Please rewrite in your own words and add some research into each thought with your own references
MT1 – Anticipating and Responding to the Pressures of Commoditization
This week I learned how to anticipate and respond to the pressures of commoditization. First things first, I learned that there are no quick fixes to the pervasive power of commoditization (Kashani, 2006). In addition, commoditization is a permanent feature in today’s marketplace that will continue to challenge firms, even the best-managed firms (Kashani, 2006). When it comes to anticipating the pressures of commoditization, a firm can either use the value-in-use approach or the process innovation approach. On the other hand, firms can respond to the pressures of commoditization by market focus or service innovation. Carpenter and Sanders (2008) suggest that firms often find themselves responding to the pressures for commoditization, instead of driving them. According to Holmes (2008) “responding to the challenge of commoditization depends on where you stand and what your perspective is” (p. 123). More importantly, Holmes (2008) points out that the pressures of commoditization will not stop exerting itself on firms everywhere.
The first concept I learned this week was how a firm can anticipate the pressures of commoditization. There are two approaches that Carpenter and Sanders (2008) discuss, the first is a value-added approach, the second is a process-innovation approach. The value-added approach is when a firm increases service benefits while concurrently raising or holding prices (Carpenter & Sanders, 2008). A firm can use this strategy to promote a value add feature as a key differentiator. The second approach is a process-innovation approach, which involves a firm decreasing service and process costs and finding alternatives to compensate for the decreased attributes being offered (Carpenter & Sanders, 2008). The goal is to reduce operating costs as a cost savings advantage and finding a low-cost position in the market (Carpenter & Sanders, 2008). One firm that uses the process-innovation approach is Spirit Airlines. Spirit’s strategy is to be the low-cost leader in the airline industry, and does this by reducing service benefits to customers (Brooks, 2012). By offering limited services, the firm can cut costs, therefore offering lower rates on flights. What’s important is that each approach is valuable as pressures of commoditization dictate market strategy and differentiation. A firm can use either of these approaches to stay competitive and differentiated in competitive market.
MT2 – Value Curve
This week I also learned about the value curve and how it can be used to anticipate change. According to Sheehan and Bruni-Bossio (2015), the strategic value curve analysis tool is a straightforward method that managers can use to evaluate and improve their customer value propositions and delivery processes. In addition, the value curve analysis tool can also help improve a firm’s profitability (Sheehan & Bruni-Bossio, 2015). Carpenter and Sanders (2008) note that a value curve is a useful tool because it helps managers visualize how new disruptions might be targeted (Carpenter & Sanders, 2008). Furthermore, the main purpose of the value curve is to “visually plot how major groups of firms are competing” (Carpenter & Sanders, 2008, p. 182). The value curve tool is very beneficial because it is a visual representation of how certain firms present their products to customers along key buying criteria. Thus, the value curve tool can be used to anticipate change.
The second concept I learned this week was strategies for creating new markets and tactics for competing in the new or existing markets. Creating a new market can be challenging, yet rewarding if a firm can successfully develop a disruptive technology using proper resources and capabilities. When a firm is assessing a potential new market, there are three strategies to consider. There is the high-end disruption strategy, low-end disruption strategy, and a hybrid disruption approach. Each approach is unique to a disruptive technology and how a firm strategically approaches a market. A high-end disruption strategy could result in new markets and new players, redefining an industry and the rules and competitors who engage in the market (Carpenter & Sanders, 2008). The low-end disruption strategy target less desirable competitors by focusing on the low end of a market (Carpenter & Sanders, 2008). The hybrid disruption strategy is a combination of both high and low end and is considered a more conservative approach. Each strategy allows a firm to develop new technology that is either dramatically disruptive to a market, or incrementally disruptive. As Jaruzelski, Staack and Goehle (2014) point out, investing in technology is important for a business to remain competitive and identify breakthroughs in the market. Using the various disruptive technology strategies can help a firm stay dynamic in a competitive, and volatile market.
MT3 – Defensive Strategies for Hypercompetitive and Turbulent Markets
Lastly, this week I learned about hypercompetitive and turbulent markets and defensive strategies for both. Carpenter and Sanders (2008) suggest that turbulent or hypercompetitive markets are characterized by “frequent, often bold, and typically dynamic moves on the part of competitors” (p. 183). In addition, turbulent and hypercompetitive markets experience constant change and conditions of disequilibrium (Carpenter & Sanders, 2008). That being said, managers in turbulent or hypercompetitive markets must develop effective cognitive frameworks (Bogner & Barr, 2000). Bogner and Barr (2000) note that there are three specific activities that are used often to build these required frameworks and they are as follows: developing cognitive diversity, implementing rapid decision making, and taking experimental actions. However, Carpenter and Sanders (2008) explain that strategy in hypercompetitive contexts is typically accomplished through managerial improvisation. It is important for managers in turbulent or hypercompetitive markets to simplify their strategies into a select set of cast iron rules that define direction without confining it (Carpenter & Sanders, 2008, p. 186).
The third concept I learned this week was defensive strategies a firm can utilize when competing in hypercompetitive and turbulent markets. There are three strategies provided by Carpenter and Sanders (2008) that allow a firm to compete as markets fluctuate and rapidly shift. The first defensive strategy a firm can use to combat hypercompetitive and turbulent markets is through managerial improvisation: “Managerial practices that contribute to a culture of frequent change dictated by a few simple rules.” (Carpenter & Sanders, 2008, p. 186). The second defensive strategy is sequencing past and future strategies. In this stage activities are focused on future outcomes based on past learning’s. “In this model of business strategy, the bridge between past activities and future conditions is built on a substructure of experimentation and learning.” (Carpenter & Sanders, 2008, p. 187). The third strategy suggested by Carpenter and Sanders (2008) to help a firm compete in a turbulent and hypercompetitive market is pace and staging. The key take-away from the various strategies is allowing for flexibility internally so the business can adjust as the market shifts. According to Carlopio, Harvey and Kiessling (2012), flexibility allows a firm to respond quickly to short term changes in the industry, and additionally evolve and grow to long-term changes in arenas such as technology, organizational performance, and customer demands. By being able to adjust short and long-term strategies, a firm can improve performance.
Bogner, W. C., & Barr, P. S. (2000). Making sense in hypercompetitive environments: A cognitive explanation for the persistence of high velocity competition.Organization Science, 11(2), 212-226. Retrieved from https://search-proquest-com.library2.csumb.edu:224…
Carpenter, M. A., & Sanders, W. M. (2008). Strategic management: A dynamic perspective—Integrated StratSim simulation experience. Upper Saddle River, NJ: Pearson Prentice Hall.
Holmes, A. (2008). Commoditization and the strategic response. Retrieved from https://ebookcentral.proquest.com
Kashani, K. (2006). Fighting commoditization strategies for creating novel customer values. Perspectives for Managers, (137), 1-4. Retrieved from https://search-proquest-com.library2.csumb.edu:224…
Sheehan, N. T., & Bruni-Bossio, V. (2015). Strategic value curve analysis: Diagnosing and improving customer value propositions. Business Horizons, 58(3), 317. Retrieved from https://search-proquest-com.library2.csumb.edu:224…
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