Introduction
Business organizations today are committed to form a business strategy that will eventually bring them success through competitive advantage and appropriate marketing strategy. The question arises as to how many business organizations have topped the game by adopting such a strategy? The answer is obvious as not many businesses tend to succeed in topping the industry with the help of business strategy based on competitive advantage, supply chain system, and other product related systems. This implies that the business are making mistake in formulating their business strategy somewhere, which does not let them reap the benefits of a potentially profitable market. Following is the analysis of Target and Walmart, two grocery giants, in the context of two articles ‘what is a strategy?’ and ‘are you sure you have a strategy?’ to compare and highlight the drawback in the strategy of both companies.
‘What is a Strategy?’
Michael Porter in ‘what is a strategy?’ begins with defining real business strategy. To him, most of the business strategies are nothing but a segment of a business strategy. Business strategy must be unique and involves meeting the needs of customers, depending upon the market segmentation (Harvard Business Review, 1996). This implies that businesses must focus on the creation of a unique business position that is value-based and customer-oriented. Additionally, businesses must choose their game selectively as not each and every factor is worth the competition in the industry. Yet the companies have to create a strategic ‘fit’ to stay ahead of the game. To Michael Porter, ‘catchy’ business lines are merely operational effectiveness where the management realizes the most important factor of the business strategy. This is to say that majority of business organizations suffer from ‘wrong’ or ‘ineffective’ business strategy by not focusing on the real aspects of a ‘strategy’. This takes us to the basic understanding of a strategy. Strategy involves ‘selective’ competition as competing on every front will cause waste of resources and efforts. There have to be ‘trade-offs’ in establishing a business strategy. One better aspect has to be chosen over a less effective strategic position. This is to say that the essence of strategy does not lie in choosing what to do, but in choosing what not to do. In simple words, business strategy in the world before Porter’s ‘Sustainable Competitive Advantage’ model relied on aggressive and blind competition where every benchmark will be followed and best practices will be adopted. To Porter, a successful business position is a fit between activities chosen by the management, thus, working selectively on gaining unique competitive advantage.
‘Are You Sure You Have a Strategy?’
Hambrick and Fredrickson start off with criticizing the misuse of word ‘strategy’ in the business world. Managers terms everything they want to as strategy. They end up failing the whole business mission due to lack of understanding of the concept ‘business strategy.’ Sometimes, they collect many business strategies and form them into one collective strategy, which is not realistic and will be of no help. Instead, it will be a cause of wastage of resources and efforts of the business. There needs to be only one and great aspiration behind a business strategy. To help the business managers further, there are five elements defined in the article, to formulate a real strategy. These include Areans, Vehicles, Differentiators, Staging, and Economic Logic (Hambrick & Fredrickson, 2005). Areans decide about the type of business, while vehicles define the route to gain a market position and it is not a set of tactics but activities that will gain business repute. Differentiators, just as unique competitive advantage of Porter, are unique weapons that will help capture a significant place in the market. Staging is the art of pace and sequence of major strategic moves to compete the rivals. Economic logic is important as it is the insight into why people spend money and how cost of the product can be minimized.
Let us analyze the Target Corporation and Walmart’s business strategy in the context of the two articles;
Target Corporation
Target Corporation witnessed more than 2.5% setback in terms of overall business in the market, which moved its management to improvise the business strategy. The plan is to narrow down the focus on the product categories that bring most of the profit to the company. This will reduce the amount of resources spent on each category, while supporting the growth of active categories. This idea is similar to the ‘trade-offs’ in business strategy as defined by Porter in his article. The management of the company has realized that it is unrealistic to fight on all fronts, where resources are becoming scarce with every passing day. The business strategy will now focus on improving the major profitable categories, which will include some aggressive measures. Target Corporation will have to keep the customer interest intact to attract them to the store, while minimizing the categories of products at the same time. To implement this strategy. The management has decided to pay more attention to baby and kids’ products, furnishing products, fashion products, and other important well-being products. These categories were famous in customers, turning out to the customers’ reason for returning the Target. It is important to notice that the business does not plan to shut down the less profitable categories as this can intimidate customers, which can result in low turnover. Instead, the management will invest more in the categories that are more profitable, while sidelining the less productive categories (Sadler, 2003). The improvised business strategy of Target indicates that the management has realized that the business did not have any business strategy in particular, as explained by Porter and Hambrick and Fredrickson. The new ‘selective’ business strategy of Target can be a turning point in the financial history of the organization.
Walmart
Walmart, another grocery giant, recently witnessed 4% drop down in its market share. The management at Walmart then decided to change the course of its business strategy by investing more in small neighborhood stores than the large retail stores. The company narrowed down its focus on large retail stores and invested more in small and online stores. This case is different than that of Target, which recently adopted only some categories of the products. Walmart has not focused on product categories, Walmart has opened online stores to capture more customers to the stores. In addition to this, the company has decided to focus on improving the quality of food stock by keeping fresh food items and also training its employees to recognize a rotting fruit or vegetable.
Conclusion
The discussion Target and Walmart reveals that the flaws in business strategy as pointed out by Porter and Hambrick and Fredrickson can cause the business to slow down by wasting the resources and decreasing the customer turnover in stores (Baye, 2000). To cope with the growingly complex competitive market, companies need to look into the strategy and highlight the problem areas just as defined in both the articles. Most of the businesses need to simplify the business strategy that will not only help in minimizing the cost of the product, but also optimize the profitability of the business organizations. In this regard, competitive advantage can help the business grow if it is selective and not all-inclusive. For instance, if Target had not decided to narrow down its focus on some of the most profitable product categories, it would be facing even more drop down in its market share as the stagnant and all-inclusive business strategy stays common and does not attract any more people to the stores. Even more important is the recognition of the flaws in the business strategy that Walmart recognized and improved by fulfilling the customer needs in the form of new small neighborhood stores and online stores. In this regard, online investment turned out to be effective ‘fit’ as people find it hectic to go to stores and roam through the whole store before picking up only a small number of products that they needed to buy. This implies that in modern world, businesses need to realize that business strategy is not a collection of business activities, but a smart and unique focus on selective competitive advantage, not to stay ahead of the game, but to stand out of the crowd, as it is challenging to stay ahead of the rivals in a growingly complex global market.
REFERENCES
Baye, M. (2000). Managerial economics & business strategy. Boston: Irwin/McGraw-Hill.
Sadler, P. (2003). Strategic management. Sterling, VA: Kogan Page.
Hambrick, D., & Fredrickson, J. (2005). Are you sure you have a strategy?. Academy Of Management Executive, 19(4), 51-62. http://dx.doi.org/10.5465/ame.2005.19417907
Harvard Business Review,. (1996). What Is Strategy?. Retrieved 2 February 2016, from https://hbr.org/1996/11/what-is-strategy
