Competitive Business Models
Competition and gaining strategic advantages from it have been the main focus for scholars with diverse perspectives, such as industrial economics and structural analysis, game theory, and competitive dynamics. The reason behind the development of several competitive models is the desire of researchers to find solutions to why individual companies exhibit superior performance over others. The first models of competition developed were neo-classical models based on industrial organization economics ranging from monopoly to perfect competition. From the industrial organization economics and Mason-Bain, approach the structure-conduct-performance was developed. The SCP model states that a highly concentrated market will likely be dominated by a few large firms that will lead to little rivalry and excessive prices and profits (Saadatmand, Dabab, & Weber, 2018).
Conversely, structures made up of several small firms will produce a high degree of rivalry and competition, leading to markedly lower prices and profits. The destroy your business (DYB) model entails a strategic plan created and implemented by management with the involvement of employees. The model is based on the ideology of destroying the organization’s weaknesses, as well as business units that are inefficient and do not add value to the overall performance of the firm.
The DYB model is essential in that companies need to identify and eliminate weaknesses to compete, especially in highly competitive business environments effectively. In contrast, the Grow Your Business strategy (GYB) involves finding innovative ways to promote existing business units and increase efficiency. Therefore, a destroy your business model can be useful in eliminating redundant and inefficient practices within the organization. Firms should regularly take up a DYB strategy to get rid of business units and resources that add no value to company performance. Implementing a GYB strategy is also useful in identifying real business opportunities that the organization or company can tap into. Correctly utilizing these strategies will likely give the organization a competitive edge against other firms that offer similar products or services.
Cannibalization was initially defined as the fraction of demand that arises from users switching to other products marketed by the new producer. Cannibalization can be categorized into cannibalization within and between brand category, primary demand, and brand switching. There are also instances where new products can cannibalize existing products within the same product category and other product categories without substantially affecting the firm’s performance (Giovanni & Ramani, 2017). Such cannibalizations do not have an impact on the organization’s market potential as the number of units sold remains constant; that is, the firm’s market share remains unaffected. Thus, a cannibalization strategy can only occur when a newly developed product encroaches on the market of an existing product, as opposed to expanding a firm’s market share. The original aim of the product development might have been to capture a new market segment and increase market share. However, the developed product ends up appealing to the firm’s existing customer base, resulting in reduced market share and sales volume of the existing product.
Cannibalization does not impact the firm’s market performance as the number of units sold may remain constant. A quick analysis shows that a DYB strategy might be far more effective than a cannibalization strategy with respect to growth and competitiveness. This is because a destroy your business strategy is developed and implemented to improve the organization’s competitiveness. In contrast, cannibalization can lead to the premature death of a product as sales shift into a new product instead of tapping into a new market segment (Giovanni & Ramani, 2017). Moreover, brand switch cannibalization has become a serious concern as consumers today are more willing to environmentally friendly and socially responsible brands, which may lockout products from companies that do not meet consumer expectations on sustainability. This can also create opportunities for socially responsible manufacturers who may exploit the potentiality of green products to come up with new primary demand.
A business strategy is defined as the outcomes of decisions created to direct the organization with respect to the environment and processes that influence performance. Approaches to business strategies can be textual, typological, or multivariate in nature. The typological approach strategy can be described as one aimed at creating a better understanding of the organization. Technology deployment refers to how companies plan and manage their ICT resources to derive benefits.
Information technology plays a vital role within businesses, as strategic information systems support and even shape the business strategy employed by the organization. In order to carry out a successful planning process, it is vital to align the information system with the firm’s business plan and strategies. Several frameworks can be used to address the strategic advantages of an IS. Information systems are a vital source of changing trends and patterns, in addition to promoting the development of new products as businesses need to model their strategies to take into account the predictive capabilities provided by such systems. Businesses that analyze their strategic activities while using information technology have a higher chance of achieving success. This is because information and technology systems are a valuable source of performance improvement relative to the competition, and organizations that have IS align with their business strategies stand a chance of success. Strategic planning is made up of forecast based approaches that are adaptive to changing consumer expectations and opportunities to create sustainable competitive advantages (Croteu & Bergeron, 2001). Information Systems, therefore, provide competitive strengths to businesses that can successfully align and integrate such systems with their organizational strategies.
Social IT describes the interactive forms of media popularly referred to as social media. Social IT systems found within organizations focus on creating social networks and building teamwork without any departmental or geographical boundaries. By promoting interaction on large-scale firms and businesses can strategically place their products to reach wider target audiences. That is, social IT can promote product engagement by providing much wider audiences, making it a suitable medium to grow the company’s brand. However, social IT also opens up the company to both positive and negative reviews and comments. This is because social media places emphasis on interactivity, and as such, consumers and citizens can freely share their opinions about a product with almost no limitations. The low cost and accessibility associated with Social IT makes it a suitable platform to promote company products as millions of users every day can gain access to their social media accounts and learn or share information in their various groups and forums (Manning, 2014).
There are several steps and tools on how companies can use social media to further their social business strategies. Some of the collective company goals that are usually employed by businesses include promoting referral traffic to the organization’s website, raising business credibility as well as the organization’s corporate identity, and promoting customer engagement. To take advantage of the new and emerging benefits that can be derived from social media, companies need to carefully select the most suitable IT platform and assign a media team. Some of the more popular platforms commonly used for advertising company products are Facebook, Instagram, Twitter, and Pinterest, all of which are a considerable following. Moreover, conducting pure market research on which platform will adequately promote the organization’s products is completely necessary to promote success. Also, consumer trends derived from the social networking platforms can be a suitable avenue of consumer targeting and product placement on social media.
References
Croteau, A. M., & Bergeron, F. (2001). An information technology trilogy: business strategy, technological deployment, and organizational performance. The journal of strategic information systems, 10(2), 77-99.
De Giovanni, P., & Ramani, V. (2017). Product cannibalization and the effect of a service strategy. Journal of the operational research society, 1-17.
Manning, J. (2014). Social media, definition, and classes of. Dalam Encyclopedia of Social Media and Politics, 3, 1158-1161.
Saadatmand, M., Dabab, M., & Weber, C. (2018, August). Dynamics of competition and strategy: A literature review of strategic management models and frameworks. In the 2018 Portland international conference on management of engineering and technology (PICMET) (pp. 1-14). IEEE.