Firms may have the objective of profit maximization; it would be hard to find an employee who shared the same objective as the firm all the time. There is clear conflict between the goals. This inefficiency means motivation has a big part to play and solve the problem. However, the extent to which managers can change employee’s motivation is debatable since it can be said that it is human nature to be selfish and ‘impossible’ to be altruistic especially to an organization. Thus, it is crucial to assess different mechanisms (incentives and corporate in particular) which may help improve motivation with perspectives from economists, sociologists and psychologists.
The same issues such as getting existing services for a reduced price at acceptable quality standard came up repeatedly. Second, failure to meet service standards can force management to find other ways of achieving reliability. It is not atypical to find a company in which cumulative IT management neglect eventually culminated in an out-of-control situation the current IT department could not recover from. Management can see outsourcing as a way to fix a broken department. Third, a firm under intense cost or competitive pressures, which does not see IT as its core competence, may find outsourcing a way to delegate time-consuming, messy problems so it can focus scarce management time and energy on other differentiators.
A skimming strategy may be recommended when the nature of demand is uncertain, when a company has expended large sums of money on research and development for a new product, when the competition is expected to develop and market a similar product in the near future, or when the product is so innovative that the market is expected to mature very slowly. Under these circumstances, a skimming strategy has several advantages. At the top of the demand curve, price elasticity is low. Besides, in the absence of any close substitute, cross-elasticity is also low. These factors, along with heavy emphasis on promotion, tend to help the product make significant inroads into the market.
According to this, we can learn that competitive advantage is a very important concept in strategic management. Next, I will look deeper into ¡°what¡¯s competitive advantage¡±. Competitive advantage is what sets and organization apart. When a firm sustains profits that exceed the average for its industry, it has something that other competitors don¡¯t does something better than other firms do, or does something that others can¡¯t, the firm is said to possess a competitive advantage over its rivals. The goal of much of business strategy is to achieve a sustainable competitive advantage.
An organization with low commitment to strategic management may be unable to quickly adapt to the changing business environment and, therefore, companies that implement strategies in their workforce have a competitive advantage over them. For instance, the CSR practices that were outlined above can become a part of organizational strategy and increase the legitimacy of company’s actions, attract investment and raise profitability. It is also important to understand the strategies of competitors whilst developing your own. When a company analyses the strategies of competing businesses, it can manage its own strategies and put itself in the reactive position with the ability to control and influence the business environment (Robert 1990). When an entity understands its competitor’s strategy, it can adopt successful elements of it and adjust its own organizational strategy, making it more effective.
4. Barriers to Entry When a business is profitable, it attracts potential entrants that desire to gain market share. In addition, it can negatively affect the existing firms' profitability. The probability that new companies will enter an industry depends on the extent to which barriers to entry have been build. In other words, existing firms in the industry set up multiple constraints to limit the number of potential entrants.
More than likely, consumer-products companies face some amount of supplier power simply because of the costs they incu... ... middle of paper ... ... part from that, the threat of substitutes. With so many firms in the quick service drink industry, low switching costs, similar products, and healthier options, the threat of substitutes is very high. When there is one product successful, it also leads to the creation of other products that can perform the same functions as the product of the same industry. Porter also mentions that if one industry wishes to follow suit, producing products with similar function, attention should be given to product that enjoy steady-price performance treads off with the industry product. Secondly is would entail minimum switching costs for a buyer.
A competitive strategy is the research so as to find a suitable position in the market. The selection of the competitive strategy by a firm is widely dependent on two factors: Firstly the attractiveness of the industry for securing long term profits and secondly on the determinants of relative position within the industry. But it is noticed that none of the factors is most suitable in determining the competitive strategies for any company. A company operating in a very eye-catching industry may also sometimes fail to earn profits because of a poor competitive position but at the same time a better competitive position will help a firm to earn profits even in a not so attractive industry. The choice of competitive strategy becomes more interesting and challenging because both industry attractiveness and competitive position of a firm can change.
High cost of entry the more it will cost to get started in an industry, the higher the barrier to entry. Brand loyalty when brand loyalty is strong within an industry, it can be difficult and expensive to enter the market with a new product. Substitute Products This is probably the most overlooked, and therefore most damaging, element of strategic decision making. It's imperative that business owners (us) not only look at what the company's direct competitors are doing, but what other types of products people could buy instead. When switching costs (the costs a customer incurs to switch to a new product) are low the threat of substitutes is high.
But this is not always the case. Furthermore, the other parties in the IPO process can not afford to be linked to a firm of bad quality, so they do extensive due diligence (Draho, 2004). This enhances the overall quality of the pool of issuers and increases their reputation. Another reason is explained by Maksimovic and Titman (1991). They argue that firms with a lot of debt have a lower incentive to maintain their reputation as the reputation’s payoff accrues over many periods.