Critical Analysis of Strategic Approaches

Critical Analysis of Strategic Approaches

1. Porter’s Model

Porter’s Model was proposed with a focus on five critical industry level areas that include existing competitors, threats of new entrants, substitute products, supplier’s bargaining power and buyer’s bargaining power (Arons and Waalewijn n.d., 4). Existing competitors pose threats of cutthroat elimination through constricted market share affecting customer loyalty, reducing customers switching costs, increasing commodity varieties and making it difficult to leave and industry at a profit. New entrants pose threats of further reduction in market share, provision of substitute product alternatives and diluting customer loyalty. Technical requirements of supporting the new entrant are deemed to be readily available or accessible to support new entries, reducing barriers of competitors’ entry.

Substitute goods presence in the market lower customer loyalty and reduce market share that determines how profitable and sustainable an organization remains. Product prices are likely to be affected by substitutes that are usually of a low quality thereby reducing profitability. Suppliers’ bargaining power is heavy when only a few of them are interested in the business of an industry, leading to manipulation of supply prices. Buyers’ bargaining power depends on their perceived product value and quality. Customer loyalty and bargaining power oppose each other depending on their access to substitute goods and determination of how much value they can attach to a product in the competitive market (CMA 2007, p.9).

Advantages and Case Study in Complex

The model captures the industry level forces in a precise and simplified approach that enables strategic focus on important competition reorganization. Such a defined scope of the industry facilitates in tackling competition forces in a better way than as explained by any other model. In a perfect competition setting with effective regulations and level playing grounds, the industry is exposed to a perfect environment where Porter’s forces are clearly manifested. The model captures the industry needs in a perfect way that enables modeling of suitable actions against the forces of competition in an open approach. The model enables businesses generating ideas of minimizing competition as much as possible, among them being the justification of strategic alliances and partnerships, continued innovativeness, commitment to quality, employment of information systems to analyze market moves and define desirable market structure (Middleton 2003, p16).

In addition, Porter’s model focuses on profitability determining factors, which is a measurable variable for managers to consider in their strategies, unlike other qualitative features that are difficult to quantify. The applicability of Porter’s forces in many industries is important to managers who rely on measurable outcomes to inform workable and appropriate business strategy. Porter’s Forces witnessed in action can be witnessed in the case of Apple Inc. where the technology giants manifest various strategy forces in context of business operations in the global market. In terms of the company’s realities with threats of existing business rivalry, other huge technology companies such as Linux (Software) and Dell (hardware and software) providing different components stand in the way of Apple’s flawless presence (Wikiwealth, 2012). In countering this, Apple produces products with both the hardware and software from PCs to desktops, in a way that keeps off sharing through incompatibility.

Other competitors find it hard to beat Apple in its business model as illustrated by the uniqueness of its products, where its products cannot be replicated or shared with competitors. In an illustration of its unique brand presence and product design, Apple has attracted a number of court battles with existing players such as Samsung. The threat of new entrants to apple has been fought through a strategy to raise the bar for technology and making the technology specialization as unimaginable as possible. Alternatively, setting the ground too high for technology prowess in the business niche that apple has arced, it is increasingly difficult for new entrants to afford to buy the proprietary and copyright value that Apple will attach to its technologies, making technology licensing a powerful tool to ward off new entrants into the market. Unique product launch by the company catches the attention of the whole world making it difficult for new entrants to match such level of investment (Porter 2004, p51).

Apparently, Apple is the most valued company on the market today, than any other company’s in history, which makes such a muscle unmatchable by new comers. A loyal customer base that would take astronomical capital, technology and human resource costs, probably out of rich by prospective new comers, to be weathered to create market share to entrants. Entry barriers are therefore set at a very high ground for new entrants to venture (Mohta 2010, p10). Threat of substitute products is almost eliminated by the current performance by Apple’s products that offer a wide range of unique features that competitors cannot offer, due to massive investment in constant innovativeness. Perhaps what keeps Apple in business is its unmatched dedication to technology, which has been repaid by a growing loyal customer base around the world as the internet age unfolds before its market niche. Substitute products in comparison with Apple can be referred to be inferior and of a lower performance, which builds Apple’s case for continued innovation in subsequent product releases. Substitute producers are equally not as many as would be required to bring apple down on its knees from pressure emanating from possible competition from substitutes.

The bargaining power of suppliers has been taken care of at Apple as every supplier wants to be associated with the guaranteed returns projected by Apple’s performance into the coming years. Apple cannot struggle to find suppliers and shifting suppliers is possible at low costs due to its ability to attract such partnerships based on its market share and guaranteed returns. A number of suppliers can compete to supply Apple with processors such as IBM, Intel and Motorola, which have strategically established a partnership for long-term benefits in the Apple’s experience (Mohta 2010, p11). The bargaining power of customers has been reduced at Apple through quality and class association with its products, perhaps outperforming any electronic brand in the market. The value associated to the Apple products is high to an extent that customers cannot feel shortchanged for the products acquired from an Apple supplier. The undoubted massive following of happenings at Apple by a huge global customer base makes Apple to target numbers to its advantage in significantly reducing buyer bargaining potential. Peer to peer sharing platforms created by Apple’s designers enables the company to compel customers to stick to its products in an indirect way.

Limitations of the Porter’s Forces Model

Porter’s model would not make meaning to business environment with imperfect competition conditions, such as unequal treatment of investors by authorities, corruption and price fixing scandals. For instance, the recent revelations that certain British and American banks contributed to shaky global economic performance due to participation in unfair practices is evidence that competition was imperfect for other financial institutions. Barclays Bank and Standard Chartered banks in the recent months have attracted hefty fines in the US for taking part in malpractices, which would have made it impossible for Porter’s forces to work. The model in various ways makes assumptions that the market is a rigid and static platform where all the proposed forces act (Lever, 2008). In real interpretation of the market experiences by many companies, it is not possible to isolate just five forces for all cases of industrial operations.

Some experiences could have fewer than five forces to consider, whereas others would have several other factors to consider. In critical analysis of such a perspective on rigid assumption of the industry, every analyst thinking independently would be possible to formulate a set of forces that can be put into proportion with prevailing circumstances. In such a reality based approach, Porter’s concept of forces would be deemed corruptible and rigid (Arons and Waalewijn n.d., 1). Other critics of the model have a view that the model took a biased view of the industry, by only concentrating on the inside-out view of the industry (Lever, 2008). Resource based schools of thought would provide a different concept that that highlighting forces other than the resources that are accessible to the organization, from which opportunity can be transformed into returns.

Other forms of criticism highlight the modern direction taken by commercial ventures, with overlapping and blurring boundaries making the clear forces remotely achievable and inconceivable. For instance, the emerging concept of blue ocean freedom enabling investments to roam freely into unconventional grounds of idea diversification makes it too random and amorphous for any boundary to be set for the forces. For instance, the threat of new entrants in a business environment where businesses diversify to access new opportunities in grounds that have never been experimented on makes it difficult to define what new entry implies in a world of myriad brand new ventures. Alternatively, the concept of supplier’s bargaining power will continue to lose meaning in the new frontiers of business freedoms enabled by internet, information and constant innovativeness.

According to certain critics of the model, the level of focus for the industry is poorly set at the meso estimations, ignoring the micro and macro operations levels. The industry level consideration assumes the existence of other levels such as individual organization as well as the higher international arena with different forces to the organization (Lever, 2008). For instance, the model does not talk about the lowest internal and external factors as powerful and distinct forces to reckon with. According to other famous strategic models such as SWOT, simple details such as internal strengths on staff motivation can be highlighted as main forces. Alternatively, macro status consideration of the business environment such as globalization impacts on exchange rates and trade policies do not bother Porter enough for inclusion in his model (Bizmana 2010).

Mitigating

To mitigate the loose ends in the Porter’s model, it is perhaps advisable to consider introducing an integrated strategy system, which considers more than one model. Using more than one strategic approach in dealing with challenges facing the modern business is an insightful preparedness to tackle underperformance. An integrated system on business strategy will provide the solution to various concerns of weaknesses in Porter’s model (Burrell and Duan 1995). An expanded industry sector perspective for instance will expound on issues beyond the industry as witnessed under Porter’s forces. Incorporation of other models such as SWOT will enable managers to consider finer internal and external forces, and expand on limitations defined by the forces in modern paradigm such as the blue ocean strategy.

2. Core Competences

The concept of core competence in business strategy focuses on the identification of the areas where an organization has exemplary endowment and concentrating maximizing what can be achieved in a flawless scenario of those strengths. This in line with mitigating other impacts in areas with weaknesses facilitates a comprehensive probe into ways of holding onto unique abilities to bring about success to the organization. Most of core competence models highlight the identification of intangible assets that an organization has and bringing them out for opportunity development and nurturing (KPMG 1999, 11). Among the most important business functionalities that have facilitated a seamless introduction of competences into the organization to spur productivity is the human resource competence concept.

Competency models around individual strengths and potential in order to support organizational objectives, values and targets indicate that human potential is usually underutilized. Highlighting the potential that individuals possess in order to motivate and nurture them towards desired productivity outcomes proves to be a vital strategic approach that uses simple techniques to achieve and attain high levels of satisfaction and gratification. Building on the individual potential concept to recreate organizational culture supported by teams of confident and able minded players facilitates an overall sustainability in driving corporate culture (Harter, Hayes and Schmidt 2002, p269).

The three core competency enhancement touch on different approaches that bring out motivation and concentration in the assignment. Firstly, educational approach that targets improvement of personal skills and credentials assists in bridging the information gap in a culture that heavily relies on technical knowledge. Role outcomes and skills must be brought out in the employees’ perception towards corporate culture (Allpress, Cooper-Thomas and Markus 2005, p117). Every individual can be assisted through appropriate training to overcome the challenges posed by lack of knowledge in delivering better satisfaction and productivity outcome. Secondly, it is possible to turn the productivity attributes of an individual through empowering of psychological perceptions on organizational roles (Waddell 2002, p46).

Altering behavioral repertoires represented by attitudes, values and beliefs can facilitate attainment of best productivity trajectories among individuals and the entire organization. Self-images and associated social skills must always support the expected organizational performance. This is also attainable if the appropriate psychological environment and nurturing form part of the competency building functionality. Finally, business approach realignment of the competitive demands of the business environment using external information gathering system with deliberately designed core competence resources provides the appropriate approach for organizational productivity (Hanges et al. 2003, p844). Collective engineering of individual capabilities towards harmonization of business agenda guided by goals and objectives can be coined from business management of core competency.

Advantages and Case Study in Context

Emphasis on competencies ensures that quality is assured in products and services provided to customers, which increases customer loyalty and sustainable performance. In addition, the focus on individual behavioral performance enables generation of a broader and real picture of issues that define an individual’s life. Alternatively, core competence approach focuses on rewards for exemplary performance, which acts as a motivation for underperforming individuals, bringing outcomes that would never have been realized without such attention. Apparently, core competence focuses on other talents and potential management considerations that can assist in innovation and diversification of production targets (CLC 2004, p2).

The basic business motivation is improvement of the quality of stakeholder’s life in terms of various achievements, including earning a living and prestige. According to various motivational theories, human satisfaction determines the level of concentration and dedication in delivered duties thereby influencing the personal and organizational productivity outcomes. It therefore implies that the improvement of the individual’s perceptions of satisfaction and motivation in the assignments allocated at the organization translates to positive outcomes in organizational performance (Ash et al. 2000, p722). Modern human resource insights underscore the individual satisfaction theories in order to improve the organizational productivity variables dependent on employee input. As a strategic tool to reorganize performance opportunities into real fortunes, the sharpening of potential and competence among employees facilitates the identification of the building blocks for appropriate organizational competence.

An example of core competency approach in context is perhaps in the health care industry where the delivery of healthcare service staff determines the quality and performance delivered by health facilities such as Aurora Health Care (AHC) (Brookings Institution 2012, p4). Although the facility operates by serving Eastern Wisconsin largely in an NGO basis, a few business formats make its core operations to fit in a commercial setting worth a highlight of the core competence strategy. Since its strategic plan is based on a target of serving increasing numbers of patients, quality remains a vital decision for observation of its status as a leading health care facility in the country. A wide range of service delivery functionalities at the facilities owned by Aurora Health Care extend from specialty centers, primary health care as well as several pharmaceutical discharging units. Under an integrated system, taking care of all the services handled by different staff, core competencies forms the central strategy for the facility (Aurora, 2012).

Physician engagement by the facility aimed at provoking their leadership potential using various resource platforms facilitates the facility’s agenda of bringing the best contribution of the pharmacists on a peer platform. The communication facilitation targeted by the facility assists in sharpening clinical expertise and raising credibility confidence across the professional profiles available at the institution. Increasing operational effectiveness is emphasized and nurtured, through the appropriate networking, which builds on communication skills gained during interactions between the clinical and non-clinical staff. Formal training and facilitation for the improvement of the necessary clinical, management and leadership skills occurs at AHC in order to generate the best environment for core competence identified by building on a fine network among the staff.

Different leadership programs with a definite structure fully supported and funded by the institution enables promotional consideration of staff into various levels of mainstream management. For instance, a number of director positions are reserved to be filled by the members of the clinical staff to increase confidence among the various classes of staff (Eliot, 2012). Relevant information and tools needed for different leadership tasks ensures that the main and sensitive issues on the facility are relayed to the competently composed team of medical experts. Review of personal performance and peer-to-peer appraisal ensures that the networking concept brings out motivational benefits where members encourage each other to deliver quality service.

Disadvantages and their Mitigating

In terms of limitations of using core competencies in management, reliance on competencies is direct and less to related to real contribution to achievement of objectives (Salaman 2004, p58). In order to mitigate this weakness, a constant and thorough assessment of competence as well as the direct contribution that it makes to realization of objectives can be adopted. Additionally, it may be difficult to roll out a competence-based strategy in an organization as its relevance to business processes, clarity of its mechanism, its determination and definition and explaining new performance standards to employees who don’t like direct attention may affect successful application of the strategy. In order to ensure that the impact of such factors is not significant on production variables, introduction of chances in phases, perhaps one department at a time may enable a smooth transition. Subsequently, clear programs with simplified and pleasantly explained procedures may assist in reducing resistance among the employees (CLC 2004, p2). Equally, simplified competence and performance appraisal designs alongside a reward program must act as a reference motivation for excellent performance among every employee.

References

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