Strategic development and competitive sustainability

UNDERSTANDING STRATGEIC DEVELOPMENT AND COMPETITVE

SUSTAINABILITY

Student name
BS6100(S) Strategic Management (Aventis)
Professor name
Institute of afflation
Date of submission

Strategic development and competitive sustainability

Table of content
Impact of organizational factors on competitive advantage2
Introduction....2
Competencies, resources, success factors and competitive advantage..2-4
Theoretical framework4-5
Conclusion5
Organic development and strategic business model6
Introduction.6
Relevance of organic development..6-8
Challenges of organic development.8-9
Recommendations9
Conclusion9
Cost leadership strategy vs. Differentiation strategy.10
Introduction...10
Understanding the cost leadership strategy10-11
Understanding differentiating strategy11-12
Comparison12
Application for competitive strategy.12
Conclusion12
Reference.....13-14

Strategic development and competitive sustainability

Impact of organizational factors on competitive advantage.

Introduction
In every industry, companies strive to sustain competitive advantage and market
dominance through the means of varied resources and competencies. A competitive
advantage enables an organization to thrive in an economy, and allow it positional advantage
over the competitors. This advantage is characteristically attained through varied components
of the business model, yet is part of only an emergent strategy, and is susceptible to change
based on the business climate (Majeed, 2011).
As per a review conducted by Agha et al. (2012), a competitive advantage of an
organization is a result of strategic utilization of sources in a socially complex environment,
in synergy to all the internal and external organizational components. In the ever changing
business and economic environment, organizational success is attributed to sustained
competitive advantage. The present analysis is thus focused on understanding the relation
between competitive success and competency, skills and resource of the organization.
Competencies, resources, success factors and competitive advantage
Success in a business is based on analysing the market need and delivering a product
based on consumer specifications, needs and differentiating the product as per the market
standards. Meanwhile competitive success of a business is based on the uniqueness of
strategic business model, focus, internal and external business variable synchronization,
strategic management and assimilating a culture of utilization (Kabue and Kilka, 2016). In
this sense it is reflected that certain variables acts as a factor for the preferred choice amongst
a targeted audience, and hence become a reason for the sustainability and competitive
advantage of the company (Srivastava et al. 2013).

Strategic development and competitive sustainability

A prominent example of this aspect is seen in the context of Pepsi and Coca Cola,
where the preference over the latter can be attributed to the dynamic business model,
comprehensive distribution system, innovative work culture and comprehensive distribution
and technology infrastructure. Hence, for the long term success of the business there is a need
to assess the variables responsible for the competitive strength of the company (Majeed,
2011). Through the example of Coca Cola it is evident that the competitive advantage of the
organization is not only based on its core competencies, but also on the resource utilization
and strategic business management.
Typically, competitive advantage plan of an organization must acknowledge the
competitive threats, consider industry opportunities and deliver as per their maximum scope,
furthermore this strategic model must be imperfectly imitable in order to ensure that the
firm's sustained competitive advantage is causally ambiguous (Srivastava et al. 2013).
Business climate in the last few decades has changed drastically. Today, business models are
based on consumer orientation, consideration of economic attributes in a globalized
marketplace and innovation. In this sense, companies such as Apple Inc., that are able to
anticipate the consumer needs and deliver value for money products are successful.
As per a review by Agha et al. (2012), there is a need for the business to develop a
unique skill set to ensure a superior edge in this competitive landscape. In an interview with
Nike CEO Mark Parker, Carr (2013) noted that many organizations today are acknowledging
the relevance of core competencies, however, they are soon realizing that ensuring the same
alone will not warrant competitive advantage. In this sense Parker recounts, that business
models are becoming dynamic in the present climate, and there is a pressure on the leaders to
adapt and change, or suffer challenges in the global business platform (Carr, 2013).
It is realized that core competencies such as human resource management, strategic

Strategic development and competitive sustainability

business model, cost differentiation and value based product, along with supply chain model
has an impact in the success of a company (Majeed, 2011). The same is made evident in the
case of Coca Cola, which is a preferred brand owing to product quality and taste, along with
product differentiation. Furthermore, the product marketing and comprehensive distributive
model along with technological adaption contributes to the core competency of the
organization and serves to enhance its competitive position in the market.
As per Srivastava et al. (2013) in terms of resources, there are two variables namely,
tangible and intangible assets. While, financial, fixed and current assets of the organization
are deemed as tangible variables; human capital, consumer relation, and structural capital
contributes towards forming the intangible assets of the company. It has long since been
acknowledged that human resources and by account the intellectual capital is a prominent
contributing factor for the success of the organization (Agha et al. 2012). The same is evident
in the case of companies such as Nike that are expanding its business model through an
innovative team that is facilitating the adoption of digital media for product differentiation.
Theoretical framework
In their review Agha et al. (2012) notes that core competencies must have a value for
the consumer, should be extendible to other products and must focus on competitor
differentiation, basis of this understanding is the theory of competence-based competition. In
an attempt to understand the relevance of competencies and resources as a variable in the
competitive advantage of the company a review of institutional theory is conducted. It is
noted, that, organisations secure the positions and legitimacy of the business through the
management of varied norms and standards. Since understanding these variables is part of the
intellectual understanding for the organization, it is reflected that this measure is part of an
intangible variable (Kabue and Kilika, 2016, 100).

Strategic development and competitive sustainability

Through the course of this brief review it is reflected that institutional success of an
organization is based on the success of delivering competencies as per the organizational
needs. In this sense it is reflected that core competencies along with resources and specialized
skills together contribute towards competitive advantage of the company (Majeed, 2011). The
same is evident in the case of Apple that functions on its core competency of design, but was
perceptive enough to appoint radio frequency experts and hence anticipate industry standards
to achieve an intangible growth model (Carr, 2013). As per Wang (2014) a model based on
the consideration of core competencies impact the resource based view of the market, and
contributes towards enhancing the capability of the organization.
Conclusion
Competitive success is vital for any business in this globalized workplace. However,
amidst the rising competition, it is not plausible to presume that success would be achieved
on a singular contributing factor. Through the present analysis it is reflected that sustainable
competitive edge is a process that is a result of comprehensive management of institutional
competencies, uniqueness, resource utilization and dynamic business model. The study reflect
upon the lessons from the theory of competence-based competition, to acknowledge that the
business must be able to adapt to changing trends of industries while adapting their intangible
resources to achieve an edge.

Strategic development and competitive sustainability

Organic development and strategic business model

Introduction
Every business has influencing internal and external factors that contribute towards its
strategic success. As per a review conducted by the International Institute for Sustainable
Development [ISSD] (1992), a strategic plan of the organization reflect upon the internal and
external resources, and thus design a platform to utilize these resources to achieve
organizational goals. Understandably the business climate has its tumult, in the face of which
there is a need to ensure that strategic plan of the company is carefully considered.
In their reviw, Berg (2011) notes that there are three measures for the organizational
development, namely: organic growth, business model based on bolt-on acquisitions and
strategic acquisitions. However, it is reflected that the organic business model that is based on
a model of self-improvement serves as a cost effective, sustainable and comprehensive
strategic model for the business success. This paper is focused towards understanding the
relevance and challenges of this business strategy.
Relevance of organic development
Market today is consumer dominated, as a result the relevance of variables such as
product quality, uniqueness, and differentiation and consumer relation is more important than
ever (ISSD, 1992). As per a review conducted by Berg (2011), in a business model focused
on the development of product, an internal or organic business model serves to enhance the
efficiency of the company and thus contribute towards its success. It is believed that this
consideration will contribute towards expanding the scope of opportunity and balancing the
cost of operation for the organization. The basis for this application can be seen in the Edith
Penroses theory of firm growth, which notes, that the growth rate of an organization is

Strategic development and competitive sustainability

influenced by the variables of productive opportunities such as adjustment cost and previous
growth (Lokett et al. 2009, 2).
It is realized that even though the time is an important variable in the consideration of
the success of an organization in the context of internal strategy, it serves to enhance the
success quotient of the company through improving the bottom line. As per The Theory of
the Growth of the Firm, there are no external limits to the growth opportunities within a firm
(Loketta et al. 2009). This understanding coupled with the paradigm of financial
liberalization is the reason for organic growth strategy within the organization.
Typically an organic strategy entails measures such as business expansion which
facilitate optimum utilization of resources and contribute towards expanding the product
portfolio (Chand, 2016). This measure can be achieved through business penetration in
emerging markets, product differentiation, and market development strategies. A prominent
example of this is emergence of KFC in china, which has led to dominance of this restaurant
in the country (Berg, 2011). Another measure to facilitate organic growth is diversifying
business which contributes towards economic, cultural and social development of the
company. As per Wang (2014), there are four types of diversification strategies deployed by
the organizations in their organic growth model. These are,
a) Vertical diversification: Achieved through backward integration (going back to basics
such as Textile Company entry into agriculture for growing fibre) or forward
integration (as in the case of New Zealand based Natural health care products
company Comvita that purchased its Hong Kong distributor Green Life Ltd. and
gained access to green lifes retail infrastructure) (Lockett et al. 2009) to improve their
product line.
b) Horizontal diversification: Enhancing the product portfolio in parallel direction
beyond

Strategic development and competitive sustainability

the original line of product. Example of the same can be seen in the context of
Samsung that expanded in the smart phone market to counter competition from Apple
c) Concentric diversification: Enhancing product portfolio in related business direction.
Example of the same can be seen in the context of Nike that is expanding into digital
market (Carr, 2013).
d) Conglomerate diversification: When a firm opens business in a direction not related to
the original business line.
It is reflected that an organic business model allows the leaders a chance to see their
vision materializing as per their desired pace. Furthermore, it allows the company to
strengthen their consumer base and gather more consumers and hence capture more market.
Challenges of organic development
Even as it is acknowledged that the relevance of organic growth is evident in the
context of enhancing the company portfolio, it is realized that this measure require more time,
and resources. In this sense Berg (2011) notes that this model despite promising results has a
slower rate of materializing. It is noted that this business model also is associated with risks.
In this sense it is noted that there are challenges associated with the risk of competitive
standing and patency risks as was seen in the case of Apple. It is further reflected that such
interaction places pressure upon the business owners that might compromise the elementary
business model and thus success in the industry (ISSD, 1992).
In their review Berg (2011) notes that even when the benefits are completely
absorbable in an organic business model, deploying this strategy pose a risk of over
investment for the owner. Furthermore, this pose a pressure upon the organization to create an
organized, comprehensive, prioritized and specialized business model. This perspective is
resonated by the theory of the growth of firms that notes the relevance of examining the
changing POSs of firms (Loketta et al. 2009).

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10

Recommendation
It is noted that even as there are specification associated with the organic growth
model, this model allows the business to grow in diverse market place and hence is deemed
as a lasting solution for sustainable growth in globalized economy. However, while making
such consideration there is a need to prioritize goals and objectives, and have realistic
expectations amidst the opportunities and industry challenges (ISSD, 1992).
Conclusion
In their review Berg (2011) reflect that a strategic business portfolio must balance the
financial and social aspect of the business. In this sense it is countered that a business must
focus beyond financial equilibrium. The same is reflected through, the perspective of Berg
(2011) that notes that the main focus of the organizational structure for any strategic
development must be careful delegation of local resources to the organizational structure. The
study notes that the organic growth model allows a unique competitive edge to the businesses
provided it is carefully structured and analysed.

Cost leadership strategy vs. Differentiation strategy

Introduction

Strategic development and competitive sustainability

11

Marketing is a prominent aspect of the business which is achieved through different

strategies, namely: focus, cost leadership and differentiation. In their review Majeed (2011)
reflect that these variables contribute towards continuous success of the company. At one end
it is noted that in a consumer centric market, focus upon product and consumer satisfaction is
an optimum measure for sustained success (ISSD, 1992). While at another it is noted that the
age old cost based leadership model, such as that practiced by companies such as Samsung
and Micromax against Apple has more power in terms of attaining maximum market share.
Yet, as per a review by Minarik (2007), cost leadership model can pose challenge for
the company in terms of compromising the quality and placing pressure on the production.
On the other hand a differentiation strategy facilitate distinctive attributes for a business and
allows the business to create a lasting relation with the consumer. Yet at the same time
challenges for the company in terms of risk of failure, competitor and resource utilization are
raised with this model. In the face of which, the present analysis focus towards understanding
the relevance and challenges of different marketing strategies in the context of sustained
competitive edge for business.
Understanding the cost leadership strategy
As per a review by Mernick (2007) cost leadership focus on organizing business
resources around products and services at the lowest delivery cost possible for the consumers.
Understandably, this model is directed to gather the interest of the consumers from different
demographics and is practiced by companies such as Walmart, IKEA, McDonalds and
Southwest airlines amongst others. The basis of this model is to ensure that aggressive and
focused measures of cost reduction and management are followed in the business model and
the focus is directed towards superior profitability. In this sense, Mernick (2007) notes, that

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12

the low cost positioning defends the firm from buyers and prepare them to be efficient
competitions.
While there are obvious advantages to this measure, it is reflected that this method
requires stringent considerations in implementation such as policy and regulatory
considerations. Furthermore, there is a need to reflect upon the variables in terms of internal
as well as external environment (Wang, 2014). While reflecting upon the relevance of this
model, Porter in his initial assessment reflected that the relevance and impact of this strategy
will also be based on the organizational design and the industry standards and scope
(Mernick, 2007).
Understanding differentiating strategy
On the other hand a differentiation strategy has focus upon creating different business
profile through product and market expansion. As per a review by Mernick (2007), this
measure allows the business a chance of capturing a wider set of audience. Furthermore it
allows the business to strengthen relation with the sellers and get more market dominance and
recognition. Meanwhile, it also raises pressure in terms of the risks of failure and competitive
growth for the business owners (Majeed, 2011). In the face of which relevance of balancing is
recounted. An example of the price sensitive and product differentiation can be seen in the
case of Walmart.
Incidentally as per Portar it is noted that this strategy restrain market share growth,
and thus argues that there is a need for trade-off between these strategic theories (Mernick,
2007). Meanwhile, Bowman reflects upon the model of strategic clock and recounts that the
impact of the strategy is based on the perceived value by the buyer and the seller (Barskova,
2010). Hence, it is reflected that even as Porter argues that there is only one plausible method

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13

of adoption in the context of the marketing, both model of strategic marketing and their
relevance can be seen by the business owners.
Comparison
Through the course of the present review it is realized that typically the benefit is
driven towards the company in a low cost framework. However, in the context of a
differentiating leadership style the benefit are for both consumer as well as the seller. It is
reflected that even as cost based leadership is seen as a prominent business model by many
business owner, it does not entail sustained success owing to the rise in the consumer
orientation and growing focus towards quality, cost and innovation. Meanwhile, often
differentiation is seen as a route for success owing to the variables such as management of
cost as well as consumer needs. In this sense it is reflected that the latter allows more
competitive advantage to the business.
Application for competitive strategy
Through the present analysis it is reflected that the business that are seeking growth
opportunity need to understand the risk and anticipate the consumer needs in order to sustain
in this economy. In this sense it is reflected that there is a need for ensuring that
differentiation strategy with a combination of cost leadership style. In this sense it is noted,
that there is no singular theory, either cost based, focus or differentiating that ensure the
success of the business in the present business climate. In this sense it is countered that there
is relevance in terms of strategic positioning and organizational as well as industry analysis
(Wang, 2014).
Conclusion

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Through the course of the present review it is noted that even though determining the
boundaries of the industries is challenging there is need to ensure that the focus is driven
towards a value based model to ensure competitive strength for business.
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