Aspects a business should consider in corporate strategy

Corporate Strategy

 

The way a company’s managers should manage a company should largely be down to the business plan. However there are often external factors limiting a companies business, they may choose to solely benefit shareholders, but practically and legally they must provide some benefit to their employees and their customers to remain socially responsible and have a strong positive public relationship to remain profitable. An umbrella corporation may often have to make strategic decisions to combat potential problems well in the future. In the show Silicon Valley (external) the senior venture capitalist spends a lot of his time studying sesame seed markets in Myanmar and Brazil in order to profit in the future, this example (although fictional and a little overplayed) is a small look into the world of ensuring that profits are maintained and some of the crucial detail that must be taken into account.

The ability to assess the viability of consolidating corporate strategy is not only about turning a profit, but is also about financial and shareholder relations, the capability and flexibility of dynamic and slow moving markets, the technical ability of the employees and manufacturing capabilities as well as cost, the people and manpower involved and the risks undertaken at every stage.

Ensuring that a business has a strategic plan ensures that the company has direction and vision, companies that fail to innovate or differentiate could get left behind or never reach their true potential. A business must define the scope of its operations, how it defines its goals, then how it plans to achieve them, and finally, evaluate. Companies that fail to find a suitable corporate strategy could be left behind and not identify important challenges ahead of time and their current states failings such as their branding or vision.

Aspects a business should consider in corporate strategy.

  • Brand appearance, awareness.
  • Internal Culture
  • Market Segmentation
  • Product, Pricing, Placing, Promotion
  • After sales
  • Research and Development
  • Growth Strategy
  • Human Resources
  • Product and Market Innovation
  • Technology

There are many techniques that businesses use to maintain a strategic advantage, such as Porters strategic matrix (external) and Ansoff’s matrix.

Influences for Supply and Demand

Businesses work on a complex demand and supply based method of producing products and services.

  • Supply is the quantity of a good or service that a producer is offering to supply into the market
  • Demand is the quantity that the customers are willing to buy at a given price over a given period of time
  • External factors, such as income or environmental or ethical change may mean that a product is no longer viable, smoking for example is no longer as profitable as it was as people no longer smoke as much as they used to. Influences may be out of the businesses control.

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You may notice demand is present in the what influences the demand section, while it would not be a good idea to present it in an exam, I thought it worth including at the bottom as it technically does effect demand, as people may buy a product to own one before everyone else. Promotion is also a very broad term, this also encompasses things like fasion events, tastes and Economy also includes factors such as income.

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Supply and Demand Competition

Supply of a product can generally be negated, as long as there is demand there will usually be a supply. Some mass markets, such as commodity items are often very unchanging and can have extremely thin margins to drive out competitors, this is known as a price war and can sometimes be more destructive to business profits than good as the product becomes devalued by the low price and people become unwilling to pay for the prices needed to pay for the product, however, this can sometimes improve the rate of the moving average as it forces businesses to increase their prices, usually at the same time to a higher-than-original value.That is one example of a price strategy (price war).

If there is no demand for a product, then there most likely will be no supply, as producers are not interested in creating a product that will not sell.

Demand and Supply Graph

A Supply and Demand graph shows the relationship between the two, the graph can be altered by shifting either to the left or right, depending on whether you want to increase or decrease either, just remember that,

Left is less…

So by shifting either to the left, you are decreasing them. A handy tool for showing equilibrium.

 

What actually is Marketing?

Marketing is Anticipating, and satisfying, customers wants and needs, efficiency and profitability, Marketing includes

  • Market Research
  • The Marketing Mix

What is the purpose of Marketing?

  • To make profit, essentially by improving sales
  • To remind the customer of your product through promotion
  • To see what the customer wants by offering their product
  • To link the product to the brand and create a brand association
  • To communicate and offer competition to other businesses (to compete)

There are two types of business orientations, Business to Business where businesses sell products to other businesses, such as tools, office equipment and building supplies. Business to Customer is more noticeable to individuals as it is more prominent and most common.

Marketing begins by setting a goal or objective that defines what the company wants to achieve, and when it hopes to reach these goals.

They then create a marketing strategy, to outline how they will bring in what they wanted to reach their objective.

the four ps of marketing product price place and promotion marketing mix

What defines a Market?

A market is anywhere that brings together buyers and sellers with a view of exchanging goods and services. The location can be physical, national global, physical or electronic.

A niche market is a small or select group of a larger market. Niche markets generally have a smaller cohort of customers interested in the product, however some businesses sell their products at a high price to compensate for lost sales.

Market size is the total volume or value of all sales of a particular group of products. Market growth is the percentage change in market size over a period of time. Market share is the percentage of the market achieved by one firm, or brand, or product.

Markets can be dynamic, which means they change quickly or stable, where any change is fairly small. Dynamic markets are becoming more and more common as technology advances to new greats, incorporating new techniques mean a business can become obsolete.

How Customers Associate Quality with a Brand

brand qualityWithin any business there are multiple factors that a customer can imprint on to recognise a brand and associate with quality. Businesses can use the customers intuition to their advantage, targeting on the key aspects of a quality product in order to maximise return. Here is a list of the common points a business can tailor in order to maximise their revenue;

 

trusty tea co allows product association quality brand reputation

  • Profitability, Businesses must decide how much profit each product or service should undertake, whether it be a large return or a small one. Customers may be willing to buy a product purely on its premium price point.
  • Customer Service, Businesses may wish to place the quality of their product on par with the quality of its customer service. Poor customer service could reflect badly on a quality product and vice versa.
  • Competitiveness, Businesses may wish to use pricing in order to undercut the cost of its competitors. Businesses may also want to take on new locations and footfall in order to maximise profitability.
  • Supply Chain, Business may cut costs and use cheaper suppliers, however unethical or environmental considerations could be overlooked and come back to haunt businesses later.
  • Reliability, A product that is unreliable or prone to failure may mean that customers look elsewhere for new products, defined obsolescence could damage the perceived quality of the product as well, If it were to fail after a certain time because of a weak part, customers may feel frustrated having to buy new ones.
  • Brand Image, For some customers a brand could be vital to what product they purchase, If a brand is damaged, it could affect the sales of businesses massively. Some businesses may also struggle to maintain a positive reputation if the business specialises in cheap services, such as transport or hotels and may not be too affected by bad publicity as the cheap price point means the demand for the product does not change (it is inelastic).
  • Quality Control could also mean that products are of a constant high quality and should in tern allow a business to work effectively on producing high quality products for the consumer, who will hopefully repeat purchase. Kaizen and Total Quality Management can allow a business to excel at creating a quality product that is lean and high quality as it forces the product to be a standard that the business expects and what the customer wants.
  • Brand Awareness, A customer who does not know a product exist may not buy it, additionally any customer who recognises a product may choose to buy it over a generic product because of it. Advertising and promotion can artificially create the connection between the customer and the brand of trust and safety in a product, that this is the product they should buy.

Advantages and Disadvantages of Capital and Labour Intensive Production

In Business, production generally has two techniques;

  • Labour Intensive Production aims to use a large workforce to complete work by hand, this usually employs a lot of people to create a product. Some products may be seen to have more value if they were manufactured by hand.
  • Capital Intensive Production aims to create a product using as little people as possible, the process could be entirely or partially automated and can sometimes be used to assist individuals in manufacture, such as a custom robotic factory worker that moves parts of a product to assembly, or a robot that screws in multiple screws at once. The aim of these tools is to make the job simple or quicker than manual labour, in order to product multiple product in a given time. Production machinery may be very expensive, but aims to be cheaper than labour intensive production in the long run.

labour intensive production

Labour Intensive Production

Labour costs are higher than capital intensive production, however they can vary. If the task is simple then automation may not be necessary. Labour Intensive production will generally have lower running cost than capital intensive production, as workers will perform most of the tasks. Firms can benifit from access to low-cost labour as the job will likely be low skilled.

  • Businesses can benefit from premium pricing for ‘hand crafted’ goods.
  • There is generally better quality if it is not a fast process.
  • Labour costs can be lower if businesses hire on temporary contracts. Individuals will not need to operate specialised machinery.
  • Some businesses can use a flexible workforce to make sure that locations are staffed efficiently.
  • Labour Intensive production allows for improvement easily compared to capital intensive production.
  • Observation is easier.
  • Lower Break-even output.

automotive-production-line-2 capital intensive production

Capital Intensive Production

  • There is generally a better consistency than manual labour.
  • Businesses can loose competitiveness as they are stuck in the same production technique.
  • Machinery may become obsolete.
  • You can’t make businesses such as a restaurant or hotel capital intensive as customers may feel that their stay was devalued by it.
  • May generate resistance from labour workforce when implementing.
  • Kanban systems are easier to implement.
  • There may be a greater loss if there is a fault.
  • Programmed machines do not loose skill and there is no skill shortage for machines.
  • Potentially High labour costs if individuals need to maintain complex machines.
  • Firms can benefit from access to long term financing.
  • Labour is more specialised so individuals are good at their job.
  • There is usually longer term benefits.
  • Robots do not require pay.
  • Costs are mainly fixed.
  • There is therefore usually a higher break-even output.