Written by Samuel Muriithi for Gaebler Ventures
After deciding on the plan of action for the business the next thing is obviously to determine the manner in which those objectives will be attained. Doing so requires the adoption of an effective organizational strategy for success that will ideally cover all the plans of action required in achieving the set aims and goals.
An organizational strategy for success needs to be adopted to help in the entire planning aspect of a small business.
Multiple strategies can be adopted to cater for each strategic business unit (SBU) in a larger business structure. There are three common organizational strategies used for doing this and these are as follows:
Porter's generic-strategies model
This organizational strategy for success was developed by the Harvard Business School's Professor Michael Porter. He postulated that the achievement of success in a competitive market depends on three generic strategies i.e.
- Overall cost leadership - achievable through the production of a low-priced standardized product/service which is underpriced as compared to all the other options available
- Differentiation - marketing a product/service as if it were a higher-than-average-price commodity and in this way manage to convince the market that this product/service is superior in terms of quality, brand, design or any other factor worth consideration
- Focus - the deliberate effort to concentrate on a small specialty market.
Porter's model is represented in the form of a curve. Firms that focus on specialty markets are successful since they get to command prices that are above average. Those that differentiate and do cost leadership are also successful in that they can similarly set their product prices above average or they get to enjoy a large market share thanks to their low prices and costs. Those firms at the curve's dip are a disadvantaged lot because their market share and profits are low and constricted.
The Boston Consulting Group Matrix
The BCG organizational strategy for success takes the form of a matrix that is plotted on a vertical and horizontal axis. On the vertical axis it is the numerical quantity of marketing advantages which can be accrued that is plotted. The horizontal axis indicates the size of these advantages.
For this model analysis is made as follows:
- Stalemate/stagnant industries (dogs) - The advantages are small in size and few in number. This is typical of e.g. the steel industry
- Volume industries (cash cows) - Here there are few advantages that are however quite big in size. This can be seen in the cost advantages typical of the printing industry
- Fragmented industries (question marks) - Here there are many competitive advantages but each of these is limited in size. This can be seen in the bar and pub industry
- Specialization industries (stars) - There are many competitive advantages which are all large in size e.g. Japanese car manufacturers.
Product/market expansion strategies
This organizational strategy for success is based on the premise that in order for a business to improve on its revenues and profits it can either better its effort using its current product/service and market or it can venture into new products/services or markets. There are four alternatives that can be adopted in light of these two observations:
- Market penetration - Through selling more present products to present markets. This can be achieved by investing more in personal selling and advertising.
- Market development - Where the business decides to sell its present products to a new market.
- Product development - Where the business starts developing new products to sell to its current market.
- Diversification - Where the business starts developing new products and seeks new markets in which to sell the same.
Samuel Muriithi is a business owner in Nairobi, Kenya. He has extensive international business experience in the United States and India.
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