Pricing as Part of Corporate Strategy

Abstract

Pricing strategies are an integral part of corporate strategy (Helmold et al. 2019). Strategic management has been defined in many different ways based on the organization’s mission, policies, sector, structure, objectives, strengths, weaknesses, opportunities, threats, key success factors or decisions, capabilities, planning, implementation and sustainable competitive advantage. Research on strategic management has a long history. There are several definitions of strategy by key authors in the field of strategic management such Henry Mintzberg or Michael E. Porter. Strategic management can be defined as “the management of an organization’s resources to achieve its goals and objectives. Strategic management involves setting objectives, analysing the competitive environment, analysing the internal organization, evaluating strategies and ensuring that management appropriately rolls out the strategies across the organisation”. At its heart, strategic management involves identifying how the organization stacks up compared to its competitors and recognizing opportunities and threats facing an organization, whether they come from within the organization or from competitors. Strategic management is important for organizations, which is making companies able to compete in a hostile and competitive environment (Johnson and Scholes 1997). Translation of strategic management plans into practice is the most important aspect of the planning itself in any organization. Strategic plans can include actions such as entering new markets, global sourcing, make-or-buy strategies, deployment of new products or services, centralization or decentralization of activities or aligning leadership and resources as outlined by various authors (Johnson and Scholes 1997). Porter is best known for his strategic frameworks and concepts in his paper, which was published in 1980 (Porter 1980). The five forces model has five elements that can be utilized to assess the attractiveness and competitive situation of the industry. Moreover, the generic strategies differentiation and cost leadership are a good method to define, in which direction a company should go to increase profitability and to acquire a competitive advantage (Porter 1980, 1985; Helmold et al. 2019). Chapter 10 outlines the tools which have been derived from authors such as Porter. Mintzberg et al. (1995) define strategy as “the plan, which is a direction, a guide, or a course of action into the future. A pattern, which points to consistency of behaviour over time. A position, which places specific products in particular markets. A perspective, which refers to the fundamental manner of accomplishing goals. A ploy, which is a specific manoeuvre intended to outwit competitors”. Mintzberg provides five definitions of strategy: plan, ploy, pattern, position and perspective (Mintzberg et al. 1995). Firstly, strategy is always a plan. A plan integrates intended actions activities based on previous assessment of the situation. Secondly, as plan, a strategy can be a ploy too, really just a specific manoeuvre intended to outwit an opponent or competitor. If strategies can be intended (whether as general plans or specific ploys), they can also be realized. In other words, defining strategy as plan is not sufficient; we also need a definition that encompasses the resulting behaviour. Thirdly, strategy is a pattern. The definitions of strategy as plan and pattern can be quite independent of one another. Plans may go unrealized, while patterns may appear without preconception. Plans are intended strategy, whereas patterns are the realized strategy. Fourthly, strategy is a perspective. A perspective is not just of a chosen position but consists of an ingrained way of perceiving the world (Mintzberg et al. 1995).