Strategy

Diversification strategy is used to increase the firm’s value by improving its overall performance. Value here is created here either through related diversification ( my report) or through unrelated diversification ( which will be discussed further) when the strategy allows a company’s business to increase revenues or reduce cost while implementing their business –level strategies In some case, using diversification strategy may have nothing to do with increasing the firm’s value; in fact it can have neutral effects or even reduce firm’s value.

Value neutral reasons for diversification include those of a desire to match and thereby neutralize a competitor’s market power ( such as to There are 2 ways diversification strategies can create value. One is operational relatedness (sharing activities)the other one is corporate relatedness ( transfer of core competencies).

Economies of scope- are cost savings that the firm creates by successfully sharing some of its resources and capabilities or transferring one or more corporate-level core competencies that were developed in one of its businesses to another of its business.

To created economies of scope, tangible resources such as plant and equipment or other business unit physical assets, often must be shared. Less tangible resources, such as manufacturing know –how, also can be shared. However, know-how transferred between separate activities with no physical or tangible resource involved is a transfer of a corporate-level core competencies, not an operational sharing of activities.

Operational Relatedness: Sharing Activities Firms can create operational relatedness by sharing either a primary activity (such as inventory delivery systems) or a support activity (such as purchasing activities).

Firms using related constrained diversification strategy share activities to create value. Example: Procter and Gamble uses their corporate level strategy because P&G paper towel business and baby diaper business both use paper products as a primary inputs for both business and is an example of shared activity. In addition, because they both produce consumer products, these two businesses are likely to share distribution channels and sales networks. Another example is Unilever- Clear Shampoo and Cream Silk. Read also about network level strategy

Advantage: Disadvantage: Corporate Relatedness: Transferring of Core Competencies

Corporate level core competencies-are complex sets of resources and capabilities that link different businesses, primarily through managerial and technological knowledge, experience and expertise. The ability to successfully price new products in all of the firm’s businesses is an example of what research has shown to be value-creating, corporate level competence. Firms seeking to create value through corporate relatedness used the related linked. diversification strategy Example: Virgin Group Ltd transfers its marketing core competencies across travel, cosmetics, music, drinks, mobile phones and even health clubs.

Virgin Casino, Virgin Balloon Flights, Virgin Atlantic Airways, etc. In the Philippines, the famous SM. With the acquisition of SM Group of Companies to banking, real estate, consumer goods, SMDC, BDO. Virgin Group Limited is a British branded venture capital conglomerate organization founded by business tycoon Richard Branson. [2] The core business areas are travel, entertainment and lifestyle. Virgin Group’s date of incorporation is listed as 1989 by Companies House, who class it as a holding company; however Virgin’s business and trading activities date to < the 1970s. Read about Ball and Brown Study

The net worth of Virgin Group Ltd as of September 2008 is ? 5. 01 billion. It consists of more than 400 companies around the world. Market Power-exist when a firm is able to sell its products above the existing competitive level or to reduce the costs of its primary and support activities below the competitive level or both. Example: Federated Department Stores Inc- parent of Macys acquired May Department) Stores Company( parent of Foley) in part to give the combined company the clout it needs to reduce various costs such as purchasing and distribution below those of competitors.

Porter’s generic strategy of Low-Cost Leadership stipulates that organizational managements strive to minimize all forms of costs to the point of incurring the lowest average cost per unit as compared to the industry’s standards as well as the competitors. This strategy requires that policies are put in place to help in mitigating losses, phase out non value addition costs and focus on the per unit returns from an investment. For example, a firm may be registering the lowest levels of unit costs as compared with other industry players, resulting into not low profits which though are higher the competitors’, (SOB, 2008).

Another example of cost leadership is exhibited where an organization strives to protect its market share from new entrants and have ability to defend its self from powerful suppliers through tight inventory control, research and development, process innovations and sustained fight to maintain market share even to the pint of selling below industry’s price, (AUEB,2008) . The generic strategy of differentiation implies innovative product development and offering for sale distinct products which is easily identifiable with an organization by the potential consumers and the general public.

For example a firm may strive to innovatively develop unique products for a market by having a unique brand, product packaging and performance capabilities. Similarly, to insulate itself against competition, enhance customer loyalty, create barrier and reduce need for a low cost advantage, (SOB, 2008), the coca cola company launched Novida drink with varied tastes and a brand name to deal with competition in the drink’s market. Highly competitive environment best suits the strategy of Low-Cost Leadership.

This is because the strategy advocates for having the lowest per unit cost in the industry as compared to the competitors, (SOB, 2008). The strategy suits this environment since pricing can be the major determent of the level of costs which a firm is wiling to absorb, help in proper management of selling and purchasing costs and also help in implementation of strategies aimed at lowering chances of new entrants through economies of scale.

Read also Focused Low Cost Strategy

Investors They expect returns on investment. They are usually less concerned by CARS and more by financial results. Any decision made has to convince them of the long-term interest of taking that action. Employees They earn the money from the company. A specificity of the sport industry is the tight relationship employees usually have with the brand they are working for. There is a strong hare of values. Community Every brand has to keep up in line with the values of the community. They must ensure the reputation of the brand by following good ethical behavior.

Events Organizer / Committees It represents a complex mutual relation. Events need the brands to bring money wrought sponsorship, but also quality products to ensure quality show while brands need events for exposure and show their strength. Clubs / Athletes As for events, brands will associate its image with clubs or athletes. When taking CARS decisions, it has to respect the values of these stakeholders to avoid conflicts. Competitors When positioning against competitors, CARS can be use as marketing tool.

Governments Local and national government body are major actors in any strategic decision for brands. No’s No’s represent a good way to show concern on social topic for brands. 2. Pros and Cons of CARS for stakeholders Before entering into any CARS strategy for a sporting good brand, it is important to estimate the impact it can possibly have on your stakeholders. First of all lets consider the main positive effects. On the one hand, CARS as a general Cars Strategy of Sport Industry By relish and the brand. It is also a good tool to increase the community base with deeper and stronger values.

Though it has to be consider that a strong positioning can sometimes have the opposite effect with customers no longer identifying with the brand values. On the second hand, social responsibilities are a good way to motivate your employees and thus increase your production and/or quality. It has a positive impact on the unity of all your members and helps create a healthier working environment. This is also a positive way to increase the attractiveness of your company through fair hiring process and rewarding treatments.

Moreover, CARS can increase the company reputation. This will positively impact the business with suppliers but also with governments, event organizers, committees and athletes. Not only these actors will be more willing to work with you, but also your existing partners will benefit from your positive reputation. Nonetheless, even though sport industry share generally the same big values, a strong positioning can once again result in conflicts with potential partner and needs to be taken into consideration.

Nonetheless, CARS cannot only affect positively the entire group of stakeholders. Among the main stakeholders concerned about CARS are the investors. Social Responsibility is broadly understood as spending money and not earning return on investments. And these cost matters get more important when considering medium and small enterprises. Program to reduce environment impacts for example are costly, the same when it comes to relocating decisions. Discussing all possible positive and negative impacts on stakeholders isn’t possible.

Sport industry is a complex structure and the tight links between companies and their stakeholders makes every CARS decision even more important regarding their impact on many stakeholders at the same time. More than in any other industry, CARS are deeply value driven and should reflect the consumer values. Hence it requires to take into consideration all possible impact and strong risk analysis. 3. Risk analysis The prime purpose of including CARS in corporate business is to make the corporate equines activities as well as the corporate culture economically, socially and environmentally sustainable.

It seems the customer satisfaction is only about price and service, but concentrating on only these aspects of business makes them blind folded towards other important changes taking place worldwide that could blow the business out of the water. Some of the drivers pushing business towards CARS include: Inefficiency of the Government In the past, governments have relied only on legislation and regulation to deliver social and environmental objectives in the business sector that has led to certain

There is a growing demand for corporate disclosure from stakeholders, including customers, suppliers, employees, communities, investors, and activist organizations. Increased Customer Interest It has been seen and proved through a survey conducted found that more than one third of surveyed consumers believed that large companies “should do more than give money to solve problems. ” Increased pressure from the Investor Investors are changing the way they analyze companies’ performance, and are making decisions based on ethical concerns too.

Change in employee behavior Employees are increasingly looking beyond paychecks and benefits and seeking out employers whose operating practices match their own principles. In order to hire and retain skilled employees, companies are being forced to improve working conditions. CARS and risk management CARS, particularly for a global company, is related to corporate risk management through two means: by providing intelligence about what those risks are, and by offering and effective means to respond to them.

The key to both, as implied in the above definition, is more effectively “managing stakeholder relationships. ” Stakeholder engagement through CARS programs provides an invaluable source of information about social risks, which is different from simply stakeholder managing. A stakeholder management mind-set focuses the dissemination of information to stakeholders, through public relations or community relations, on decisions already made without completing the feedback loop. This way of managing stakeholders might be ineffective in global operating environments.

Managing stakeholder relationships requires closing the loop; it means truly engaging stakeholders. For any company, only few stakeholders may warrant reaching the highest level of engagement, but managing stakeholder relationships is a key dimension of effective CARS programs for all global companies. Effectively managing stakeholder relationships focuses on issues, problems and opportunities that go far beyond one organization and involve the whole global systems or network.

By integrating the business sensing, learning and innovations gained from CARS programs, companies can better manage their risks and subsequently their economics, social and environmental impacts, in a manner that is roughly analogous to what they learn from their customers, a more well-established form of business intelligence adhering. Generally, companies consider implementing responsibility systems too expensive and besides they can even lead to a number of disadvantages compared to their competitors.

In fact, the cognitive assumption is that higher levels of responsibility will add to unrecoverable costs, because the costs related to an irresponsible corporate behavior are often hidden or unrecognized while the apparent benefits of cutting corners sometimes seem obvious. And environmental problems that in the past. Organizations therefore have to try to follow socially orientated aims, ranging from the protection of the environment as ell the worker’s rights in order to make the economical rule fit the social one.

The interesting socially responsible investment is part of the CARS. It has led to the growth and popularity of investment funds claiming to invest in companies that are socially responsible, and to the growth in the number of enterprises that provide information to investors about the social to environmental performance of companies. This has increased opportunities for trade unionists to obtain leverage over corporate behavior though means such as introducing shareholder resolutions at annual company meeting. Benchmark analysis Before undertaking any kind of CARS action, it important for sporting goods companies to be aware of the different issues existing in the sector and define the priority according to the corporate strategy. According to literature review, 3 mains axes have been define for CARS: environment, economic and society. The environment section is probably the most important for the outdoor sport enterprise as it is strongly related to the main concern of the industry. This section includes , preservation of resources such as water, air and soil.

The economic axes deal with the salary of employees and the involvement in the payment of taxes to the community. In addition, the economic responsibility of a company is to provide adapted products that respond to the need of customers, and make profit. The third dimension deals with society: employees’ wellbeing and respect of human rights. CARS actions are understood differently among companies and the operation showed by the main players will respond according to diverse values and priorities. A. Charity: Some outdoor sport brands are helping homeless people by providing apparel to rooter these people against rain, wind and keep them warm.

Volcano launched a campaign to distribute old pair of Jeans all across America. They collected it from customers in store. This action allowed the customers to be directly involved and have a very positive impact. Similarly, the Canadian brand Racketeer created weatherproof Gore Tex cape to distribute to homeless. B. Environment friendly In the outdoor industry, respect of environment is a strong value. Patagonia is probably the brand the most invested in the protection of environment and very concerned about reducing it carbon print.

The company tries to spread their vision about the overcompensation the western society is facing. In November 2013, they to make people buying only what they need. The company is also very transparent on its supply chain and the origin of their raw material. C. Education and improvement of society The CARS actions undertaken by The North Face have for objective to educate young kids and transmit them value of the respect of the environment. In addition, their program “explore the fund” increases access to nature and backcountry to children that may not have this opportunity without this program.

The most important concern for consumer in the outdoor industry is the respect for the environment. In fact, evolving outside, it mandatory for participants to respect nature. According to the 3 dimensions we have define before, a sporting good company can: Environment Make sure to have a echo friendly supply chain and try to limit your carbon print among your different operation Economic Pay taxes to the local community regarding environment regulation. Invest in R&D to develop products involved with a recycling process Society Try to educate people regarding environmental issues

To conclude, we will advise a sporting good company to undertake CARS action on environment protection, and choose the dimension (environment, economic or society) in which the company prefers to operate according to its values. 5. CARS actions to engage Through many company websites, especially sports ones in this case, we observe an increasing trend on communicating the engagements companies are taking. A special section is reserved to CARS explaining the roots of it and the future achievements they have in mind. As a general trend we see the protection of the environment on almost every website, whether Nikkei, Aids, lotto or puma.

For instance, Nikkei interestedly named its environmental engagement the “North Star” with the following table as a guideline: Another major point is to improve working conditions in global supply chains and the industry as a whole. Mainly, the goal is to help build an equitable and empowered work force. The way to do so is by giving work empowerment, a more efficient management system and sustainable manufacturing and sourcing. Moreover, something particular to sports is the concept of community, and Nikkei understood that point very well, that is why we see a strong involvement in the latter since they feed this industry.

Toyota Motor Corporation is considered as the market leader in the automotive industry. It has been formed on certain principles which include challenge, improvement and teamwork. The company has been rated as the fifth largest company of the world by Fortune Global 500 in 2006. Toyota is selling its vehicles in around more than 170 countries and states by the end of March 2010. It has its operations going on with 52 companies in 27 states of the world. Toyota is one of the best examples of globalization as it has its network operating around the world.

The company believes in immense localization, instead it has initiated a Toyota Way where the company is seen in localizing the operations in order to take advantage from it. (Paul, 2010) Optimization through globalization Globalization allows the company to expand in different markets with different needs and different perceptions. The company by going into new markets gets a chance to understand the new people and serve them with their needs. This along with increasing the profits allows the company to expand into new markets.

The company is already operating in 170 countreis around the world where it has integrated its operations with 52 companies around the world. This has made the Toyota circle a huge one. The company has an opportunity to integrate its supply chain on the global level where it can procure goods from the cheapest location. A few new componenets can be added to the supply chain which can make it a global supply chain for the company where it would be using the best and the cheapest resources available around the world. (INA, n. d. )

The company already has a lot of emphasis on localization as it belives firmly on integrating the local strategies into the organizations strategies which has been named as the Toyota Way. The company can further localize its operations by incorporating the local ways of operating. This would help the organization on the global level as well because the company may then integrate the local ways of working into their global strategies which may bring in more efficieny and reduce the cost for the company. (Wyman, n. d. ) Research and the Global Expansion

The company earleir used to only export the vehicles to different countries but later it moved to the next model where it started manufacturing locally. The company has gone for immense geographic expansion and is still looking for opportunities where it can get into more regions of the world. Expansion requires immense research by the company before entering the market. Every market has separate needs and ways to satisfy those needs. The different traditions of the countries influence their need for various things including the automobiles.

By research the company has an opportunity to explore the new markets around the world and understand their requirements for the automobiles. The company currently has incoporated an extensive research system due to which it has managed to introduced extremely localized cars that are designed by the local designers and engineers. This is one of the ways how research ahs currently helped the company in getting and being accepted into different parts of the world. Research may provide the level of risk involved in a particular conutry that the company would have to face in terms of operating over there or exporting vehicles over there.

Other than the needs of the customers Toyota may also see the level fo competition and the way the other organizations operate in the country. This would enable the company to evaluate the various countries in terms of its profitability level and decide whether it would be a profitable decision to enter in a particular country or not. Research may provide the company with a complete country analysis which would be helpful in deciding if the company would be profitable or not. (Ichijo, 2006) Leadership in Toyota

Toyota has a flatter organization structure within the corporation which has always encouraged the leadership culture in the organization at all the levels. The company??™s philosophy is to disperse responsibility even at the lowest level in the organization. The Toyota Way espicially has been the way the company has spread leaders all around the organization around the world. The level of leadership is to such extent in the company that the team leaders in the company are considered as running a minibusiness which is thus run wholly by them.

The company since incorporates continuous improvement procedure thus the leadership is required immensely. The reason for this is the fact that that continuious improvement requires immidiate decisions on the spot thus the employee at every level is taking decisions on the spur of the moment. Leadership currently has impacted the globalization procedure of Toyota as the company has encouraged leadership globally. The leadership is to such extent that the company has local designers and engineers for each region who have been given immense leadership and autonomy in terms of their work.

The local designers and engineers decide for the local vehicles themselves and not a lot intreference is seen from theToyota headquarters at Japan. Leadership at the new locations may allow the employees to work autonomously which help in the innovation within the organization. The localization within an organization is only possible where the employees are given enough freedom to work and decide on their own. Leadership is considered as a pre requisite for localization. Leadership would allow a better and a efficient working conditions around global Toyota.

It would allow the employees to be their own leaders and work more efficienlty and serve the local people in a better way. Leadership allows the employees to get the best out of them by putting their maximum efforts. Since the employees are given responsibilities so they are seen working more efficiently in order to achieve their targets. Other than that leadership also helps in making the vehicles in the most localized manner as the local employees have the full autonomy to make the vehicle.

This makes the vehicles more acceptable by the local and that is the only reason why Toyota today has managed to lead the automobile sector in such a diversified automobile market of the world. (Meier &amp

The cultures around the world are so different that it may sometimes even become a hurdle while at various times it may even benefit the organization in the operations. Various positive and negative impacts on the global strategies are as follows: Positive Impacts Cultural Diversity: The cultural diversity may be a hurdle and also a positive impact on the organization. The positive impact may be the cross cultural exchange of knowledge within the employees. The employees from different cutures may teach the good points of their cultures to the others as well which would benefit the working culture of the organization.

New Markets: The exchange of knowledge from the cultural diversity may even benefit the organization when entering the new markets as it would give them an idea of the different people around the world. Negative Impacts Cultural Diversity: The negative impact of cultural diversity may be the communication barriers or the differences that different cultural people may have within them. This may hamper the working conditions of the organization and may even create disputes in certain extreme conditions.

Cultural Traits: Toyota is originally a Japanese company which has its various norms originating from the Japanese culture. The various global strategies may also have a little influence of the Japanese culture which is extremely opposite from the western world. It may make it difficult for the strategies to be adopted in such parts of the world where the norms and cultures are very different from the Japanese culture. (Silverthorne, 2005) Conclusion: Toyota has beenone of the best examples of globalization which has adopted the different localized procedures within the company.

The country has expanded to various countries and this has been possible due to the immense research that the company does. Research would enable to the company to understand the local needs and traditions that would be influencing the needs of the local people. The company has previously also benefitted from the local processes that it has adapted. Localization has been a good sign for the company as it has always benefitted from the cross cutural influences in the past. It has a strong conviction of adapting the local procedures that have proven to be successful for them in the local regions.

Th company believes in learning new and improved techniques from the local markets and then incorporating them at the global level. These staretgies have made Toyota very successful in the past and the company is still looking forward to explore new opportunities in order to further benefit from the environment.

However, the only problem of the hotel was its design style did not combine with local cultures. The Ibis hotel also had capabilities to provide the 15 minutes contract to guarantee the staff will solve problems in short time. In addition, the Ibis hotel operated its business in high efficiency and quality, and It could be regarded as the most innovative hotel chains, which were the most obvious competitive advantages. In terms of external analysis, the growth rate of the economy and global trades contributed to the development of the Ibis hotel.

Based on Porter’s five Forces analyzed, the risk of entry by potential competitors was high. Bargaining power of suppliers was low, which was an opportunity for Ibis hotel development. In the last part of the report, the Ibis hotel applied the franchising plan to expand its business, but it still needed to reduce its cost. Furthermore, the Ibis hotel should focus on its service and facilities quality.

Recommendations for corporate-level strategy XIV 5. 00 Conclusion XVII Reference List 1. 00 Introduction Ibis hotel is an economic chain hotel which is one of the brands of Accord international hotel. Since it was established in 1974, Ibis hotel is world-renowned for TTS quality service and competitive prices. Nowadays, Ibis hotel has nearly 900 branch chains which are located in 45 countries and regions. This report aims to analyze the internal and external environment of Ibis hotel and find out the business strategy for the enterprise.

This report is divided into three aspects. Firstly, the authors critically analyze the Ibis hotel’s internal environment. Secondly, external environment is analyzed from two aspects, which are macro- environment and industry environment. Recommendations are proposed in the third part, which assists Ibis hotel maintain and improve its competitive advantages. . 00 Analysis of the internal environment ‘The internal environment consists of the inherent competencies of the firm and the structure of its internal systems and processes’ (Hill & Jones 2010, p. 9). In order to formulate a distinctive strategy of the corporation it is essential to analyze the internal environment of the company, which includes evaluating its resources and capabilities. In this section, the author will critically analyze Ibis hotels’ internal environment and discover this chain hotels’ competitive advantages based on Hill and Jones theory.

Resource As (Hill & Jones 2010, p. 0) pointed out, ‘Resources refer to the assets of a company, which also can be divided into two types: tangible and intangible resources’.

In terms of Ibis hotel, it has standard hotel facilities and high- level service quality, but there are still some problems cannot be ignored. Tangible resources international hotel. This hotel equipped with full range of facilities, including internet connection, bath room, room furniture, and restaurants (Ibis 2013). Compared with other economic hotels, the sound insulation of the walls of Ibis hotel is quite satisfactory, which protects customers’ privacy. In addition, the Ibis hotel also arioso language backgrounds, and the hotel also applied the advanced VA equipment to attract more professional merchants.

Meanwhile, the Ibis hotel offers a clear price both outside and inside of the hotel, which means there are no difference between the announced price and what is paid (Accord Business Traveler survey 2009), which conveys the reliability of the hotel service to guests. Nevertheless, Ibis hotel merely provides free internet in public areas, which is not convenient for guests. Furthermore, even though the Ibis hotel has more than 900 branches all over the world, the types of the guest rooms are simplex, which cannot attics family groups in some countries.

According to (Rosary’s 2010, p. 20), analyzing the local market needs is the key element to expand business in different places. Therefore, the Ibis hotel should focus on different types of customers to expand its customer base.

Intangible resources ‘Intangible resources are nonphysical entities that are created by managers and other employees’ (Hill & Jones 2010, p. 21). Ibis hotel followed the policy of innovation and modernization to build branch hotels and improve service quality, which is the important intangible resource.

From 2002 to 2010, the Ibis hotel continuously won My Favorite Economic Hotel” brand, which directly improve the brand image and develop customer base (Ibis hotel 2008). Therefore, the intangible resources of Ibis hotel play an essential role in developing hotel potential markets, but the design of the Ibis hotel should involve local cultural and the manager should employ more experienced staff.

Capability ‘A company’s capabilities are basically the skills available through the company to perform certain actions’ (Hill & Jones 2010, p. 25).

As one of the well-known economic chain hotel, the capabilities of Ibis hotel not only reflect in its human resources management, but also in service management. The Ibis hotel teams are well organized and trained by Accord hotel group, because they aim to provide the quality service to customers. For instance, the hotel multi-skilled employees will sign a 15 minutes satisfaction contract with customers which means the hotel staff will solve problems within 15 minutes (Ibis hotel 2010). Len terms of service management, Ibis hotel offers the breakfast from am to noon (Ibis hotel 2010).

Compared with other economic hotel, this service is crucial to attract the customers, which also prove the comprehensiveness and particularity of the Ibis hotel. However, both breakfast service and 15 minutes contract will consume too much human resources, which probably influence the operating of other departments.

Distinctive competencies ‘Distinctive competencies are firm-specific strengths that allow a company to differentiate its products from those offered by rivals and achieve substantially lower costs than its rivals’ (Hill & Jones 2010, p. 28).

Compare with other budget hotels, Ibis hotel has its own superiority. From the budget hotel in China. However, service quality and infrastructure of the Ibis hotel are exceeded other budget hotels. For instance, Ibis hotel is the first economy hotel chain to receive sissies certification. The hotel provides some high quality service that makes customers feel comfortable, such as providing 24 hours reception and dining facilities for customers (Ibis hotel 2010). From the operator’s point of view, Ibis hotel provides a reasonable procurement method, which is not only providing purchase service in China, but also global purchase.

The operators can use large-scale procurement to reduce operating costs, and gain more profits. 2. 40 Competitive advantage ‘Competitive advantages are those resources that allow a business entity to develop ND maintain an edge over competitors who produce similar goods and services’ (Hill & Jones 2010, p. 35). Meanwhile, according to Hill and loner’s building block, the competitive advantage should be reflected in three aspects, including Superior efficiency, Superior quality and Superior innovation. Superior efficiency The efficiency of hotel is an essential element to expand customer resource market (Hill & Jones 2010).

The Ibis hotel follows the service and training standard of Accord hotel, hence the staff can solve the problems and customers’ complain in short time to enable other departments will not influenced by any unnecessary issues. In addition, the Ibis hotel applied the advanced computer system which insures reception staffs increase the efficiency of check in process (Ibis Hotel 2013). Superior quality Although the Ibis hotel is an economic hotel, the hardware facilities of the hotel are in good conditions and the price is unchanged with other competitors (Ibis Hotel 2013).

Hence, the quality of facilities and equipment is the competitive advantage of the hotel. Furthermore, the service quality of the Ibis hotel is reliable because the staffs aims to provide the comprehensive services to customers and guarantee the efficiency of solving problems. Superior innovation Innovation in business is including the creation and improves products and services for customers. The goal of business innovation is providing the unique products and service which can help companies stand out from competitors.

Innovative room design is one of the innovative products of the Ibis hotel. Each room has super soft fluffy pillows, which can provide customers a comfortable sleep environment. Also, the hotel has a noise barrier, which can provide a quiet environment for customers. Black-out curtains can block the sun when customers are A new restaurant operation principle is another innovative product of the Ibis hotel. Generally, opening hours of budget hotel’s restaurant is a very short time, which is only a few hours on lunch and dinner time.

However, compare with other budget hotels, Ibis hotel provides a kitchen which is open 24 hours a day, and can service many different tastes of dishes for customers.

Analysis of the external environment

Analysis of the macro-environment According to Mill (2009), macro environment is the major external and uncontrollable factors that influence an organization’s decision making, and affect its performance and strategies (Mill 2009). These factors include macroeconomic forces, global forces, genealogical forces, demographic forces, social forces and political and legal forces (Mill 2009). . 11 Macroeconomic Forces Business is affected by the external environment, and understanding of macroeconomic factors will help enterprises recognize the current market environment, and develop a different strategy to gain more profits (Hans 2009). Three macroeconomic factors are analyzed below and these are the growth rate of the economy, interest rates and currency exchange rates. Growth rate of the economy Economic growth can improve the purchasing power of the customer and therefore his will reduce the competitive pressure for enterprises (Healthier 2012).

The growth of an economy can provide the opportunity for companies to expand their industry and earn higher profits. For instance, in the past year, Chinese hotel occupancy rate was increased by about 1% because of the growth rate of the economy (Hold 2011). However, an economic decline will decrease people’s income and then the rate of service requirements declines. For example, the 2008 economic crises led to the global economic recession and the hotel industry has also been affected. Chinese hotel occupancy rate was decreased by about 1. % (Hold 2011). Also, an economic decline can intensify the competition; so many companies may decide to reduce prices to attract customers. This will reduce the profits of the enterprises. A typical example is “7 days hotel “which provides 77 Yuan for the customers who are staying at the hotel for the first time (Hold 2011). Interest rates The interest rate impact on the enterprise is reflected in bank borrowing (Nelson 2011). For Ibis hotel, an increase in interest rates is a threat, because it will increase the cost of borrowing.

For example, when the Ibis Hotel group wants to expand its pay the rental fees. However, the growth interest rate will cause the hotel’s borrowing costs to increase. In addition, from the consumer’s point of view, growth interest rates might prompt them to cut back on spending, which would result in lower demand (Nelson 2011). For instance, in China, increased interest rates led to a declining demand for tourism, so the spending of tourism products also decreased, and Ibis Hotels profits will be reduced (Hold 2011).

Currency exchange rates Hospitality and tourism are the world’s single largest industry and probably one of the industries most affected by foreign exchange movements (Bilabial 2002). The impact of currency exchange rates on inbound tourism is mainly reflected in the price competition. For example, China will lose a price advantage if ARM appreciates. The number of foreign tourists will be reduced, and it is a threat to the development of the hotel industry.

Global Forces Globalization gives many enterprises the opportunity to expand their scale and become a multinational corporation (Gloss 2012).

With the reduction of barriers to international trade and investment, an increasing number of enterprises have the opportunities to enter the international market. For instance, more and more foreign companies are attracted to China because of the development of the Chinese economy and the political reforms and open policies. Ibis Hotels is one of the foreign companies which are gaining the opportunity to grow it profits. However, lowering barriers to entry has made it easier for foreign enterprises to enter the domestic markets, which is a threat for Chinese companies.

Domestic market competition will intensify because of the entry of foreign companies.

Analysis of the industry environment Industry environment is an exterior force which cannot be controlled by marketing UT may have a significant impact on helping enterprise to make successful strategy (Hill & Jones 2010). Michael Porter’s Five Forces Model shows that there are five factors that affect the competition of an industry, which are the threat of new entrants to a market, bargaining power of suppliers, bargaining power of customers, threat of substitute products and the degree of competitive rivalry.

According to this model, the industry environment of the Ibis Hotels is analyzed as below.

Risk of entry by potential competitors–High When a new competitor enters an industry it has the potential to obtain a market hare and intensify the competition in the industry (Awoke 2010). If barriers to entry are low then the threat of potential competitors will be high and vice-versa (Awoke 2010). Therefore, high entry barriers play an important role in keeping potential competitors out of an industry, even when industry profits are high (Awoke 2010).

The threat of new entrants to the market in this report is high, because the entry budget hotel is relatively low, which means that many competitors may appear to share the market. For instance, the cost of opening an Ibis Hotel is aboutY6000000 Ibis 2013), and due to the low prices, the occupancy rate can reach nearly 90%, hence, the company can recover the cost in only three years. However, opening a four-star or five-star hotel needs an investment of at least a thousand million Yuan. Low costs and high profits will attract many competitors, and increase the threat of entry by potential competitors.

However, Ibis Hotels provides high quality service and low prices for customers, which means that Ibis can attract many loyal customers, and it is not very likely that these customers will try a new brand. Hence, the well-established brand of Ibis Hotels compels the new entrants have to make a considerable investment in the quality of service, which increases the difficultly of entry for potential competitors.

Bargaining power of suppliers-Low The budget hotel industry is a highly profitable industry because of the low bargaining power of suppliers.

In this report, suppliers for Ibis Hotels are facilities suppliers and food suppliers. However, these suppliers are not unique in the market. Hence, this will reduce the bargaining the power of suppliers. Secondly, Ibis Hotels is an established global chain company, so some suppliers would want to keep a long- ERM relationship with the company, so the bargaining power of suppliers will be reduced. Moreover, suppliers to Ibis Hotels are not providing scarce resources and will have lower cost of the hotel to switch to alternative suppliers. Hence this benefits the company.

Bargaining power of customers-High Powerful customers are able to reduce profits in an industry (Hill & Jones 2010). In this report, the bargaining power of customers is high for the Ibis Hotels. Firstly, the switching costs are low for Ibis’s hotel customers, because most budget hotels are providing similar service quality and price. For instance, ‘Homeliness’ is the bellwether of the Chinese budget hotels and, compared with ‘Homeliness’, Ibis Hotels cannot provide better quality service and lower prices, and are not as well known as ‘Homeliness’.

Hence, customers find it easy and inexpensive to switch to alternative suppliers, which is a threat to the company. In addition, online booking leads to a greater price selection for customers, so the bargaining power of Ibis’s customers is high.

Intensity of rivalry-High The fierce competition in an industry will encourage companies to change their business strategy, such as participation in a price war and investment in a new reduce. However, these strategies will increase the costs and lower profits for companies (Michael 2009).

Firstly, competitive rivalry will be higher in an industry with many current and potential competitors (Michael 2009). The Chinese budget hotel sector has increased Green Tree Inns, and also, there are Chinese budget hotels such as “7 days hotel”, “Homeliness”, and “Motivate”. The increasing number of budget hotels will share the market and pose a threat to the Ibis Hotels Company. Secondly, the more lower degree of product differentiation, the greater the intensity of price competition (Michael 2009). Because the difference is not obvious, price promotion becomes the main competition for budget hotels.

For instance, with the increased competitive pressure, many hotels provide a preferential price to attract customers. However, the price promotion strategy has a risk for the company, because it will reduce the profits.

The Threat of substitute products-High Substitute products are regarded as something that can provide the same requirements for customers (Hill & Jones 2010). If a company has many substitute products, then it will have to limit price and this will reduce the company’s profits Hill & Jones 2010).

The main threats to budget hotels come from two aspects, which are backpacker accommodation and apartments. Although the backpacker’s facilities are relatively simple, however their low prices still can attract a large number of low-income tourists. Apartments are another competitor, which can provide relatively high quality service and the same price for customers. Ibis is one of the budget hotels, so if Ibis wants to attract more customers, it has to reduce prices or introduce innovative products. However, these methods will reduce the company’s profits, which are a risk o the company.

Recommended strategic direction

Recommendations for business-level strategy ‘A generic business-level strategy detail actions taken to provide value to customers and gain a competitive advantage by exploiting core competencies in specific, individual product or service markets’ (Gallagher 2004, p. 4). It includes cost leadership, differentiation, focus, and combination of the strategies. According to (Hill & Jones 2010, p. 1 54), ‘A generic business-level strategy gives a company a specific form of competitive position and advantage vise–vise its rivals that results in above- average profitability. Based on the current situation of Ibis hotel, cost leadership strategy will benefit the maintenance and improvement of the competitive advantage. The cost leadership strategy aims to attract more business opportunities with lower cost than other competitors (Hill & Jones 2010). The room price of the Ibis hotel is in same level with other economic hotels, and the cost is lower. From 2010 to 2013, the Ibis hotels have carried out franchising plan to replace independent management 2008) pointed out, franchising plan is the way to promote the business and gain an opportunity to advertise its brand.

For instance, the franchisees of Ibis hotel use hotel brand and reputation, and they also follow the standard service system of the hotel, which not only save the cost of land and facilities but also worldwide expand the Ibis brand. Therefore, the lower cost is one of the competitive advantages that need to be retained by Ibis hotel. The differentiation strategy focus on produce the unique service and product to attract more potential customers (investor words 2010). The differentiation between Ibis hotel and other economic hotels is the comprehensive service.

As the author mentioned in internal analysis part, the Ibis hotel starts the breakfast from am to noon, which will satisfy the need of different guests, especially for those travelers who need to get up early to catch airplane. Generally, those economic hotels provide breakfast from am to loam. Therefore, the majority of guests will prefer to choose Ibis hotel because of its quality and unique food service, which needs to be retained and regarded as the competitive advantage.

However, the economic hotels apply the standardized operation mode, which is not flexible because guests with different ultra backgrounds have different requirements. Therefore, the Ibis hotel should combine its standardized operation mode with local characteristics, which probably improve its competitive advantage. A firm attempting to implement a focus strategy is serving the needs of a limited group or segment very well, which also can be divided into focused Low Cost and focus differentiation (investor words 2010).

In terms of focused low cost, the Ibis hotel should expand its suppliers to get relatively low cost, and this hotel also needs to reduce its price to attract guests in different periods and places. In addition, the Ibis hotel merely focus on business groups, and it provides the advanced VA equipment and facilities, which needs to be retained. For focus differentiation, the Ibis hotel not only needs to focus on narrow target market, but also need to focus on room and food service. For example, the room facilities should be functional and the food menu should be optional for customers. . 20 Recommendations for corporate-level strategy Corporate-level strategy refers to ‘specifies actions taken by the firm to gain a competitive advantage by selecting and managing a group of different businesses omitting in several industries and product markets’ (Hill & Jones 2010, 178). It also includes diversification strategy and concentrate in single business. Diversification strategy is the process of organizations move into new businesses and services (Hill & Jones 2010). For Ibis hotel, it carried out the related diversification strategy to expand similar industry.

The Ibis created three style hotels for customers with different services and styles which directly expand the market share. Guests could select one of three types of Ibis hotel depend on their own need and preference. Therefore, this related diversification creates the additional value for companies, which means these companies can share the customer base to discover more customer resource markets. Nevertheless, this diversification strategy is easily affected by external environment of Ibis hotel.

For example, the Ibis hotel probably will influenced by the change of exchange currency and seasonal tourism. In this case, in order to create value, the Ibis hotel should explore other relevant industries and keep the loyalty of customers. Another direction of corporate level strategy is concentrate in single business. For instance, the McDonald’s consistently produce unique fast food industry and update its products and design of the restaurants, nowadays this fast food chain restaurant gains more than 80% market share(BBC 2010).

As the branch of Accord, the Ibis hotel probably needs to learn the strategy of McDonald’s to concentrate on its hotel service quality. Currently, the service of economic hotels still in an average level and the room price is almost same (China Daily 2009). In order to make more profits, reducing room price may not be the best way to attract customers, so the Ibis hotel should insider improving the room and service quality to gain value instead of using price strategy to compete with other economic hotels.

The recommendation for Ibis hotel is that the hotel should focus on improves its original business.

Conclusion

In conclusion, Ibis hotel provides the high level tangible and intangible resources to attract different customers. Standard hotel facilities, high quality of service and innovative products provide powerful competitive advantage for Ibis hotel. However, the network in the hotel is a limitation of hotel development. The challenges and opportunities of the hotel development are discussed through he analysis of the external environment.

Plagiarism is presenting somebody else’s work as your own. It includes: copying information directly from the Web or books without referencing the material; submitting joint coursework as an individual effort; copying another student’s coursework; stealing or buying coursework from someone else and submitting it as your own work. Suspected plagiarism will be investigated and if found to have occurred will be dealt with according to the procedures set down by the School.

Any student for whom it has been proved that they have plagiarised the work of others will be subject to the School’s disciplinary procedures which could result in them being dismissed from their course of study Your work will be submitted for electronic plagiarism checking. Any attempt to bypass our plagiarism detection systems will be treated as a severe Assessment Offence. Looking at key elements of Kellogg’s business strategy that I have listed for Question two, above, I would like to examine how well I think the Kellogg’s company is facing up to those potential problems.

The first possible setback with strategic planning is when a company lacks clarity of purpose; I really do not think this is the case with Kellogg’s, as their mission and objectives are clearly set out on their website for all their stakeholders to see and clearly communicated through advertising. As regards to having SMART objectives, this is also very clearly the case with Kellogg’s.

Their objectives were measured to be achievable, communicated very clearly to all their employees, and were set over a time frame with all staff agreeing to certain actions required of them to implement the strategy over a three year period. Whether it was a goal of achieving best in class safety performance within their workplaces, implementing food labelling or any other objective, they have very clear goal setting within a specific time frame and they do constantly measure, monitor and publish their results, as well as renewing their commitments to even better results.

The strategies that they choose fit with their corporate culture. They bring everybody on board by encouraging diversity within the workplace, running leadership programs for their workforce; encourage participation for all in healthy lifestyle initiatives, not just for their employees but the community as a whole.

On their website, their beliefs, goals, commitments and overall initiatives are communicated clearly and strongly include their workforce who their openly state is their greatest asset, borne witness by this quote by W Kellogg himself, “Whatever success I have had in business has been as a result of my good fortune in selecting employees who could do their jobs better than I could have done them myself”. The organisation of my choice is Apple and I am going to look at some of the strategic planning problems they faced in 1997 and how they dealt with them, or rather how Steve Jobs turned the company around to an astonishing degree.

After Microsoft’s Windows 95 release, Apple was in a slump, struggling to stay afloat in a world dominated by Windows lintel driven PCs. CEO Gil Amelio cut staff and reorganized Apples products into 4 groups: Macintosh, information appliances, printers and peripherals, and alternative platforms, but nothing worked. On Feb 5th 1996 Business week had written them off with a cover article with the Apple logo and titled, ‘The Fall of an American Icon’; other articles abounded with titles like ‘101 ways to save apple’, and many Wall Street analysts were hoping they would do a deal with Sony or Hewlett Packard.

In September 1997, Apple was 2 months away from bankruptcy! Steve jobs, who had co-founded the company in 1976 with Steve Wozniek and had been pushed out of his own company, had agreed to return to serve on a board of directors and to act as an interim CEO. Fans of the Apple Macintosh were overjoyed at his return but people in the business world were not expecting much. However against all expectations, within a year of his return, things were to change dramatically! So how did Jobs turn apple around and set it on the path to becoming one of the most successful companies ever?

Jobs decided on a retrenchment strategy; he cut Apple back to its core, he shrunk the company back and decided to focus on being a niche producer of quality products within the highly competitive PC market. For example he drastically cut product selection, focusing on just one desktop rather than fifteen; he cut out all the printers and peripherals, software development and engineers. As well as this he cut virtually all his manufacturing, moving it to Taiwan. Costs were less, short cycle times, and overall much less working capital was needed. A much simplified product line cut inventory by 80%, and reduced costs everywhere.

A new Apple web store sold direct to customers, cutting out distributors and dealers. Jobs brought the NXT software with him that he had developed successfully in his time away from Apple. He even persuaded Microsoft, his main rival to invest  150 million in Apple, convincing Bill Gates that a failed Apple would lead to problems with the Department of Justice, and importantly he needed up to date version of Microsoft software to work on Apples computers. He didn’t announce any major plans or targets, just concentrated on cutting back and simplifying, cutting Apple back to its ‘core’ ironically.

He didn’t try to restore Apple computers to its former market share; at that stage they had just 4% of the computer market share. Interestingly when asked by ‘Good Strategy, Bad Strategy’ author Richard Rumelt exactly what his strategy was he replied ‘I am going to wait for the next big thing’, ( Rumelt, 2011, p. 14) , which of course we now know was the I pod and I tunes, followed by the I-phone, but he couldn’t have known that then. He was just putting himself in a position where he was ready to pounce and capitalise on the next window of opportunity he recognised.

In the past ten weeks, this class has tested me by having to read challenging articles that presented several different strategic theories to us. While all of the theories brought us interesting and valuable information, the one that resonated most with me and stuck out the most was the Blue Ocean Strategy. I have always been someone who enjoys a challenge and I feel that while this theory is a challenge, it has the most potential to bring organizations the greatest amount of success.

To fully understand why I selected this theory opposed to one of the other ones, I feel that first I need to explain exactly what Blue Ocean Strategy is and who has used it and gained enormous amounts of success. While there are many people who believe taking down the competition is the best plan for their company and will result in huge success, Blue Ocean Strategy does not even factor it into their decision making process as a way to reach success. To discuss Blue Ocean Strategy, we also have to understand Red Ocean Strategy.

Red oceans are all other strategies that are currently trying to out-compete one another in hopes of being the one on top. The first thing that comes to mind when I think off taxation such as this is the results of Apple first launching the pod. All a sudden a portable music player like this was what everyone wanted, so other companies started doing the same thing and came out with comparable products such as the Zone. Sadly, no one has been able to reach the success that Apple has when it comes to portable music devices.

As you can see from the chart, Microsoft, the creator of Zone, tried to reach success by hitting all five points that were mentioned on the left side of the chart. However, they were unable to do so because they underestimated the demand that the pod was producing. Microsoft as well as other companies tried to compete, but could not maintain as high of a demand as the pod and eventually the market became too crowded and the products eventually became undervalued and over produced.

When the creators came out with Zone it sounds like a Hyperventilation strategy was being used. Hyperventilation is defined as rapid and dynamic completion that is escalated on price-quality positioning (Divine, 1998). While a Zone is very similar to an pod, what the creators thought would make them out-sell the pod was that the Zone cost half of what the pod was. While often times cost is a huge consideration when buying a product or service in this case people were willing to pay the extra money and choose the company that used the Blue Ocean Strategy.

Potential Risk: Now take a complete 180-degree turn and you have Blue Ocean Strategy. With this strategy, demand is created rather than fought over. By doing this, there is more room for growth that can be quickly profitable. At first when I read the article, I thought to myself that this seemed too risky and why would a company bother using this strategy; after doing a lot of different research on the topic, I have come to the inclusion that there is a minimal amount of risk.

I think it is important to realize that with any strategy there is a certain amount of risk, no matter what choice you decided to make. For Blue Ocean Strategy, there are currently six key risks that a company could face (Kim & Maneuvering, 2004). Of these six risks, the first four revolve around the creation of the strategy itself and the final two relate to the actual execution of the strategy.

Search risk Planning risk Scope risk Business model risk Organizational risk Management risk However, there are six principals represented in Blue Ocean Strategy that are signaled to protect an organization from that risk (Kim & Maneuvering, 2004): Reconstruct market boundaries Focus on the big picture, not the numbers Reach beyond existing demands Get the strategic sequence right Overcome key organizational hurtles Build execution into strategy The first principal identifies the direction by which managers can methodically create conclusive market space across diverse industry domains and crippling search risk. It teaches companies how to make the competition irrelevant by looking across the six conventional boundaries of competition to open up commercially important blue oceans” (Blue Ocean Strategy, 2014). The second principal has to do with looking at the big picture and not focusing on Just what the numbers would be, it deals with planning risk. By looking at the big picture first and foremost I believe this is why, when using this strategy, there is such long-term success that comes with it. Using a visualizing approach that drives managers to focus on the big picture, this principle proposes a four-step planning process for strategies that create and capture blue ocean opportunities” (Blue Ocean Strategy, 2014). To reach beyond existing demands hose using the Blue Ocean Strategy must challenge the traditional process of aiming for finer segmentation in order to meet existing customer preferences. Instead, this principle, which addresses scale risk, states the importance of aggregating demand, not by focusing on the differences that separate customer but rather by building on the powerful commonalities across uncustomary” (Blue Ocean Strategy, 2014). In order to accomplish correct strategic sequence companies must ensure that their business model will be able to produce and maintain profitable growth. This sequence consists of the following: (1) utility, (2) price, (3) cost, and (4) adoption requirements (Blue Ocean Strategy, 2014).

When a company follows this sequence, it addresses the business model risk. The fifth principal is all about overcoming the hurdles that come your way. This is the first principal in the execution portion of the strategy and therefore in this principal the organizational risk is heavily considered. “This principle mitigates organizational risk, outlining how leaders and manager can surmount the cognitive, resource, motivational, and political hurdles in spite of emitted time and resources” (Blue Ocean Strategy, 2014).

Last, but certainly not least, is building execution into the strategy and this is defined as having the ability to encourage others to execute the strategy in the best way they know how. This principle addresses the management risk associated with people’s attitudes and behaviors. “By integrating execution into strategy formula, people are motivated to act” (Blue Ocean Strategy, 2014). While there is still a certain amount of potential risk involved in this strategy, you can see that there are several different principals that were created to eliminate said risk.

Cost and Value: A lot of traditional strategies state that you much choose if you want to be known for cost or for value. However, when deciding to use Blue Ocean Strategy, it is possible to have both differentiation and low cost. If you look to the chart to the right you can see that Blue Ocean Strategy has figured out that the key to value innovation is equal parts cost and buyer value. While the chart makes it look simple, in order for this to happen, utility, price, and cost all need to be aligned.

By driving both the cost down and the value, the product has the potential to meet so many more people. A really good example of this balance is the Ford Model T. In 1908, Henry Ford was a person with vision who created a company and a product that was not in the market. He made it price friendly so that people could actually afford it and it would fall under the category of value pioneering. When the Model T first came out in 1908, it cost $ 850. 00, which was half the price of anything else out there at the time (Kim & Maneuvering, 2004).

The key to success in this example was not using the competition as a benchmark. While Henry Ford could have followed everyone else and created a actionable and customizable car, he knew that it was not what the market needed; they needed affordability and reliability. Long Term Viability: When a company or organization is in the process of selecting a strategy to use, they want something that will not only last a long time, but also help them build a brand. There have been several companies that have used Blue Ocean Strategy and have had decades of brand equity (Kim & Maneuvering, 2004).

Companies will be happy with the results that many have and are expected to continue to use Blue Ocean Strategy multiple times. Blue Ocean vs.. Strategic Supremacy through Disruption and Dominance: Almost the opposite of Blue Oceans is the theory of strategic supremacy, which has been influenced by hyperventilation and understanding the relationships in this theory. By understanding the interaction between strategy and environment, managers can better tailor their strategies to the environment or change the environment to their advantage.

This begins with analyzing the current competitive environment (opposite of Blue Oceans) then understanding the rules of the game in that industry. Simply put, the leaders in the industry control the “rules of the game”, if they do something, he smaller brands will follow to compete. Having the ability to control the rules of the game and controlling the evolution of the market and its competition is part of strategic supremacy. Sometimes old leaders in an industry do not want to change and this gives new entrants an opportunity to sneak in and disrupt the rules of the game and use it to their advantage.

Overall, this strategy is all about controlling your market at large and if you do not have the caliber to do this, then you find a niche market to focus on. When competitors disrupt the “rules of the game” then it comes a competitive battle. When this happens, it eventually turns into a Red Ocean. Leaders often are in their position because they have battled with lowering prices and are able to compete with lower margins. If a leading competitor was disrupted by a new entrant with lower prices it would change the game and they would be forced to lower their prices or create a new strategic approach to beating the new threat.

In this business strategy, I think it leads to saturation in the market where there really isn’t a new value for the customer; they Just battle over perceived values, marketing and price wars. If you are someone who is going to enter into a particular market strong, would you rather go into a bloody war with dominant leaders and try to find a way to sneak past them and out into the market with the threat of them copying you and crushing you because they have deeper pockets and more control or avoid this fight and go where nobody else has gone?

I think that many existing firms find themselves battling for strategic supremacy and if you are a new business, you should let them fight and enter the market through a Blue Ocean Strategy instead, but you are also never too old to use your brand equity and create a ewe space. Blue Ocean Strategies vs.. Coping with Hyperventilation: Companies regularly struggle to sustain their competitive advantages and the reality is that no advantage is sustainable. Technological wonders can happen overnight, aggressive competitors enter the market, organizations are restricted, new laws change the field, markets and trends appear and fade away.

In a hypersensitive environment companies must disrupt the advantages of their competitors. To fight back with this, managers must apply the g’s according to this theory to analyze industries and competitions strengths and weaknesses. Huge companies that were once thought to be untouchable have been brought to their knees, such as IBM & GM. Having economies of scale, large advertising power, deep pockets and all the other things that give them buyer and supplier power is no longer enough. “Leadership in price and quality is also not enough to assure success. Being first is not always the same as being best.

Entry barriers are trampled down or circumvented. Goliath are brought down by clever Davis with slingshots. Welcome to the world of hyperventilation” (Divine, 1995). According to Divine, companies cake progress in hyperventilation by actively disrupting advantages to others in order to adapt the market to themselves; this is done by applying the g’s framework. The new g’s framework is: Superior stakeholder satisfaction, strategic soothsaying, positioning for speed, positioning for surprise, shifting the rules of the game, signaling strategic intent and simultaneous and sequential strategic thrusts.

Before going further in depth with applying these g’s, this would seem like a very bloodthirsty strategy to destroy your opponents. When you strike first, you better be ready to take a hit or keep swinging. I am not saying that this is not the way to compete, but I am saying that it is not the best way to be in business or enter. Hyperventilation is a Red Ocean Strategy and all of these battle tactics do not have to be your fundamental strategy in a Blue Ocean. Moving on, these g’s are only based on a strategy of finding and building temporary advantages in the market.

These advantages are from market disruption and not sustaining advantages because of the reasons mentioned in the beginning of this paragraph. Looking at the chart below, you can see the qualities of competition in different levels of competition. The g’s are about paying in the 4th category whereas Blue Ocean Strategy is about figuring out a way to compete in the first or second category. Even if you are a company who is part of hyperventilation it does not mean you have to play a part of the price war, you can use your branding and find a way into an area of more moderate competition.

Blue Ocean vs.. The Core Competence of the Corporation Another theory of competitive advantage is in the knowledge and diversity of core competencies. Focusing on your core competencies creates unique, integrated systems that reinforce your business model. Once you clarify your competencies, then you will know how to support them, increasing your competitive advantage and reducing the ability of a competitor copying you. The theory states that once you establish your competencies you must enhance them by investing in needed technologies and creating strategic alliances.

This theory seems to be not as brutally competitive as some of the other theories. It is difficult to argue because identifying your company’s core competencies is indeed very important for strategic decisions and success. The reason I believe Blue Ocean Strategy is still a stronger strategy is imply because I do not believe that understanding your core competencies alone will be a sustainable enough advantage. There will still be competitors who change the game, new technologies and entrants that will emerge and I do not think that focus on your competencies are enough in a highly competitive market.

In a Blue Ocean Strategy you do not need to worry about the competition as much. This theory points out that your competition may not be able to copy you as easily but that does not mean that they wont be able to take more of the marketplace. For these reasons, I think blue ocean is still the smartest strategy. Blue Ocean vs.. Resource Based View of the Firm The resource based view of the firm (RUB) is a basis for the competitive advantage of a firm that is based on application of their tangible and intangible resources.

By doing this a business can transform their short-run competitive advantage into a more sustained competitive advantage. The basic idea is that you first identify potential key resources within your organization. Next, evaluate if the resources are valuable, rare, in-imitable, non-substitutable and other criteria. By protecting and sustaining these resources you can achieve greater organizational success. Similarly to understanding the core competencies of your business, this business strategy is also difficult to argue.

A business should evaluate their resources and these resources may very well be their core competencies especially if they are rare, inimitable and non-substitutable. I believe that simply having a resource based view does not protect you from changes in the market, always or guarantee long-term sustainability or competitive advantage. As mentioned before, technology advances happen overnight and these types of changes can make resources obsolete. Example of Successful Blue Ocean Strategy – Apple: Sometimes the only way to fully understand something is by looking at examples to get a better idea.

In my opinion, the most successful company using a Blue Ocean Strategy has been Apple. A game changer for Apple was when they launched what we know of today as tunes. In 2003, they launched tunes, which to this day has changed the way people buy and enjoy music (Blue Ocean strategy, 2014). They saw a need in the market for digital music that was not illegally downloaded and were able to fill the need by providing clear music that was priced reasonably. One of the biggest perks of this is because there are a lot of people that only want one or two songs and no longer need to purchase the entire CD.

They have been able to maintain their success by launching a program that was easy for users to use and provide great customer service; it was very difficult for others to even try to replicate. Apple did not want to stop there and saw another chance to move a new idea into the market when they came out with the pad. Apple was getting people to move away from laptops and cheap notebooks and offered customers an entirely new experience. With billions of dollars of success, we have to wonder what they know that others cannot seem to figure out.

I feel the biggest reason why this is happening is because they are focusing on the end user. Apple continues to create projects that are solely customer driven. Also, they do an excellent Job highlighting their assets. For example, do you ever wonder why people get so excited when a new model of their device comes out? It is because Apple markets the parts that others want. I once watched a documentary that claimed when the pad 2 came out, it was almost exactly he same with the exception of the size and weight.

This attracted business because the pad is portable and can travel anywhere. A theory that shares similar characteristics to Blue Ocean Strategy is Core Competency by C. K. Parallax and Gary Hammer; the products and services that are produced with this theory is hard to replicate (Hammer & Parallax, 1990). However, Blue Ocean Strategy stands out since they created a market of their own and they have a much greater chance of focusing on things like pricing. It is something that no one has ever seen before so it gets a lot of attention right off the back.

Example of Successful Blue Ocean Strategy – WI: Another company who has displayed success as a result of Blue Ocean Strategy is Microsoft when they created the WI. Video games are a billion dollar industry and companies continue to try and top their competitors with what they can provide consumers. Instead of fighting this trend, Microsoft decided to ignore the standard features that most video game consoles offer, such as built in DVD players and low processor speed; and in its place offer us something that no one had ever imagined: a censored video game that requires the movement of the player (Stewarded, 2007).

In the article, Nineteen’s Blue Ocean Strategy: WI, the author writes, “In Kim & Embrasure’s terms, this means that while Microsoft’s Oxbow and Sonny’s ASS are fighting each other fiercely in a red ocean (I. E. The existing market), Nineteen’s WI is calmly sailing in the blue ocean it created for itself (I. E. A new market)” (Stewarded, 2007). This was an extremely successful strategy, to put WI into the market because not only did it attract video game users but also brought in a whole other market. When it first came out, I was surprised and shocked to see the gaming system in my grandfather’s nursing home.

I soon learned that not only were the gaming systems being placed in nursing homes all over the country, but they were also being placed in physical therapy and rehab centers. I believe this example especially proves that Blue Ocean Strategy is superior to Michael Porter’s Theory. If Microsoft were to follow Porter’s theory instead, they would have looked at the OXBOW or ASS gaming system and did something comparable because he believes that you should try to top the competition (Porter, 1996). This leaves very little room for creativity and the chance to create something as innovated as an interactive video games.

Conclusion: “The only way to beat the competition is to stop trying to beat the competition”. As you can see, Blue Ocean Strategy has a lot to offer companies and organizations that wish to succeed. Out of the eight strategies that we learned about, I feel that not only is Blue Ocean Strategy most different from all the others, but also offers people the most potential. Instead of going off what is already out there or creating something that resembles something else, Blue Ocean Strategy decides to do the exact opposite and create something that is not already out there.