Evaluation and Choice of a Business Strategy
In a world of perfect competition, there exist losers as well as the successful lot. The business arena is not any different. There exist firms that are successful as well as firms that have failed as per the business measure of failure. Some businesses fail to take off and are left as mere ideas in the heads of the proprietors. The success of any company is by the strategies that the particular business adapts so as to survive. The entity needs to adopt a policy that gives it some competitive advantage (Miller 2008). The benefits may be viewed in terms of customer loyalty, sales turnover, labor turnover rate, market share as well as product pricing and differentiation. For a firm to gain these advantages, it needs to adopt strategies that are in line with its objectives. The article ties well to the topic since it helps a firm choose and evaluate their business plan.
Miller (2008) uses the five forces proposed by Michael Porter to analyze the strategies that a company can adopt for survival. Porter’s five forces analysis tries to look at the level of competition within an industry as well as the process of developing strategies. The five forces principles have their roots in an attempt to analyze the organizational economics in a bid to look at the attractiveness and the competitive nature of any industry. The five forces are divisible into; the bargaining power of the supplier, bargaining power of the customers, the threat of substitute goods and the threat of established rivals. Lastly is the threat of new entrants into the market. By the use of the five principles, the firm will be able to formulate a comprehensive strategy that caters for its operational needs. The article by Miller relates directly to the topic of discussion since in both instances the business strategy is at the core.
The strategy chosen by any entity would need to be matched with the structure of the organization as well as the surroundings in which it operates. There are two main types of strategies that are adopted by most firms seeking to have an edge in their area of operation. They are; cost leadership and innovative differentiation. In creative distinction, the company tries to make its products and services unique (Miller 2008). That would make sure they woo the buyers, hence increasing the sales turnover. The differentiation may be in terms of packaging, branding, after-sale services and the quality as well as quantity. The firm strives to look at what is being offered in the market and tailors its goods and services to look appealing and different. The distribution strategy taken up by the organization also needs to be one that is cost efficient as well as customer friendly (Miller 2008). That would mean the firm reduces the cost of distribution, but it also ensures that the goods reach the target market.
In matters of cost leadership, each entity tries to make profits. Miller (2008), argues that there are mainly two principles related to cost. They are; minimizing the cost and maximizing benefits. That means that the firm tries to maximize profits at the lowest cost possible. That would enable the company derive the economies of scale, and that would in turn be reflected in their pricing strategy. If a firm incurs relatively lower costs of production, then it can lower the prices of its products. That would earn them market leadership (Miller 2008). The five forces come into play since in evaluating and choosing the strategy; other players in the market have to be considered. A successful entity is one that understands its position in the market and strives to make sure its strategies reflect the current situation as well as its improvement path. After analyzing the article on would need to answer the following questions. Are the five forces by Porter effective in choosing a business strategy? Can a business fully analyze and understand the five forces in choosing a strategy.
Miller, D. 'Relating Porter's Business Strategies To Environment And Structure: Analysis And Performance Implications.’ Academy of Management Journal 31.2 (2008): 280-308. Print.