CORPORATE BUSINESS STRATEGY
Marcus McCall
Corporate Business Strategy
In the modern era of globalization there are ample opportunities for businesses to flourish. But there are challenges too, as the level of competition within the domestic and in the international market is severely high. Every business organization, within its own industry, is striving to emerge as the leader, and for accomplishing such objective business organizations are competing to gain the competitive advantage. In this respect, it must be noted that it is only through the application of proper corporate business strategies that it can become possible for a business organization to gain the competitive advantage that not only reflects the organization’s core competencies but also reveals the organization’s potential to sustain its market hold and market share amidst competition. There are several different corporate business strategies, but among them, it is the strategy of cost leadership that has been chosen by my organization to achieve its objectives related to market domination and revenue earning. As the cost leadership strategy is infused with certain benefits, and as the model fits to the structure and needs of the organization; the leadership of my organization has thought it right and justified to resort to the concerned corporate business strategy.
The concept of generic competitive strategy, popularized by Porter, is meant for making the leadership of organizations understand the importance of the formulation and implementation of the right business strategy to gain the competitive advantage. Competitive advantage is the pillar on which the edifice of a business’ success rests thoroughly. The leadership of our organization has been able to understand, since long, the importance of business strategy, and this understanding has always been reflected in their decision-making process and in their approach towards accomplishing organizational goals and objectives. Our organization, XYZ Ltd, solely manufactures talking Tablets that are ingrained with certain specific features. The Tablet comes with general communication features like interactive platforms, social networking platforms, email options, camera options, calling options, etc., and moreover, applying the strategy of innovation, the research and development team is planning to introduce the 4G technology to the product. But our organization operates within a highly competitive business environment with competitors having extended product lines and costly brands that are quite popular among Tablet users. It is to cope with the challenges posed by the competitors that XYZ Ltd. has resorted to the strategy of focusing on the domestic market only, and the plan of expanding the business further has been kept in reserve for the time being. Moreover, it is to compete with the differentiation strategies applied by the competitors that the leadership of our organization has deemed it suitable to adhere to the cost leadership policy. Considering the benefits of the cost leadership strategy the leadership has stuck to the decision of implementing the same in the process of maintaining the domestic market share that has been continuously generating sufficient revenue for the business. In this respect, certain specific advantages of the cost leadership business strategy should be considered. It is noteworthy that, “A firm which finds and exploits all sources of cost advantage and aims at becoming a lot cost producer in the industry is said to pursue a sustainable cost leadership strategy” (Tanwar, 2013, p.11). The leadership of our organization has identified some specific advantages of resorting to the cost leadership strategy in the quest of gaining hold over the domestic market which itself is dominated by a customer segment that constitutes the primary customer base of our organization. The primary advantage of resorting to the cost leadership strategy is that; the implementation of the strategy helps our organization to sustain the appeal of its product to the target customers. XYZ Ltd. has consciously chosen to retain the customer base by providing them with quality product in cheaper price, and hence, it has adhered to the cost leadership strategy. It is to be noted that our organization must compete with popular brands which, to some extent, are more innovative and ingrained with more communicative features. It is under such competitive environment, to perform well and to stay in the competition, it has become necessary for our organization to, initially, stick to the cost leadership strategy.
The leadership of XYZ Ltd. is quite aware of the fact that the number of competitors is already sufficient to pose difficulties to every firm within the industry. Hence, there is a need to provide barriers to new entrants to refrain from getting involved in more competitions. And that is one reason why the leadership of XYZ Ltd. has resorted to the cost leadership strategy. In this respect, it must be noted that, those firms that might have been willing to enter the market with their new Tablets, would have observed the presence of XYZ Ltd. as a cost leader that has the capacity to offer customers lower price which cannot be offered by the new entrants at the initial stages of business (Open Text Books for Hong Kong, 2016). This forms a barrier for new entrants, and this eventually provides advantage both to XYZ Ltd. and its competitors. Moreover, the leadership of XYZ has been inclined to follow the cost leadership business strategy because; it aims at sustaining its hold on domestic markets and on specific customer segments that are always looking for quality products in low price. The target customer segment and the existing customer segments of XYZ Ltd. are mainly comprised of teenagers who are provided with limited amount of money by their parents for satisfying their technological needs, and of professionals whose earning should be considered either low- or mid-ranged. Hence, it has always been imperative for the company to keep on eye at producing Tablets that have quality features but can be sold in lower price. In this respect, it must be stated that the strategy of cost leadership has helped our organization to attract the domestic market share because the target market is constituted by a large portion of potential customers who are more inclined towards paying low prices for goods and services that are of acceptable quality and easy to use (Open Text Books for Hong Kong, 2016). Also, in terms of profit margin, though it has been found that XYZ Ltd. earns profit at a percentage which is a bit lower than its more powerful competitors producing popular brands of elite Tablets with superior quality; the overall process of earning profit befits the company’s profit-earning objectives. In this regard one must note that, “The need for efficiency means that cost leaders’ profit margins are often slimmer than the margins enjoyed by other firms. However, cost leaders’ ability to make a little bit of profit from each of many customers means that the total profit of cost leaders can be substantial” (Open Text Books for Hong Kong, 2016).
XYZ Ltd. is a mid-sized company which strives to compete with industry giants in the long-run too. Considering its objectives and considering its financial strengths and resources, the leadership has decided to continue with the cost leadership strategy in the long-run. Till date, to ensure more return on investment (ROI), the top management of the company has resorted to a policy of keeping the cost of production low by minimizing the costs related to advertising, market research, and channel recruitment (Open Text Books for Hong Kong, 2016). But it has also followed such cost minimization strategy so that the left-over resource can be utilized in production and research and development. Moreover, to reap the benefits of the strategy the company has decided to follow the same in the future. And in this respect what White has suggested is noteworthy. White has stated (as cited in Yasar, 2010, p.311) that, “business units that employ pure cost strategies achieve higher return on investment (ROI).” Besides, it has also been observed that, in the long run, firms that stick to the cost leadership strategy usually enjoy the benefits of can establish positive relationships between the ration of sale to capital expenditure with substantial percent of growth in their sales (Birjandi et al., 2014, p.152). And all such factors have motivated the leadership of XYZ Ltd. to stick to the decision of adhering to the cost leadership strategy (for gaining the competitive advantage) in the long-run.
In conclusion, it is only through the application of proper corporate business strategies that it can become possible for a business organization to gain the competitive advantage that not only reflects the organization’s core competencies but also reveals the organization’s potential to sustain its market hold and market share amidst competition. There are several different corporate business strategies, but among them, it is the strategy of cost leadership that has been chosen by my organization to achieve its objectives related to market domination and revenue earning. As the cost leadership strategy is infused with certain benefits, and as the model fits to the structure and needs of the organization; the leadership of my organization has thought it right and justified to resort to the concerned corporate business strategy.
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