Strategic Information Technology
Companies choose to adopt a particular organizational strategy when it serves them well regarding the realization of goals and strategies. The following study focuses on the strategies that Wal-Mart, Apple, and Toshiba, which have made the leaders in their lines of business. Emphasis has been placed on how the companies are using their strategies to enhance their competitive advantage.
A competitive advantage makes a company’s products or services superior compared to other options in the market (Magretta, 2012). Harvard Business School Professor Michael Porter outlined three key strategies that companies can use to gain a competitive advantage. These include cost leadership, differentiation, and strategic alliances.
Cost leadership is whereby a company offers products or services of reasonable value at a cheaper price (Magretta, 2012). Companies that follow this strategy tend to continuously enhance their operational efficacy. Usually, this implies paying their employees low wages. For some firms, they compensate for this low pay by giving employees intangible benefits like promotional opportunities, benefits, and stock options. For others, they maximize on the unskilled labor surpluses. As the companies grow and expand, they take advantage of bulk buying and scale economies.
Wal-mart exemplifies a company that uses cost leadership for competitiveness. This company dominates a good number of retail store segments and competes against stores such as Costco, Kmart, and Target. Cost leadership is Wal-Mart’s overall business strategy (Zacks, 2017). The primary concept is to draw the biggest portion of customers while delivering goods at the lowest cost possible. Wal-Mart has been successful in this strategy as they now control their cost drivers, have a cost advantage and constantly pursue efficiencies from their supply chain. The company has formed close collaborations with suppliers that dominate their industries and who supply Wal-Mart’s stores with full product lines (Zacks, 2017). Basically, their strategy is to meet with vendors and try to understand their vendors’ costs to learn how these vendors could drop their costs to attain a win-win relationship. Wal-Mart has expanded by opening stores in smaller towns near metropolitan areas and then saturating that area before moving to new locations and saturating each territory. Often, the company has sent smaller retailers out of business whenever they enter a new market (Zacks, 2017).
Differentiation means a company delivers the most unique products or services which offer the best benefits than other competitors (Magretta, 2012). Some companies achieve differentiation by providing high quality or unique products. Other companies achieve it by delivering services or products faster. Alternatively, companies can achieve differentiation by marketing products in a way that reaches consumers better. Companies with differentiation are likely to charge a premium price. This implies that they generate higher profit margins (Magretta, 2012). Typically, companies can attain differentiation through customer service, quality or innovation.
Apple is an excellent example of a company that follows the differentiation strategy for competitiveness. It engages in the business of manufacturing, designing and selling computer hardware, electronics, software, and personal computers. Apple is popular for its innovative products like the iPod, iPad and the Macintosh line of computers. Michael Porter postulated that differentiation is all about delivering new and unique items with great value for which consumers must pay a premium price. Apple has been using this strategy since it was established and it has helped the company maintain a competitive advantage in the consumer electronics and computer market segments. The company’s designs are user-focused and bridges gaps that are often unaddressed by rivals (Zoephel, 2011). For instance, the Mac interface was introduced to bridge the user interface gap associated with MS-Dos. Moreover, the introduction of the iTunes made it easier for people to load music into MP3 hardware. Further, the iPhone applied the connective strength of smartphone to yield the collection of new mobile applications.
Apple has limited the innovation of new product generations and instead focuses on few intriguing innovations while re-applying the current product designs. This helps the company to focus on few but highly differentiated innovations which lead to unique marketing innovations while controlling the costs, resources and maintaining stability. The Macintosh product line differs completely from rival brands such as Windows computers. Different manufacturers make the Windows computers, which make it challenging Microsoft to control the baseline of its hardware segment. Conversely, Apple controls all its software and hardware baselines, which minimize end-user technical challenges since there is a guarantee of a common Macintosh hardware platform involved in creating user experience (Zoephel, 2011). Therefore, Apple is the only company known for the manufacture of Macintosh products. Such monopoly motivates them to make quality products which compete differently with rival brands that are manufactured by many manufacturers. This unique branding gives Apple the advantage of charging premium prices.
Companies can also use strategic alliances to gain a competitive advantage within the same industry or in related industries (Zoephel, 2011). In strategic alliances, a company collaborates with one or more companies in order to pool resources and gain themselves exposure to battle with other competitors not in the alliance (Zoephel, 2011). Toshiba Corporation, commonly known as Toshiba has been following this strategy for many years. This Japan-based multinational Corporation has used this strategy to successfully dominate the technology industry. The company is known for developing synergetic relationships with different companies for different technologies. Toshiba’s corporate strategy is based on the component of strategic alliances. Recently, Toshiba signed an agreement for light bulb filaments with General Electric (Zoephel, 2011). This partnership has helped Toshiba become one of the leading electronics company globally. Moreover, Toshiba has entered into various partnerships, joint ventures, and technology licensing agreements. Some of its alliance partners are Ericson, Motorola, National Semi-Conductor, Thomson, Samsung, Apple Computers, and Microsoft.
Magretta, J. (2012). Understanding Michael Porter: The essential guide to competition and strategy. Boston, MA: Harvard Business Review Press.
Zacks, I. R. (March 15, 2017). Can Wal-Mart’s (WMT) expansion strategies attract investors? Zacks Investment Research, 2017-3.
Zoephel, M. (2011). Michael Porter’s competitive advantage theory: Focus strategy for SMEs. Munich: Grin Verlag Ohg.