Strategic management: theory: an integrated approach

A profitable niche

A profitable niche is a market emphasis that allows a company to significantly achieve its goals. A normal business plan requires an organization to establish acceptable estimates, which implies that the organization must ensure that it has the necessary resources to accomplish its objectives. Nonetheless, in the case of a profitable niche, a company can exceed its sales targets even with limited resources (Hunger et.al 165). It is important to note, however, that such an opportunity is contingent on several conditions; there are those that can produce this situation and those that can cause it to disappear. Considerably, various issues can lead to the emergence of propitious niche. One of the areas that have been noticeable in the creation of the propitious niche is the changing technological situations. Innovation changes tremendously and an organization that coincides with the relevant technical case gets a chance to enjoy the propitious niche.

The disappearance of the propitious niche

The disappearance of the propitious niche is dependent on both external and internal conditions. Under the external environment, there is the contracting and expanding options. In the contracting alternative, there are cases when a company can be producing goods, but because of uncontrollable situations in the market such as inflation, the buyers cannot buy the products. Still, under the external context, the niche can disappear because of expanding activities in the market. For instance, there are cases where the market demand increases and a company becomes unable to handle this situation. In such an occurrence, another competitor can take advantage and end up overtaking the first business that was offering the commodities.

Contracting and expansion factors

Similarly, under the internal context, there is also the aspect of contracting and expansion factors that affect propitious niche. Under the internal contracting element, it could involve a situation where a company decides to save its resources towards the provision of goods and services, and as a result, that company fails to meet the demands of the market. On the part of the internal expansion factor that makes propitious niche to diminish is when an organization decides to increase its production activities to the extent that it forgets its core business niche; as a result, it loses its core market to a competitor.

The challenges of utilizing cost leadership and differentiation

Practically, it is difficult for an organization to utilize both cost leadership strategy and at the same time use the differentiation approach. Cost leadership involves minimizing costs but aim at maximizing profits (Hill, Jones, and Melissa 12). Conversely, differentiation requires the use of resources to make a commodity unique.

Considerably, this makes the use of these two approaches challenging. However, Banker, Mashruwala, and Tripathy indicate that when an organization maintains a close customer relationship, it is possible to manage a business with the use of both differentiation and cost leadership (879). One of the companies that have survived in using both differentiation and cost leadership is Dell (Flew 33). In this situation, Dell had a direct contact with its prospective customers, and as a result of this relationship, the company identified specific needs if its clients. Here, the company used resources that coincided with the customized needs of every customer. In some cases, producers make commodities using features that may not be relevant to the needs of the clients. Therefore, such a producer ends up wasting resources on differentiating a product feature that may have less impact on the buyers.

Works Cited

D. Banker, Rajiv, Raj Mashruwala, and Arindam Tripathy. “Does a differentiation strategy lead to more sustainable financial performance than a cost leadership strategy?.” Management Decision 52.5 (2014): 872-896.

Flew, Terry. Global creative industries. John Wiley & Sons, 2013.

Hill, Charles WL, Gareth R. Jones, and Melissa A. Schilling. Strategic management: theory: an integrated approach. Cengage Learning, 2014.

Hunger, J. David, et al. “Strategic Management and Business Policy: Globalization, Innovation and Sustainability.” (2015).