Strategy Implementation and Control
Part A Identify two (2) companies, each pursuing a fundamentally different strategy: one diversification, the other, cost leadership. The two firms need not be in the same industry, but they need to be public and based in the U.S.
Part B Explain why each firm has opted for its chosen strategy. Specifically, you should highlight the exogenous and endogenous factors that might have contributed to their choice. For example, is cost leadership the only feasible strategy in the industry in which the firm operates? If so, why? What makes diversification a poor choice? Or, if diversification is feasible and some of the firm’s competitors pursue diversification, what valuable, rare, inimitable resources do those companies hold that would allow them to successfully implement diversification instead of cost leadership?
Part C Given the company’s level of success, should it continue to pursue its current primary strategy or look to change? State whether the fundamental strategies of the companies you have chosen have changed in the recent past. If they have, explain the drivers of the change. (For instance, has there been a change in leadership or in consumer taste?)
Part D Discuss the impact on performance of each company’s chosen strategy. Have these companies been successful relative to their competitors? Why or why not? If so, how? Please be sure to clearly identify the direct link between the company’s strategy and the economic outcome it yielded.
PART A
Diversification as a business approach is used by a company that intends to significantly increase its profitability through the enhancement of sale volume that can be achieved through the company engaging in the manufacture of new products and venturing into new markets (Le, 2019). General Electric, the GE company, is among the effective organizations that successfully applied a diversification strategy (Wang & Nie, 2019). GE is an American-based international organization that mainly operates in various sectors, including aviation, power, and energy. Also, the company has diversified its operation area by acquiring and investing in transportation, home, business solutions, energy infrastructure, and financial services. Every segment of the company is diversified to enable the company to offer steam, gas, power generators, mining machines, oil and gas extraction, and wind turbines. Further, the firm’s transportation segment provides technology in the oil, gas, mining, and marine sectors. The aviation segment, on the other hand, deals with manufacturing aerospace products used in military and commercial applications. Overall, the diversification approach has assisted GE in minimizing risk in the market and enhanced its sales and revenue.
Another approach is Cost Leadership. The cost leaders are often inclined to keep their costs low by reducing advertising, research and development, and market research (Ali & Zehir, 2016). Cost leadership is a generic competitive approach that primarily focuses on the low cost of a firm’s operation within the industry. Hence, the approach uses the scale of production, and exceptional buying strategy, whereas manufacturing uses highly standardized products through advanced technology. The organization that mostly applies this strategy is Walmart. Walmart company is mainly identified for its low-cost producer of retail services and other related corporate results (Nilufer, 2020). The firm operates closely with suppliers that dominate the brands within the industry. Therefore, it can offer its clients high-quality products at an extremely low price since it cuts down all the excesses at all points of manufacture. Additionally, Walmart has sustained its cost leadership approach through its effectiveness in operations and distribution techniques and supply chain management. Further, most of the bargaining power considers that Walmart purchases the products from manufacturers at the lowest costs, exchanges high purchase volume for the low cost, and passes the savings onto its clients. The company has experienced a steady increase in capital utilized for business development, reducing the stiff competition within the retail industry and enhancing its sustainability.
PART B
GE mainly depends on diversification as the main business development approach and has facilitated continuous development despite the highly dynamic economic conditions. Further, diversification has substantially boosted the firm’s resilience as one of the biggest diversified businesses globally among its competitors, such as 3M and Siemens (Jung & Shin, 2019). Besides, with the company’s high focus on research and development, the diversification approach is a quantum leap for the organization. It has developed brand loyalty, which is particular and unique compared to its rivals. Also, GE has a robust capital base, which has boosted its product diversification. Walmart’s financial resources are highly valuable, which has aided them in investing in external opportunities. Further, the firm perceives its clients are a rare resource; hence, it ensures that employees are effectively trained and possess the right skills, which is not the focus of its competitors. The company’s patents are challenging to imitate since the business regulation protects it, as it is considered unlawful to replicate a patented product. It has implemented an effective distribution network that is very organized; thus, these resources, VRIO, have been advantageous and proven to be a source of competitive edge over its rivals.
On the other hand, Walmart generally uses the cost leadership strategy, which has attracted most of the clients compared to its rivals, such as Kmart and Target. Its approach to meeting producers and suppliers to reduce the costs offers a win-win correlation for all the involved parties. Besides, this approach has been successful and has made the company open other outlets within the cities and metropolitan areas and acquisitions other stores globally and locally (Roy, 2019). The company has shown the success of cost leadership via the VRIO analysis using techniques like supply chain management, technology and innovation, low pricing strategy, and training and development of the employees. Such practices are considered valuable, imitable, rare, and well organized.
PART C
Both Walmart and GE’s cost leadership and diversification approach have recorded substantial success. Hence, both organizations require not to change their strategies. Further, GE’s diversification strategy correlates with its business mission statement, ‘to invent the next industrial era, to build, move, power, and cure the world.’ Besides, the diversification technique is perceived as a major parameter through the decades; thus, continuity is recommended. On the other hand, Walmart’s low-cost leadership is a driving force in the retail industry that has increased its market shares, has a huge profit margin, recorded great financials, and possesses a loyal and huge client base. Also, the efficacy of its supply chain, inventory management, and pricing approach has remained a driving force over the years and has provided them with a competitive advantage over its rivals; thus, it should sustain this strategy.
PART D
The main influence of General Electric’s and Walmart’s strategic performance differentiates them from their industrial rivals. It has been fused to their brand loyalty, enhanced client satisfaction, and increased the rates of its return on different assets and investments. Further, General Electric’s capital returns on the asset are almost double that of its main competitor Siemens. Its significant profitability is reflected in its market shares and value in its sectors. From the VRIO analysis, Walmart’s daily low-price store corporate strategy and establishing itself as the cost leader is considered a vital source of development for the firm. Additionally, its economies of scale and supply pressure, supplier relations, IT investment, and cost-conscious prove that the organization’s selected approach effectively aligns with its sustainable and competitive advantage. Also, the strategy applied by Walmart has resulted in tremendous development in brand loyalty, profit margins, and overall sales. Besides, Walmart’s effect is positive in curbing inflation rates and ensuring optimal workforce productivity. Also, the company saves substantial funds for the clients and reduces competition within its existing operation locations. Overall, its main concentration on the low prices has aided Walmart in its mission stated, which visualize saving the clients’ money and ensuring that they live better due to the high quality.
Overall, GE and Walmart have successfully applied diversification and cost leadership business strategies to ensure their development and relevance in the market. As the market leaders in different sectors, both the firms have used these strategies to increase their client base, profit margin, and market shares locally and globally. Therefore, it is recommended that both the companies sustain their business strategies for continued development.
