Part Three: Outline Your Strategy Chapter 4 of the textbook details business-lev
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Question
Part Three: Outline Your Strategy
Chapter 4 of the textbook details business-level managerial strategies and Chapter 8 details the corporate-level strategy considerations. Familiarity with these concepts is essential to plan your company’s strategy in the simulation. At the beginning of the simulation, your team faces an unusual business situation – all companies and products are identical to each other. In the real world this situation rarely if ever occurs. The closest analog might be a highly regulated industry.
Looking into the future, the simulated industry will rapidly differentiate. Nothing you can do will stop it. Given time, the industry will evolve into a state where competitors occupy defendable strategic positions. There are two important questions. “How long will the process take?” “Will two or more competitors attempt to occupy the same position?”
Let’s use an analogy. Picture a flat landscape. Now imagine several hills placed on the landscape. Each of the hills represents a strategy. Your success depends upon how quickly you can identify a hill, and how high you can climb it. Your hope is that you will choose a hill that nobody else picks, and that you can defend it against competitors. Complicating this is the fact that some hills are more attractive than others. Further, the more companies trying to climb a particular hill, the more difficult it is for each of them to successfully climb it.
The Capstone site and Chapter 12 of the Team Member Guide provide a series of methods and techniques that will help you identify 6 basic strategic approaches to climbing these hills. They include:
Broad Cost Leader
Broad Differentiator
Niche Cost Leader (Low Technology)
Niche Differentiator (High Technology)
Cost Leader with Product Lifecycle Focus
Differentiator with Product Lifecycle Focus
In a 1-page section, incorporate the two approaches to selecting and climbing a hill and determining a strategy combination you would like your team to pursue. Your proposal should address these issues:
1) Segments. Which market segments matter to you? How much share of those segments must you achieve to be an “average competitor” in the overall industry? For example, if you choose to play only in Traditional and Low End, you would have to command a higher share of those segments to achieve “average industry sales.”
2) Profit potential. How likely are you to face high versus low cost pressures? How likely are you to face high versus low demand for local customization?
3) The speed at which you can create a defendable position. For example, new products typically take two years to bring to market. Significant productivity improvements could take several years. Is this type of differentiation important?
4) Priorities. Which products are most important to you? Which are least important?
Explanation / Answer
Telecom US is a US telecommunications company which offers fixed line telephone services, a mobile network, and an internet services provider. The company is a major Information and Communications Technology (ICT) services provider to US businesses through their Telecom Digital division. Also, the company products include GSM and CDMA phones. The company adopts different business level, corporate level strategies.
Telecom US has recently launched a GSM mobile connection called Telenet. Telenet is planning to offer their service all over US through GSM phones. It works well with high-end and low-end phones and offers a 3G and 4G network. Considering the highly competitive industry in US, the company is planning to execute a strategy. Since Telenet is a new product, it would like to adopt a strategy based on the life cycle as well as a strategy to differentiate themselves. Therefore, Telenet would like to adopt Differentiator with Product Lifecycle Focus and Broad Differentiation Strategy.
BROAD DIFFERENTIATION STRATEGY AND SEGMENTS
Based on the market plan of Telenet, the company would like to render their service affordable to customers from all income groups. The company would provide data plans to all income groups, high end to low end customers. Therefore, the data will be available for 3G and 4G customers.
A broad differentiation strategy aims to differentiate a company’s products from their competitors through appealing a broad range of customers.
Therefore, by adopting a broad differentiator strategy, Telenet is planning to focus on all segments- demographic (age, gender, income) and all geographic areas (rural, urban and semi-urban).
In order to capture all these segments, Telenet has introduced plans targeting youth like special hours offer for night callers at discounted rates, Special schemes for senior citizens. Also, Telenet has introduced plans which offers 100 minutes/day, 500 sms targeting both low and high income customers.
DIFFERENTIATOR WITH PRODUCT LIFE CYCLE FOCUS
Telenet would also adopt a differentiator strategy with a product life cycle focus. As the product was just launched and company is new to the market, it will be in the Introduction stage. While establishing the market, the company will focus on promotional activities, adverisements etc. In the introduction phase, the profit margin may be low, but once the company moves to growth stage between six months to one year, Telenet can adopt strategies for their returns and profit.
In the growth stage, the company will start giving better offers and schemes retain the existing customers and gain new customers while focusing on their profit margin.
Similarly, Telenet will adopt a differentiator strategy in their maturity stage too.
PROFIT POTENTIAL
If the company adopts a broad differentiator strategy, the profit potential may be less for the first quarter. But after gaining a large customer base, the company will be able to gain a net profit margin to cover their investment expenses.
Once Telenet products are established in the market, the company will start gaining a defendable position within six months to one year. By the end of two years, Telenet will be in the Growth stage of their product life cycle, capturing new markets and adding differentiating plans and offers.
PRIORITY PRODUCTS
The priority products for the company are internet services and mobile network.
These products offer a large profit margin to the company.
The company is also planning various new strategies to expand their Information and Communications Technology (ICT) and digital services. They are focusing more on the business segments and companies to promote their ICT and digital services.