Evaluation of Business Strategy

One of the most important aspects towards the success and growth of any organization or company is having a good strategy. The development and use of a sound business strategy has become an important issue in the modern business environment because of increased competition. In essence, modern businesses are experiencing tremendous challenges due to increased competition, which necessitates the establishment of a good business strategy. The issue of a business strategy has attracted considerable from various stakeholders in the business world including scholars. It has become a major issue because many business organizations lack coherent strategies to promote their success.

In light of the significance of a sound business strategy in today’s business environment, Richard Rumelt has written a book on the difference between good strategy and bad strategy. According to Rumelt (2011), a good business strategy incorporates direction, identifies major challenges and how to overcome them, and promotes coherent action within an organization. In this case, a good strategy commences with acknowledging that there is usually a particular problem that needs to be addressed. Additionally, the strategy includes a diagnosis of the specific problem, guiding policy (which act as indicators of future direction), and coherent action for overcoming the problem. Based on this process, Rumelt (2011) contends that strategy is not extravagant goals, but focuses on outlining how an organization will move forward. Therefore, a good strategy is centered on identifying critical issues (specific problems) and focusing action and resources on addressing the identified issues.
An example of a strategy I am familiar with is pricing strategies that have become common in today’s business environment because of increased competition. The two most commonly utilized pricing strategies are low pricing and high pricing strategies. Low pricing strategies basically entail keeping product prices low in order to attract more customers while high pricing involves pricing a product beyond the affordability of some customers. A low pricing strategy is utilized to sell a lot of products since profit margins are relatively low whereas a high pricing strategy is utilized to give products and/or services aspirational value. I am familiar with low pricing strategy since it’s commonly utilized by Wal-Mart because of its position as the world’s largest retailer (Mikoluk, 2014). The retailer bargains for low prices with manufacturers and suppliers because of its strong market position. Additionally, Wal-Mart keeps low prices for its products and focuses on selling in volumes because of very low profit margins. As a result, the company obtains significant competitive advantages over its rivals because of low prices for its products and sales in volume.
Wal-Mart’s low pricing strategy resembles the process described by Richard Rumelt with regards to a good business strategy. The strategy identifies the specific problem/issue to be resolved, which is to offer products to customers at very low prices that are affordable to ordinary people while making profits. The provision of affordable goods and services while making profits is a major issue in the retail industry, which is characterized by increased competition. Wal-Mart’s strategy acknowledges this issue and considers low product prices as the premise for addressing it. Apart from identifying this critical issue, Wal-Mart’s strategy identifies the most suitable action or way of addressing the problem i.e. offering its products at very low prices. Additionally, the strategy focuses action and resources on dealing with the issue of offering products at low prices while maintaining/increasing profitability. The strategy provides two major actions for dealing with this issue including negotiating for very low prices with manufacturers and suppliers. Secondly, Wal-Mart’s business strategy focuses on sales in volume, which is critical towards enhanced competitiveness and profitability.
References
Mikoluk, K. (2014, January 7). Business Strategy Examples: Four Strategies Businesses Use to Make Money. Retrieved October 11, 2017, from https://blog.udemy.com/business-strategy-examples/
Rumelt, R. (2011). Good strategy/bad strategy – The difference and why it matters. New York, NY: Crown Publishing Group.