EFFECTS OF HYBRID STRATEGY ON ORGANIZATIONAL PERFORMANCE (A CASE STUDY OF NESTLE PLC)

EFFECTS OF HYBRID STRATEGY ON ORGANIZATIONAL PERFORMANCE (A CASE STUDY OF NESTLE PLC)

CHAPTER ONE

1.1 Background To The Study

According to Porter Generic (1980). Low cost and differentiation strategy constitute and effective strategy in overcoming strong competition and postulated the pursuit of the hybrid or ‘combination ‘strategies which involves the adoption and implementation of two strategies at the same time as against the adoption of a single strategy. (Kim et al., 2004; Spanos et al., 2004). The hybrid’ strategies combine the feature of both low cost and differentiation elements (Gopalakrishna & Subramanian, 2001; Proff, 2000).

A combination strategy provides the advantage of viability profitability .Consequently firms that pursue the hybrid strategy achieve higher performance than t firms with singular strategy. Pursuit of a differentiation strategy for low-cost (Yasai-Ardekani & Nystrom, 1996). International Journal of Business and Management Vol. 7, No. 20; 2012 124

A hybrid strategy fundamentally seeks to attain differentiation and low price over its competitor. This is aimed at delivering enhanced benefits to the customers with low price profitably to provide a margin for reinvestment

The hybrid strategy facilitates the sale of product at lower prices than the competitor while at the same time offering higher quality for the product. The hybrid strategy blends the elements of differentiation and low-cost to offer products to customers with a competitive edge. (Thompson et. al, 2012). Most consumers do their purchase of product with high expectations to pay less price for products with somewhat highly differentiated features. As a result, the hybrid strategy is considered most suitable to meet this customer expectation. The, hybrid strategy has become highly essential in the face of global competition when Compared to the single generic strategy. The hybrid strategy facilitates the production of products with differentiated features or characteristics that customers’ value at an additional benefit of low cost compared to competitors’ products.

The implementation of the hybrid strategy provides multiple sources of competitive advantage which include economies of scale, customer loyalty) as against the single strategy.

They also emphasize efficiency in creating value for the customers which enhances customer loyalty. Example of organizations with the hybrid strategy are IKEA (differentiate in design + low cost), Toyota (quality – although under pressure + price) and Ahold (quality + price). Just competing on price is not good enough anymore (Learning, D.A., 2010).

1.2 Statement of the Problem

Acquaah & Ardekani (2006) justified that the implementation of a combined competitive strategy is not only feasible, but will also generate superior incremental performance over the implementation of single competitive

Strategies. The implementation of a combined competitive strategy results in multiple sources of competitive advantage (e.g., economies of scale and brand/customer loyalty) as compared to advantages gained through pursuit

of single competitive strategies.As the pressure of international competition has grown, so too has the demand for hybrid business unit strategies. They combine the competitive advantages of low costs and differentiation. However some challenges exist that need to be addressed otherwise the adoption of the hybrid strategy may result in a colossal loss of investment to the organization. Some of the envisaged problems include the challenge of managing the hybrid policy effectively to yield the needed objectives. Managing the hybrid policy without proper understanding of its workability could lead to confusion. It could also lead to high expenditure cost in adopting the implementation of two strategies which the hybrid strategy entails. Other challenges include the efficient management team to implement the hybrid policy as well as building and maintaining effective communication network to address issues arising from the adoption and implementation of the hybrid strategy.

EFFECTS OF HYBRID STRATEGY ON ORGANIZATIONAL PERFORMANCE (A CASE STUDY OF NESTLE PLC)