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“Strategy: The Uniqueness Challenge” by Todd Zenger Essay (Article)

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Updated: May 1st, 2019

Introduction

Investors should develop patterns of executing their strategies and this may include establishing departments or introducing systems that will help employees to perform their functions properly (David 2012).

There is the need for investors and managers to evaluate the effects of various strategies used to improve the performance of their organizations. This discussion analyzes a case study that presents the challenges facing strategic plans used by investors and managers to improve the performance of their companies.

Central Theme and the Importance of Todd Zenger’s Article

Todd Zenger claims that there are two strategies that organizations can use to improve and evaluate their performance. He claims that most investors diversify their investments to reduce risks and offer a one-stop-shop for their clients, but this has never been taken positively by financial analysts and this affects the prices of their shares in the stock market (Zenger 2013).

He argues that simple strategies are easy to understand and copy; therefore, they fetch premium prices in the financial markets because analysts understand them without the need of consulting their managers. However, these strategies are not sustainable and do not have value because they are easy to copy and thus have a very short lifespan.

For instance, the Coca-Cola Company uses a simple strategy that ensures financial analysts understand its operations and give it a share value that shows its performance in the stock market.

Secondly, he argues that some companies have unique and complex strategies and this makes financial markets to undervalue them because they take longer to evaluate (Zenger 2013). In addition, their complexities discourage analysts to cover them and this contributes to the scarcity of information about them in financial markets.

He recommends that companies that use unique and complex strategies should try to improve the market’s access to information about their structures. Moreover, they may hire independent equity researchers to enable the public to understand them.

In addition, they may go private where there are patient investors who are interested in understanding the operations of companies from their point of view and not believing issues presented by financial analysts (Zenger 2013).

The author argues that the Lemon Market Strategy can be used to improve the performance of an organization, even though this has a short-term effect on businesses. However, companies that disguise their low quality products with cheap prices risk going out of market when investors realize their plans.

He concludes that CEOs have a major role to play in shaping the performance of their companies by either maintaining the course they have set or adhering to the one demanded by determinant markets (Zenger 2013).

Application in the Hospitality Industry

Zenger argues that it is not easy to observe or measure the value of goods or services in the market. This occurs when buyers fail to estimate the value of products offered to them. The hospitality industry faces this challenge and thus most investors offer high prices for their low valued products and services (David 2012).

For instance, most resorts and hotels in Saint Tropez offer different rates for their bed and breakfast services even though they are of the same standard. The hospitality industry can sell its products and services using the Lemon Market Strategy to reduce its operation costs.

In addition, people have different lifestyles and it is not possible to determine the level of satisfaction they get from services and products offered by a hospitality investment. Therefore, players in this sector can use a simple strategy to ensure its clients understand its processes and can make comparisons without difficulties (Zenger 2013).

On the other hand, complex strategies may work in cases where an investment wishes to offer long-term services to its clients. For instance, a five star hotel seldom changes its management strategies and even though lifestyles are not static this investment rarely experiences major challenges in the tactics employed to attract customers to its services and products.

In addition, the need to embrace modern practices in this industry does not involve issues like the adoption of complex strategies that are hard to comprehend by investors (David 2012). Moreover, most customers take time to research and know the services offered by different investors in this sector before investing in them.

They are patient and pay attention to details to ensure they get quality services. This means that hoteliers should adopt complex management and operation strategies because their clients are never in a hurry. In addition, most analysts avoid covering hotel investments because very few of them know its operations (Zenger 2013).

McDonald’s and Wendy’s have few market analysts covering their practices because of the complexities of their operations. Financial analysts hardly understand what or how to evaluate the effectiveness of different strategies employed by hoteliers.

However, these restaurants should improve the market access information to their strategies to ensure financial analysts and markets understand them and assign appropriate values to their shares.

Moreover, it will not cost them anything to look and wait for patient investors that wish to understand the strategies of an investment from their own analysis and not information offered by subjective financial analysts and markets.

Article’s Contribution to the Development of Strategic Management Theory

The Strategic Management Theory is a set of beliefs and policies that enable managers and other senior employees to develop short and long-term strategies that will help their organizations to achieve their objectives.

This article focuses on the importance and impacts of adopting simple and complex strategies to improve the market values of companies (Zenger 2013). The author supports this theory by explaining how short-term and simple strategies are not sustainable and thus ineffective in promoting efficiency in an organization.

He supports the belief that going private enables companies to focus on management strategies that are important in sustaining the productivity and performance of organizations. Monsanto managed to streamline its production and performance after it developed and executed plans to specialize in biotechnology (Zenger 2013).

The article covers the advantages of using independent equity research companies or individuals to provide accurate information about an organization’s strategy to ensure clients get correct information on the performance of companies before making their choices.

A similar position is held by this theory and this proves that the author of this article understands various issues in management strategies.

Conclusion

Businesses should have strategic plans to enable them to compete with others and generate profits without incurring unnecessary expenses. Effective strategies involve planning, executing and evaluating approaches used by an organization to ensure an investment generates profits.

It also includes ensuring all departments play their roles to promote coordination and unity in an organization. Simple and common management strategies are not suitable in organizations because they are unsustainable and easily copied by others.

On the other hand, complex and unique strategies should be employed by companies because they are sustainable and offer long-term solutions to managerial problems.

Companies may improve their awareness in the financial markets by going private and looking for patient investors or increasing awareness of their strategies through hiring independent equity researchers.

References

David, R. F. (2012). Strategic Management Concepts and Cases. New Jersey: Pearson.

Zenger, T. (2013). Strategy: The Uniqueness Challenge. New York: Harvard Business Review.

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IvyPanda. 2019. "“Strategy: The Uniqueness Challenge” by Todd Zenger." May 1, 2019. https://ivypanda.com/essays/strategy-the-uniqueness-challenge-by-todd-zenger-article/.

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IvyPanda. (2019) '“Strategy: The Uniqueness Challenge” by Todd Zenger'. 1 May.

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