Competitive Strategy and Innovation Entrepreneurship

Strategy has a different connotation from company’s tactics, objectives, descriptions, and goal. A company may provide a great customer service or it may be a low-cost provider. However, these are not strategies but only small components of an overall business strategy. To understand ‘what is strategy’, it is necessary to understand ‘what strategy is not?’ According to historical facts, strategy has been derived from the Greek word ‘strategos’ that means ‘the art of the general’. To be specific, the original meaning refers to the art of the war or the role of the general in the war. In 2^nd century BC, a Chinese general Suntzu used this word to describe the art of war. For example, to beat Rome in the war can never be called a ‘strategy’. Strategy is utilizing the strengths against the weaknesses of Rome to achieve the desired victory. According to Jayawardhana and Weerawardena (2014), Grey Hannibal’s strategy was directed towards the united attack by the North Pole unit to win the battle. He valued high-level orchestration and vision. Business is considered a modern day war and the executives can achieve victory over its rivals by chalking out a set of tactics. A strategy should focus on the market structure in which they are operational, the Unique Selling Point of their brands, the resources and capabilities of the organization, and the sustainability of the Uniqueness. Thereafter, a strategy formulated by IKEA is discussed in the video and Henry Mintzberg’s description of Intended, realized, and Emergent strategy is highlighted.

A Netherland based company IKEA is known for its Scandinavian style of furniture and home furnishing. IKEA is a successful company with a systematic strategic planning. They have kept in mind the four components mentioned in the above. Now, the discussion will focus on the implementation of these elements into the strategy of IKEA. According to Rothaermel (2015), the first element is the market structure in which IKEA runs their business. They sell their products in many countries across the world. IKEA is the first such private retail company that has extended their business globally. The target customer’s of IKEA belongs to the young white-collar group. This selection of market has helped IKEA to provide a unique value. This unique value is the Brand USP. IKEA is giving tough competition to other organizations such as Walmart, IIva, Asda, Barn furniture. The USP of their products is that they are contemporary, innovative, stylish yet inexpensive. Moreover, the products are set up in a stress free and fun showroom. The next component is the resources and capabilities of an organization. The suppliers that manufacture the products use mass production technique and they are shipped in flat boxes. Then the customers do the final assembling of the products and because of this, the shipping cost is reduced. It helps the manufacturers to ship the products across the globe in a low shipping cost. Such a unique design, manufacture and shipping strategies are impossible for others to imitate. According to Walker et al (2016), however, IKEA never competes in high-end furniture business; they do not provide customized and high-level service. They design the products but they do not manufacture them. All these are part of strategy too. Apart from deciding upon what to do, strategy also includes the elements to be avoided. (YouTube, 2016)

Business Model Innovation

While decoding the reason behind recent deterioration of some companies such as Nokia, Kodak and Newsweek, it is seen that they lack innovative business models. These companies have done good business although did not pay attention to future opportunities. They were busy serving their regular clients through fulfillment of regular demands and thus, forgo t to create customers with fresh demands. However, they have clear understanding of the market, quality employees and good R&D resources but still, the lack of innovation became the reason for their downfall. Innovation raises the customer’s demand for a product or lowers their cost resulting into competitive advantage. According to Sako (2012), there are three misconceptions tied with the idea of innovation. Firstly, people assume that innovation is something unique nobody thought of previously. Second, success comes from resources only. Third, one requires great technological support for innovation. As discussed by Martins et al (2015), what the innovators do is to recombine the facts gathered through constant learning as the 14 firms have done. According to Leih et al (2014), this business model focuses on four things- target customers, product or service, value proposition, and generating revenue. The innovators try to change minimum two of the mentioned dimensions. According to Sako (2012), over 50 years, all these models have transformed one or more industries although only 10% of them introduced new business and 90% models are created through adaption and recombination. Overall, there are 55 such model patterns responsible for business model innovations. Flatrate, E-commerce, and Experience selling fall into this category. However, one should follow four steps for innovative business model- initiation, integration, ideation and implementation. Apart from all these hard factors, companies should focus on proper management behavior and teamwork. They should not come up with too many ideas and should maintain good communication about new ideas; they should give proper time for proper result, emphasize on commitment from top management and never become self-esteemed. Innovation is the key to success in today’s economy. (YouTube, 2016)

In this assignment, Apple’s innovative business model will be discussed in terms of the four steps. During the Initiation, the current target customers, the current product, the recent creation of value proposition, and revenue generation are analyzed. According to Bergvall-Kåreborn et al (2013), Apple has line of products such as- iPad, iPhone, Mac, itunes etc. The maximum revenue is generated from iPad and iPhone. These two products are responsible for Apple’s long-term success. Similarly, the products have a great Graphical User interface. The target customers belong to the group of economically enriched, young and technologically updated people. As discussed by Salunke et al (2013), Steve Jobs reinvented the designs by introducing Mac. The next is Ideation that includes rethinking about basic assumptions and search for logical solutions. The key is to learn from 55 business models and reinvent one’s own. As discussed by Martins et al (2015), for example, iPod revolutionized the music industry with its simple design and large storing capacity at a time when music industry was going through illegal file sharing and new digital formats. Integration is the next step that demands detail research to fit the model into the organization structure. Apple focused on great GUI and great design although it was lagging behind Microsoft previously. Later, it beat them. In the final implementation level, the job is to awaken the competitors. . According to Sako (2012), Microsoft, that was once much ahead of Apple, failed to retain its position because of Apple’s new and innovative business model.

Reference

Bergvall-Kåreborn, B. and Howcroft, D., 2013, December. The Apple business model: Crowdsourcing mobile applications. In Accounting Forum (Vol. 37, No. 4, pp. 280-289). Elsevier.

Jayawardhana, K. and Weerawardena, J., 2014. Conceptualizing the Role of Market Learning in Social Innovation-Based Competitive Strategy.

Leih, S., Linden, G. and Teece, D., 2014. Business model innovation and organizational design: a dynamic capabilities perspective.

Martins, L.L., Rindova, V.P. and Greenbaum, B.E., 2015. Unlocking the hidden value of concepts: a cognitive approach to business model innovation. Strategic Entrepreneurship Journal, 9(1), pp.99-117.

Rothaermel, F.T., 2015. Strategic management. McGraw-Hill.

Sako, M., 2012. Business models for strategy and innovation. Communications of the ACM, 55(7), pp.22-24.

Salunke, S., Weerawardena, J. and McColl-Kennedy, J.R., 2013. Conceptualizing the interplay of knowledge accumulation and integration capabilities in service innovation-based competitive strategy: a project-oriented firm context. In Proceedings of the 16th Biennial World Marketing Congress-Looking Forward, Looking Back: Drawing on the Past to Shape the Future of Marketing (p. 279). Academy of Marketing Science.

Walker, G. and Madsen, T.L., 2016. Modern competitive strategy. McGraw-Hill Education.

YouTube. (2016). Business Model Innovation. [online] Available at: https://youtu.be/B4ZSGQW0UMI [Accessed 26 Aug. 2016].

YouTube. (2016). What is Strategy?. [online] Available at: https://youtu.be/TD7WSLeQtVw [Accessed 26 Aug. 2016].

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