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2FE806 Business Strategies - Global Strategies

You are required to select an organization of your choice and to undertake strategy evaluation of this firm. You can use the same organization identified for your report in Assessment Item 2.

1 .Identify and examine strategies for the firm (or SBU) of your choice. Strategies could include:

  • Business-Level Strategies
  • Corporate-Level Strategies
  • Networks, Partnerships and Alliances
  • Global Strategies and the Multinational Corporation

2 .Evaluate the suitability of the firm’s current business strategy based on the outcomes of your analysis (e.g., the identification of the firm’s current strategy and the most significant factors affecting the firm’s performance, and your understanding of strategy). If the current strategy is not suitable, please recommend no more than two alternative strategic initiatives that the firm should pursue and justify your recommendations.

3 .Draw your conclusion.

Answer

Introduction

Strategic management is a process which involves the identification, description and application of the relative strategies to achieve specific goals, better performance and attain competitive advantages (Freeman, 2010; Wheelen & Hunger, 2011). Business strategies can be successful in the situation of strong competitive level, better financial performance and leading growth of business. The current report is based on the identification of business strategies of Toyota, Australia. In this context, analysis has been carried out for different types of strategies including business level, corporate, global and networking etc. Apart from this, suitable strategy has been selected for an organization and accordingly recommendations have been provided for continuous improvement.  

Identifying the Strategies

Different strategies applied by business are explained into the four major categories-

Corporate level strategy

Corporate level strategies are long term planning which allows adjustments according to uncertainty and changing market conditions. The major concern of the strategy is allocation and optimum utilization of resources for the benefit of organization (Ramamurti, 2012). The three main types of corporate strategies are Growth, stability and Retrenchment strategies.

  • Growth Strategy- This strategy is based on the concept of generating more profit and sales revenue from the existing goods and products. Growth Strategy mainly refers as vertical and horizontal expansion strategy where vertical strategy contains growth by taking over the various part of operational department, for example a restaurant decides to farm its own ingredient which means it is taking over the supply chain operation which results in better quality and supply needs (Prange & Verdier, 2011). In the same context horizontal strategy refers as business expansion of existing products and service in new geographical areas or to target new audience.
  • Stability Strategy- According to stability strategy, to maintain the market share, company leaders retain its present strategy at corporate level and continues focus on existing products. This neither ensure profit nor loss of the business rather concentrate on increasing the overall rate of return of the business. However, it proves to be effective in increasing the profitability of the business through customer retention (Lubatkin, 2013). At this juncture, businesses like Toyota focuses on increasing the customer satisfaction by offering the discount and other related lucrative offers.
  • Retrenchment strategy-This strategy is applied when company finds itself in weak competitive stage and declining in market position due to poor performance of existing product line. It helps to improve company’s performance by various strategy as turnaround, divestment and liquidation strategy (Hill, Jones & Schilling, 2015). The turnaround strategy emphasizes on operational efficiency in beginning of the decline rather than on the critical stage. However, such strategies work when the business does not sufficient resources and finance to continue with the operation and meet the expectations of clients.

Business level strategies

Business level strategies refers to those which are used to offer value to customers and attain the competitive advantages with the help of the additional competencies (Nandakumar, Ghobadian & O'Regan, 2010). Core competencies can be derived from the individual, specific and service markets. There are four generic business level strategies such as cost leadership, differentiation, focused cost leadership and focused differentiation (González?Benito & Suárez?González, 2010). The organizations focus on the competitive scope with the help of the cost efficiency and uniqueness in products.

                                                                              Figure 1: Business-level generic strategies

                                                                        (Source: Nandakumar, Ghobadian & O'Regan, 2010)

  • Differentiation strategy- The main aim of the strategy is to offer the product which is different from competitive items in the form of quality, uniqueness and specially with respect to cost etc. (Aaker, 2009). As per the differentiation, organizations like Toyota emphasizes on the high-quality products, rapid innovations and creativity, high customer service to present the products differentially. For example, Rolex company is using the differentiation strategy to grab the consumer market by offering the quality watches (Kapoor watch company, 2018).
  • Cost leadership strategy-The company leads in the competitive market place on the basis of cost and price with cost leadership strategy because it emphasizes on providing the products at a low cost (Valipour, Birjandi & Honarbakhsh, 2012). The firm reduces the price of the commodity as per the cost structure to attract the consumers and share the benefits to the customers in the form of low price of the products. This stage can be achieved through minimization of operational cost, additional expenses and development cost etc.
  • Focused low-cost strategy-In this type of strategy, organizations are not only centralized to the cost but a special segment is also a focal point to attract the customers (Snaith, 2013). The firm like Toyota select a small segment from entire market place and offers the products and services at low price to that particular segment instead of entire market. For example, a supplier company which is delivering the goods only to one country and giving a special weightage to requirements of a small segment.
  • Focused differentiation-The organizations not only emphasize on the differentiation in the form of quality, price, uniqueness but also centralized with special segment of the consumer market (Huselid & Becker, 2011). Further, in this type of strategy, organizations offer the products and services in more efficient manner to attract the particular segment; however, there is a risk that competitors may overcome the selected segment by offering the variety of products.

Network, partnerships and alliances strategy

These are the strategies used to get success in the competitive environment by developing network, formation of partnerships and alliances etc. 

  • Network strategy-Networking strategies are used to generate new connections as well as retaining the existing networks for the growth of the businesses such as Toyota. With the help of these strategies’ organizations can be effectively communicate with expertise to know about potential customers. Further, it would be beneficial to the businesses in the form of achievements of targets and to reach at the level of expected potentials. These strategies involve the focuses on relationship building, enter into unknown branches of business and generate the social creeps to expand (Jennifer, 2018).
  • Partnerships strategy-Companies work with partners across the country as well as within the value chain due to different reasons such as to expansion of business and the requirement to cut cost (IMD, 2018). Partnerships strategies are useful for all the parties of business because it is based on the bargaining situation of both the sides. At this juncture, the success of partnerships has been accelerated in current business era due to marking of risk-sharing, technology upgradation and pool of resources etc. (Nadkarni, 2010). Moreover, it would be helpful for the organizations like Toyota to share the risk and maximize the availability of resources.
  • Alliances strategy-Strategic alliance is a small part of legal partnership entity which is based on the agreement between two or more than two parties (CFI Education Inc, 2018). This type of formation can be adopted by many organizations such as Toyota to achieve the set of agreed objectives. For example, in a strategic alliance, two companies such as A and B can integrate their respective capabilities, resources as well as core competencies. All these would be done to acquire mutual interest in manufacturing, designing or products along with distribution of services.

Global strategies

There are different global strategies used by businesses operating across the globe. It consists of standardization and adaptation through which business can effectively track the performance. However, Bordean, Borza, Nistor & Mitra (2010) cultural differences of each country impede the performance of corporation because of unique belief system of each region. For this purpose, it becomes crucial for an organization to focus on those differences and accordingly shed light on actual performance. However, adaptation facilitates to resolve the issue related to cultural barriers. Also, the appropriate degree of adaptation makes it easy to adapt the current business practices on the basis of changing scenario (Ramamurti, 2012). This contribute towards increasing overall rate of return. Owing to this, companies like Toyota standardize its marketing practices and business model along with the appropriate degree of adaptation. This enables business to cater the requirement of different stakeholders.

Evaluating Current Suitable Strategy of Toyota

According to several studies, Toyota is using different types of strategies such as generic-business level strategies, growth-corporate level and networking strategies (Toyota Annual Report, 2017; Andrew Thompson, 2018). Toyota motor corporation is a global force in the automobile industry of competitive business environment and success of the organization is based on the effectiveness of the generic and growth strategies (Andrew Thompson, 2018). In this regard, growth strategies have an aim to achieve the large market share with minimum expenditure for short-term earnings (Hill, 2017). As per the several studies, growth strategies have tremendous effects on the technological innovations of the products to achieve the competitive expansion against another firms (Boxall & Purcell, 2011; Rothaermel, 2015). In this context, Toyota is ensuring the benefits and high rate of technological advancements in comparison to Maruti, Suzuki and other automobile companies (Toyota Motor Corporation, 2018).

Different strategies used in Toyota

The Toyota is expanding its business at global level by applying the appropriate growth strategy with the help of specification like market diversification, product and market development along with market penetration etc. (PR Newswire, 2018). On the other hand, Toyota is getting success and focusing on the innovations in the automobile products through the application of growth strategies. Thus, it indicates that the growth and generic strategies are suitable for the Toyota which are currently in use. These generic strategies are the combination of the cost leadership and vast differentiation for the Toyota motor corporation. At this juncture, with the help of the cost leadership, Toyota is centralizing with minimization of cost and selling price of the products. However, differentiation strategy is ensuring that Toyota is offering the unique products with the proper development as well as innovations to achieve the competitive advantages in the market (Toyota Annual Report, 2017). Further, Toyota is encompassing a connected manifesto which is important for the businesses of automakers to provide a vide variety of cars, develop new modes to use and create new value for the connected cars (Toyota Annual Report, 2017). Nonetheless, with the help of the networking strategy company is focusing on the connected technologies to attain further growth (Toyota Motor Corporation, 2017). Therefore, it reveals that the current strategies of the Toyota are effective in nature for the growth of the business and maintain a leading role in the stratgeic environment.

The analysis of the strategies indicates that recently Toyota is focusing on the alliance’s strategies for the developments in the car models and expansion of the business along with creativity. For instance, Toyota has done alliances with other Japanese car makers such as Subaru and Suzuki to maximize the sales ratio in the Asian countries. In this alliance, the company has decided to spent on the fuel cell ungradation and realize that there is a risk factor so company turn to electronic vehicle mix (Steve, 2018). At this juncture, Cartwright & Cooper (2012) stated that company can apply the strategic alliances in three different forms involving joint venture, equity and non-equity strategic alliance etc. In this context, the companies agreed upon a contractual relationship to share the resources-financial, human, physical-machinery, equipment’s and capabilities for the expansion and growth of the business (Das & Rahman, 2010). Thus, it reveals that strategic alliances are effective for the companies to achieve the high volume of profits with minimum application of resources because all types of resources would be shared as per the requirements.     

Partnership is also followed by Toyota to build a continuous relationship with automotive companies and to establish the brand image in the front of the competitors. For instance, Toyota has entered into a partnership agreement with Mazda before 3 years ago and both the companies were mutually benefited in terms of adoption of new technologies and products. Further, the company has decided to change of resources, complementing the technologies and products towards the achievement of goal to deliver more luxury cars (Toyota Motor Corporation, 2017). At this juncture, main aim of partnership with Mazda is to achieve the sustainable growth of the business, strong collaboration with parties, to deal with the challenges of automotive industry. Thus, it reveals that partnership offers the competitive advantages to firms by providing the variety of products and services to grab the entire consumer market.

Recommendation

On the basis of the study, it has been found that Toyota is using almost all the required strategies involving business-level, corporate, networking, partnership, alliances and global to expand the business and create innovations in production of cars. Although, it has been recommended that Toyota should stay on the business level strategies- differentiation and networking strategy to achieve higher growth and fulfill the demands of customers.

  • Differentiation strategy- As per the analysis, Toyota focuses on the international strategies and gain the attention of customers. However, it is suggested that Toyota should implement business level strategy as the differentiation. In this type of strategy, company would be able to offer the unique, innovative and advanced technology related products to attract the large number of customers. Further, the company can meet the demand of the customers as well as can apply the extra amount or premium for the produced goods and services. In this regard, Toyota can enhance the customer loyalty and make the strong identity in front of the competitors.
  • Networking strategy- Although, Toyota is already engaged with networking strategy but it is suggested that business should build vaster network since it would be helpful in collaborating the key partners who can helps in bringing innovation in the current products and services. Business networking has huge benefits because it generates new opportunities through joint venture, partnerships, increases asset sales and lead the clients. At this juncture, joint venture in developed countries can be used as the platform to expand into the new market and increase the volume of buyers.

Conclusions

On the basis of report, it has been concluded that the use of strategies is depends on the nature of the business. Toyota uses different types of business level strategies such as cost leaderships, differentiation, focused cost etc. to enhance the business and improve the volume. In this regard, with the help of the cost leadership strategy, company is focusing on the low prices with delivery of quality cars. However, company uses networking strategy to develop the new connections along with retaining the current growth and enhance the profits. On the basis of evaluation, it has also been concluded that alliances strategy is supportive to develop the new car models due to collaboration of resources and assets.

References

Aaker, D. A. (2009). Brand portfolio strategy: Creating relevance, differentiation, energy, leverage, and clarity. Simon and Schuster.

Andrew, T. (2018). Toyota’s Generic Strategy & Intensive Growth Strategies. [Online]. Available at: <https://panmore.com/toyota-generic-strategy-intensive-growth-strategies>. [Accessed on: 24th September 2018].

Bordean, O. N., Borza, A. I., Nistor, R. L., & Mitra, C. S. (2010). The use of Michael Porter's generic strategies in the Romanian hotel industry. International Journal of Trade, Economics and Finance, 1(2), 173.

Boxall, P., & Purcell, J. (2011). Strategy and human resource management. Macmillan International Higher Education.

Cartwright, S., & Cooper, C. L. (2012). Managing mergers acquisitions and strategic alliances. Routledge.

CFI Education Inc, (2018). Strategic Alliances. [Online]. Available at: <https://corporatefinanceinstitute.com/resources/knowledge/strategy/strategic-alliances/>. [Accessed on: 24th September 2018].

Das, T. K., & Rahman, N. (2010). Determinants of partner opportunism in strategic alliances: a conceptual framework. Journal of Business and Psychology, 25(1), 55-74.

Freeman, R. E. (2010). Strategic management: A stakeholder approach. Cambridge university press.

González?Benito, J., & Suárez?González, I. (2010). A study of the role played by manufacturing strategic objectives and capabilities in understanding the relationship between Porter's generic strategies and business performance. British Journal of Management, 21(4), 1027-1043.

Hill, C. W., Jones, G. R., & Schilling, M. A. (2015). Strategic management theory. Cengage Learning,.

Hill, T. (2017). Manufacturing strategy: the strategic management of the manufacturing function. Macmillan International Higher Education.

Huselid, M. A., & Becker, B. E. (2011). Bridging micro and macro domains: Workforce differentiation and strategic human resource management.

IMD, 2018. Strategic Partnerships. [Online]. Available at: <https://www.imd.org/research/insightsimd/strategic-partnerships/>. [Accessed on: 24th September 2018].

Jennifer, S. (2018). 3 Powerful Networking Strategies that Never Fail. [Online]. Available at: <https://www.entrepreneur.com/article/298262>. [Accessed on 26th September 2018].

Kapoor watch company, (2018). Rolex watches. [Online]. Available at: <https://www.kapoorwatch.com/rolex>. [Accessed on 26th September 2018].

Lubatkin, M. (2013). Merger strategies and stockholder value. In Mergers & Acquisitions (pp. 43-57). Routledge.

Nadkarni, V. (2010). Strategic partnerships in Asia: Balancing without alliances. Routledge.

Nandakumar, M. K., Ghobadian, A., & O'Regan, N. (2010). Business-level strategy and performance: The moderating effects of environment and structure. Management decision, 48(6), 907-939.

PR Newswire, (2018). Toyota and Mazda Enter Business and Capital Alliance. [Online]. Available at: <https://www.prnewswire.com/news-releases/toyota-and-mazda-enter-business-and-capital-alliance-300499722.html>. [Accessed on 26th September 2018].

Prange, C., & Verdier, S. (2011). Dynamic capabilities, internationalization processes and performance. Journal of World Business, 46(1), 126-133.

Ramamurti, R. (2012). What is really different about emerging market multinationals?. Global Strategy Journal, 2(1), 41-47.

Rothaermel, F. T. (2015). Strategic management. McGraw-Hill Education.

Snaith, H. J. (2013). Perovskites: the emergence of a new era for low-cost, high-efficiency solar cells. The Journal of Physical Chemistry Letters, 4(21), 3623-3630.

Steve, H. (2018). Mazda And Toyota Form Strategic Alliance With An Eye On Electric Cars. [Online]. Available at: <https://gas2.org/2017/08/04/mazda-toyota-form-strategic-alliance-electric-cars/>. [Accessed on: 24th September 2018].

Toyota Annual Report, (2017). The Changing Business Environment and the Expansion of Mobility Value. [PDF]. Available at: <https://www.toyota-global.com/pages/contents/investors/ir_library/annual/pdf/2017/ar17_2_en.pdf>. [Accessed on: 24th September 2018].

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Valipour, H., Birjandi, H., & Honarbakhsh, S. (2012). The effects of cost leadership strategy and product differentiation strategy on the performance of firms. Journal of Asian Business Strategy, 2(1), 14.

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