What do you know about Strategy?

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Business strategy could be described as a means to achieve a desired objective whether these be long term or short term doesn’t matter, but the way in which we plan to get there is what strategy relies on. In the majority of companies, strategies are focused on bringing in revenue. In the case of the business strategy game this was the aim however for some businesses the aim may be to change something. Many charitable organisations are businesses with the aims to change the world, therefor the end goal of their strategies may not be to make money but to solve a problem.

When playing the Business Strategy game, my team decided it would be best to look at strategies separately then bring our ideas to the table to discuss any points of disagreement. In general when thinking about a global shoe manufacturer, the main strategy would be to obtain some amount of growth. Strategy can be broken down into General and Competitive strategies.

General Strategies

Growth is how the company can expand by purchasing new assets or developing new products. In a way, strategy is about asking questions about assumptions you make about the market and your target customer. By asking these questions we can review whether the strategy is working or not.

Competitive strategies are about how we place ourselves in the market in order to compete with other players. Some of the most common strategies can be explained using Porter’s generic strategies.

For many consumer products we would see a broad scope cost leadership strategy to try and appeal to the masses. However in some cases, such as luxury fashion, we may see a differentiation approach with a narrow scope. Everything depends on where the company wants to place themselves. In our case during the BSG we asked ourselves a lot of questions at the start.

Growth

  • How can we expand the company by purchasing new assets, or developing new products?
    • We looked into expanding the company by purchasing warehouse space in the Latin America region which was the cheapest for both production and export, whilst slowly increasing the number of branded products we offered. This allowed us to take a large market share due to keeping our costs down but offering customers a variety of choice whilst other companies focused on private label products.
  • Does it make sense for us to increase capacity right from the beginning?
    • We asked ourselves this to make sure that we knew whether increasing our production capacity at the beginning made sense. We had to take into account that everything can depreciate and we do not want to build facilities if we are unable to use them.
  • Do we need to look at the trends more closely in order to push through growth – i.e. supply and demand for shoes in certain countries?
    • We looked very closely at the supply and demand within the BSG to make sure that we could meet the number of branded production shoes required to each country and keep a lead in market share.
Globalisation
  • Should we increase our output to different regions right away or focus on one region first and expand later into the game?
    • Our strategy was to move our production facilities to Latin America where we could produce shoes at the cheapest price and export them to the other regions. This made sense for the type of business we were running as it meant we could turn a higher profit margin for our shareholders.
  • What data do we need to look at in order to find the best markets to enter?
    • We found that after looking at the industry report within the game, our strategies were to continue supplying North America and Latin America at full capacity and try to take the largest market shares here. We then looked at expanding to Europe and Asia as a secondary objective as part of our strategy.
  • How can we review what other teams are doing in terms of globalisation?
    • This was done through reviewing the data on where other companies were trading and manufacturing in the regions where we were trying to enter. We found that the other teams didn’t try to enter the Latin American markets until after we started exporting from here.
Competitive Advantage
We considered one of 2 options here when deciding on strategies. We could either sell our shoes at a lower price, which would work best if we are the market leaders and have a reputation advantage over the other teams. We found that this worked in the first round however as the game went on other teams started to increase their prices steadily and held the same market shares as us.

The other method we looked at was to differentiate our products so that we can charge a higher price for a variety and the quality of our shoes. With this strategy, we would use private label production as a ‘cash cow’ selling minimum quality shoes at a large profit margin and focusing our efforts from this to branded production of high quality products. In the end we decided to produce something in the middle, with medium quality shoes at a lower price than our competitors in the branded market. This however made us suffer in the private label market as we did not enter it earlier in the game which put us behind.

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