Economy deals with the utilization of scarce resource with an aim of maximizing profits. Having the knowledge of economy helps people draw up strategies that will foster this principle of economics perfectly. In drawing up strategies, it should be clear that it has a single part comprising of both a positive side and the negative sides, also known as the normative side. The positive side focuses on how and why other business groups make profits while the normative side focuses on why the same styles of strategy do not work for all business groups.
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The positive side of strategy looks at the success of various strategies and draws principles out of them with an aim of also creating success. This involves coming up with narrations that are simple, clear and praiseworthy. These type of narrations have three objects: the actors, their ultimate goals and the options, which were available to them (Grimm, et al., 2006). One would focus on two companies having the same goal of maximizing profits while the actors, goals, and the options do not relate directly to reality. Such models are locked up and do not allow new entrants, instead, they are left to differentiate and not to.
The other thing is that no model can be as rich as, and to fashion as the world business. In such a case, there is a discrepancy between facts on ground and the intricacy of the representation or the model thus leading to one thing, comprehension of little portions of strategy.
In strategy, another essential fact is equilibrium whose principle states that if each person in a game is doing his best even if presented with everyone else’s options (Morton, 1999). This is involves using different tactics in order to compete favorably in a market niche. One business company should not use the same tactics as used by their rival organization because this would always create an imbalance (DeLong, (n.d).).
If this system would not be in place, the success of many companies would be a chance or a luck and not by painstaking procedures. These painstaking procedures can create principles that others can refer to in future (Foss, 2006). The focus should then be in situations where all companies are working to their level best, and not succeeding buy luck.
The other wrong side of a strategy is transferring practices from one case to the other thinking that they will work. We do not need to impose the strategies used by other companies on other companies because the contextual situations are usually different. Companies are heterogeneous, thus; a strategy must address this fact very clear. This means that that there are dimensions that are not same in all companies and this knowledge will comes up with distinguished strategies that work for one company and not to the other. Such dimensions are things like the culture of the people around that locality, the assets that the company has and the image of the brand. The cookie cutter approach does not consider this uniqueness of a company.
Positive aspects of strategy
If one selects the appropriate strategy that suits his or her situation, he or she is bound to enjoy several advantages. Strategies determine the exact goals that an organizations or a company is set to achieve. With such goals, the company will gather all the resource and channel them to organized use in order to achieve the goals. Strategy will determine how a company or an organization is going to achieve its goals after a certain period. That is to say, that it keeps the company in the right track, keenly working in accordance to the mission. This is very important in the case of helping all the team members to work constantly towards the achievement of such a goal.
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Again, a clearly drawn strategy in the context of organizations communicates the specific goals of the organization to the constituents of the organization. This will ensure that all the people are working on the right task at any one particular time. This will create harmony in the achieving the goals of the organization. That harmony creates efficiency and hence making the company to achieve the goals within the required time.
Creating good strategy will make all the members of the organization own the plan. This element makes the other members of the organization be part of the whole organization (McNamara, (n.d)). This is contrary to some organizations whose members view plans as belonging to the management team alone. This will in turn make them have intrinsic motivation and thereby contribute to the wholesome success of the company or the organization. This aspect is very crucial for the success of any organization. If the members know that hey are part of the plan, them they will contribute to their level best.
Strategy will create a base for checking progress. This is in making momentary evaluation prior to the main evaluation. This helps to keep the process that leads to success running smoothly and with surety. If there were a problem, the necessary change is made based on clear information retrieved from such an evaluation.
It also calls from within people their best in contributing to the organization in terms of ideas. In the process of formulating a strategy, all members in the planning team are eager to put forward facts that are well agued and informed. The result of this is coming up with quality decisions that are most likely to give the company or the organization success.
Normative aspects of strategy
There are moments when strategies focus on a future that do not come to be. Planning is usually a very demanding undertaking. In some cases, the plans expected to work may not work because of some few reasons (Robinson, 2005). If they fail, the organization may incur some losses. Even though planning is taking a risk, it has worked well for many organizations. Studies into this fact have shown that those companies and organizations have had much more success.
Using strategy also is expensive. Coming up with one that works will need the study of many aspects. This research is what will require time and resources in establishing the facts. Another thing is that strategies will only focus on long term goals for organizations. Some times, there are crises in organizations and companies therefore coming up with a strategy to solve the case, is not always practical.
A business model shows the underlying principles of the way a company or an organization uses make delivers and articulate value. This is in terms of economic, social political and other types of values. Strategy is a core part of the process of creating a business model. A business must represent the main features of business model. These include purpose, which describes reason for existence.
Other aspects are strategies that show how organizations are going to achieve their goals in a certain period. Infrastructure describes the physical amenities of an organization, in relation to what it does to achieve its goals. Organizational structures show the arrangement of the human resource in an organization. The arrangement depends on each person’s responsibilities. Trading practices are the things that the companies do as they sell their services or products. Lastly, we have the set policies and processes that show how the organization does its activities every day.
There are several types of business models. This depends on how organizations look at and practice the aspects discussed above. Many people have defined different models depending on their contextual situations. In that case, we do not have specific business models to say that they are universal. Secondly, as technology advances, internet based models are coming up. These are some that we have mentioned in this essay; utility business model, which customers are on a pay as you go tariff. Such businesses are like the mobile phone service providers, where customer buy credit and use their money at the instance they are using the service.
Another example is “multi –level marketing (MLM)” (Consumer Awareness, par 1, (n.d)) where firms and companies use “endless chain or pyramid selling scheme” (Consumer Awareness, par 1, (n.d)). This is where anyone is used as a sales person for a company. The person earns compensation depending on how he or she is getting other customers (MLM, 2003). He or she also rises up certain ranks depending on how many people she has brought. In addition, the growth through the rank depends on the number of people brought by those he or she brought.
E- Business model is also growing over time. This is the use of internet facility to sell to as many people as possible (Jansen, et al., 2007). With this system, many business people have sold their services across the world. This part of technology is really revolutionizing business (MLM, (n.d).). There are thousands of businesses using this system. Industries such as software, books and even transport industries are using internet to serve their customers (Techarena Community, 2004).
Cookie cutter approach
This is the approach that business people and trainers apply strategies used in other companies directly to their own situations. The author says that this is the wrong approach. The right way is to draw principles out of the various case studies and use them to apply appropriately into your own situation (Malhotra, 2001). The author emphasizes the fact that every situation is unique because of facts such as culture, business model, the products the companies produces and many other factors.
The researchers should therefore get reasons to why other strategies succeed. In this, they should then come up with principles that hold true for all cases. Therefore, the researcher should ultimately be looking for the knowledge backing the strategy (Amidon, 1997). This will make the principles that we are advocating come up clearly and hence lead to its easy application in other cases.
Amidon, M. D., 1997. Innovation strategy for the knowledge economy: the ken awakening. Butterworth-Heinemann.
DeLong, B., (n.d). Thinking like an Economist. Web.
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Foss, J. N., 2006. Strategy, Economic Organization, and the Knowledge Economy: The Coordination of Firms and Resources. Oxford University Press.
Grimm, M. C. et al,. 2006, Strategy as action: competitive dynamics and competitive advantage. Oxford University Press.
Jansen W., et al., 2007. New business models for the knowledge economy. Gower Publishing.
Malhotra, Y., 2001. Knowledge management and business model innovation. Idea Group Inc (IGI).
McNamara, C., (n.d). Strategic Planning (in nonprofit or for-profit organizations). Web.
MLM.com, (2003). Understanding Multi-level Commissions. Web.
MLM The Truth.com, (n.d). Consumer Awareness Institute. Web.
Morton, S. F., (1999). Why economics has been Fruitful for Strategy. Financial Times. pp. 1 – 5. Web.
Robinson, R., (2005). The Advantages and Disadvantages of Strategic Management. Web.
Techarena Community, (2004). Types of E-Business Models and Markets. Web.