Question

1. Characteristics of strategic decisions

2. 5 generic competitive strategies (explain)

3. what's a business model and what are its components?

4. when does a strategy works best, when does low-cost, differentiator, focused, work best?

5. 5 external competitive pressures, come from 5 sources?

Answer 1

1. Strategic decisions are descriptive of an organization's strategy. They have a huge impact on the organization. They provide a competitive advantage to the organization. It helps in solving a number of factors within as well as outside the organization. Strategic decisions are broad and long term in nature. These are resource-intensive and many ordinary and regular decisions are based on strategic decisions.

1. 5 generic competitive strategies are as follows:

1. Low-cost provider

With this strategy, low cost is offered to the customer. The price is lower than the competitors in the market.

1. Broad differentiation

A detailed study of customer needs is carried out and a differentiated price is offered to the customer along with some unique features as applicable to the customer. It appeals to the buyer to pay the differentiated price for the unique features.

1. Focussed low cost

It is aimed at obtaining a competitive advantage over competitors by selling the products at a low price. In this strategy, the focus is on a market and aimed at a narrow segment of the market. Serving customers with tailor-made needs and demands are key objectives.

1. Focussed differentiation

It is aimed at customers who have different requirements and existing competitors are not willing to fulfill it. The focus is laid on a small number of target market segments.

1. Best cost provider

It is a mixed strategy of low cost and differentiation. It is aimed at providing the desired customer needs and fulfilling them at a low cost at the same time.

1. A business model is a plan for running an organization. It includes detailed operations of the business organization, finance details, products that the organization will be offering, the customer base which will be targeted by the organization. It a complete representation of the organization in the real world. It helps in gaining useful insights into the organization

Components of a business model are as follows:

1. Value Proposition

2. Product or Service

3. Value Architecture

4. Revenue Model

1. A strategy works best when it delivers the desired results kept in mind when the strategy was planned.

Different strategies work in different setups.

1. Low-cost strategy: This strategy works best when the competitors have prices set at higher. The profits are lower but as volume increases the profit increases.
2. Differentiator: It works best when the product is unique and the customer has the need for uniqueness.
3. Focussed: It works when the requirement of the customer is to be fulfilled at a low cost along with the unique features of the product.

1. External competitive pressures are as follows:

1. Customers: Strength of customer, Bargaining power of the customer.
2. Suppliers: Competitive supply by suppliers, cost of switching suppliers, Bargaining power of the supplier.
3. Competitors: Competing firms in the market, Strength of competitors.
4. Product substitute: competitiveness of substitute products.
5. New entrants: Market situation of new entry of competitor, cost of investment of new entrant.