Inmost cases, a firm`s intended strategy is not always the realizedone. A company`s strategy is perceivable as the unique position itasserts in the mind of its clients, as opposed to the actions ittakes. A firm, therefore, must consider incorporating the plans thathave been formulated beforehand and the information that comes intoview as new information is obtained in its strategy. Six factorsdetermine the process of developing and executing a strategy. First,to gain competitive advantage, a firm seeks a unique position in themarket to separate itself from competition. Second, the companyanalyses its competition to develop assumptions regarding itsinternal and external environments and how they may vary in thefuture. Third, the firm develops a plan that can be altered in lightof new information. Fourth, the firm develops a metric to measure thesuccess of its strategy. Fifth, the company develops structures thathelp create the ideal environment for proper strategicimplementation. Lastly, the business develops a strategy that iscongruent with the resources that are available to it.
TheMarket-Based View strategy posits that external market orientation,coupled with industry factors, determine how a firm performs.Conversely, the Resource-Based View asserts that the internalenvironment of a company, in addition to the resources at itsdisposal, is critical to gaining competitive advantage. Thus,managers, depending on the preferred perspective, choose to approachmarkets in different ways. The two viewpoints offer significantinsights into how firms operate in the market. The Market-Based Viewcontends that firms assess their competitive advantage through theFive Forces Model. The Model consists of 1) barriers to entry, 2) thebargaining power of suppliers, 3) the peril of substitutes, 4) thenegotiation capability of buyers, and 5) rivalry among competitors.The Resource-Based View, on the other hand, affirms that a firm`sresources (physical, human, and monetary) help it develop corecompetencies that are distinctive, rare, and valuable.
TheKnowledge-Based View hypothesizes that knowledge, intellectualassets, and know-how are the primary determinants of improvedperformance in the informational age. The Relational View ofStrategy, on the other hand, contends that inter-firm linkages offera substantial competitive advantage and relational rent to a firmover its rivals. Relational rent, in this case, is perceivable as asupernormal profit that is generated in a partnership, where bothcompanies must be present if this profit has to be realized. Managersmay prefer using one of these approaches over the other. Firms thatprefer the Knowledge-Based approach focus on enhancing organizationallearning and using this learning more swiftly than their competitors.In other words, this approach supports the premise that a firm shouldshift its focus toward moving from one competitive advantage to thenext faster than its competitors. Conversely, businesses that electto use the Relational View seek partnerships with other firms in abid to accrue supernormal profits, which would not have been accruedif either company chose to work in isolation. Four relational rentshave to be considered if a firm must realize competitive advantage:1) relation-specific assets, 2) complementary resources andcapacities, 3) knowledge-sharing routines, and 4) effectivegovernance.
Astrategy can be viewed as the unique position that a firm establishesin the mind of its clientele, and not the actions that the companyelects to take. A tactic, on the other hand, focuses on how a firmcan enhance its operational effectiveness. In essence, strategiesplace emphasis on fundamental questions regarding the choices made bycustomers, industries, and customers. In this respect, firms seekways of finding a unique position in the eyes of their clients, inaddition to creating value. In opposition, tactics focus on howbusinesses can make their operational systems more effective. Inother words, firms look for ways that can help them become betterthan their competitors, in addition to capturing value. No, firmscannot realize sustainable competitive advantage based solely ontactics. Reason being, the ability of a firm to outperform its rivalscannot be entirely premised on its capacity to maintain operationaleffectiveness, be better than its competitors, and capture value.Factors such as the firm`s ability to position itself (in the market)in a manner that is unique and value creation must also beconsidered.
Theprinciple "No Strategy is formulated and Implemented in aVacuum" posits that a strategic analysis must incorporate ananalysis of the key competitors in a market. Managers – whosedecisions are informed by this principle – considering executing anew strategy must ponder on a number of questions. Five key issuesmust be covered in an analysis that is guided by the "NoStrategy is formulated and Implemented in a Vacuum" principle.First, the main competitors (present and potential) must beidentified. Second, the capabilities of these competitors must beanalyzed. Third, their behavior in the past should be put inperspective. Fourth, predictions, regarding the behavior of thesecompetitors, should be made, considering their tendencies andcapacities. Lastly, how the actions of these competitors will affectthe firm should also be considered.