What is the role of risk management?
Positioning school of strategy is highly adept at handling the risks in the marketplace. However, the depth of analysis is dependent upon the variables considered by the analysts. This process of risk management attenuates the focus of the company and needlessly amplify the cost by defining the operational plans each time.
The uncertainty or the unexpected risks in the business environment need to be handled pro-actively to ‘keep the show in the road.’ The success of any business depends on how the frequently the uncertain situations are faced. The challenging situations, decision-making with a short-term horizon can result in uncertain business results. Moreover, the business environment is never certain. The new competitors are always there to enter the business sector, in which the firm is operating. The bargaining power of the customers and suppliers is ever-changing, and the business firm needs to respond appropriately to the uncertainty around it.
The management of the uncertainty in positioning school of strategy is dependent upon Porter’s generic strategy. These generic strategies are the cost of leadership, focus, and differentiation. The firm can choose any of these three generic strategies to manage uncertainty in the future. The analysis of the firm’s economic landscape combined with the identification of the appropriate generic strategy results in the firm achieving the competitive advantage.