Business firms use the concept of strategy to achieve one or all of the outlined long-term or overall goals when they face any form of uncertainty. Strategy is an important plan when the available resources needed to deliver goals are limited in nature. This approach entails outlining priorities and goals, identifying the best actions to achieve them, and acquiring the resources needed to execute the intended actions. The strategy will, therefore, help a firm achieve its competitive edge. A competitive advantage identifies the advantages many organizations command over their competitors. These two approaches to business strategy are usually common: market-based and resource-based approaches.
The market-based approach is the first form of strategy. Its users begin by analyzing the existing external business environment to fit the available resources to such an environment. The relevant leaders will achieve the intended aim through continuous analysis and planning. This model will concentrate primarily on the nature and level of competition in the sector. Participants will rely on it to understand the primary differences defining such an external environment.
Consequently, the business will be in a position to deal with every notable factor. For example, Kuwait Airways relies on such an approach to achieve its aims and overcome the problem of competition. This airline company studies the aspects of the external environment, the major competitors, and the notable economic, political, technological, and social affecting its performance. The acquired information is usually utilized to help the company design the most appropriate strategy that is applicable to such an external environment.
Resource-based approach forms the second type of strategy. Such a model compels companies to shift their focus from the external to the internal aspect of the business. The leaders in the company will concentrate on the resources it possesses or needs to acquire in an attempt to form the most appropriate strategy. Professionals relying on this model believe that firms will always have both intangible and tangible resources. Some of them would include knowledge and experience, business skills, advanced technologies, information, and data.
The move to combine all these resources would result in new capabilities. Additionally, the business will create Core Competencies intended to offer the best competitive advantage. Honda is the best example of such an approach. This company’s core competencies, power trains, and engines have given it a unique competitive advantage in its business segment. These gains have given the organization a big name. Companies that follow such a strategy will become true leaders in their respective industries.