Strategic Management and Business Policy

Strategic Management and Business Policy

Why are some entrepreneurial ventures successful almost immediately while others fail to even reach break even status? What considerations should small business entrepreneurs keep in mind when they are deciding whether a company should follow a growth or a stability strategy?

The most differentiating factor of new, entrepreneurial ventures that succeed vs. those that fail is the ability to create products or services that engender trust and loyalty from prospects and customers. Competing purely on price turns products into commodities, yet focusing on the unmet needs and wants of customers, and then segmenting them based on loyalty, is far more important to long-term growth (Markey, Ott, du Toit, 2007). The greatest consideration that entrepreneurs need to keep in mind is that they need to strive to become the trusted advisors of their specific product or service segment through exceptional, creative products and services. Differentiating on strategies of customer retention by delivering exceptional performance is by far more critical than any other strategy, as it generates customer loyalty over time (Gustafsson, Johnson, Roos, 2005). Customer loyalty can keep any company financially viable even over the worst economic conditions.

Question 2: What are the advantages and disadvantages of privatization of state owned business? A number of not for profit organizations in the U.S. have been converting to profit making. Why would a not for profit organization want to change its status to profit making? What are the pros and cons of doing so?

The advantages of privatization include more confidentiality with regard financial performance, greater levels of government support, and more opportunities for global integration with other organizations as being part of a state-owned business can make those efforts more effective over time. The cons or disadvantages are the lack of accountability to the public, a risk the organization will lose touch with its customers and the needs it is meeting, becoming bureaucratic and inflexible in the process. Another disadvantage is the fact that organizations often lose control to government agencies over time as well. These are all critical factors organizations need to consider before going private and being funded by governments. When not-for-profit organizations shift to being for-profit, there are the opportunities for greater control of their strategic direction, greater flexibility in addressing the needs of the customers they serve, and greater potential to define their own financing strategies. Often non-for-profit organizations must abide by strict requirements of their benefactors, whether they are government agencies or large donors. Being for-profit can give a non-profit organization much more freedom to pursue their own strategic direction and plans, unencumbered with the demands of those financing their organization.