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  • Top 5 Concepts Every Student Should Know in Firm Strategy

    April 29, 2023
    Emily Clarke
    Emily Clarke
    United Kingdom
    Firm Strategy
    With an MBA in Firm Strategy, Emily Clarke is a business strategist with over a decade of experience in the industry.

    A business student must comprehend the key principles of firm strategy. We will discuss Porter's Five Forces, SWOT Analysis, Cost Leadership vs. Differentiation Strategy, Blue Ocean Strategy, and Resource-Based View in this blog. By mastering these principles, you will have a solid foundation in firm strategy and will be able to analyse and build effective company strategies. We hope that you will learn how to approach your assignments in the future. If you encounter a daunting task, don’t forget that we can do your firm strategy assignment at very affordable prices. Contact us immediately.

    Introduction

    Learning about firm strategy is one of the most significant components of your education as a business student. A company's strategy is its plan for attaining its goals and objectives, and it is essential to its success. When studying firm strategy, you will come across many different concepts and theories, but in this blog article, we will focus on the top five elements that every student should understand.

    1. Porter’s Five Forces
    2. Porter's Five Forces is a well-known and extremely significant concept in firm strategy. It was developed by Michael Porter, a Harvard Business School professor, and defines the five key dynamics that influence rivalry within an industry.

      These are the forces:

      1. New entrant threat: The extent to which new competitors can enter the market and compete with incumbent firms.
      2. Supplier negotiating power: The extent to which suppliers can impose terms on the companies they supply, such as pricing and quality.
      3. Buyer negotiating power: The extent to which purchasers can impose requirements on the companies from which they buy, such as pricing, quality, and service.
      4. The threat of substitute products or services: The extent to which alternative products or services can meet the same customer needs as existing products or services.
      5. Competitive rivalry intensity: The degree to which competitors in an industry compete for customers, resources, and market share.

      Companies can gain a better understanding of their industry and the competitive landscape by analyzing these five forces. This information can be used to discover opportunities and challenges, build strategies to overcome entrance hurdles and differentiate themselves from competitors.

      For example, if a company works in a sector with high entry barriers and little competition, it may opt to prioritize quality and customer happiness to keep its market share. If, on the other hand, a company works in an industry with low entry barriers and severe rivalry, it may choose to focus on cost reduction and efficiency to remain competitive.

      Finally, Porter's Five Forces is a must-know idea for every student studying Firm strategy. Students can design successful plans for organizations to flourish in their industry by studying the five forces and their impact on a company's competitive position.

    3. SWOT Analysis
    4. SWOT Analysis is a strong tool that firms use to examine their internal strengths and weaknesses, as well as external possibilities and threats. SWOT is an abbreviation for Strengths, Weaknesses, Opportunities, and Threats.

      • Strengths:
      • These are the internal qualities that provide a company with a competitive advantage. A strong brand reputation, talented personnel, proprietary technology, or a dedicated consumer base are all examples of strengths.

      • Weaknesses:
      • These are the internal elements that place a corporation at a competitive disadvantage. Poor financial management, outdated technology, insufficient staff training, or low employee morale are all examples of vulnerabilities.

      • Opportunities:
      • Opportunities are outside factors that a firm can use to its advantage. An expanding market segment, new legislation, changing consumer habits, or the advent of new technologies are all examples of opportunities.

      • Threats:

      Threats are external elements that can have a detrimental impact on a company's performance. Intense competition, economic downturns, supply chain interruptions, or changes in consumer behaviour are examples of dangers.

      Companies can acquire useful insights into their current situation and find areas for improvement by doing a SWOT Analysis. They can then utilize this knowledge to create plans that capitalize on their strengths, fix their shortcomings, seize opportunities, and minimize potential dangers.

      For example, if a company's SWOT Analysis reveals that it has a strong brand reputation and a loyal customer base (strengths), but outdated technology and insufficient employee training (weaknesses), it may decide to invest in updating its technology and providing more comprehensive training to its employees. Similarly, if a SWOT Analysis identifies a new market segment with strong development potential (opportunity), a company may decide to enter that market and develop products or services specifically for that area.

      Finally, SWOT Analysis is an important subject for every student studying Firm strategy. Students can build successful plans for organizations to succeed in their industry by understanding the internal and external elements that influence their performance.

    5. Cost Leadership vs Differentiation
    6. Companies can acquire a competitive advantage in their sector by implementing two important strategies: cost leadership and differentiation.

      Cost Leadership: Cost leadership is a firm strategy that aims to achieve the lowest possible cost of production in a certain industry. Companies that use this technique seek to offer their products or services at a cheaper cost than competitors while maintaining comparable quality levels. This enables them to target price-conscious customers looking for the most cost-effective solution.

      To achieve cost leadership, businesses must focus on lowering production costs through multiple methods such as economies of scale, process optimization, and supply chain management. To maintain their cheap prices, they may need to slash costs in areas such as marketing and research & development.

      Differentiation: Differentiation is a marketing approach that focuses on providing customers with unique and high-quality products or services. Companies that use this strategy seek to separate themselves from their competition by providing features and perks that other companies do not provide. This enables them to attract customers willing to pay a premium for distinctive and high-quality items or services.

      To create distinction, businesses must focus on generating distinctive products or services that satisfy the demands and preferences of their customers. To generate a differentiated value offering that is difficult to imitate, they may need to spend on research and development, build strong brands, and provide exceptional customer service.

      In summary, companies that use the cost leadership strategy strive for the lowest feasible cost of production, whereas companies that use the differentiation strategy strive for distinctive and high-quality products or services. Both tactics can be effective in creating a competitive edge, and the choice can be influenced by several factors such as industry structure, consumer needs, and available resources.

      As a firm strategy student, it is critical to grasp both strategies and how they can be utilized in various circumstances to achieve long-term success. Students can design effective strategies for organizations to prosper in their industry by studying these ideas.

    7. Blue Ocean Strategy
    8. The Blue Ocean Strategy is a strategic framework that tries to assist businesses in creating uncontested market sectors and rendering competition obsolete. The Blue Ocean Strategy, developed by W. Chan Kim and Renée Mauborgne, is based on the notion that corporations should focus on developing new market sectors rather than competing in current ones.

      The term "Blue Ocean" refers to an undeveloped and uncontested market region in which enterprises can create new demand and growth without confronting fierce rivalry. In contrast, a "red ocean" is a market space that is already crowded with competitors, making it difficult for businesses to differentiate themselves and win market share.

      Value Innovation and the Four Actions Framework are the two key components of the Blue Ocean Strategy Framework.

      Value Innovation: The process of producing new value for customers while simultaneously cutting expenses is known as value innovation. Companies can separate themselves from their competitors by developing unique and differentiated value propositions. Identifying the major drivers of customer value in an industry and then building a new market sector that meets those drivers uniquely and cost-effectively is what value innovation entails.

      Framework of Four Actions: The Four Actions Framework includes four essential questions that businesses can utilize to uncover value innovation opportunities:

      1. Which elements that the sector has historically competed on should be eliminated?
      2. Which elements should be significantly decreased below the industry standard?
      3. Which factors should be elevated far above the industry norm?
      4. What factors should be developed that the industry has never provided?

      Companies can identify possibilities to build new market sectors with distinct and differentiated value propositions by answering these questions.

      The Blue Ocean Strategy framework has been effectively utilized in a range of industries, including consumer products, healthcare, and technology. Cirque du Soleil, Southwest Airlines, and Nintendo are examples of organizations that have successfully utilized the Blue Ocean Strategy.

      Blue ocean strategy is an important subject for every student studying firm strategy. Companies that focus on developing uncontested market areas and value innovation can create new demand and growth possibilities that differentiate them from their competition.

    9. Resource-Based View
    10. The Resource-Based View (RBV) is a paradigm for determining a company's competitive advantage by examining its internal resources and capabilities. According to the RBV, a company's resources and competencies, rather than external variables like industry structure or market conditions, are the key drivers of its competitive advantage.

      According to the RBV, a company's resources are classified as either tangible or intangible. Physical assets such as buildings, equipment, and inventory are examples of tangible resources, whereas intangible resources include intellectual property, brand reputation, and organizational culture.

      In contrast, capabilities refer to a company's ability to do specified operations or tasks. Processes, methods, and abilities that enable the company to produce high-quality products or services are examples of these.

      According to the RBV, a company's competitive advantage is determined by the unique combination of its resources and capabilities, as well as how well those resources and capabilities are matched with the company's strategy. Companies with valuable, unusual, and difficult-to-copy resources and capabilities are more likely to maintain their competitive advantage.

      Companies must perform a thorough examination of their internal resources and capabilities to determine their strengths and shortcomings before using the RBV framework. They must also assess how their resources and talents connect with their strategy, as well as identify areas for improvement.

      The RBV framework has been effectively utilized in a wide range of industries, from manufacturing to services to technology. Toyota, Apple, and Amazon are examples of companies that have used the RBV framework to create long-term competitive advantage.

      The Resource-Based View is an extremely useful concept for any student studying firm strategy. The RBV can assist organizations in identifying their competitive edge and developing plans to sustain it over time by assessing their internal resources and skills.

    Wrap Up

    Finally, knowing firm strategy is crucial for business and management students. The five principles we've covered in this blog - Porter's Five Forces, SWOT Analysis, Cost Leadership vs. Differentiation, Blue Ocean Strategy, and the Resource-Based View - are critical foundations for helping businesses establish competitive strategies and achieve long-term success. Porter's Five Forces gives a framework for analyzing an industry's competitive forces, whereas SWOT Analysis assists businesses in identifying their strengths, weaknesses, opportunities, and threats. Cost Leadership vs. Differentiation allows businesses to select between two broad competitive advantage strategies, whereas the Blue Ocean Strategy promotes businesses to establish new market areas and value innovation. Finally, the Resource-Based View emphasizes the relevance of a company's internal resources and competencies in maintaining a competitive advantage over time.

    While each of these frameworks provides a unique viewpoint on firm strategy, they all have one purpose in common: to assist organizations in developing strategies that allow them to compete effectively in their industries. Students can get a deeper appreciation for the complex and dynamic world of Firm strategy by learning and using these concepts, and thus be better equipped for success in their future jobs.