Planning involves outlining what needs to be done in the future in line with the organization’s objectives and operations. This ensures that the management attends to all the company’s operations as outlined in the objectives. Planning also limits time wastage by the employees. There are different models that players in the business sector use to explain the whole concept of planning. One of such is the generic strategies model. This model can best be explained by considering the scenarios given below.
Lucky Washing Machines Manufacturing Company manufactures modern day utensils’ washing machines. This retail firm produces 10,000 machines annually. Lucky Washing Machines Manufacturing Company uses the cost leadership strategy in order to penetrate and sustain itself within the competitive market.
Cost leadership strategy involves winning the potential market share by producing commodities, which are sold at a price which is appealing to cost-sensitive customers (Pearce & Robinson, 2012). The firm, therefore, produces commodities which are comparably cheap to the ones already existing in the market. In order to balance between market retention and profit maximization, the firm uses cheap factors of production, which cut on the cost of production.
Also, the firm produces commodities in large volume so as to spread the fixed costs of production over a large number of units. This approach seems to be working well for the firm as evidenced by high sales return. The company has also maintained its position in the market as one of the best firms in manufacturing washing machines.
Neo Leather Retail Company manufactures soft leather shoes. This retail company uses the differentiation strategy in order to penetrate the leather shoe market which gets supplies from other companies. Firms use differentiation strategy in situations where the target market is not price-sensitive. Rather, the market is characterized with specific needs such as uniqueness as is the case with the fashion industry.
Neo Leather Retail Company, therefore, produces quality products, which are unique in their nature by factoring in the current trends, in the fashion industry. The firm also has contracts with different celebrities so as to maintain its stake within the competitive fashion industry. Neo Leather Retail Company gains from the public perception of celebrities being current trend leaders in the fashion industry, by dressing the celebrities.
Differentiation strategy has worked well for this manufacturing firm, because unlike before, when the firm had to go in search for the celebrities whom to offer contracts, the trend has changed as the firm has experienced a high number of celebrities who have approached its management for contracts. Additionally, the firm has reported a significant increase in sales volume over the last on year.
Linley Milk Company is a firm that processes and supplies dairy products. This company uses the niche strategy in order to maintain its stake within the market. Smaller firms that can not employ the extremes of both the cost leadership and differentiation strategies usually use the niche strategy (Bryson, 2011). These small firms aim to strike a balance between the low cost market and the differentiated market.
The firm targets price-sensitive customers by offering products at low prices. Equally, the firm offers unique commodities like powdered butter in order to capture the differentiated market. Niche planning strategy approach does not seem to be working well for this firm, because there are distinctive products, which can be derived from milk. Consequently, it is difficult to attach any uniqueness to the product other than quality.
References
Bryson, J. M. (2011). Strategic planning for public and nonprofit organizations: A guide to strengthening and sustaining organizational achievement (Vol. 1). New York: John Wiley & Sons.
Pearce, J., Robinson, R. (2012). Strategic planning. New York: McGraw-Hill