Dynamic Digital Company 1
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Introduction
This paper seeks to highlight the lessons learnt on the performance of the company we established. The company’s name is Dynamic Digital. The company is involved in production of digital cameras. It has five competitors. The lessons will be based on Glo-Bus simulation strategy. These lessons were used to evaluate the performance of our company. This paper will look into factors that enhance performance of a company. The factors must give the company a competitive advantage over other companies of its kind. This is with the view that businesses are established to make profit, and to do so require that the business rise above the rest in terms of strategy.
Strategy
According to Welch Jack, strategy refers to making clear choices about how to compete (Thompson, 2014). Ross and Kami add that without strategy an organization is like a ship without a rudder (Ibid). With this in mind, our company had to come up with a strategic plan on how to achieve competitive advantage over our competitors. This strategy was to help us achieve our business objectives and hence enable us achieve our vision and mission.
Collis and Rukstad argue that a strategy that can be applied to another firm cannot be a good one (Ibid). This then tells us that for our strategy to be effective it has to be unique and exclusive to our company. This implies that a company that can apply our strategy can easily beat us in the game. Therefore, if we have to win over the other company we have to have a strategy that is jealously guarded and that cannot be easily copied by our competitors. For instance, our company is ranked position three in the market. It has a target performance of 107 points compared to its best competitors 117 and 106 ranked position one and two respectively. We managed a score of 79 (best in industry score), 93 (overall score) and 95 (overall G-T-D score).
In developing a strategy for our company, three things have to be taken into consideration. These are very crucial to the performance of the company. They are the company’s present situation, the future on how to run the company and produce results (ibid). Our prospect is to be the leader in the industry. We realize that the best overall score of the top ranking company is 108. We therefore have to develop strategic moves to defeat it. Our target has to be raised and we also need to find ways of reaching our target.
While looking at the company’s present situation, the manager should be able to recognize the industry conditions, the competitive pressures the company faces, where the company stands presently, its strengths and weaknesses, and the future prospects with a view to the changes taking place in the business environment (Ibid). These will be very necessary when drafting a strategic plan for the company. They will form the basis of evaluating whether the company’s objectives are being met, and if not, what best practices need to be put in place to meet them.
The future of the company is also very important. The future outlines the company’s vision and mission. In looking into the future of the company, the emerging needs must be looked into. These will help to make necessary adjustments that will give the company the competitive advantage needed while still maintaining relevance in the market. Maintaining relevance also means the ability to recognize which markets need to be abandoned (Ibid). The future also looks at where the company is headed on ways of measuring its success.
Running a company is about producing good results. Therefore, there needs to be perfect ways of running the company in order for it to give the desired results. These ways form the competitive moves and the business approaches or what Thompson refers to as company strategy (ibid).
According to Thompson, a company strategy represents the managerial commitment to undertake one set of actions rather than another (ibid). Decisions have to be made on how to attract and please customers, compete against rivals, position the company in the market place and capitalize on attractive opportunities to grow the business, respond to changing economic and market conditions, manage each functional piece of the business and achieve the company’s targets.
A systematic process that defines the organization’s purpose and goals and carefully examines the external and internal environment to identify opportunities and constraints regarding that strategy should govern developing a strategy that works (Kaplan & Norton, 2008). A company’s strategy can be best indicated by what it does in the market place, and what the managers of the company say about the business approach of the company, the plans and efforts to strengthen the performance (Thompson, 2014). This could therefore mean the company’s strategy can best be observed from its vision and mission statement.
Kaplan and Norton argue that in developing a strategy four steps should be followed. These are what business we are in and why (mission, vision and values), where we are going (strategic goals), the key issues that our strategy must address (strategic analysis) and how we can best compete strategy formulation) (Kaplan & Norton, 2008).
From this view, it can be argued that Kaplan and Norton agree with Thompson that a company’s strategy is about helping it gain competitive advantage over its rivals. Thompson says that there is a tight connection between competitive advantage and profitability. He concludes that this connection means that the quest for competitive advantage always ranks center stage in constructing a strategy. A good strategy must therefore have the ability to draw customers and make them prefer the products of my company to my rivals. Thompson argues that without a strategy that leads to competitive advantage, a company risks being outdone by stronger rivals and/or locked into mediocre financial performance (Thompson, 2014).
Competitive advantage is gained when a firm acquires attributes that allow it to perform at a higher level than others in the same industry do. This can be achieved through implementing and creating strategies that are not simultaneously being implemented by any current competitor. They should not be easily copied and can therefore be maintained over a long period. These strategies must have the ability to win customer loyalty by offering perfect location, unique goods, proper distribution channels, good seller relations, a good reputation for customer service and several sources of advantage.
A company’s strategy cannot remain rigid. It must be reviewed overtime because market conditions change, there is advancement in technology, competitor moves change, customer preferences change, new opportunities arise, there are new ideas for enhancing the strategy and also there could be evidence that the strategy is not working (Thompson 2014).Hessinger argues that deciding to change a business strategy can be difficult. He postulates that tough economic times and dwindling sources of old revenue can be best indicators of the need for a change of course. He says that change is scary and there is the risk of alienating loyal customers along the way.
Field says that changes to strategy can be risky. It could mean confusing or alienating existing clients. The new line of business could be less lucrative than the original hence reduced profit margins. There is also the risk of employees not being able to adapt to the new business model (Field, 2009).
Company’s external environment
To run a successful business, managers need to be able to understand deeply the pertinent factors surrounding the company’s situation. Thompson identifies two pertinent facets of a company’s situation.
1. The industry and the competitive environment in which the company operates and the forces acting to reshape this environment.
2. The position of the company in the market and how it competes with others. These are its resources and capabilities, its strengths and weaknesses compared to those of the rivals and the opportunities the company has open to it. (Thompson, 2014)
He says that a proper diagnosis of the company’s external and internal environment is a fundamental to succeeding in coming up with a strategy that will fit the company’s situation in an excellent way, will be capable of building a competitive advantage, and will have good prospects of enhancing the company’s performance. In this, I agree with him because a company’s performance will be determined by its competitive advantage over its rivals on how well the managers understand the environment of the operations of the company.
In looking at the environment, we need to understand the forces that a company faces. Thompson uses the five forces model to outline these forces. In this model, the state of competition comprises five competitive forces:
1. The market maneuvering and contending for buyer support among rivals in the market.
2. Threats by those entering the market for the first time.
3. Companies trying to win workers to buy their substitute products.
4. The buyer using his/her bargaining power (Thompson, 2014).
Using this model, competition is built in three steps namely:
1. Identifying the specific competitive pressures associated with each of the five forces.
2. Evaluating how strong the pressures comprising each of the five forces are (fierce, strong, moderate to normal, or weak).
3. Determining whether the collective strength of the five competitive forces is conducive to earn attractive profits.
Factors driving change in industry
Change in the industry is driven by various factors. These factors form a strong basis in strategy formulation. Ignoring them could mean a company does not get the right strategy to keep it afloat. As noted earlier, a good strategy will improve a company’s competitive advantage while at the same time increasing its profit margins, which means better performance.
It is important to acknowledge that environments in the industry are dynamic hence making it necessary for players in the industry to change their actions. These dynamic forces arise from a company’s environment, which may or may not be immediate.
Thompson says that driving forces to change has three steps that are, identifying what the driving forces are, assessing whether the drivers of change are acting to make the industry more or less attractive, and determining what strategy changes are needed to prepare for the impacts of the driving forces.
Competitors’ strategies
Success in business means being able to know what your rivals are up to and being able to counter it. This means that you are able to give your company a competitive advantage by bringing a strategy that is different from that of your competitor. Thompson says that unless a company pays attention to competitors’ strategies and situations and has some inkling of what moves they will be making, it ends up flying blind into competitive battle (Thompson, 2014). It is important to gather information about your rivals’ strategies, financial performance, resource strengths, and weaknesses, the actions and plans they have announced, and their executives’ thinking and leadership styles (Thompson, 2014). He says these are important for envisaging and anticipating the strategic moves competitors are likely to make next. It also helps to avoid losses in sales and profits should rivals launch an unexpected and successful strategic offensive (Ibid).
The aim of the company therefore is to get as much of its competitors as it possibly could. This will help the company counter any move the competitor makes and develop strategies with confidence. When you know, what your rival is thinking you can easily overcome them. You can also take advantage of their weaknesses and mistakes to make your strategies better and effective.
One can get information about the rival companies through looking into how they are fairing in the market. It is also important to know the type of rivals one is dealing with. This helps the company to strategize on each particular rival. In most cases, one will be dealing with more than one rival who may not have equal ability and strength.
Dynamic Digital competes with six other companies. Out of the six, two, namely, Bionix Camera and Envision Images rank better than our company. However, on the overall score we tie with Envision images after earning 2 bonus points. Envision Images targets were lower than ours and they managed perform slightly better than us. In working out our strategy we will have to look at all our competitors’ strategies in order for us to be the leader in the market and also reach our targets.
Thompson suggests that managers pose these questions to predict the likely actions of important rivals:
1. Which rivals have strategies that are effective in results – and thus are likely to make only minor strategic adjustments?
2. Which competitors are performing poorly in the market place or otherwise unable to come up with a good strategy – and thus are most likely to alter their process, improve the appeal of their product offerings, move to a different part of the strategic group map, and otherwise adjust important elements of their strategy?
3. Which competitors are ready to gain market share, and which ones appear certain to lose ground?
4. Which competitors are likely to rank among the industry leaders five years from now? Do one or more competitors have powerful strategies with sufficient resource capabilities overtaking the current industry leader?
5. Which rivals badly need to increase their unit sales and market share? What strategic options are they most likely to pursue lowering prices, adding new models and styles, expanding their dealer networks, entering additional geographic markets, boosting advertising to build better brand-name awareness, acquiring a weaker competitor, or placing more emphasis on direct sales via their website?
6. Which rivals are likely to enter new geographic markets or make major moves substantially to increase their sales and market share in a particular region?
7. Which rivals are strong candidates to expand their product offerings and enter new product segments where they do not currently have a presence?
8. Which rivals are good candidates to be acquired? Which rivals might well acquire one or more industry rivals (or an outsider with competitively valuable capabilities)?
These questions are pertinent in considering the next moves of ones rivals and help one determine which strategies to counter each of the move the rivals are likely to make (Thompson, 2014). Thompson says this is not easy work. It is time-consuming. However, to gain competitive advantage over ones rival, one has really to work hard.
The key to a successful company is in how one can effectively maneuver competition, gain customer loyalty and make sustainable profits for the company. This requires coming up with working strategies that will enhance the company’s sustainability in the market. It will take hard work that entails evaluating competitors’ abilities and weaknesses, coming up with proper ways of countering their moves and making sure, they never learn or copy ones strategies.
Conclusion
The lessons learnt here are vital for the success of our company. A well thought out strategic plan is paramount for the success Dynamic Digital. This means that our strategies are unique and cannot be applied by our rivals. We have to be aware that gaining competitive advantage over our rivals is the key to maintaining higher performance in our company and making sure this is sustained and growing.
Successful businesses mean working hard. It is important that the shareholders in our company understand that in order to come up with working strategies, we have to gather intelligence about our competitors. This information will be vital for our sustained growth in the industry. In doing so, we need to not only be able to look into our company’s resource strength and weaknesses but also that of our rivals. As we develop our strategies, a keen look at our internal environment and external environment will help us come up with strategies that will ensure enhanced and sustainable performance of our company. Several factors will affect the performance of our company. Unless we put them into consideration, we might risk losing business to our rivals.
We also need to understand that strategies will not remain static because factors influencing our strategies are also dynamic and therefore we need to be flexible enough to make necessary adjustments where need be.
References
(n.d.). Retrieved 2014, from http://www.businessdictionary.com/definition/corporatestrategy.html
Field, A. (2009). Retrieved 5 5, 2014, from http://www.businessweek.com/magazine/content/09_68/s0908046301619.htm?chan=smallbiz_smallbiz+index+page_top+small+business+stories
Kaplan, R,. & Norton, P. (n.d.). Retrieved 5 5, 2014, from htttp://www.exed.hbs.edu/assets/documents/developing strategy.pdf
S., H. (n.d.). Retrieved 5 5, 2014, from http://www.bizsugar.com/strategy/when-to-change-business-strategy
Thompson, A. (2014). Retrieved 5 5, 2014, from http://www.glo-bus.com/users/StudentGradebook