A non-evil discussion of Business Strategic Management

Written and Edited By James Connaughton, so there’s no one else to blame….

 

Dear Know Nothing Digest readers, I call this a non-evil discussion to attract your attention to perhaps a dismissive conversation for those who do not hold interest in studying the why’s and how’s of big business.  This is for those who dismiss all big business as an exploitive process to part you with your hard earned money.  This is for those who cannot see past the butterfly money chasers in business suits frolicking in the sunshine fields of our wallets.  This discussion is more along the lines of a guide to understanding business management strategies as a way for managers to build successful firms and grow markets like a gardener builds a garden and tends to the life of her beloved crop.  What follows is a non-parasitic guide to better business through market science.

Oklahoma_James_Connaughton.jpg  James Rowe Connaughton is an MBA Student at Mid-America Christian University.

 

1st Question:

  1. Why do key success factors need to be viewed overtime?
  2. What happens if they are not?
  3. Provide an example of a firm that has viewed these factors overtime and one that has not.

 

Answer:

  1. Key success factors, along with a firm’s initial conditions are the basis for a firm’s initial Business Level Strategy. That means that key success factors help a firm achieve competitive industry advantages.  Monitoring key success factors overtime enables a firm to improve and adjust these factors to increase competitive advantages.  This is known as Competitive Dynamics.  The long-term success of a firm relies on maintaining a competitive advantage just as much, if not more, than just having an initial advantage.
  2. By not placing enough emphasis on key success factors, a firm will lose any competitive advantage it currently has along with market share.
  3. Coca-Cola has taken a longitudinal view of maintaining and expanding upon its key success factors over the firm’s long lifetime. Coca-Cola is the World’s largest non-alcoholic beverage company.   Hastings Entertainment, on the other hand, was unable to maintain and increase its key success factors through the turn of the century and has subsequently been slowly dismantled.

 

 

2nd Question:

  1. Why is it necessary to segment markets?
  2. What happens to firms if they do not?

 

Answer:

  1. Segmenting markets is necessary for a firm to determine specific consumer needs to provide for. By segmenting the market, a firm can specialize in a certain product category and optimize their efforts to best serve the consumers in that market segment.  The key success factors for each market segment differ in importance between each market segment.
  2. If firms do not segment the markets they operate in, they will be unable to focus their efforts to obtain optimal market share. Consumers place different importance on key buying criteria and firms must evolve their efforts to earn the most business from the most consumers in a firm’s chosen market segment.  The key success factors the firm develops to meet the key buying criteria of consumers is called the marketing mix.  Segmenting the chosen market(s) of a firm is a vital ingredient in any successful firm’s marketing mix.

 

3rd Question:

  1. Explain the difference between Market Penetration, Market Development and Product Development.

 

Answer:

  1. Igor Ansoff published an article in the Harvard Business Review in 1957 titled, “Strategies for Diversification.” In this article Ansoff outlines a quick and simple way for managers to devise strategies for future growth of their firm.  The first step is to develop existing products in existing markets more fully toward their optimal potential.  This is Market Penetration.  The second step is to introduce the existing products into new markets.  This is Market Development.  The third step is to develop new products for existing markets.  This is Product Development.

 

The first growth option, market penetration, involves the development of existing markets with existing resources.  This is done by utilization of the firm’s current excess production capacity.  This leads to increased profit margins through economies of scale.  This leads to lower operating costs, which lead to lower prices, which in turn leads to increase in market share.

 

The second growth option, market development, stems from the first growth option/strategy.  Fuller development in one market enables a firm to enter new markets from a position of strength.  Walmart expanding into the international market is a prime example of successful utilization of market penetration leading to market development.

 

The third growth option, product development, is a logical and necessary evolution of a firm to achieve long-term competitive advantage over its competition.  New products can retain current customers and attract new customers.  New products can create added value to existing products.

 

The successful implementation of Ansoff’s three step growth strategy can benefit both firms and markets alike and can provide stability in the global economy.

This article was funded in part by the Macro Finance Society of South Side Oklahoma City.

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The mission if the MFSoSSOKC is to disseminate current research in MacroFinance and to advance and promote the development of this science.  Macro Finance is a broad area of study that lies at the intersection of macroeconomics and financial economics.  We at the MFSoSSOKC arrive to promote the economic education of all interested Oklahomans. “When we cannot find invested parties, we throw them.”

Sources:

 

  • Pettus, Strategic Management for the Capstone Business Simulation® and Comp-XM® and Global DNA®, 7th edition
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