Introduction
The present report comprises of three sections. The first section discusses the recent trends in the business environment, which call for the attention of the Board of Directors as well as the Chief Executive Officer. The next section discusses Porter’s generic strategies including overall cost leadership, product differentiation, and focus strategies and demonstrates the way their implementation will help Partical, Inc. stay ahead of the competition in the global environment. The last section discusses and evaluates both the value chain analysis and Porter’s Five Forces, and indicates how the firms can gain competitive advantage through their effective use and implementation respectively.
The global business environment has become highly competitive and uncertain, and this is presenting a myriad of challenges to the contemporary companies. Nooraie (2012) insists that managers are faced with a variety of decisions each day. Notably, the rapid changes in the external environment where the businesses operate are affecting strategic planning within the organizations. Marsden (1998) maintains that the hastening rate of change is making planning more difficult. The recent trends in the business environment call for the attention of not only the organizations’ Board of Directors but also the Chief Executive Officers.
Globalization is one of these trends. According to Kelly (2014), globalization has remained an enduring driver of development and change. In essence, this trend is affecting the economy, society, and business life in a variety of ways. It has resulted in increased competition. Companies are now easily penetrating the nations’ boundaries due to the increasing interconnectedness. The rise in competition is continuing to have a significant impact on various contemporary corporations. With the increased competition from overseas brands and businesses, the companies’ executives are compelled to make strategic decisions that facilitate the enhancement of the organization’s quality and standards as well as customers satisfaction services. Companies are doomed to fail if these decisions are not made and implemented quickly.
Deregulation is the other recent trend in the business environment that is having a significant impact on companies. The governments in numerous parts of the world have continued to be involved more and more in business. They are establishing rules for a variety of industries with the aim of increasing efficiency as well as competition. In essence, this is leading to the improvement in the quality of products and services that companies are providing as well as lowering prices for these services and products. The regulatory policies in various industries are focusing on protecting the consumers. Pettus, Kor, and Mahoney (2009) emphasize that the eradication of specific regulatory controls, for examples, the market exit-and-entry restrictions by the governments requires the businesses to develop dynamic capabilities to help them deal with the drastically changed competitive environment. As a matter of fact, deregulation has increased the competition significantly and led to lowering of prices in numerous industries within the global markets. As a result, this is having a substantial impact on businesses since they are required to adhere to a variety of the established rules so as to survive.
Corporate social responsibility is another current trend in the changing business environment that is affecting how corporations are doing business. According to Lawrence and Weber (2011), corporate social responsibility implies that corporations should act in ways that enhance the society and be held liable for any of their activities, which adversely affect the environment, persons, and communities. Consequently, different stakeholders require companies to be more sustainable. In other words, the contemporary businesses are required to serve the needs of their global stakeholders in a socially responsible as well as economically efficient manner. Sustainability reporting has become mandatory for the companies, and those that fail to do so are doomed to fail. In essence, stakeholders require the businesses to produce not only sustainability reports but also attest their devotion towards sustainability. The Board of Directors and CEOs, thus, need to make strategic decisions that show their companies’ commitment towards sustainability.
The advancement in technology is also a recent trend in the current changing business environment that calls for the attention of Board of Directors as well as the Chief Executive Officer. The new technological developments are continuing to have a substantial impact on the contemporary business environment. For instance, these developments are facilitating the emergence of entirely new industries and bringing significant changes in the workplace. According to Ouye (2011), the availability of enabling technologies along with social collaboration tools is among the trends, which are dramatically changing work as well as the workplace. For instance, virtual businesses are emerging due to the advancement in technology. As a result, the competition in the business world has increased and only the companies that have the ability to leverage as well as utilize the technological advancements will survive.
The short product life cycles are also recent trends that call for the attention of Board of Directors as well as the Chief Executive Officers. The changing demand patterns, rapid technological developments, and more effectual supply chains are facilitating short product development cycles (United Nations Industrial Development Organization, 2013). Consequently, the contemporary businesses are required to adopt advanced technologies, be aware of the existing consumer demands, and make their supply chain more efficient so as to shorten their product life cycles and stay ahead of the competition. The Board of Directors and CEOs, therefore, need to make strategic decisions that improve the time taken by their organizations to convert the raw materials into finished products.
Most firms experience a strategic challenge of discovering a way of attaining a sustainable competitive advantage over the rival firms. Ideally, a firm that possesses a sustainable competitive advantage attains above average profitability without difficulty. Michael Porter is acknowledged for recommending generic strategies, which businesses can adopt so as to gain sustainable competitive strategy. These strategies include cost leadership, product differentiation, and focus. Tanwar (2013) suggests that these generic strategies can help a company deal with the five competitive forces within the industry and outdo the rival companies. Consequently, the implementation of these strategies by Partical, Inc., a company renowned for selling high-quality products globally, will help it stay ahead of the competition.
The overall cost leadership strategy requires the company in a given industry be the low-cost producer for a certain level of quality. Valipour, Birjandi, and Honarbakhsh (2012) assert that this strategy occurs through conservation along with careful monitoring of the total operating costs, investment in the production facilities, and experience. In an attempt to stay ahead of the competition in the global business environment, Partical, Inc., needs to pursue this generic strategy through exploiting all the cost advantage sources, for example, advanced technology and economies of scale. The company also needs to endeavor to become the low-cost producer within the industry. It is also imperative for the firm to raise its profits through decreasing costs while selling its products at industry-average prices. The implementation of this strategy will help the company stay ahead of the competition in the global environment through making it an above average performer. In other words, the strategy will help the company gain a sustainable competitive edge. Besides, the company will stay ahead of the competition since this strategy will help it increase its market share and create customer loyalty due to charging industry-average prices and providing high-quality products.
The product differentiation strategy is intended for the broad market. It entails the production of goods that the consumers throughout the industry perceive as unique (Tanwar, 2013). The company, therefore, needs to implement this strategy through creating products that are different and more attractive compared to those of the competitors. Ideally, the company ought to invest vastly in research and development to improve its innovative capabilities, provide the consumers with high-quality products, and enhance its sales and marketing to make them more effective. The implementation of this strategy will help the firm to stay ahead of the competition in the present dynamic business environment through gaining brand loyalty. The consumers in various countries in which the company operates will prefer its brands to those of the competitors. As a result, this will help the company gain a competitive edge. The implementation of this strategy will also provide the company with better profit margin opportunities. Ideally, the strategy will help the company make its products inimitable. As a result, the consumers will be willing to pay more for the top quality provided by these products. The firm will, therefore, charge prices that will help generate substantial profits.
The focus strategy rests on selecting a narrow competitive scope in the industry. The companies utilizing this strategy focus on a select few target markets as Tanwar (2013) asserts. The variants of this strategy include differentiation focus and cost focus. Under the former variant, the companies pursue differentiation in their target segments while under the latter variant, the companies pursue a cost advantage in their target segments (Tanwar, 2013). Thus, in an attempt to survive in the contemporary business environment, Partical, Inc. needs to implement this strategy by seeking differentiation or a cost advantage in one or two target markets. The company ought to concentrate its marketing efforts and tailor its marketing mix on this target market(s) so as to meet the consumer needs better as Tanwar (2013) further suggests. The implementation of this strategy will help the company stay ahead of the competition by tailoring a wide variety of product development strengths to the specific target market(s). As a result, it will develop customer loyalty and enhance its bottom line in the selected target market(s).
Value chain analysis is primarily a strategy tool, which firms use to analyze their internal activities. Ensign (2001) describes value chain as a method of conceptualizing the activities, which are required so as to offer a service or product to the customers. Ideally, the companies through value chain analysis identify the primary activities as well as support activities, which add value to their services and final products and then assess these activities to increase differentiation or cut costs.
According to Ensign (2001), firms can use value chain analysis to identify as well as develop the interrelationships and linkages between the activities, which create value, understand their competitive advantage sources, and formulate competitive strategies. Thus, Partical, Inc. can gain competitive advantage through the effective use of the value chain analysis. Ideally, the company can use the value chain analysis to identify the areas, which it can optimize for maximum efficiency as well as profitability. As a result, this can help it gain a competitive advantage. Ensign (2001) asserts that competitive advantage is essentially based on the way value is arrived at or created in the implementation of a competitive strategy. The firm can, therefore, use the value chain analysis tool to identify the specific primary activities that add value to its products and run them at an optimum level to gain the competitive advantage. In other words, the competitive advantage for the firm can stem from how it carries out discrete activities along the value chain as Ensign (2001) suggests.
Furthermore, Partical, Inc. can use value chain analysis to define its core competencies as well as the activities where it can seek a competitive advantage. In particular, the company can apply this tool to identify its costs and force them out of the value-adding undertakings. Consequently, this can help the firm gain a competitive edge. The firm can also concentrate on the activities related to its core capabilities as well as competencies so as to carry out them better compared to the competitors. As a result, this can also help the company gain a competitive edge.
Porter’s Five Forces model is primarily a strategy tool, which firms utilize to explore the environments in which they operate. The key forces that this model looks at are the competitive rivalry within the industry, the entry threat, suppliers’ bargaining power, threats of substitute products, and buyers’ bargaining power. These five forces shape every industry by determining the competition intensity. Consequently, the model helps businesses determine the profitability as well as the attractiveness of a particular industry. In essence, firms can decide the way to make the most of or influence the specific characteristics of the industries in which they operate through Porter’s five forces model. It is important to mention that the companies' executives are required to think about the factors that are external to the industries such as political factors and social factors when analyzing the profitability and attractiveness of different industries. Ideally, this is where the application of Onion’s model is recommended. According to Grundy (2006), the three layers of this model are significantly interdependent, which could be a very beneficial phenomenon for the executives to learn about as well as apply when determining the competition.
In an attempt to gain competitive advantage, Partical, Inc. can implement Porter’s five forces to assess the intensity of the competition in the industry it operates. After determining the industry’s competition intensity, the firm can then shift the competitive forces in its favor through modifying the fundamental factors, which drive the competitive pressure and tactically decide on the strategies to push so as to gain market share and profitability. Consequently, this will help it gain a competitive edge.
Conclusion and Recommendations
The recent trends in the changing business environment that the paper has described include globalization, deregulation, corporate social responsibility, the advancement in technology, and short product life cycles. Ideally, it is apparent that these trends are affecting how corporations are doing business in different ways. Consequently, the contemporary global businesses need to be aware of these trends and be ready to respond to them. Besides, the implementation of the three Porter’s generic strategies will help the company gain a sustainable competitive advantage. It is, thus, critical for the company to fully implement them so as to stay ahead of the competition. What is more, Partical, Inc. can gain a competitive advantage through using the value chain analysis to identify the activities, which it can take advantage of for maximum efficacy as well as profitability. The company can also gain a competitive advantage through implementing Porter’s five forces to evaluate the competition intensity within the industry and then shift the competitive forces in its favor.
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