Competitive Strategy

Competitive strategy is the decision for establishing the competitive preferential order in each operational field. The basic topics in this connection are to understand the actual state of competition in the industry and market segment and the segment position of one’s own company as well as to come into competitive preferential order through the combination of management resources through this understanding. The competitive strategy is basically of three types, viz. cost leadership, discrimination and concentration.

The above discussed four aspects are closely related to each other. Therefore, the coordination of four decisions becomes an important topic management strategy.

Resource Development

Once the operation fields, which constitute the domain, have been decided, next it becomes important to decide about the necessary accumulation and distribution of resources required to meet the composition in each field. This composition is the resource development strategy.

The management resource can be divided into substantive resources (human beings, articles, money) and the informative resources (technology, know-how, and brand image). In the case of substantive resources, it is the distribution which is more important than the accumulation of resources. A proper distribution matching the discriminate preferential order for every operational field is the key factor. On the other hand, it is the accumulation rather than the distribution which is more important in the case of information resources and its key factor is the organizational learning.

Establishing of synergic effect between accumulation resources and the construction of a set up for organizational learning matching one’s domain is the main point of resource accumulation.

Operation Portfolio

Once the domain has been understood properly, the industry tries to establish its constant position within the domain. Therefore it becomes necessary to decide in concrete terms, “the type of works and the depth”. The combination must also be included in this domain.

The operation portfolio is a table of operations or the overall structure while carrying out the operational activity in the industry. Normally, it is necessary to decide about the following two selections to determine the operation portfolio.

[1] Which fields are to be included in the portfolio (deciding the composition of the portfolio).

[2] How to handle the patterns given by the multiple number of operations (deciding the structure of portfolio).

While deciding the operation portfolio, the attention of individual operation fields are important, but it is more important to consider how much total effect can generated through all the combinations of various operations. The operation portfolio shall be taken up in detail in future posts.

Definition of the Domain

First of all it is very important to decide what importance the future operations of an enterprise have in order to decide the relationship between industry and environment. This also amount to drawing the long term composition of how the industry shall adapt itself to the environment. This is the definition of domain. Zone of survival as the definition of domain is the base for deciding the other definitions.

It is said that the failure of Railways Industry in America was because of mistaken definition of domain. The American Railways Industry can be called as pilot representative of large industry. However, the Railway Industry thought that its work is only that of the railway operation rather that the transportation work. As a result, it failed to match the rapidly increasingly demand from the transportation sector. The declining market and capturing of the demand by the alternate means of transportation were basically responsible for this failure and in its background was the failure of defining the domain.

Domain specifies the work area in which the operational activities of an enterprise are carried out or it is expressed as a concept covering all such operations. Operation portfolio is the example of the former, and the latter can be expressed by “C & C” (Computer and Communication) of NEC and Life and Cultural industry of Santory.

On the other hand, the definition of domain for the American industry relatively market oriented and it includes many elements which are close to the successful factors in the market. “IBM means Services” can be called as domain of IBM (the IBM operation is not to sell the machines but to sell the functions of the products). Secondly, it comes out with solution for the problems of the customer. “Develop, Make and Sell” (technological reforms, productivity and market share) are the basics for the operation development of the Texas Instruments (TI). These are some typical examples.

For example, the management targets of IBM in 1980s can be understood from the technology map which is an internal document of the company . This map is used for describing the domain of IBM. The portion covered with mesh represents the area of activity where IBM is involved and it holds an edge technically also. It can be understood that from here it extends its operation to almost all the areas of information industry business. In this connection, it may be noted that the portion covered by full lines represents the operations of AT & T, whereas the areas covered by hatched line represents the operational are of Olivetti.

Contents of Management Strategy

Let us first try learn about the details of management strategy in order to clearly define the conception of management strategy.
The management strategy deals with relationship between industry and the environment. What type of decisions are required to decide this relationship? It is necessary to decide regarding the four areas mentioned below in order to determine the management strategy:

[1] Definition of Domain
[2] Operation Portfolio
[3] Resource Development
[4] Competitive Strategy

Let us try to consider the contents of deciding these four areas.