What Determines the Type of Strategy a Firm Adopts? Consider Both the Levels of Strategy (Corporate, Business and Functional) as Well as the Strategy Options in Your Answer and Provide Organisational Examples to Justify Your Answer?

2692 WordsApr 20, 201211 Pages
Strategy is derived from the vision and mission of an organisation. Having a strategy allows the organisation to gain competitive advantage against its competitor and assist them to adapt themselves in the changing market. Therefore, the determinants of strategy are an important aspect to consider as they influence the type of strategy a firm adopts in different levels; corporate, business and functional of the organisation. There are many determinants that can affect the type of strategy an organisation adopts, but there are three important ones which firms emphasize heavily on in the strategic management process. The three determinants are the competition they face in the micro environment, the resource of an organisation as well as the…show more content…
For instance, a customer wanted to buy a bouquet of roses for his wife but change his mind and bought a ring instead. The ring, therefore, indirectly became a substitute for the roses. These substitutes increase the risk of customers to switch to alternatives, which will result in the decline in sales. "When the threat of substitutes is high, industry profitability suffers" (Porter, 2008, p84). Unless organisations distance itself from substitutes with product performance, cost, marketing, or other means, it will suffer in terms of profitability and often growth potential. A good example is providers of long-distance telephone service. They had suffered a decline of users when inexpensive internet-based phone service such as Skype was introduced. Therefore, the organisation has to adopt a business strategy to counter this threat. An organisation might choose to adopt a differentiation strategy to seek competitive advantage through uniqueness (Schermerhorn, 2011). This strategy emphasizes in developing their product and services that are clearly different and unique compare to the potential substitute. Rivalry among existing competitors takes on many forms, including price discounting, new product introductions, advertising campaigns, and service improvements (Porter, 2008). The intensity of rivalry among competitors in an industry refers to the extent to which firms within an industry put pressure on one another and limit each other’s profit potential. If rivalry

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