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As the cost leadership generic strategy framework is identified as the business strategy which aligns with the company's goal to provide the lowest possible charges to the customers.
Severn Trent aims to be the lowest cost producer in the industry. To succeed with this strategy, Severn Trent requires achieving a cost advantage by efficiency in operations, economies of scale in production / distribution, technological innovation in service delivery, better human resources management and preferential relationship with the suppliers.
Business strategy affects the strength of the relationship between firm performance and particular technology policies.
Technology Adoption and Venture Growth
Technology adoption is the application of new science to improve products or processes. The structural and technological perspectives about technology adoption agree that product or process innovation improves business performance (Burns and Stalker, 1961; Hull and Hage, 1982).
Zahra and Covin (1993) found that established manufacturing companies with plans to adopt technology have better returns on sales than those without plans. Similarly, Zahra (1996) found that several new venture technology strategies are associated with growth and profitability.
Thus, assuming that action facilitates the strategy performance relation, and that improved products or processes improve venture competitiveness.
Hypothesis 1: Technology adoption causes new venture growth.
Causes of Technology Adoption
The choice to adopt technology is a strategic choice that is important for business performance. A review of management science, marketing, economics, organizational behaviour, and strategic management revealed five factors that researchers believe are important in technology adoption decision making. Those are technology strategy, expected cost savings, customer attraction, competitive threat and financial resources (Zahra & Covin, 1993).
Technology impacts all business activities from invention/creation to delivery and customer payment. Strategic management researchers, who have focused on technology strategies, have found varying relationships with performance across technology types (1) product design, (2) manufacturing, (3) marketing, and (4) management information systems (MIS) technologies. (Zahra & Covin, 1993).
Organizational strategy is a long term plan on how is the organization needs to evolve over the period to meet its objectives. Developing an organizational strategy for a business involves first comparing its present state to its targeted state to define differences, and then aligning it with the business strategy.
It is inclusive of management structure, reporting relationship, roles of each personals, and un written rules (culture). Organizational strategy simply explained as how is the company operates to achieve its goals.
The Porter's cost leadership model explains the alignment of the organizational goal, organizational culture, IT strategy, organizational capabilities and processes.
The organisational culture is explained by Jack welch, the former CEO of General Electric as how things being done in the company. The fit between the culture and the other elements make the human connection with the strategies.
A company can use technology to create a competitive advantage by creating barriers that to entry for rivals, introducing novel products or processes that attract new customers, or changing the rules of competition in the industry ( Zahra, 1996).
The Seven Trent's business plan aims at eight key strategic intentions, these are;
Providing a continuous supply of quality water
Dealing effectively with waste water
Responding to customer's need
Minimising carbon footprint
Having the lowest possible charges
Having the right skills to deliver
Maintaining investor confidence
Promoting an effective regulatory regime
The strategic focus of the company to achieve lowest cost producer will be achieved through better management of resources, minimizing water leakages, achieving economies of scale by providing uninterrupted supply if quality water. The cost reduction of the production and the increase of supply will result in low cost for production of unit water. Thus the company would able to charge lowest possible rate to have a competitive advantage.
The use of technological innovation; the deployment of web based billing system and the ERP system will streamline and enhance the customer interaction and the company's business process. This will need a structural change in the Severn Trent to adapt to the new changes.
The company has to change to the new processes after the new technology deployment. The change in company culture; the attitude towards technology and immediate response to customer needs will be facilitated by the new technology deployments.
As found by Zahra et al, the technology impacts all the activities of a business, that companies with plans to adopt technology have better returns on sales than those without plans. Similarly, Zahra (1996) found that several new venture technology strategies are associated with growth and profitability.