Question

How does organizational control change as a venture achieves more success in a foreign market? In what situations is a cost leadership strategy better suited? When might a differentiation strategy be better?

Answer 1

Organizational Control is the process of assigning, evaluating, and regulating resources on an ongoing basis to accomplish an organization's goals. To successfully control an organization, managers need to not only know what the performance standards are, but also figure out how to share that information with employees.

Control can be defined narrowly as the process a manager takes to assure that actual performance conforms to the organization's plan, or more broadly as anything that regulates the process or activity of an organization. The following content follows the general interpretation by defining Manegerial Control as monitoring performance against a plan and then making adjustments either in the plan or in operations as necessary.

The six major purposes of controls are as follows:

Controls make plans effective. Managers need to measure progress, offer feedback, and direct their teams if they want to succeed.

Controls make sure that organizational activities are consistent.Policies and procedures help ensure that efforts are integrated.

Controls make organizations effective. Organizations need controls in place if they want to achieve and accomplish their objectives.

Controls make organizations efficient. Efficiency probably depends more on controls than any other management function.

Controls provide feedback on project status. Not only do they measure progress, but controls also provide feedback to participants as well. Feedback influences behavior and is an essential ingredient in the control process.

Controls aid in decision making. The ultimate purpose of controls is to help managers make better decisions. Controls make managers aware of problems and give them information that is necessary for decision making.

Cost leadership is establishing a competitive advantage by having the lowest cost of operation in the industry. Cost leadership is often driven by company efficiency, size, scale, scope and cumulative experience (learning curve). A Cost leadership Strategy aims to exploit scale of production, well-defined scope and other economies (e.g., a good purchasing approach), producing highly standardized products, using advanced technology. In recent years, more and more companies have chosen a strategic mix to achieve market leadership. These patterns consist of simultaneous cost leadership, superior customer service and product leadership.

Cost leadership is different from price leadership. A company could be the lowest cost producer yet not offer the lowest-priced products or services. If so, that company would have a higher than average profitability. However, cost leader companies do compete on price and are very effective at such a form of competition, having a low cost structure and management.

Differentiation strategy is one of the most important marketing strategy in today’s business environment. With so many brands and so many varieties of products and so much advertising noise, it becomes very difficult but ultimately very necessary to differentiate your brand from competition. Thus, Differentiation strategy is being used by all top companies for their products. There are various ways to differentiate your product.

1) Innovation / Invention –

The best way to implement differentiation strategy is to invent or innovate. By innovating or inventing, you become the market leader because your product is the first entrant in the market. Inventions are of course difficult and require regular R&D expenditure. But innovations are more practical and are a Differentiation strategy used by technological companies like Apple and Google.

2) Product-level differentiation –

Observed in many industries, Differentiation strategy can be executed at product level too. Taking an example of the tourism industry, tour packages of all companies are different and the tour package might have its own differentiating factors. Some might be giving international tours whereas others will be giving national and regional tours only. Thus, by incorporating product differentiationstrategy at product level, the brands can differentiate themselves from competitors in the eyes of the customer.

3) Price differentiation –

The most used form of differentiation strategy is price differentiation. In the above example of tour packages, some brands might give the luxury package whereas other brands might give a cheap and affordable pricing. Mobile handset companies like Samsung and apple target the cream segment whereas companies like Micromax and Xolo target the price sensitive segment. Price segmentation is the biggest Differentiation weapon in the hands of marketers.

4) Branding –

Your promotion mix and the marketing communications of the company play a crucial role in the differentiation strategy of your product. Companies like Pepsi and Coke rely heavily on their branding efforts to convert the customer to their products. Thus, youngsters will like pepsi, young adults will like Thums up, families will like Fanta, and Coke can be an all time favorite for everyone. Your promotion mix helps you target the correct segment and hence plays a crucial role in differentiation.

5) Packaging –

If you go to any publications and ask them what are the critical factors in selling a book, the publication agency will say that, after the story of the book, the top cover of the book plays a critical role in the success of the book. In fact, many a times, customers might buy a book based on the top cover. Thus, packaging is important. The same can be seen when you enter a mall and you have 100’s of shelves with different types of cereals, soaps, shampoos, detergents etc. At such a time, the color, the packaging, the taglines, the ease of handling can play an important role in converting the customer to your brand. The tetrapack introduced by Frooti in the Indian market was a wonderful example of Packaging playing a role in differentiation strategy.