Thursday, March 29, 2012

Research Paper on Business Strategy

A Critical Review of a Customer-Focused Business Strategy

Unquestionably the success of a business depends on a strategy that was chosen to be implemented. In a nutshell a business strategy is a manner in which the firm formulates, implements and evaluates cross-functional decisions that will enable an organization to achieve its long-term objectives (Campbel, 2002, p. 234). A strategy a firm chooses is usually customized, thus every company develops its own kind of business strategy. However, in general, the business strategies fall into three main categories that include many subcategories (Barney, 2000, p. 197). These main categories are customer-focused, operations-focused and product-focused strategies. The following essay will focus primary on the customer-focused strategy. The strategy will be defined in details as well as examples of its implementation and advantages and disadvantages of its use will be provided.


Customer-focused business strategies as the name suggest emphasize a close relationship with the customer. This strategy approach focuses on customer value and customer profitability quite the opposite to share satisfaction, or product profitability that is a focus in other strategies. Today more and more companies choose to draw on the customer-focused strategy, however, the strategy is not always applicable. The strategy can be successfully implemented only under the condition that the company's products and services are essentially a commodity in the marketplace. Consequently, the products and services produced and provided by the company should be available from multiple sources at approximately the same price and quality (Hines, 2004, p. 23-24).

The approach of customer-focused strategy accepts that a great investment should be made in marketing activities in order to get customer recognition and make profits. At the same time, without a shadow of doubt, the firm expects to earn high returns on the customer satisfaction in the future (Hines, 2004, p. 24). Thus, this approach combines the traditional marketing approach, where the customer is the centre that gives signals to the company, and the finance approach, where the profit generation is put in the centre.

Customer-focused bushiness strategy is used by big retail corporation as well as now it is widely used by companies that offer their goods to be purchased on the Internet. The Internet has in fact had started a new ear of customer-focused business strategy because it offered many tools with the help of which it was much easier for companies to put the customer in the centre of the deal Customer-focus and devotion is presented on the websites of many companies when offering a customer a variety of options of purchasing a particular product. Consequently, such approach generates profits and creates customer satisfaction (Sharma, 2002, pp. 696-697).

Customer-focused strategy has many advantages. To begin with, the customer-focused strategy initially focuses on the long-term objectives of the company. The long-term objectives are achieved by seeing the customers as assets who provide long-term returns. Positioning the customers in the above way the investments made in marketing and advertising activities starts to be seen as a direct investment made into the customer (Hines, 2004, p. 2005). Consequently, such approach enables the business to earn high returns on the marketing and advertising investment. The second advantage of this strategy I would like to mention is that it recognizes that the value of customers might vary significantly over time. The above means that the strategy considers that very often large customers who are commonly the largest revenue generators for a company are not automatically the most profitable ones (Barney, 2000, p. 198).. This is due to the fact that serving large customers requires high costs from the company oppositely from small and medium customers (Campbel, 2002, p. 235).

However, the discussed strategy has also its disadvantages. The disadvantage I would like to mention is that customer-focused strategy does not always assume the importance of the value of a customer to a company. Thus, the customer-focused strategy can be successful when it considers the two main factors: the value that a firm provides to a customer and the value of a customer to the firm. The rule seems to be simple on the paper, however, it is the problem many businesses overlook when choosing to implement the customer-focused business strategy. Another big disadvantage is that for most organizations it seems to be difficult to indentify “the customer”, and then to integrate customer-level data sources. Additionally, organizations face a tough challenge when trying to establish the component metrics needed to develop useful customer profitability metric.

In conclusion I would like to say that certainly customer-focused business strategy offers many opportunities to a business as well as can cause failure. Those companies that are willing to implement the above strategy should be ready to bring the people, processes, and technology into alignment with the objectives of the strategy.
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