STRATEGIC MANAGEMENT Essay Example | Topics and Well Written Essays - 3000 words

STRATEGIC MANAGEMENT - Essay Example A business is said to have competitive advantage when it is able to utilize its resources as well as competencies to generate a value-creating strategy that its competitors find difficult to copy for their business (Fitzroy and Hulbert, 2005, p. 201). Competitive advantage is the influential power of a firm that in turn convinces the potential customers to buy its products or choose its services rather than its competitors’. Hill and Jones (2009, p. 74) argued that firm can be said to have attained competitive advantage when its profitability is greater than the average profitability of all companies in the industry and this become ‘sustainable’ when the firm is able to maintain above average profitability over a number of years. Fierce competition among firms resulted in varying levels of performance as individual firms may choose to pursue different objectives and strategies to gain increased profits, sales growth, better market share, and cash flow and so on. S trategy has got significant stance in the competitive business landscape and that has become the cornerstone to achieve competitive advantage. Successful firms are those that demonstrate long-term advantage over its competitors with their ability to do its core business activities better than how its rivals do in the market. As firms are highly focusing on achieving competitive advantage, they are attempting to find the best way to position itself against its rivals by using and implementing business-level strategies. Business-level strategy is the plan of action that managers adopt certain methods and ways to effectively use company’s resources and distinctive competences to gain competitive advantage over its counterparts in the market (Hill and Jones, 2011, p.119). Michael Porter, often credited as father of modern business strategy field, has profoundly impacted modern thoughts of management and business strategies through his works ‘competitive advantage’. H e wrote that competitive advantage is at the heart of any business strategy and it is extremely important for a firm to make a choice about the types of competitive advantage if it seeks to attain competitive advantage (Porter, 2008, p. 12). Michael Porter argued that firms, no matter they operate nationally or internationally, face an issue of strategic choice in relation to generic strategy. The basic generic strategy described by Michael Porter involved competing either on the basis of low-cost strategy or product differentiation strategy. He argued that a company’s position in its concerned industry can be determined by its competitive advantage and its competitive scope (Gilles, 1996, p. 214). He suggested that each of the generic strategies involved a basically distinctive route to achieving competitive advantage and he recommended a choice for type of competitive advantage a firm may consider for the strategic target. Michael Porter illustrated the combination of compe titive advantage and competitive scope through a two-by-two strategy choice matrix as illustrated below. The above depiction of the generic strategy illustrates that cost leadership and differentiation strategies pursue competitive advantage in quite a broader range of industry areas whereas focus strategies tend to vary largely from industry to industry since it represents narrow market segments. Since there are different strategies to achieve competitive advantage and all their routes are different from each other, it is very important that a firm should take a choice among them in order to see and implement the best appropriate strategy for the firm. Michael Porter stressed