Neha Sinha

237604

Assignment 1
1. What is competitive advantage, and how does it relate to a company’s business model?

Competitive advantage in a company is when it’s business gains and enough profit
needed to sustain and grow any company are relatively greater than the other
companies competing in the market with same type of customers. Every company has
its own set of strategies (low production cost, better quality, improvised product design
etc.) which when used effectively leads to company’s sustained competitive advantage
with great profitability and profit growth.
Competitive advantage is more effective when a company’s manager mix and match
different strategies and apply them accordingly when the time is right, will determine
the company’s growth and success.

A company’s business model is plan of action that explains how a company will generate
revenues and will make profits with time. It’s smartly utilizing the set of strategies that
will help in company’s growth in future. A business model of any company needs to
evolve with time and customer demands in the market.
The better business model a company has, more competitive advantage it will get in the
market.

Key points of a business model are: -

1. Establish company’s clients.
2. Establish business process.
3. Evolve business with demand and time.
4. Keep acquiring and growing customer base.
5. Introducing newer and better products/services.

2. Describe the strategic planning model, and who is involved in the strategy-making
process

Strategic planning process model has following steps: -

1. Choose corporate mission and its goals – This means to describe the very
existence/purpose of company in the market. Why the company has been
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established? What are company’s goals and mission for the consumer
market.
2. Analyze company’s competition in market to recognize its opportunities and
threats – This step analyzes and determines various other competitions a
company has in the market, so that it can work on areas to grow and to avoid
downfall of company by working on its threats.
3. Analyze company’s internal surroundings to identify its strengths and
weaknesses – Any company also needs to focus and work on its internal
environment too so as to improvise its strengths and work on its weaknesses.
4. Decide the strategies that will help working on company’s strengths and
weaknesses. The strategies should be uniform keeping company’s goals in
mind – A company needs to finalize its strategies needed for its growth.
These should consistent keeping company’s goals and mission in mind.
5. Implement the selected strategies – Lastly, company needs to implement the
strategies. Each person from team should work on specific details to make
sure that the strategies are implemented effectively.

Managers of the company are involved in strategy making process. Mostly there are two
types of managers; general managers – who responsible of overall company’s
performance or in some organizations, they are responsible for selective departments
and functional managers – who are responsible for overseeing certain function or
particular activity in a company like human resources department or logistics.

3. Describe the SWOT analysis, its components, and how it aids a company in making
strategic decisions. Provide examples of each component in the SWOT analysis.

SWOT analysis – It stands for Strength, Weaknesses, Opportunity and Threats. It’s a
technique to understand strengths and weaknesses and to identify the opportunities
open for you and the kinds of threats you face. Goal of SWOT analysis is to assure that
the company’s current business model will work best with the company’s current
resources and will meet the demands in which it operates.

Strengths - These are internal positive factors within a company. They are within your
control. This includes internal resources within a company, competitive advantage over
other companies.
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Weaknesses – These are internal negative factors. This includes areas which needs to be
worked on to improve company’s position in market against its competitors.

Opportunity – These are external positive factors. It includes areas like if there have
been any recent changes in market that the company can benefit from? Currently
exiting opportunities in market that can be used to company’s advantage.

Threat – These are negative external factors. It includes factors that are beyond your
control and could place company’s business at risk. Like potential competitors in
market, fast changing environment.

Managers analyze and set different possible strategies and then identify them as the
ones that will create competitive advantage in the market. Once these strategies have
been chosen, they need to be implemented, so as to achieve competitive and=vantage
and great performance. Implementing these strategies include revamping product
designs, offering better options of the products as per their demands, fluctuating the
prices as per market demands, increasing or decreasing the company size as per
requirement.

For example, at Time Inc., when the readers moved from printed magazines to web
materials, it was classified as Threat to the printed magazines and Opportunity to exploit
the demand of web materials. Managers saw that Times’s renowned market standards
and established reporting capabilities can be used as its Strengths that would help raise
online demand, but that an editorial culture that was disparaged the web materials was
a Weakness that needed to be fixed.

4. What are the various levels of management, and how do they participate in the process
of strategic decision making?

The various levels of management are: -

1.) Corporate Level – This includes CEO, Board of Directors, Corporate staff.
2.) Business Level – This includes Divisional managers and staff.
3.) Functional Level – This includes functional managers.
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Corporate Level managers – This includes CEO, Board of Directors, Corporate staff. Each
of them is responsible for decision making in the company. CEO is head of all the
managers. Including senior executives, corporate level manager role describes taking
major and final decisions for the company, defining goals and how to achieve them, how
much resources are needed to be allocated for different businesses, create and
implement the strategies, and being leader to entire company. CEO’s responsibility is to
ensure that the strategies that are pursued by company are consistent with company’s
profit and profitability. Developing strategies for each of the business within company is
main responsibility of the manager of that particular business and not of the CEO.

Business Level managers – Managers appointed for a business unit within a company
are business level managers. A business unit is particular division in a company that
provides its own service for certain type of market like finance, production etc. The role
of this manager is to create strategies for each of the businesses in the company.
Corporate level managers are responsible for strategies that expands individual
business. For example, in GE company, each of their general managers are responsible
for their own business unit/division and work individually on each of them.

Functional level managers – This includes functional managers like the ones responsible
for specific business functions within the company like HR, customer support service,
logistics etc. so compared to general manager who looks over operation of a company,
function level managers look over specific division of a company. Even though functional
managers are not responsible for overall betterment of company, their individual roles
have major impact on growth of company. For example, in GE company, functional
managers provide important information that is responsible for business and corporate
level manager to make better strategies for the company. This is possible because
functional level managers are able to interact with customers closely than corporate
level managers.
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1. Define “Industry”, “Business” and “Sector”. How are these related?

Industry - Is group of companies or businesses offering similar kinds of merchandise as

each other to fulfill customer needs. For example, Kit Kat, Dairy Milk are chocolate types
satisfying customer’s need for chocolates. So, here chocolate is the industry and Kita Kat
and Dairy Milk are the businesses. Cadbury is the manufacturing company for Dairy Milk
and Nestle is manufacturing company for Kit Kat.

Business – Is something that is offered by a company on popular demand by customers.

Like mentioned above, chocolate is a business industry.

Sector – Is basically part of large division of economy. Each economy has large group of
companies or businesses.

2. How can Porter’s five-forces model aid in strategic decision making?

Porter’s five-forces model helps managers with analyzing competitive forces within the
industry to recognize opportunities and threats. This model focuses on five forces that
comprises competition in a company: -

1.) Threat by entry of potential customers: - This refers to the companies which are not
in the competing in the market yet but have capability to do so if given a choice.
Entry of any new company in the market encourages more competition for market
share and lowering the costs.

2.) Rivalry among established companies within an industry: - This refers to the struggle
company has to maintain in order to survive in the market. Following factors
influence the rivalry: - cost conditions, exit barriers, industry demand etc.

3.) Bargaining power of the buyers: - Here buyers are the customers consuming the
product. Bargaining power means potential of a buyer to bargain down the prices or
to demand increase in the product quality.

4.) Bargaining power of the suppliers: - Here suppliers are the firms providing input to
the industry. Barraging power of the suppliers include probability of the suppliers to
increase the input costs in some way or the other.
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5.) Closeness of substitutes to an industry’s products: - Substitute refer to the products

available to the customer so as to satisfy their needs. Less the number of substitutes
available in market, great the chances of company increasing the prices of available
products and earning the profits.

Whatever industry might be, these five forces dominates the profitability of any
company as they affect prices, survival and competition in the industry. These five
forces help managers in making strategic decisions as it’s used by them to determine
industry’s competitive structure.

3. Describe how “Risk of Entry”, “Bargaining Power of Buyers”, “Bargaining Power of

Suppliers”, and industry competition (“Threat of Substitutes”) affect the external threats
a company faces. Provide examples of each.

Risk of Entry: - The risk of entry by potential customers (companies that are not
currently competing but can in future), are the factors that makes difficult for
companies to enter in an industry. For example, in last few decades cable companies
have come forward with internet and telephone services as well. New technologies have
enabled companies to offer internet and telephone services with same cable.

Bargaining Power of Buyers: - Here, the buyers are the consumers in the market. The
power with which the buyers can demand to lower the cost of products or demand
better products instead can be seen as one the challenges a company faces. For
example, if Target and Walmart both are selling same products but the delivery charges
of Walmart are comparatively low or free, then this is an external threat to Target.

Bargaining Power of Suppliers: - The organization providing supplies to an industry like

materials, labor, services etc. This includes suppliers increasing the service or input
prices by providing low quality services or lowest quality goods. This affects the
company as it loses profits. For example, in Computer industry, if the suppliers provide
low cost components or assembly services, the demand of the computers will fall short
in market because of bad products.

Industry competition (“Threat of Substitutes”): - Substitute refer to the products

available to the consumers so as to satisfy their needs. Less the number of substitutes
available in market, great the chances of company increasing the prices of available
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products and earning the profits. If more substitutes are provided to the consumers, the
prices of products will fall down and competition will increase in the market.

4. Describe the industry life cycle, what strategic groups are, and what mobility barriers
are.

Industry life cycle: - The stages an industry goes through its entire course of lifecycle is
called as industry life cycle. It’s useful for analyzing the industry’s evolution on
competitive forces. There are five stages in it: -

1.) Embryonic industries: - It’s the starting stage of any industry. At this stage its very
difficult to predict if the company will grow or eventually decline and so the risk
involved at this stage is high. Growth at this stage is slow because the consumers are
unaware from the products, industry and prices are quite high as well. The
company’s distribution channels are poor as well. Competition at this stage is mainly
to inform customers about the company and the products.

2.) Growth industries: - Once product has proved itself in market, its demand increases.
The company becomes more stable and market share can be easily predicted.

3.) Industry shakeout: - With time, the company’s growth rate slows down. In this stage,
the competitors build up, demand in the market reaches saturation levels. The
demand growth slows down as the company reaches the maturity stage.

4.) Maturity stage: - At this stage, competition for market share increases and prices
tend to decline. Companies recognize the alliances and avoid the price wars. High
entry barriers are the reason for increased prices and profits of a company.

5.) Decline stage: - This marks the end of company’s ability to support its growth.
Constantly evolving market negatively impact the demands and hence the growth of
the company. With declining industry, its competition increases. Biggest problem,
the falling demand leads to price cuts, thus increasing the price war in the markets.

Strategic groups: - It’s a concept which distinguish companies in the same industry with
identical business models. It can consist of any type of business depending on the
industry. For example, in commercial aerospace industry, there are 2 types of strategic
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groups: - Regional jets manufacturers like Mitsubishi MRJ-70 and Comac ARJ21 and
commercial jets manufacturers like Airbus and Boeing. Large jets are sold to major
airlines whereas regional jets are sold to smaller carriers.

Mobility barriers: - It’s inside the industry cause that restricts the movement of
companies with the strategic groups. This includes entry barriers and exit barriers.
Managers should also realize that companies in another strategic group will ultimately
become their direct competitors. This seems to be happening in many bigger industries.