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Distinguishing Between Strategy and Plan for Effective Execution

Task 1

Business growth options

Differences between strategy and plans

While the terms strategy and plan in business context have been interchangeably used, these terms have totally different meanings. According to Li (2021), a plan refers to steps taken to accomplish some goals and entails identifying the answers to questions like when, how, who, what and where. In this regard, Leyva et al (2018) argued that whereas plans are good for business, they should not be the first steps towards executing a business task.

On the other hand, strategies are bigger than plans and mainly focuses on tackling the question: why? (Williams et al, 2018). Furthermore, according to Rofiq & Pramono (2019), strategies take a broader look at issues to identify the desired outcome as well as the many paths that can be taken to achieve those desired outcomes. Therefore, strategies consider various factors that might influence the outcomes, both foreseen and unforeseen, then identifies ways of coming into terms with those factors. In short, strategies deal with the situations rather than the end results.

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Having considered the difference between business plans and business strategies, it is important to note that whereas plans reveal the steps towards achieving a business objective, strategies helps to identify the best steps for achieving those objectives (Nekhaychuk et al, 2019). Ideally, strategies identify the reasons why while plans identify how. In an ideal situation, strategies precede plans and lay the details of the plan.

Approaches to delivering business growth

While both small and large companies have plans of growing their businesses to achieve increased profits and sales, different managers have different approaches and strategies for achieving business growth. As such, according to Pourkhani et al (2019), the strategy chosen by an organization to achieve business growth depends on its financial position, government regulation, competition and other factors that influence business decisions. However, some of the most common business growth strategies adopted by most managers include market penetration strategies and product expansion strategies.

Market penetration strategy is a business growth strategy that entails marketing existing products within the same market it has been using (Garbuio & Lin, 2019). According to (Bevilacqua et al, 2017), market penetration is mostly achieved through an increase in market share – which refers to the percentage amount of sales a company achieves within a market compared to the amount its competitors make. da Costa Fernandes et al (2020) suggested that one of the most effective ways of achieving increased market share is by reducing prices. For example, in a market that has little product differentiation, a company can achieve increased market share by lowering prices.

On the other hand, product expansion strategies entail adding new features to a product or expanding a product line to increase profits through sales revenue (Taskforce et al, 2018). When a company employs the product expansion strategy, they develop their products and sell them on the same existing market. According to Biloslavo et al (2018), product expansion strategy works well with technological products because they are constantly under rapid change. Moreover, product expansion strategies are often adopted by companies when their old products become outdated.

Impact and resource requirements likely for growth strategies

Both market penetration and product expansion strategies have various implications on the business and may involve various resources to implement. For example, when trying to increase its market share, a company may decide to change its opening hours, display its entire product portfolio or reduce the time taken to process orders (Sung et al, 2017). Similarly, Minto-Coy et al (2019) proposed that effective market development might require companies to conduct a market research that evaluates whether the market has a potential demand that warrants the entrance of new products. This may include considering the search patterns on various online search engines using online tools such as Google Keyword Planner (Sedek et al, 2017). Therefore, it may be useful for the manager to consider whether these tools are available in the organization.

On the other hand, when trying to implement a product expansion strategy, managers might need to assess oversea markets and the possibilities of entering those markets. However, according to Hammer et al (2017), entering overseas markets might require more resources and introduce more bureaucratic challenges such as export duties and tariffs. Managers therefore need to find a way of manoeuvring these challenges and establishing a system that facilitates the execution of business on both geographical locations.

Task 2

Business models and their revenue streams

Täuscher et al (2018) defined business models as an outline of how a company indents to make money from its products and customer base from a market. It identifies the products or services a company sells, how those products or services will be marketed, the expenses likely to be incurred and how it will make profits from the sales (Schmidt et al, 2018). Some of the most common types of business models include subscription model, the bundling model and the freemium model.

The subscription model involves the delivery of services or products to customers who make recurrent payments on a monthly basis (Lee & Shin et al, 2018). A good example of a subscription model is that of Netflix, where customers subscribe to different television entertainment packages and pay for those packages on a monthly basis. On the other hand, the bundling business model entail the sale of two or more products together as a single unit, often at a lower price compared to what would be charged for the products or service separately (Nerurkar et al, 2017). The bundling business model is often adopted by fast food companies who sell bundled meals.

Measuring business performance

Entrepreneurs can evaluate the performance of their companies by comparing the results of various initiatives to the desired outcomes or by comparing the financial performance of the business to that of other businesses (Simeunović et al, 2020). Regardless of the approach taken by managers, there are several valuable methods that can be used to ascertain a business’ performance level including measurement of key operational variables (e.g. sales and profit margins) or evaluating the overall market performance.

By, measuring key operational variables (e.g. sales revenue or profits), managers can evaluate to what extent the business has achieved its sales revenue targets or the extent to which the company’s sales volume compare to competitor’s sales revenue (Williams et al, 2018). similarly, according to Williams (2018), managers can measure business performance by evaluating the percentage profit margin – enabling the identification of how much each dollar from sales the company keeps as profits.

Regrading overall market performance, Prihatini et al (2019) wrote that whereas a company’s overall performance is important, evaluating the company’s performance in key areas of activity can be more helpful. As such, a company’s marketplace performance influences its profitability – which is an important indicator of its financial health. Thus, managers can evaluate the general performance of a company by evaluating key performance indicators such as market ranking in sales value or even market share.

Innovation and business success

Alqahtani et al (2018) defined innovation, in the business context; as creation of new products and services that create a positive change in the business through the improvement of various practices or methods. In most cases, companies innovate to facilitate a successful achievement of business objectives, which can be in the form of business growth or expansion (Engelke, 2017). Similarly, Franzmann et al (2020) pointed out that innovative businesses achieve success by creating new products and services or by penetrating new markets. According to Smajlović et al (2019), it entails being able to turn around familiar products and make them more relevant through modern technology – consequently achieving success with them.

There are several well-known organizations such as Snapchat and Slack that have achieved tremendous success through innovation. For example, Snapchat innovated a new way of communicating through and sharing photos. They became successful by incorporating social elements and added new ways to edit photos and add things to them that made it even more fan to their audience (Oju et al, 2017). furthermore, according to Franzmann et al (2020), Snapchat achieved success through innovation by introducing an interactive and innovative way of digital photo sharing to a new age of users. On the other hand, Slack achieved success through innovation by reinventing chat rooms and making them more productive by making them more useful to teams (Engelke, 2017). whereas internet chat rooms had been in existence for quite a while, Slack’s innovative internet chat rooms have taken a sweep of most organizations and today it is difficult to find a company not using Slack.

Environmental Scanning

Abu Amuna et al (2017) defined environmental scanning as a business activity that involves a systematic survey and interpretation of relevant business data to identify business external factors (i.e. threats and opportunities) and internal factors (e.g. strengths and weaknesses) that can influence future strategic decisions. Therefore, business environmental scanning relates to SWOT (strength, weaknesses, opportunities and threats) analysis of a business to understand how these factors may influence strategic decision making.

One of the strengths of an insurance company might be the variety of insurance products they offer a variety of insurance products such as liability, auto, health and life insurance. According to Abu Amuna et al (2017), this is a strength because the company would be able to appeal to a variety of markets. On the other hand, overlying on paper transactions instead of digital transactions can be a weakness for the company because it is an old-fashioned way of conducting insurance business (Vetráková et al 2020). However, the company might have the opportunity to sell supplemental products and increase its revenues. Lastly, a significant threat that might be facing the company is the availability of many local competitors selling similar insurance products.

Businesses that have successfully used environmental scanning

Environmental scanning is a business activity that is popular with managers who seek to make strategic decisions that can effectively create organizational development. As such, several prominent companies have successfully used environmental scanning to make strategic moves that have yielded tremendous success. One such company is PepsiCo, which is considered the second largest food and beverage company in the world after Coca-Cola (Quan, 2020).

Upon conducting an environmental scanning, PepsiCo leadership realized an increased customer focus on health and wellness as an opportunity they could use to achieve growth (Kalinová & Tlusty, 2021). In response, according to Zhang (2019), the company decided to heavily invest in this area by developing a strategy to include PepsiCo’s nutrition business as a significant part of the company’s business portfolio. Since then, the company has increased the production of what it calls ‘good for you’ products that it manufactures using natural products such as nuts, fruits, vegetables and grains (Quan, 2020). Through environmental scanning, PepsiCo managed to identify an opportunity for these kinds of products and has now grown this portfolio by acquiring several functional brands operating in this space as well as increased its research and development for manufacturing healthier products (Kalinová & Tlusty, 2021).

Examples of strategic fit in determining company growth

Ge (2020) defined strategic fit as the extent to which an organization matches its resources and capabilities with various opportunities that occur in its external environment. According to Hertrich and Mayrhofer (2021), strategic fit offers an opportunity for managers to achieve business growth through geographic expansion, access to new markets, or acquisition of cutting-edge technology. In most cases, an organization’s strategic fit is seen as its unique combination of capabilities and resources that give it a competitive advantage over its peers (Amran, 2017).

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One of the most advantageous strategic fit a company can ever have is cost leadership. According to Hertrich and Mayrhofer (2021), cost leadership refers to the strategic attribute of a company to be the lowest cost contributor in the market and is usually achieved through economies of scale. One of the companies with a good cost leadership strategic fit is McDonalds. According to Hertrich and Mayrhofer (2021), McDonald’s main competitive advantage lies on its ability to take advantage of economies of scale to produce low cost products and pass the cost advantage to customers through cheap pricing. Consequently, the company offers its products at relatively lower prices that its competitors. The other company that has a competitive advantage over its competitors is Louis Vuitton. According to Ge (2020), Louis Vuitton’s competitive advantage lies on its product differentiation strategy that has enabled it to be a market leader in luxury products and sell products at premium prices.

References

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