A:

Business Strategy Effectiveness

A business strategy is an organization’s roadmap for achieving its goals. Based on its principles, a company sets priorities, makes decisions, and takes action. Cost leadership, innovation strategy, and differentiation strategy are examples of business strategies. 

Kimiti et al. (2020) evaluated the effectiveness of cost leadership on milk processing firms in Kenya. Their findings outlined that a cost leadership strategy has a positive significant effect on performance, and that cost leadership significantly predicted competitive advantage, another performance driver. When operating at a lower cost than competitors and achieving a competitive edge, companies can achieve superior performance. More specifically, company performance is impacted by the organization’s cost management approaches, operations, and objectives, cost optimization measures, output and transformation focus, cost efficiency, and the ability to understand the environment and adopt a customer focus.

Jatra & Giantari (2019) researched the influence of market orientation, differentiation strategy, and innovation strategy on the business performance of textile SMEs in Bali. Market orientation (culture to provide customer value), innovation strategy (focus on innovative products and new ideas), and differentiation strategy (offering unique, competitive, and advanced products and services) had a positive significant impact on business performance, which was measured by sales growth, profit growth, customer satisfaction, and quality. The authors concluded that understanding competitors and customer needs, strategic pricing, utilization of effective distribution channels, and offering new products improve business performance. 

Based on the reviewed articles, differentiation, cost leadership, and integration business strategies have a significant positive impact on an organization’s performance. However, market position and market orientation mediate the effect. As a result, cost leadership is not only about offering a product at a competitive price but also requires an external and internal analysis to ensure its effectiveness. Similar things can be said about innovation and differentiation strategies. Furthermore, it should be noted that not every business strategy will always be applicable. While differentiation, cost leadership, and integration business strategies could all yield a positive impact on sales growth or profit growth; cost leadership may not be the appropriate strategy to apply when the organization’s goal is to become the leading innovator for new technologies, measuring its success on number of patents filed.

References

G. Kimiti, P., M. A. Muathe, S., & M. Murigi, E. (2020). Cost leadership strategy, competitive advantage, and performance: A cross-sectional study in the context of milk processing firms in Kenya. International Journal of Management, Innovation & Entrepreneurial Research, 6(2), 64–76. https://doi.org/10.18510/ijmier.2020.627

Jatra, M., & Giantari, I. G. A. K. (2019). The role of differentiation strategy and innovation in mediating market orientation and the Business Performance. Journal of Business Management and Economic Research, 6(3), 39–60. https://doi.org/10.29226/TR1001.2019.132

B:

Alnoor et al. (2023) found that there is a research gap in the area of business strategies. They noted that although there is a notable amount of research on individual business strategies, there is a lack of research on combining business strategies. In the study, they found that taking a combined approach can be more advantageous than other individual approaches. 

     This is reasonable, considering what prior modules have revealed when delving into research. There is not one approach that works for all in every scenario. Each scenario is unique, which implies that each scenario would likely benefit from a slightly different approach or even a combined approach. By taking a hybrid approach, companies enable themselves to improve their overall performance in ways an individual strategy would not (Alnoor et al., 2023).

     The differentiation strategy focuses on features that typically come at a higher cost (Rothaermel, 2023). Cost leadership, on the other hand, is trying to offer the lowest price, which may involve reducing features. Integration aims to focus on controlling costs within the firm’s purview. Each strategy can be efficient, provided it is employed in the proper environment.

     Alghababsheh et al. (2022) mentioned in the limitations listed in their study that if the same logic were applied elsewhere, the results might not be the same. The reason noted is that the culture and the environment may differ from that of similar businesses operating outside of Jordan. They further emphasized that although a proper business strategy can be quite effective, the outcome can be impacted by other variables, such as organizational culture. 

Analysis

     Each article describes the ways in which a business strategy can either succeed or fail. They dive further into what leads to success and conclude that although a strategy, such as cost leadership, can help a company reach its goals, it may not be the right choice for others. This means that the companies should take a minute to assess their operation and their needs prior to committing to a strategy.

     In my current role, I find myself taking a mixed approach to many challenges. As we read through research each week, I find myself becoming more comfortable with the ways I have been tackling challenges over the years. As with everything, the best approach is a calculated one. Each research article describes how a data-driven process was able to identify an efficient way to reach goals. If a company can identify what it wants, the next step is to align itself with the strategy that can help obtain it.

Reference(s)

Alghababsheh, Mohammad, Dana Esam Abu khader, Atif Saleem Butt, and Md Abdul Moktadir. (2022). “Business Strategy, Green Supply Chain Management Practices, and Financial Performance: A Nuanced Empirical Examination.” Journal of Cleaner Production 380 (December): 134865. https://doi.org/10.1016/j.jclepro.2022.134865.

Alnoor, Alhamzah, Khai Wah Khaw, XinYing Chew, Sammar Abbas, and Zeeshan Zaib Khattak. (2023). “The Influence of the Barriers of Hybrid Strategy on Strategic Competitive Priorities: Evidence from Oil Companies.” Global Journal of Flexible Systems Management 24 (2): 179–98. https://doi.org/10.1007/s40171-022-00335-8.

Rothaermel F. T. (2017). Strategic management (Third). McGraw-Hill Education.