Unit 4 Week 4 Discussion 1 MBA695

Unit 4: Overview - Forming Strategies

Introduction

How and why firms outperform each other goes to the heart of strategic management.  There are three generic strategies that help firms attain advantages over competitors and sustain the advantages over time.  The three generic strategies are cost leadership, differentiation, and focus.  Successful generic strategies invariably enhance a firm’s position; however, there are pitfalls to each of the generic strategies. Thus, the sustainability of a firm’s advantage is always challenged because of imitation or substitution by new or existing rivals.  Competitor moves erode a firm’s advantage over time.

Companies may decide to vertically integrate their own value chain (buy their vendors and/ or distributors) or form strategic alliances to expand their reach within their own or other industries.  Even the way a company formulates and deploys strategies is changing because of the impact of the Internet, communication capabilities, and digital technologies within many industries.

The concept of the industry life cycle is a critical factor that managers must take into account when striving to create and sustain competitive advantages. The four stages of the industry life cycle — introduction, growth, maturity, and decline —play a role in decisions that managers must make at the business level. These include overall strategies as well as the relative emphasis on functional areas and value creating activities.