Every company wants to be successful, which is good but if a company really starts to succeed, it has to deal with problems, such as competitors. According to Magretta (2002), the way to do this is to have a good business strategy that you use to differentiate yourself from the competition and show customers a good value proposition, which will make them want to buy from you. What I have learned is that a good business strategy is important because it provides clarity on what your business is providing for customers (a clear value proposition), which enables a company to differentiate itself from its competitors. Peter mentioned in class that in the context of MikesBikes, most people are going to try to put a bike in every segment, rather than focus on one segment. What I have learned is that a company that is not focused on a particular segment will end up losing to other firms that are focused. This is due to the unfocused firm not being able to get the same efficiency gains from producing one kind of bike and because the focused firms are able to put more resources into a few products rather than spreading their limited resources over a larger number of products. A good example of an unfocused firm is Kmart (Magretta, 2002) because they tried to tap all the possible segments that it could, rather than focusing on a particular group of customers. A firm like Kmart that is trying to enter all segments fails to find a way to differentiate itself from its competitors and be unique (Magretta, 2002). It is tempting to enter all segments because you think that you will be able to make more money that way, but if a firm tries this, they will be beaten every time.
Magretta, J. (2002). Why business models matter. Harvard Business Review, 80(5), 86-92