Reply to Dale: Introduction

Competition is at the core of the success or failure of firms. Competition determines the appropriateness of a firm’s activities that can contribute to its performance, such as innovations, a cohesive culture, or good implementation. Competitive strategy is the search for a favorable competitive position in an industry, the fundamental arena in which competition occurs. Competitive strategy aims to establish a profitable and sustainable position against the forces that determine industry competition. A firm is described as having a competitive advantage when it successfully attracts more customers, earns more profit, or returns more value to its shareholders than rival firms do. A firm achieves a competitive advantage by adding value to its products and services or reducing its own costs more effectively than its rivals in the industry.

Economists seem to have two situations in mind when they speak about competition. The first is where there are many producers, each one assuming that his influence on market price is negligible and determining his output accordingly. No producer has any interest in restricting his output below the point at which marginal cost equals price and total output is in this sense optimal. Also in the second sense, competition refers to the process whereby producers develop and market new products and lower costs by improving their methods of production (Competition, 2020). It is an agreed fact among many that competition is good for a business.

Process: Deciding on a Competitive Approach

Deciding on a competitive approach for the company is critical to the process of developing a company’s strategy. Careful consideration must also be given to the company’s competitive scope. Decision models continue to impact strategy development and should continuously be evaluated, and others considered. Porter (1985) proposed three approaches to competitive strategy: cost leadership strategy, differentiation strategy, and focus/niche strategy. Essentially, cost leadership means an SME supplies goods and services at a cost lower than the competition (Pulaj et al. 2015). In the same breath, cost leadership does not necessarily compromise the quality of the products/goods/services that the SME provides.

Also, the literature speaks to the role of employees in deciding on a competitive approach. Employees play a crucial role in organizational performance, and no organizational capability is created without appropriate human infrastructure. Therefore, the organization’s ability to manage human resources is essential for forming other capabilities and its competitive advantages. It is critical that it can make the human resources unit a strategic partner of the organization’s business. However, it seems that there is a problem in the way of participation of these units in developing organizational capabilities. On the one hand, the CEOs of organizations complain that the human resources unit is “not a strategic business partner”.

In business, a term sustainable advantage means the competitors cannot duplicate the resources underlying the advantage. Wealth increases with increase in competitive advantage or with the increased demand of scarce resources. In short, one can get wealthier by strengthening a competitive advantage. The advantaged position can be attained by a firm in two ways. The first is by doing innovation and the second is to exploit a wave of change, which is beyond the control of an organization. This change can be due to number of factors such as shift and advancement in technology, cost, competiton, politics and perception of buyers (.

Strategic Thinking: Deciding on Competitive Scope

An organization’s competitive scope has been defined as a function of the number of value chains (distinct but interrelated) in which the organization is engaged. The competitive scope is classified as broad scope and narrow scope. The broad scope normally involves engaging in cost leadership or differentiation strategy. The narrow scope involves getting into focused strategy where focus can be on cost leadership or on differentiation strategy. Competitive scope can have a powerful effect on competitive advantage because it shapes the configuration and economics of the value chain. There are four dimensions of scope that affect the value chain. The link between scope of strategies as an aspect of strategic change and organizational performance has not been the subject of much attention as some important areas are underexplored in the relationship between strategic change and performance.

Having a broad scope can allow a firm to exploit the benefits of performing more activities internally. It may also allow the firm to exploit interrelationships between the value chains that serve different segments, geographic areas, or related industries. But sharing and integration have costs that may outweigh the benefits. Having a narrow scope can allow the tailoring of the chain to serve a particular target segment, geographic area or industry, to achieve lower cost or to serve the target in a unique way. A narrow scope in integration may also improve the competitive advantage by enabling a firm to purchase or perform better or cheaper. It is important to note that a firm can pursue the benefits of a broader scope independently or enter into coalitions with independent firms to achieve some or all of the same benefits. Examples of coalitions include technology licenses, supply agreements, marketing agreements and joint ventures.

Geographic Scope

Geographic Scope is the range of communities, regions, or countries in which a firm competes with a coordinated strategy. Geographic interrelationships can enhance competitive advantage if sharing or coordinating value activities lowers costs or enhances differentiation. For example, a bookstore might differentiate itself by researching and stocking foreign titles, winning sales locally as well as across a larger geographic area.

The theory maintains that firms incrementally increase their geographic scope and level of commitment (e.g., the level of ownership) through evolutionary process (Vahlne, Ivarsson, & Alvstam, 2018). Indeed, studies show that firms prefer trade and investments in markets geographically, economically, and culturally like their home country in their early stages of internationalization. The theory was revisited and replace the liability of foreignness with the liability of outsider ship by accommodating the importance of network relationships and the knowledge generated from these relationships in current business. Kim and Aguilera (2015) extend the internationalization theory in a semi-globalized world where both country- and regional-level factors determine firm internationalization.

Production / Distribution Scope

Production scope refers to the characteristics and functions of a product or service. These characteristics include physical features such as size and materials, as well as functional specifications. Functional considerations include what the product is designed to do and its purpose or end-use. Segment Scope is the product varieties produced and buyer types served. On the other hand, distribution scope distribution refers to the offering a product in a variety of ways such as advertising, direct sales, placement advising to urge the client to accept it. Distribution is thus not limited to recommending a given product to a client to urge him or her to accept it.

The literature reveals that the two most important approaches toward the diversification strategy for suppliers are extending “product scope” (product range) and “customers scope” (customer reach) within the same industry. Studies revealed that classify new business along the dimensions of both product scope and customer scope into existing and new, resulting in a total of five categories, which were then analyzed to explore the relationship with the duration of the business. Findings revealed that relationships endure the longest and have the highest probability of continuing for the new customer/existing product category, that is, providing existing products to new customers (Konno, 2017).

Decision Model

To address the competitive scenario, the Stop Rule is being recommended as it is an universally applicable alternative to the often-tortuous process of weighing up a situation and deciding which direction or choice to make. It is a cognitive tool for deciding whether to continue or stop an action based on the present information, process, and past events. This would be an ideal tool for evaluating the external environment as it would allow for an opportunity to stop and recess. It a rule that says at this point it is time for management to stop. It breaks the reverie and makes you think of something else; it gets you outside of the space you have been in. Ambiguous data or information at the start of the company’s direction with strategy requires some early risk decision making to determine the possible four alternative strategies in the SWOT analysis matrix; it seems the consequences and the yes and no rules models provide the best methods for quick answers (Krogerus et al., 2018).

Another decision model that could be used is the buyer’s decision model which allows for a decision to be made about how to create competitive advantage by looking through the eyes of the consumer (Krogerus et al., 2018). To succeed in predicting a competitor’s next strategy, company strategies need to have a good understanding of each rival’s current strategy. The buyer’s decision model considers research, lower expectations, the future consequences of the decision, and the option to let someone else decide (Krogerus et al., 2018).

Conclusion

Gamble et al., (2019) suggests that implementing and executing strategy for competitive purposes should be an operational driven strategy revolving around the management of people and business processes. The process should be on converting strategic plans into actions and good results. The execution of the strategy by management will be considered successful when the company achieves the targeted strategy and financial performance and shows great progress in making the strategic vision a reality. It is when this occurs that it could be concluded that it is braced to deal with the competitive environment.

Annotated Biography

Oh, C. H., Kim, M., & Shin, J. (2019). Paths and geographic scope of international expansion across industries. International Business Review, 28(3), 560-574. https://doi.org/10.1016/j.ibusrev.2018.12.002 (Links to an external site.)

In this paper, we investigate how firms’ international expansion paths and their geographic scope differ across industries, with longitudinal data from 1999 to 2008 for Fortune Global 500 firms. We first classify firms into three generic paths of international expansion based on the industry characteristics (i.e., institution-driven, capability-driven, and linkage-driven). We then investigate the differences in three generic international expansion paths and geographic scope with descriptive and growth curve analyses. The results show that firms operating in an institution-driven industry mostly expand their upstream activity internationally, but their geographic scope is limited. In contrast, those firms in a capability-driven industry mainly expand their downstream international activities, potentially beyond a regional geographic boundary. Firms in a linkage-driven industry likely coordinate both upstream and downstream activities internationally, but with larger geographic scope in downstream activities than upstream activities. Thus, firms across industries have taken distinctive paths of international expansion with substantially different geographic scope of operation.

Okonda, M. W. Strategic Change: The Influence of Scope of Strategies and Specific Product Dimensions on Organizational Performance.

This paper examined the influence of scope of strategies and specific product dimensions on performance of firms in the alcohol industry in Kenya. Previous studies dwelt on effect of limited aspects of strategic change such as marketing leaving out critical aspects like financial, distribution and cost control strategies. The study was anchored on the Resource-Based Theory (RBT). The study adopted a qualitative research design of cross sectional type. The population was 25 local firms registered by Kenya Revenue Authority by 2012 and approved by National Authority for the Campaign Against Alcohol and Drug Abuse, (NACADA) by 2015. A saturated sample consisted of 100 respondents to get primary data. Descriptive statistics and thematic analysis were used to determine the relationship between scope of strategies and organizational performance. Findings revealed that there was a fairly positive relation between scope of strategies and organizational performance.

The alcohol industry in Kenya dates back to 1922 when two brothers from England, George and Charles Hurst, started brewing beer in Kenya (EABL Citizenship Report, 2004). The two formally incorporated their business as a private company under the name of Kenya Breweries Limited. Kenya Breweries Limited became a public limited company in 1934. By 1990, most of the shareholders were Kenyans. Kenya Wine Agency Limited (KWAL) was incorporated in May 1969 with the objective of consolidating importation and distribution of wines and spirits from foreign owned companies and enable indigenous Kenyans take control of the importation and distribution of wines and spirits in the country. Keroche Breweries Limited (KBL) started back in 1997 as a small family business. It was a result of a market survey on opportunities available in manufacturing market then. The company currently has 3 per cent share in beer market.

References

Competition. (2020). Man and the Economy, 7(1)http://dx.doi.org.ezproxy.liberty.edu/10.1515/me-2020-0009

Gamble, J., Peteraf, M., & Thompson, A. (2019), Essentials of strategic management, McGraw – Hill Higher Education (6th ed.), New York, NY. ISBN: 9781259927638.

Kgoetiane, C. H., Sibanda, R., & Mashau, P. (2021). The Effect of the Competitive Strategies on the Tshwane based SMEs’ Performance. African Journal of Business & Economic Research, 16(2), 223–243. https://doi.org/10.31920/1750-4562/2021/v16n2a11 (Links to an external site.)

Konno, Y. (2017). Impact of “Product scope” and “Customer scope”: Suppliers’ diversification strategy and Performance. Annals of Business Administrative Science, 16(1), 15-28. https://doi.org/10.7880/abas.0161202a

Krogerus, M., & Tschäppeler, R. (2018), The decision book: 50 models for strategic thinking., W. Norton & Company, Inc. (Revised ed.), New York, NY. ISBN: 9780393652376.

Porter, Michael E., (1985). Competitive Advantage. Ch. 1, pp 11-15. The Free Press. New York.

Rumelt, R. (2011), Good strategy/bad strategy: The difference and why it matters., Crown Business, New York, NY. ISBN: 9780307886231.

Vahlne, J. E., Ivarsson, I., & Alvstam, C. G. (2018). Are multinational enterprises in retreat?. Multinational Business Review.

Reply to Farren on Effective Execution: Introduction

After management has agreed on a solid strategy, the focus shifts to putting it into action and achieving positive results. It does not matter if an organization successfully implements a superb strategy, develops a unique product, or attains revolutionary technology, it is only through excellent execution that they can remain ahead of their competitors. An effective execution has the ability to encompass the daily configurations, routines, and operational goals to set up an organization for success. Putting the plan in place and getting the company to execute it effectively necessitates a diverse range of managerial abilities including specific processes, designs, and decision models.

Process: Effective Execution of Strategy

After defining exactly what the organization’s strategy is, it is now time to effectively execute it. Because strategy execution is a process rather than a one-time event, it passes through several stages, including pre-execution, coordinating the effort, continuing process management, and lastly, maximizing cross-functional performance (Srivastava et al., 2017). Executing an effective strategy into action includes determining the precise approaches, activities, and behaviors required to get things done and produce outcomes. Gamble et al. (2021) informs us of various managerial tasks necessary to repeat during the process and execution of an effective strategy. This includes but is not limited to building an organization with the capabilities, people, and structure needed to execute the strategy successfully and installing information and operating systems that enable company personnel to perform essential activities. A successful operation plan of leadership, culture, organizational design, competencies, and incentives are also among the most essential elements to consider throughout the process of effective strategy execution (Srivastava et al., 2017). All of these components are important for creating a strategy execution method that provides strategic value, still, based on their situation and organizational environment, each business will adopt a distinct approach to strategy execution management. The ultimate goal of this process of effective strategy execution is to guarantee that the company focuses on creating high-value skills and making investments that maximize value.

Strategic Thinking: Power of Design vs. Power of Focus

Policies and processes of a firm may either help or hinder successful plan implementation. With such areas holding so much power, managers should carefully design current policies and procedures whenever a firm changes its business plan and update or eliminate those that are out of alignment. According to Gamble et al. (2021), well-designed policies and operating procedures act to facilitate organizational change and good strategy execution in three ways: help enforce needed consistency in how particular strategy-critical activities are performed, promote a work climate that facilitates good strategy execution, and support change programs by providing top-down guidance regarding how certain things now need to be done. In addition to clear, well-written policies and procedures, business leaders can thoroughly make the right judgments and decisions towards an effective strategy.

Rumelt (2011) proclaims that a good strategy draws power from focusing minds, energy, and action and when such attention is focused on a critical goal at the proper time, it can lead to a series of positive results. An effective strategic framework keeps the company focused by limiting the number of directions it may go in. For instance, attempting to grow all goods while concurrently extending all markets while also scaling up capacity or altering your company model to incorporate new forms of manufacturing, sourcing, sales, distribution, and collaborations is unanimously a bad idea. It’s very necessary to acknowledge how impactful a firm’s overall focus is as it ultimately has the power to fulfill a well-executed and well-designed strategy.

Decision Model: Key Decision Traps to Avoid

Decision traps are so deeply ingrained in our thinking that we frequently fail to identify them even while we are in the midst of them. Business leaders won’t always be able to prevent them, but they can attempt to avoid them and lessen their impact. For example, one important decision trap that may hinder the effectiveness of executing a strategy is being too overconfident in how successful it will be. Overconfidence varies with the amount, form, and vividness of the information utilized in their choice and impairs decision accuracy (Zacharakis & Shepherd, 2001). Information overdose also obstructs decisions made during the execution of an effective strategy. The information overdose trap may lead to a waste of time and money as people seek out more and more data rather than making a choice.

Conclusion

Setting strategic decision models, creating competitive designs, and putting a strategy into action all need distinct talents and provide unique obstacles. Business leaders should always consider sharpening their execution abilities before defining strategic goals and putting a plan in place, keeping in mind that even the best-formulated strategy can be badly implemented.

References

Gamble, J., Peteraf, M., & Thompson, A. (2021). Essentials of strategic management, McGraw-Hill Course Content

Delivery (7th ed.), New York, NY. ISBN: 9781260785791.

Rumelt, R. (2011). Good strategy/bad strategy: The difference and why it matters., Crown Business, New York, NY. ISBN:

9780307886231.

Srivastava, A. K., & Sushil. (2017). Alignment: the foundation of effective strategy execution. International Journal of

Productivity and Performance Management, 66(8), 1043-1063. http://dx.doi.org.ezproxy.liberty.edu/10.1108/IJPPM-11-2015-0172

Zacharakis, A. L., & Shepherd, D. A. (2001). The nature of information and overconfidence on venture capitalists’ decision

making. Journal of Business Venturing, 16(4), 311-332. https://doi.org/10.1016/S0883-9026(99)00052-X

Annotated Bibliography

Srivastava, A. K., & Sushil. (2017). Alignment: the foundation of effective strategy execution. International Journal of

Productivity and Performance Management, 66(8), 1043-1063. http://dx.doi.org.ezproxy.liberty.edu/10.1108/IJPPM-11-2015-0172

The writers of this peer review article sought to develop a model of alignment for effective strategy execution and further emphasizes that effective alignment is the foundation of effective strategy execution. Topics integrated into this writing are strategy execution frameworks, execution planning, resource commitment alignment, organization structure alignment, and total interpretive structural modeling. These authors’ findings indicate that effective alignment at different levels tunes the structure, operation, policies, best practices, etc., and helps middle managers to contribute to successfully executing the strategy. Furthermore, the lack of alignment also will lead to a lack of support from middle managers that is crucial for strategy execution. As a consequence of this research, the total interpretive structural model was able to develop specific strategy execution in firms from the emerging markets.

The lack of frameworks from previous literature has been underlined as one of the most fundamental reasons for the poor state of strategy execution., therefore, the quality of this peer-review publication and its authors sustain sufficient quality as it successfully identified key factors to be aligned with the strategy to translate the strategic goals into business results. Furthermore, the need for community orientation to being aligned with the strategy for effective execution has not been much discussed in past literature. The findings gathered within this writing suits satisfactory into my discussion as it contains a great amount of detail about what occurs within the process of effective strategy execution and the specific elements it should contain.

Zacharakis, A. L., & Shepherd, D. A. (2001). The nature of information and overconfidence on venture capitalists’ decision

making. Journal of Business Venturing, 16(4), 311-332. https://doi.org/10.1016/S0883-9026(99)00052-X

Throughout this peer review article, Zacharakis and Shepherd attempt to examine and investigate whether venture capitalists are overconfident, as well as the factors surrounding the decision that led to overconfidence. Zacharakis and Shepherd cover topics such as overconfidence, decision accuracy, availability bias, counterfactual thinking (i.e., imaging scenarios where current assumptions might not hold), and the humbling effect. According to the findings, overconfident venture capitalists may not fully consider all relevant information, nor search for additional information to improve their decision. Moreover, the natural tendency for people to recall past successes rather than failures may mean that venture capitalist will make the same mistakes again. Results also imply that high levels of overconfidence in success predictions (or failure predictions) may encourage the venture capitalists to limit information search and fund a lower potential investment (or prematurely reject a stronger potential investment).

The main contribution of this study operationalizes the concept of decision model advancing by developing a real-time experimenting method in cognitive psychology which contained a decision process design considered to be a conservative test of the impact of information on confidence. Therefore, the quality of this peer-review publication and its authors sustain sufficient quality as the authors add to this subject body of literature by demonstrating distinct factors that affect a firm’s overconfidence in decision-making and why. The information found within this research suits well fit for my discussion as contained a key decision trap all organizations should avoid during the process of strategy execution, that is, overconfidence.