Strategic Competitiveness - How to Achieve

Strategic Competitiveness

Strategic competitiveness is accomplished when a firm successfully integrates a value-creating strategy. The key to having a complete value-creating strategy is to adopt a holistic approach that includes business strategy, financial strategy, technology strategy, marketing strategy and investor strategy. The objective of the firm has to be based on creating value in an efficient way because it is the starting point for all businesses and it will generate profit after cost. Eric Beinhocker, the Executive Director of the Institute for New Economic Thinking at the Oxford Martin School, University of Oxford, says in his book The Origin of Wealth that the origin of wealth is knowledge. Knowledge does not have to be perceived as an assumption, or as an external factor. It has to be in the heart of the business. For this reason, the value-creating strategy must include a thorough knowledge of each area of the company in order to develop a competitive advantage.

Why is strategic competitiveness important?

The company’s primary goal is to achieve sustainable competitive advantage. To do this, companies must have strategic competitiveness. That requires not only design but also the implementation of a successful value creation strategy.

Value creation allows companies to make high profits. They deliver returns that benefit investors, more than what their competitors offer.

Not only that but creating value means they are also socially responsible. They also prioritize environmentally friendly businesses.

The company achieves it all through strategy. They design and implement strategies that create value. If successful, they have strategic competitiveness. If not, it is just “strategic.”

To achieve a sustainable competitive advantage, companies must ensure competitors are difficult or too expensive to duplicate their strategic competitiveness. That often requires a combination of radical innovation, market expertise, and courageous leadership.

When they succeed in creating value, companies excel competitively. In textbooks, companies with competitive advantages produce above-average returns, measured by return on invested capital (ROIC).

How to achieve

The value creation strategy requires having core competencies. It requires superior resources and capabilities and is difficult to duplicate. To exploit it, companies must have a thorough knowledge of both in every area of ​​the company.

Creating value requires a holistic approach. Companies, according to the Boston Consulting Group, need to devise a comprehensive value creation strategy by aligning three strategies: 
  • Business strategy
  • Financial strategy
  • Investor strategy

Business strategy

Companies can start by developing fact-based cash flow forecasts and future performance to be achieved. From there, the company identifies which strategic areas contribute to creating value. Then, they allocate capital and resources to these areas.

Say, the company identifies online channels as one of the contributions of future cash flow. The channel is the key to selling more products in the future. The company also sees online channels as the right path to reach a strong position in the market. They can increase the company’s branding and visibility through it.

To exploit online channels, companies build interactive websites. Consumers can trade on these sites. They also introduce social media, allowing customers to spread information more widely.

Financial strategy

Financial strategies include decisions about funding, investment, and dividends. Investment decisions related to capital investment and current investment. Financing decisions include capital structure targets and how companies manage a combination of equity and debt. Meanwhile, dividend decisions relate to dividend growth and dividend payments. Financial strategies also focus on issues of tax strategy and hurdle rates for investment projects or mergers and acquisitions.

In order to run well, companies should balance the use of equity, debt, and free cash flow in a balanced manner. The company must also have a clear plan for it.

Investor strategy

Essential investors for companies because they contribute capital. When satisfied with the company’s performance, they are willing to provide money when the company needs it.

The value creation strategy should be consistent with the priorities and expectations of the investors. For example, companies need to take specific growth initiatives that provide a return above the cost of capital. If returns are less than the average company in the industry, it can disappoint investors, encouraging them to withdraw money from the company.

• How would you describe the twenty-first century competitive landscape and the various challenges it brings to businesses?

This essence of the new competitive landscape remains a strong influence on company's success in the twenty-first century. Without effective strategic leadership, the probability that a firm can achieve superior or even satisfactory performance when facing the challenges of the global economy will be greatly reduced.The global economy had created a new competitive landscape where events change constantly and unpredictably. Managers would have to develop and use unique capabilities in this challenging competitive landscape to sustain and grow. Strategic leadership is now the most critical issues facing organizations. The key challenges are ethical issues, corporate strategy, CSR, global responsibilities and diversity in the workforce.

Many of the concepts used in strategy were developed during the late 1970s and 1980s and the competitive conditions evolved in a established models. Japan's manufacturing success with its emphasis on operating efficiency challenged some of the traditional assumptions - but it is only in the 20th century that a new competitive landscape has emerged which changed the rules of engagement. Traditional strategic planning processes emphasized on resource allocation and improving operational efficiency.

• Why will a traditional mindset not lead a company to strategic competitiveness and what values must managers adopt to overcome these challenges?

Though both traditional and new concepts of strategy have similar type of goals, it is in the focus that they differ. In the current century and also future, Managers with a "Strategic Intent" will emerge leaders in the global market dominance. Strategic Intent combines the vision of a leadership position and also establish criteria to chart the company's progress. Short-term issues will get resolved while leaving scope for new opportunities to emerge. This landscape's characteristics combine and interact to create an environment in which managers with modern mindset have the potential to capture existing markets in some instances while creating new ones.

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