What are the components of competitive strategy?
Depending on the framework used by the organization, different sets of components may be used to create a viable competitive strategy. However, many of the elements are common in the majority of suggested frameworks. The first component is the proper acknowledgment of strengths and weaknesses of the organization (Editorial Board, 2015). On the one hand, an understanding of strengths will facilitate a more effective utilization of the company’s resources and contribute to a competitive advantage. On the other hand, the recognition of weaknesses would allow the company to adjust strategic solutions in a manner that will either minimize the most probable risks or focus on the areas that contain the fewest barriers.
Some experts suggest focusing on distinctive competencies as a part of strengths recognition. The uniqueness of some of the core competencies may have a favorable effect on the organization’s performance, the quality of the final product, added value for customers, or a significant cost advantage (Editorial Board, 2015). These competencies need to be included in strategic planning in order to ensure adequate resource allocation.
Next, a value chain is an important component of a competitive strategy. Its relevance is stemming primarily from the possibility to assess a multitude of factors that comprise the total value of a product, such as the cost of components, production, distribution, and marketing (Jurevicius, 2013). The value change framework is important for two reasons. From the competitors’ standpoint, such an approach will create a situation where the company in question will have a more competitive pricing strategy since it will be able to control its assets and resources in a more productive and efficient way. From the customers’ standpoint, it will result in a greater value of goods or lower prices, both of which are known to contribute to competitive advantage.
Planning a strategic alliance
Several issues should be taken into consideration when planning a strategic alliance. The first is the handling of important information in the process. An effective partnership requires that some of the information available to one party is shared with the other in order to increase productivity and efficiency. Importantly, some information can be shared relatively harmlessly regardless of the trustworthiness of a partner (Zoogah, Noe, & Shenkar, 2015). It is important to identify this data in order to be able to collaborate effectively without losing sensitive information.
The second issue is the structure of the alliance’s planning aspect. The agreement developed in support of the alliance should outline the key expectations of all involved parties and clearly state the possible barriers and risks associated with the process of collaboration. Once all stakeholders formulate realistic expectations, it becomes possible to systematically assess the progress, identify the causes of setbacks, and introduce necessary adjustments (Inc. staff, 2010). In addition, a clear statement of goals is beneficial to the vision shared by the company employees and, by extension, their engagement and motivation.
Third, in order to be able to assess the outcomes of the alliance, it is important to develop evaluation criteria that can be considered representative by all sides of the agreement. In addition to the ultimate goal, several secondary objectives and intermediary milestones are necessary to track the progress. When conducted in a described manner, the assessment would ensure the consistency of expectations and minimize the likelihood of conflicts of interest.
Finally, once the boundaries of sensitive information are established, the approaches to creating trust need to be determined. These may include a reward system based on the input proportion, openness and transparency, and contribution to an overarching strategic goal rather than a focused pursuit of the objectives irrelevant to other partners.
What are the critical factors that are necessary in a joint venture to increase the likelihood of success?
Joint ventures offer many advantages to their members, such as the ability to penetrate new markets, increased performance as a result of improved access to assets, resources, and proficiencies, and a more even risk distribution. However, in order for a joint venture to succeed, several key factors need to be taken into consideration. The most apparent one is agreement on the key aspects of collaboration. The partnering entities need to negotiate the performance norms of the business they intend to launch and the principles of governance expected to take place in the joint venture (Eileen, Rinaudo, & Uhlaner, 2013). In addition, the proportion of investment expected from each party should be determined. Finally, the potential risks should be covered and responsibilities distributed in order to avoid conflicts in the future.
The second factor is the alignment of goals formulated by the participants. The success of a joint venture ultimately depends on the collective effort, which is impossible without a uniform view of the outcomes (Rinaudo & Roswig, 2016). Thus, the potential disagreements should be timely detected and diffused in a timely manner.
The third factor is the joint venture’s capacity for development. The said capacity can be increased by working along the lines of the initial agreement while at the same time establishing new communication channels and facilitating collaboration opportunities. In simple terms, it is necessary to react to the emerging changes and introduce minor adjustments without distorting the initial vision. With these recommendations on hand, it is possible to expect a sufficient likelihood of joint venture’s success.
References
Editorial Board. (2015). Research methods for strategic management. New York, NY: Words of Wisdom, LLC.
Eileen, J. C., Rinaudo, K., & Uhlaner, R. (2013). Avoiding blind spots in your next joint venture. Web.
Inc. staff. (2010). How to build business alliances. Inc. Web.
Jurevicius, V. (2013). Value chain analysis. Web.
Rinaudo, E. K., & Roswig, J. (2016). Negotiating a better joint venture. Web.
Zoogah, D. B., Noe, R. A., & Shenkar, O. (2015). Shared mental model, team communication and collective self-efficacy: An investigation of strategic alliance team effectiveness. International Journal of Strategic Business Alliances, 4(4), 244-270.