Strategic Management for the MBA
Wayland Baptist University
1. What are the characteristics of the current competitive land- scape? What two factors are the primary drivers of this landscape?
Competitive landscape is a process that involves relating the company to its environment. Competitive landscape helps identify the strengths and weaknesses of the company, as well as the opportunities and threats that affect it within its target market. The competition is integrated by the companies that act in the same market and perform the same function within the same group of clients regardless of the technology used for it. It is not, therefore, the competitor that manufactures a generic product like that of another company, but the one that satisfies the same needs with respect to the same target or consumer audience. Two of the primary factors are global economy and technology. There is no doubt about the impact that science and technology have had on the emergence and consolidation of this phenomenon, from the scientific-technological revolution of the transistor and the development of information and communication technologies. Global economy has really done is to force the underdeveloped countries to open their markets to the goods of the most advanced industrialized countries.
2. How do the five forces of competition in an industry affect its profitability potential? Explain.
In many industries, companies compete fiercely with substitute product manufacturers in other industries. The presence of substitute products puts a cap on the price that can be charged before consumers opt for a substitute product. The bargaining power of suppliers affects the intensity of competition in an industry, especially when there are many suppliers, when there are only a few good substitute raw materials or when the cost of changing raw materials is especially expensive. Frequently, suppliers and producers do well to help each other with reasonable prices, better quality, development of new services, just-in-time deliveries and low inventory costs, thus reinforcing long-term profitability for all interested parties. When customers are very concentrated, are many or buy large volumes, their bargaining power represents an important force that affects the intensity of an industry’s competition. Companies can follow a backward integration strategy to acquire control or domain of suppliers. This strategy is especially effective when providers are not reliable, are too expensive or are not able to meet the needs of the company consistently.
3. What is outsourcing? Why do firms outsource? Will outsourcing’s importance grow in the future? If so, why?
Outsourcing is the figure by which a company uses external suppliers of labor to perform certain tasks, tasks or activities in the company. In these times, the range of business services that can be outsourced is very extensive, since it is possible to cover all the functional areas of a company, from the area of production, packaging, storage, distribution, transportation, accounting, sales, finance, human resources and even the quartermaster services, this company being able to operate outsourced in a large part of its structure, with only one or two departments that are those that develop the main operations of the business unit. With the alternative of outsourcing, the company undergoes a process of weight loss in the expenses of the same department, as it is the payroll and the expenses that this entails: the benefits and the consequent fiscal burden. Yes, it will grow. As can be seen, the above advantages result in saving money because risks in the performance of operations are reduced. All these added values create an accumulation of savings that are not always detected, but that are present and play to the benefit of the user of outsourcing services.
4. What are the specific risks associated with using each business-level strategy?
The business-level strategies are cost leadership, differentiation, focus, and integrated cost leadership/differentiation. Below is the specific risk for each one.
Cost leadership – The competitors could imitate the strategy, diminishing the profits of the industry in general; that technological advances in the industry can make the strategy ineffective or that business interests could be diverted to other features of differentiation besides price.
Differentiation- competitors could develop ways to copy differentiation characteristics quickly; In this way, companies must find durable sources of exclusivity that rival companies cannot imitate quickly or at a lower cost.
Focus- the possibility that many competitors recognize the strategy of successful approach and imitate it, or that the preferences of the consumers are diverted towards the characteristics of the product that the market wants in general. Another risk is that customers may not value the exclusive product enough to justify its high price.
Integrated Cost leadership/Differentiation- firms find it difficult to perform primary value-chain activities and support functions in ways that allow them to produce relatively inexpensive products with levels of differentiation that create value for the target customer (Hiit, 2017).
5. Who are competitors? How are competitive rivalry, competitive behavior, and competitive dynamics defined in the chapter 5?
The competitors are those businesses that focus on a target audience like that of another company or that offer products or services that are on the same market line. When analyzing the existing competitors of an industry or sector we can see the degree of rivalry that it has, since these current rivals are against those who are going to face and compete to achieve the most precious objective, to gain that market share that is wanted.
Competitive rivalry- is the set of actions and responses that companies must make to be sure that they are taking advantage in the industry (2017).
Competitive behavior- is defined as the set of actions and competitive responses that a company develops to create or defend its competitive advantages and to improve its position in the market (2017).
Competitive dynamics- is the total set of actions and responses taken by all firms competing within the market (2017).
Hitt. (2017). Strategic Management: Competitiveness and Globalization Concepts and Cases. Boston, MA: Cengage Learning.