Discuss about the Competitive Strategy Generic Theory.

 

 

The “AAA” triangle framework is a marketing idea that has been exploited by several companies and industries within the global market. The application of Adaptation, Aggregation and Arbitrage which is also known as the “AAA” Global framework according to Ghemawat Harvard law professor has been of great help in economic scale improvement in the recent past. The global market has been faced with a lot of challenges which have been eliminated to a certain level through “AAA” Global framework. Formulation of a competitive strategy depends on the relevant factors within the industry affecting affirm within or external forces. For accompany to manage challenges and strong influence from the competitors, a strategy has to put in place (Motohashi 2015). As a result of a number of forces within and without the firms and industries, many business entities has picked a strong strategy like “AAA” triangle to defend themselves from the forces. Such industries which developed application of these strategy has since reduced the level of competition pressure in the industry (European international business association, Pla-barber& Alegre 2010). The companies using adaptation, aggregation and arbitrage enjoy a lot of benefits. These companies enjoy growth in the amount of money and available market shares. The application of adaptation brings together the components of the firm’s models in relation to demand and preferences. The achievement of economies of scale depends on the aggregation strategies of a firm. Therefore companies using aggregation benefits due to the efficiencies in the market and standardization of manufacturing process. Application of third “A” which is arbitrage exploits economy in various markets both national and international. It assists in the location of separate parts in the supply chain management. The scope of this paper investigates the application of adaptation, aggregation and arbitration framework strategy “AAA” in four companies within two industries. The paper examines the application of “AAA” in food and beverage industry and ICT industry (Information Communications Technology industry. The paper examines deep into the two industries selecting two companies. It discusses the competitive strategies being used by each in relation to adaptation, aggregation and arbitrage.

This is a strategy which assists in the development of an overall market value through alteration of the already existing market elements to satisfy customer demands. The application of adaptation by accompany helps in meeting consumer preferences globally.  The strategy is divided into three sub-strategies:  variation strategies which involve mostly the making variations in the production and the services offered by a given company or an industry. The application of this strategy by a given company can be by choice or most of the time it is unavoidable. The strategy is divided into to three parts, the focus type of adaptation where a given company focus on the production specific commodity. Focus can also be applied in terms of geographical based operation where production done by a given industry targets a particular area. The second branch of adaptation strategy is the variation strategies. When accompany operates based on variation strategy they have to make changes in their products as expected by the consumers all over the market. The last branch of adaptation is known as externalization strategy. Externalization involves modification of the company models and strategic alliances.

 

Coca cola Company in the food and beverage industry faced a lot of challenges forcing them to apply the adaptation strategy in the past years (Etienne 2006). The company started as alcoholic drinks producer using cocaine as part of their ingredients. Due to the modification of law in 1886 the company was forced to adapt to the situation and began producing soft drinks. The company faced another challenge in meeting the taste and preference of their customers in 1985 and produced excellent taste. Coca cola products in the United States of America and in Europe has different tastes as a result of different water taste and sugar addition .the Company has used adaptation strategy to deal with situation in the market. Coca Cola Company adopted the franchise design model approach in 1899 leading to improvement in their production scale, communication as well as new equipment.

 

McDonald Food Company is another firm which applies adaptation strategy in management of their challenges. The company started in India in 1996 and since has been stable in the global market.it produced fried bugger using mutton only, chicken bugger, French fry using potatoes along other food staffs. The market was never good since many of the local consumers like cooked food (Olson & lópez 2009). The company faced chargers for the use of meet in bugger sold in America. This forced them to adapt supply of beef bugger in the United States of America after defending themselves in court that products in America is different from India where they only make mutton bugger.

 

 

This strategy majors in creation of perfect economies of scale to cub the different situations in the market. The strategy is employed in a way that it doesn’t compromise the prevailing adaptation but to fit and match with the adaptations. It exploits the global market variation through identification of a standardized regional approach. Coca Cola Company has used the strategy to exploit difference and similarities in their product tastes to maximize on economies of scales. The adoption of the regional approach in dealing with global difference used by coca cola is the most aggregation used in the world today. The company uses aggregation to exploit the similarity of the taste in the other parts of the global market apart from the Europe and United States of America. Aggregation as resulted to the continuous relevancy of coca cola Company in the industry as well in the global market. McDonald Food Company has also maximized on the economies of scale in utilizing the market similarities and currently producing best food staffs for their consumers. McDonald faced competition from other companies but reverted to aggregation strategy to cop up with completion and have the food market control. Indian executive utilized the similarity of the Indians basic menu to solve the problem and maximize on the economies of scale.  The company develops basic research on the R&D trucks the findings and apply them appropriately in relation to the strategies. Current the company is the best in the market through exploitation of economies of scale.

Food and beverage industry has also applied the third generic strategy in the exploitation of the available global advantages (Meyer,2016). Arbitrage enable accompany to exploit the difference in the market instead of assessing the gaps and making the relevant bridging. Coca cola the world’s largest beverage manufacturer uses arbitrage approach to exploit the different tastes in the global market. The taste of the company products in Europe is different from that in United States of America. Coca cola has not made efforts to bridge this gap but has been applying arbitrage strategy to maximize on the sales (Hill & sims-bell 2010). More tasty products from Coca Cola Company are sold at higher prices. Products with low tastes sells at low prices as per the approach. The company also utilizes an administrative arbitrage approach on profit gained. Similarly, McDonald food firm utilizes the bridge in their bugger to acquire more profit. The more quality bugger are sold at high prices as seen in coca cola industry.  Geographic strategy as another approach the two companies above maximize on. Foodstuffs and beverages produced by these two companies reach various markets in the world due in time. From this industry it is evident that all the arbitrage strategies results into maximization of profit rather than bridging differences in the market.

The theory of adaptation, aggregation and arbitrage has been the reason behind the success of the two ICT companies within the industry for long time. The government provided the industry with an autonomy to defend themselves from stiff competition in the global market. The need for illustration on computer and ICT skill enabled Apple and IBM to stand the best of all time in the market (Motohashi 2015). Several companies in early 1980 entered into the industry which is almost being monopolized by the two companies. During the era of personal computer many invested in the industry due the high demands but never made through to date as a result of their weak strategies. Apple and IBM took advantage of the authority granted by adapting the “AAA” Global strategy beating down best financed companies and taking over. Apple and IBM makes software equipment, hardware and microchips. They also deal with modern computer equipment in all time share computing facilities and Ethernet connection in offices which earned them a large profit margin.

Apple as a company in the information and technology applies the use of adaptation. The company use focus adaptation strategy approach in fitting in the market. IBM also has adapted the same model as that of the competitor. The companies major on the satisfaction of local consumers than the global due to profit margin and sales margin (Tihanyi., Pedersen, , Devinney & Banalieva 2015). In supply of their products they use segment focus approach. This involves targeting a given group than supplying a lot to the global market with low profit margin.  Apple and IBM have accepted the reality and sells more to the local buyers as a result of adaptation geographic scope.

Apple and IBM in personal and computing industry has been relevant due to economies of scale they apply in various segments.  The companies have avoided aggregation in the whole area of information and technology provision in in the whole market (Ghemawat 2000). Most of the company’s revenues are acquired through a greater market segmentation inconsideration of the prevailing economies of scale. The products from Apple and IBM are specific to individual customer within the market (Ghemawat 2007). Even though the companies utilize the local market they also sell to external market all around the globe. This is as a result of aggregation strategy which demands more on economies of scale. It is important for a company to enlarge and minimize their scope of operation as it creates efficiency within the business (Day 2004). The creation of new markets increases the range of commodities being offered thus increasing profit margin of a firm sales. Globalization improves economies of scale. The global economicvalue is important when supplying produce to global customers via a coordinated chain of supply (Porter 1980). Apple and IBM are able to acquire the market power and capability expand.

Apple and IBM companies applies the use of arbitrage to maximize on their sales. In this way the companies are able to exploit variations in the market and in their areas of production. Instead of correcting the differences in their line of production they enjoy the gap and generate income from it (Gunasekaran 2001). These companies utilizes labor difference within to maximize on profit generation. Apple and IBM  experiences low sales in the global market due to the prevailing stiff completion from other producers of the same.in contrary for the companies to maximize on ensuring that the gap in the global market is bridged they turn their back and supply more to  local market. These companies sell more of their products to the local market than to the outside but ensures maximum profit margin.

In conclusion, competitive strategy is one of the best strategies that businesses and their operators should opt for. This will rank them averagely well or even at the top in terms of those who are fetching out well in the business domain or the business world (Montgomery 1991). Competitive strategy is simpler to the business people and can be applicable for the purpose of success and healthy competitive competition. Adaptation, aggregation and arbitration applies works together in ensuring growth and expansion of a given firm as discussed above (Porter 1998). The above companies maintain their existence in the world market regardless of several other firms with well and stable financiers but always dormant due to “AAA” strategy application.

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