Applying your understanding of strategic management, answer the following questi

Question

Applying your understanding of strategic management, answer the following questions:

•How can business-level and corporate-level strategies be best used to gain a competitive advantage and earn above-average returns? Explain. •What are the advantages and disadvantages of competitive rivalry?

•How can a company use competitive rivalry to its advantage? Provide examples.

•Under what conditions would you choose a single or dominant business corporate-level strategy versus a more diversified strategy and why? Discuss.

Explanation / Answer

Corporate level strategy gives direction to the organization and finds out the most suitable alternative for the organization. At this level of strategy, required resources are identified, procured and allocated to achieve the best result. Thus, the beginning of a successful venture starts from a corporate level. With a suitable capital budgeting plan, companies can gain competitive advantage. After the planning at the corporate level, business level strategy goes for the detailed planning to achieve the goals and objectives set by the corporate level strategy. At this level, step by step method of progression in the given business environment is prepared and forwarded for implementation. It helps in getting above average return for surety if done with meticulous precision.
Advantages of competitive rivalry:
1.   Learn from each other and improve
2.   Focus on quality improvement
3.   Always puts companies on toes for continuous development
4.   Focus on innovation to edge each other in the market
Disadvantages of competitive rivalry:
1.   It can lead to a price war that affects both the competitors
2.   Lower profit margin
3.   Increasing cost of marketing, advertising and promotions
A company can do the benchmarking analysis of the competitors. It will make company to improve the quality of the product. To see this, other competitors will raise the bar and will come up with new features and benchmark will go upwards. This process continues and companies make a better product portfolio than before. It can be seen in the automobile industry where one model launched by one competitor is followed by launch of better model by another company. It is also observed among mobile phone manufacturers .Name of the company cannot be mentioned due to copyright reasons.

If a company receives more than 70% of the sale from a single business, then it will go for single or dominant corporate level strategy. It should be done, because it will help in maximizing the revenue and consolidate the position in the market.

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