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Porter Model and External Environment - Assignment Example

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The assignment "Porter Model and External Environment" demonstrates that strategy is the course of action that the firm adopts to achieve destinations among various options available. It is a combination of internal competencies aligned with external factors…
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Porter Model and External Environment
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?ANSWER Strategy is the of action that firm adopts to achieve destinations among various options available. It is a combination of internalcompetencies aligned with external factors. Strategy based mainly on internal resources is termed as Resource Based View while one based on external factors is known as Market Based View. Also, strategy resulting from undue or total reliance on either factor may lead to forceful conditions for business to change the course of action; moreover, realization of this fact may occur in point of return having serious implications. Porter model enhanced emphasis on MBV considers the external environment only. Its limitation is that two firms of same industry with MBV- strategy do not grow with similar pace despite opting for similar options. For example, firms opt to sail the ocean for being the safest alternate without sailor in the team while ignoring mountain-ing for being less attractive alternative despite having skilled mountaineers. RBV based strategy ignores the demand side of the business. It relies solely on the endogenous aspect and ignores the exogenous factors’ effect on firm. Hence, to void the limitation, firm has lent support from both views complementing each other than contrast. Apple Inc’s success is the strategy being combination of both views. For instance, team with innovative skills exploited the market factors that welcome changes in new dimensions; hence giving hit products like iPod, iPad. ANSWER 3 Greiner’s Theory (1972) refers that firm growth is a subset of six phases each comprising of stable growth followed by a challenge before entering the succeeding phase. It suggests that phases occur in series; therefore, predictable challenges (evolution) to be accounted in a predictable way (revolution). Firm initially grows with creativity and establishing position in the market and after some time it faces challenge of leadership crises. This challenge requires professional management for further growth. Growth in second phase continues to expand with direction and increase in scale hence, leads to issues in managing thing by few personnel. Evolution of structural change mainly with delegation of power becomes the need to maintain survival. Upon delegation development, firm grows through third phase for some time and lands to the control crises. It now requires business to strengthen connections among the business -units to maintain growth in single direction with co-ordination and monitoring. 4th phase of growth through connectivity ends up to red tape issues and bureaucracy. These issues hamper growth again requiring management to induce collaborative culture than centralized control. Collaborative culture results firm fostering with more of matrix and team based structures but also ends up once firm has exploited maximum of the internal capabilities and faces internal growth crises. Evolution from this crisis requires firm to shake hands with complementary organizations to maintain growth. This sixth stage growth, recently added, refers to merger, networks, alliances, outsourcing etc. Growth rate in phases vary from company to company and even within company from phase to phase. However, longer the phases harder it will be implement transition by catering crises. ANSWER 4 Resources and Competencies held by organization are all not of equal strength when evaluated on the yardstick to provide firm a competitive advantage against competitors. Strength of the Resource Based View refers that resources and competencies that possess value, rarity, inimitability and non-substitutability characteristics, acronym as VRIN, are of immense importance to organization. Organizational strategy aligning VRIN-resources and competencies with external environmental factors form the foundation of success. Successful organization such as Wall- Mart (Strong Supply Chain), Tesco (UK national and supply Chain), Apple (Innovative Human Resource), Starbucks (expertise in providing premium flavour of coffee) have profited globally upon strategically by utilizing their respective resources and competencies. However, VRIN characteristics forming pillar for the Resource Based View is also accountable for criticism. From an economic perspective, resource is only valuable if rare; therefore, either it has to valuable or rare. Moreover, the life of inimitability resource is also vague. For instance, Wall- Mart’s strength of strong supply chain has been employed by various other retailers giving competition to the Wall- Mart of an equal level. Similarly, Starbucks capability of premium coffee is more supported by its positioning strategy of premium coffee while innovative flavors of coffee are also available on other chains giving competition to Starbucks. Hence, importance of VRIN is non-avoidable when complemented with other factors despite in isolation. ANSWER 5:  CEO of Barclays has correctly stated that acquisitions are not strategies. Strategies are related to developing course of action for goal of future. Goals include, but not limited to, expansion, diversification etc. Hence, devising goal, planning objective for future etc are part of strategy that is concerned with thinking perspectives. Tactics, on the other hand are meat and bread of what has been planned in strategy. Tactics are arms in soldiers’ kit that are arranged in a manner to be utilised as required to accomplish the doing aspect of strategy. Hence, planning the change is strategy while course to achieve this change is a tactic. Further, strategies may comprise of various tactics while tactic in itself is a single course of action. Strategies are long term direction that defines scope of business while tactics are short term approaches that collectively lead to overall achievement of goal set in strategy.  Acquisition is a way to achieve expansion (plan); hence, it falls in the category of tactics. However, despite the technical and conceptual difference both terms are used interchangeably; though incorrect but fact.  ANSWER 6 Strategy is any course of action with following features: Direction with defined scope of action for an organization. For the long-term. Action using company resources to gain advantage for the organization within a challenging environment by addressing certain markets needs. Meeting stakeholders’ expectations. Strategy is developed with deciding objectives to be achieved in future (strategic choices), upon evaluation of their internal and external factors (strategic analysis) and deciding ways to achieve these goals within prevailing conditions (strategic implementation). It is prepared depending upon the policy of organization. For instance, in centralized organizations policies for all departments are prepared by top management with implementation responsibility is delegated to respective departments or business units. On other hand, departments and business units develop their own course of action to achieve centrally decided objectives in decentralized firms. Both mechanisms offer benefits as well as disadvantages. Such as centralized strategy is criticized for not accounting ground realities effective at various levels whereas decentralized strategy is considered to be based on individualized perspective of department and not entire organization. Strategy itself has also undergone dimensional change. Traditional strategies require effective use of resource whereas recent strategies are only considered to be successful if adaptable to change. Moreover, line of demarcation between strategy development and implementation has also blurred overtime. Hence, the focus has been shifted from developing process to incorporating factors that achieve success. ANSWER 7: Debate on purpose of business existence has managed to accept fact that objective of business goes beyond than profit maximization only to fulfilling societal responsibility. For the purpose, contemporary businesses have added component of corporate social responsibility in overall strategy. Basic idea behind CSR is to create value for the all stakeholders including those that do not have direct connection of any kind with company. Hence, CSR is making efforts to return something to society that allow its existence as well reaping benefits from societal resource. Apart from civil society criticism stating CSR nothing more than organizational efforts for private publicity as well as from capitalists referring CSR efforts to be divergence from core purpose (of profit maximization); CSR has managed to make its way in organizational strategy. Contemporary strategies incorporate CSR efforts based on share value principal where business invest in avenues that benefits both society and also lends benefits to business. For example, Nestle is fetching considerable benefit from developing milk districts in India, Pakistan and China. This activity at same time has resulted in increasing miserable standards of living in such areas. Thereby, both aspects benefitted. Also, Wall Mart’s in-store magalogue that guides shoppers of Wall Mart way of shopping that helps Earth is an example of CSR benefitting earth and Wall Mart both. Hence, CSR activities with shared value principal are more beneficial as it addresses criticism by finding middle way and not leaving benefit receiver on the mercy of investor. ANSWER 8 Growing challenges such as knowledge economy; intense technological advancement and global competition has moved business from traditional mechanisms of business conduct. Contemporary businesses for survival are required to be more adaptable to change than ever. Moreover, adaption at a pace faster than change itself is being regarded as the top priority of today’s CEO; alternatively referred as the innovation capability. Despite the accepted importance, innovation as a part of strategy and capability to develop new products and services is often ignored as part of overall broader strategy. Ignoring innovation as the overall strategy results in organizations missing un-tapped wants-driven market and employing all resources to strengthen existing products and processes as well as resources and competencies. For instance, innovation in processes or business models to gain cost advantage not made part of strategy has resulted in extra cost incurred in production processes. Cost of production reduced greatly by innovating business models such as by out-sourcing peripheral activities etc. On the other hand, organizations that have maintained innovation as part of strategy exploited considerable benefits even in times of financial crises. An example of IKEA’s is best suited to this fact. Organization maintained innovation as prime objective and this led to continuous re-engineering of products; hence, reducing cost and benefitting both firm and consumer. ANSWER 9 Businesses to remain successful and even safeguard their survival attempts to specialize in any business aspects. Such as business may develop partnerships or alliances to access new markets and obtain economies of scale while some may opt to seek and obtain competitive advantage in their existing domain. However, this does not refer to the mutual exclusivity of the options to maintain growth. For instance, Starbucks has developed competitive advantage as a premium coffee provider. With this competitive advantage it has expanded internationally that facilitated Starbucks with economies of scale. At the same time Starbucks has opted to develop strategic alliance with Tata Group for establishing its foothold in Indian Market; hence, strengthening its competitive advantage of being global corporation. Entering Indian market in collaboration with Tata Group would also gain economies of scale which has benefit to Starbucks for huge investment done in Chinese cities for growing coffee. Moreover, many of the supplies that add value to the exclusive coffee experience at Starbucks are also made available in alliance and partnerships with suppliers. Hence, business’ strong network of alliance, standing in abroad market or competitive advantage in local market all can be competitive advantage of the firm complementing each other instead of matter of choice for one among all. ANSWER 10 Strategy is defined as how one would like to achieve the objectives using the resources it has. Whereas, brand management is the process with which the organization tries to build relationship with the consumer or by which organization influences perception of the consumer regarding any product or service it offers. However, market is defined as the place where buyers and seller meet. Therefore these three terms are different and calling market and brand management cannot be said as strategy. Brand management or market is not a strategy. The reason for this is that a strategy for the organization would be a broader term. For instance, strategy for any company is to expand its services into a new geographic region. To expand, the organization needs to analyse the market and whether the market has enough potential to achieve the required rate of return. Therefore the organization first of all will create a strategy and then it will analyse whether it can achieve sufficient profits and then it will take the decision to go ahead. Once it has taken the decision, it will try to create awareness and this will be done by branding or by brand management. So, brand management is not a strategy it will be a part of the overall strategy. ANSWER 11 For years, it was considered that products would be successful if there is a need in the market. However, the trend has changed as there are several products that have been invented and now they have become almost a need for the consumers. So now it can be said that if the product is good enough to attract consumers and entice them to buy, then it will attract consumers and will become successful. So the main point is that if the 1st P of the marketing mix is exceptional and the company is able to handle other Ps of the marketing mix as well appropriately then it will result in encouraging consumers to buy. So, it can be said that if the product is good then it will be bought by others. However, if there is a potential in the market but the product is not good enough then it will not lead to long term sales. Read More
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