The Product / Service Concept

Like the business definition, an explicit product/service concept could have far-reaching implications of strategic management. A product/service concept is the manner in which a company perceives its product or service. Such a perception is based on how the product or service provides functions that satisfy customer needs. Consider the examples given below where companies define their product/service concepts and what implications such definitions have.

Modi Xerox: viewed its product concept as providing neat reproduction facilities at a reasonable cost per copy.

Bhadrachalam Paperboards Ltd: recognized paper as a product and not as a commodity. As a result of this, it has been able to consider the productivity of its customers and make tailor-made products for them. In the process, it comes in direct contact with customers rather than the wholesale agents, thus defying the traditional way in which the paper business operates.

HCL Ltd: perceived the computer not as a sophisticated awe-inspiring machine but as an everyday commodity. Such a product concept prompted it to advertise the computer as a consumer durable available through an innovative hire-purchase scheme.

A product/service concept, when defined carefully and innovatively, can prove to be of significant worth to strategists in different phases of strategic management. An explicit business definition and product/service concept are powerful tools for strategic management.

The vision, mission, business definition, and product/service concept serve to determine the basic philosophy that is adopted by an organisation in the long run. To realise its mission and to achieve its intent organisation will have to set goals and objectives to be pursued in the short run the next section deals with objectives and goals.

This lesson has been devoted to the discussion of the hierarchy of strategic intent. Organizations lay down objectives at different levels, starting from the enunciation of their strategic intent down to the practical level of time bound, specific objectives. Strategic intent refers to the purposes the organisation strives for. These may be expressed in terms of a hierarchy of strategic intent. The framework, within which firms operate, adopt a predetermined direction, and attempt to achieve their goal, is provided by an overarching strategic intent.

The hierarchy of strategic intent it covers the vision and mission, business definition, and the goals and objectives.

Associated with the idea of strategic intent are the concepts of stretch, leverage, and fit. Stretch is a misfit between resources and aspirations. Leverage refers to concentrating, accumulating, complementing, conserving, and recovering resources in such a manner that a measure resource base is stretched to meet the aspirations that an organisation dares to have. The idea of stretch is diametrically opposite to the idea of fit, which means positioning the firm by matching its organisational resources to its environment.

Vision constitutes future aspirations that lead to an inspiration to be the best in one’s field activity. This has several benefits. The process of envisioning involves dealing with the two components of core ideology and envisioned future. The core ideology defines the enduring character of an organisation that remains unchangeable. The envisioned future has a time bound, long-term goal and a vivid description of what it will be like to achieve that goal.

Mission is a statement which defines the role that an organisation plays in society has gradually expanded to re present a concept The definition of mission that embodies an organization’s purpose of existence.

Organizations derive their mission statements from the particular set of tasks that they are called upon to perform. Entrepreneurs may envision the type of organisation they wish to build. Major strategists may contribute to the building up of a mission statement formally or informally. Specialized assistance from consultants could also be used as a means for the formulation of a mission statement.

There are several characteristics of a mission statement in order to be effective, a mission statement should be feasible, precise, clear, motivating, and distinctive, indicate the major components of the strategy, and indicate how the objectives are to be accomplished.

Business definition involves defining a business along the three dimensions of customer groups, customer functions, and alternative technologies. Customer groups relate to ‘who’ is being satisfied, customer needs describe ‘what’ is being satisfied, and alternative technologies mean. ‘How’ the need is being satisfied.

Business definition could be defined at several levels. At the corporate level, the business definition will concern itself with the wider meaning of customer groups, customer functions, and alternative technologies. The divisions of an organisation could have more accurate business definitions covering all the three dimensions. Each division could again have more accurate business definitions at the SBUlevel.

Product / service concept is the manner in which a company perceives its products or services. Such a perception is based on how the products or services provide functions that satisfy customer needs.

Go denote what an organisation hopes to accomplish in a period of time. They represent the future state or the outcome of an effort put in now. Objectives are the ends that state specifically how the goals shall be achieved. They are concrete and specific in contrast to goals which are generalized.

Objectives play an important role in strategic management. They define an organization’s relationship with its environment, help an organisation pursue its vision and mission, provide the basis for strategic decision making, and provide the standards for performance appraisal.

The characteristics of objectives should be such that they are understandable, concrete and specific, relate to a time frame, are measurable and controllable, challenging, correlate with other objectives, and are set within constraints. The issues in objective setting are those of specificity, multiplicity, periodicity, verifiability, reality, and quality.

Objectives need to be set in all those performance areas, which are of strategic importance to an organisation. The factors that are taken into account for the formulation of objectives are the forces in the environment, realities of an enterprise’s resources and internal power relationships, the value system of the top executives, and awareness by management.

Critical success factors (CSFs) are crucial for organisational success. When strategists consciously look for such factors and take them into consideration for strategic management, they are likely to be more successful, while putting in relatively less efforts.

An explicit structuring of a hierarchy of strategic intent has important implications for strategic management. It serves as a charter of aims the organisation plans to achieve, is helpful in laying down the aims of different subsystems within an organisation, is a powerful means of communicating the organisational intent down the line, and ensures the creation of a result oriented organisational system.