A decision-making process is of extreme significance for every company. It is the task of the manager to analyze, evaluate, and, sometimes, predict the development of the situation to make a proper decision. The ability to make decisions is a challenging task as far as there are always several options. Every choice can affect the overall performance of the company. There are particular groups of questions that any manager should always take into consideration before making the decision. This paper will examine the significance of these issues and the way they can influence the firm’s performance.
The first question refers to the examination of economic conditions. Market structure, supply, demand, and technologies belong to this group. The evaluation of economic conditions in the particular market is significant for understanding the general situation in the sphere. Besides, the manager studies the economic conditions within the market from three perspectives. A supply-based perspective provides insight for comprehending the competitiveness and possible collaboration in the market taking into consideration particular supply features. Customers’ attitudes belong to the demand-based perspective while technologies — to environmental-based perspective (Shankar, Carpenter and Hamilton 62). The case study of the cellular phone industry exemplifies the way these factors influence the development of the business. Thus, together with AT&T, Apple manufactured iPhone. Such a decision demonstrates a supply element. From the customers’ attitudes, it was clear that they considered iPhone as a device for entertainment. 3G and 4G technology facilitated the rapid development of the product popularity.
The second task of the manager is to analyze the place of the firm in business. This aspect presupposes the definition of price and outcome level the company should possess to become competitive in the niche. The manager should start from the evaluation of financial resources of the organization. As a result, he or she will be able to define cost structure of the company on different levels of the output (Hill, Jones and Schilling 110). Also, it is significant to conduct the analysis of the competitive advantage of the company and its primary competitors. This action assists in finding the most relevant competitor and directing the firm’s development of the particular course. The analysis of the competitive advantage should evaluate such aspects of the company’s performance as efficiency, innovation, quality, and responsiveness to customers. The example of IKEA exemplifies the successful combination of innovation and responsiveness to customers.
No manager should forget about the additional economic conditions. Governmental regulations, a collaboration with foreign partners, unpredictable future conditions, and macroeconomic factors can change the company’s performance drastically. PEST analysis is a useful technique for the evaluation of political, economic, social, and technical factors (Thompson and Martin 89). Thus, political factors can help in the understanding of the local, national, and even international law regulations concerning particular activity. Economic aspects of the analysis presuppose international dimensions as well. However, they also include the examination of the current demand as well as potential changes. The investigation of the social factors reveals consumers’ attitudes toward particular market niche, products, or services. Finally, technical aspects create the overall picture of all additional economic conditions. The manager should never neglect the potential development of the technologies as far as new advances can even change the nature of the business.
The achievement and maintenance of the competitive advantage is a direct way to the success. The manager has to choose a strategy of the competitive advantage that will give the best results. There are several the most widespread approaches. A cost leadership strategy is possible when the company can offer the products or services at competitive prices. In this case, the firm has to establish an efficient collaboration with suppliers. Walmart employs the cost leadership strategy with maximum efficacy. The primary emphasis is laid on low prices for products and goods (Scilly par. 1). Product differentiation strategy means making the product different from others (Ferrell and Hartline 245). Such a uniqueness may refer to the particular technology of the manufacturing, specific design, or usage. Market niche strategy focuses on the long-lasting retention of customers. One more way to gain a competitive advantage is to commence the collaboration with other companies. Alliances, outsourcing, or mergers serve this purpose. Besides, it is possible to establish a course for company’s expansion into the foreign markets.
The last group of questions refers to the potential risks. The identification of the potential risks can be the most difficult task. It can be explained by the fact that some risks are difficult to predict. Many aspects change and influence the overall performance of the company. The most widespread types of risks include shifts in demand and supply, technological progress, competition, and governmental regulations. The case study exemplifying these risks demonstrate the way changes in supply and demand alter the business (Gillespie 192).
All managers should bear in mind these issues before making a particular decision. An effective decision-making process is essential for the successful performance of the company.
Works Cited
Ferrell, O.C. and Michael Hartline. Marketing Strategy. Boston: Cengage Learning, 2010. Print.
Gillespie, Andrew. Business Economics. Oxford: OUP, 2013. Print.
Hill, Charles, Gareth Jones and Melissa Schilling. Strategic Management: Theory: an Integrated Approach. Boston: Cengage Learning, 2014. Print.
Scilly, Monica. Examples of Cost Leadership & Strategy Marketing. n.d. Web. 2015.
Shankar, Venkatesh. Gregory Carpenter and James Hamilton. Handbook of Marketing Strategy. Cheltenham: Edward Elgar Publishing, 2012. Print.
Thompson, John and Frank Martin. Strategic Management: Awareness & Change. Boston: Cengage Learning, 2010. Print.