even salespeople need to plan their target to the customer channel. Moreover, benchmark practice is to granularity the target into base or core business (Bread and butter) and new business. This breakdown essentially helps to strategize how to achieve each element. The base business strategy could have different priorities, and significant project orders must be explicitly addressed, as the customer base is different.
- We add the necessary competency-building workshop, such as tracking the targets. Believe us, tracking weekly targets is the benchmark practice. All this leads to the basic foundation established in the planning and execution competency, which is a valued competency.
- We offer tools to use, improve, and use for regular analysis and insights. Many times, different companies have specific requirements. We can guide your team in developing those tools. Tools built in Excel are an excellent beginning. Once the understanding and processes reach proficiency levels, automation, and software systems can enhance their value.
- During the assignment, we encourage your team to take some initiatives and projects under our supervision. That will be an excellent chance to showcase and apply their recently enhanced competence to the company's requirements. We review their performance and guide them toward continuous improvement.
- We wish to take key personnel mentoring. We hope what we deliver to clients will be sustainable in the medium to long term. Many times, mentoring key personnel helps keep that momentum. We identify them as super users. Super users are responsible for mastering specific skill sets and internally training others. This is the benchmark method where the company can internalize the competence building without frequently hiring an external advisor.
How Do We Serve Our Clients?
Frequently Asked Questions
Business (Competitive) strategy focuses on establishing a competitive advantage within a company’s industry. The core of the strategy is ensuring a positive relationship between relative price and cost. A successful strategy creates a net positive outcome, creating a competitive advantage. Michael Porter stresses the importance of thinking in precise, quantifiable terms, ensuring the strategy is economically grounded and fact-based.
A business strategy creates the ability to compete through cost leadership or differentiation. It focuses on creating a competitive advantage that outperforms the competition. Operational excellence is not a strategy, which is precisely why a business strategy is crucial. While operational excellence is essential, it does not lead to sustained competitive advantage. Over time, companies can face diminishing returns with static or declining prices. While operational effectiveness is crucial, it should not supplant a proper strategy, as it can compromise a company’s ability to invest in the long term.
A company’s position within its industry is crucial for its performance. Strategic positioning involves choices about the value a company will create and how it will differentiate itself from competitors. This can result in either a premium price or lower costs. Trying to cater to all customers can be a strategic mistake, leading to being stuck in the middle. Positioning choices determine what to do, how to do it, and how everything fits together. Positioning can be broad or narrow, arising from different sources.
The primary focus of a business strategy is to create a competitive advantage. Competitive advantage is crucial for a company as it allows for higher margins between revenue and cost than other companies engaging in the same activity. This additional margin can be used to defend against competitors and ultimately win in the marketplace. Critical concepts for achieving competitive advantage include low cost and differentiation, which keep companies honest about their strategies. Companies must ensure that their strategy translates into genuinely lower cost structures or higher customer prices rather than focusing on operational effectiveness or customer intimacy in name only.
Innovation creates a competitive advantage that favors a business charging premium prices and lowering costs. When companies embrace innovation, they can improve efficiency, enhance customer experiences, and remain adaptable. This enables them to respond to changes and maintain a competitive edge. A well-defined business strategy ensures these innovations align with the company’s vision and goals.
