Importance of Strategic Thinking

Many companies struggle with understanding their customers and overall market. This is very dangerous because it inhibits the firm to be able to develop and execute an effective strategy. Another popular problem many companies experience is the tendency of trying to be everything to everyone. This usually holds a company back from creating an excellent product. Instead, the firm will have a large variety of mediocre goods. If the company has planned for this approach it can still be quite effective; however, in order to efficiently maximize profits with this approach, the company has to be a low cost leader. The whole point of this discussion is that employees need to learn how to implement strategic thinking. They need to learn how to position their products and prices in the market in order to create a competitive advantage. With this competitive advantage, companies will capture a large market share and generate large profits. This will impress all steak-holders of the firm and raise the overall company value.

When positioning a product in the market there are 5 general segments. These include the high cost, performance, traditional, size, and low cost. As time goes on, consumers are going to demand all goods to have better performance and smaller size. In many industries including: vehicles, computers, cell phones, motorcycles, and many other products, these are two most important characteristics. All of the five segments are positioned on the same grid but in different areas. When thinking about the different section think about a perceptual map that has two different criteria. Look to the picture on the right hand of the screen but substitute the values with the ones I am going to list. On one side there is the size of the good. The higher the unit is on the map the larger the size. On the other vertices is the performance. As the product moves from left to right the performance improves. These two criteria determine which segment the product fits under. The five different segments are presented as large circles that move toward lower size and higher performance as time goes on. These circles never intersect but move diagonal together. An example of this would be a circle that represents the low cost division. It would be positioned in the upper left hand corner. This would represent that it has the largest size and the worst performance. Directly below the low cost is the size section. It has a lower size than the low cost, but has the same performance. In the middle of the five segments is the traditional. It is a little bit bigger than the size section but smaller than the low cost. It has better performance than both of them. The performance section is on the right corner of the size section. It has a larger size than traditional but much better performance than the other three. The last segment is the high-cost. It is positioned off the bottom right tip of the traditional. It has the lowest size and the highest performance of all sectors. The costs of the goods are going to be in direct correlation to the size and performance of the widget. Companies need to think which segment they are going to pursue. They also need to plan for the future and design a product that can be competitive in their industry.

There are many different factors that will determine what segment a person fits into. For example, a family of 5 with total income at $50,000 is probably not going to be looking for a car in the performance or high-cost section. They are going to be much more interested in purchasing a traditional or low-cost vehicle. On the other end of the spectrum would be a single, college graduate that makes $75,000 a year. He would be more interested in a car that fits in the size or high-cost section. He is going to value a small performance based vehicle over a low cost minivan.

Companies need to determine which segment they can gain the most market share. This will help it on the production side as well as the finance department. Strategic thinking is the art of looking at all of the outside factors. It is thinking of a solution that solves all the problems in the least cost method possible. Companies are constantly looking for employees that can implement strategic thinking skills. They want people that are going to be able to solve difficult problems with creative ideas. The first step in positioning a product is to gain a detailed understanding of the market. It is important to do significant research so you can analyze the different forces in the market. After this is done, you can proceed to look at your company’s strengths, weaknesses, opportunities, and threats. This will give you an idea on where you company should place its precious resources. The third basic step is to give your actual suggestion on what the company should do. It is important to back up your recommendations with marketing research and statistical facts. Lastly, it is essential to have a control mechanism to keep track of how your recommendations are playing out.

Executing strategic problem solving is going to be very beneficial to your company, and raise your overall market worth. Through practice and dedication it is possible to understand a market and make excellent managerial recommendations.