1.Porters Generic Operational Effectiveness is important but the Strategy is more critical. Operations and Strategy (Good Strategy + Good Execution), (Cost/Diff), Value Chains and Examples
There is confusion sometimes between strategy and operational effectiveness as explained by porter. Operational effectiveness is when a company does similar activities like others but in a more efficient manner. Strategy on the other hand is doing different activities as compared to other organizations so that a unique mix of value is attained. Organizations can gain competitive advantage through operational effectiveness and strategy. Competitive advanatage that is gained from strategy is however more sustainable. This is because benchmarking leads to similarity in company operations. An organisation can have a strategy that will lead to it being operationally effective (Porter & Heppelmann 2014). Operational effectiveness is usually part of the main organizational strategy to remain competitive while at the same time differentiating oneself through the products produced or kind of service that is given.
An organisation, which wants to maintain high earnings over a lengthy period, must have sustainable competitive advantage. This can only be achieved by having a sound strategy, which is based on how a company differentiates itself. The company must be focussed and also make some trade-offs if it wants to be successful. When looking at strategy, the organization must ask itself whether the activities chosen are the ones that should be done differently and if they can be simply copied by other companies. The activities chosen should be very unique such that not any one can copy them. Identifying and focusing on core competencies and unique advantages lead to success and these are the characteristics of a good strategy.
Figure 1. Operational Effectiveness vs. Strategic Positioning
One of the strategies that a company can implement to attain competitive advantage is having a unique value chain. Starbucks is a company that has used this to enable it gain competitive advantage. An example is the inbound logistics of the company, which aims at selecting top quality coffee beans, which are transported directly to storage sites where they are roasted and then packaged. Starbucks does not outsource procurement so that the high quality standards are maintained from selection of coffee beans at the farm to final production.
Figure 2. Process Differentiation in Starbucks Coffee
2.Recourse Based View. Why are some organizations more successful than others? Porter, Business strategy / Barriers to Entry. But RBV says uniqueness of their internal resources which include (Tangible &Intangible). Explain and Give examples.
The resource-based view is a way in a company is able to achieve competitive advantage. It argues that companies should be able to look within themselves to find sources of competitive advantage instead of looking at the competitive environment for the same (UNC 2013).
Figure 3. Resource Based View Model
The resource-based view explains that it is much easier for an organization to exploit external opportunities using the resources, which already exist in the organisation in a new manner rather than try to acquire new skills. The model gives resources the main role in helping an organisation to achieve its objectives. These resources can be tangible or intangible. Tangible resources are physical and can include buildings, machinery, equipment and capital (Porter & Heppelmann 2014). The disadvantage of tangible assets is that other companies can easily acquire similar assets in the long run hence they will not be much of an advantage. Intangible assets have no physical presence but can be owned by the organization. These include things like brand strength, patents, trademarks and intellectual property. These are not easily duplicated by competitors hence lead to sustainable competitive advantage for the company.
The VRIO framework examines of an organization’s resources are valuable, rare, costly to imitate and cannot be substituted. These lead to a firm having competitive advantage.
Figure 4. VRIO Framework
Under the framework, value means that resources should help an organization add value offered to customers. This happens through product differentiation or decreasing production cost. This helps in attainment of competitive advantage. Rarity means that it is very hard to acquire the resource. This helps an organization produce unique products, which help it to gain a niche market. Imitability means the resource should not have the ability of being easily copied by a competitor. Copying the resource should be very costly to a competitor. Organization means the resource should be organized in such a way that it can capture value for the organisation.
The resource based view can compared to the Michael Porter Five force analysis business strategy concept. This concept states that a company will have unique resources that will enable a company achieve competitive advantage in the market where it operates. Both models are similar because they agree that the ultimate objective of a business is to achieve sustainable competitive advantage (UNC 2013). In Porter’s model, the organisation achieves competitive advantage by having high returns in the end while the resource based view model mainly speaks about the company achieving competitive advanatage when competitors can no longer beat its position.
3. Blue Ocean Strategy. Some firms have rejected respective industry recipe for success (not to follow what other does). Give Examples, Strategy Canvas, 4 Actions framework on Blue Ocean Strategy)
The blue ocean strategy is a theory, which gives a suggestion that companies are better off looking for ways to gain market space that is uncontested rather than participate in traditional competition. The industry and innovation may be unknown and the aim is to make competition irrelevant.
In the traditional industries, organizations compete with one another for the market share. It is very intense and leads to some companies exiting the industry, as they are unable to sustain themselves (Porter & Heppelmann 2014). This type of industry is commonly referred to as a red ocean and it is a representation of a saturated market, which is shared by different bloodied competitors. In order to avoid this competition, which can be quite costly an organization can innovate or expands it hopes to get a blue ocean. The blue ocean will allow the organization to expand with no competition.
Some of the companies that have implemented the blue ocean strategy are Apple and Ford. The Ford Motor Company came up with model T as a car for the masses. It was reliable, durable and affordable and this was possible because Ford used a new manufucturing process that enabled them produce cost-effectively. The car officially replaces horse drawn carriages as the transportation mode. Apple Limited also found a blue ocean through the iTunes music download platform (UNC 2013). They came up with the first legal way for downloading music in 2003 and gave users a very reasonable price. It also provided a new revenue stream for music producers. They account for 60% of the global digital music market.
Figure 5. Four actions Framework for Blue Ocean Strategy
One of the strategy tools for the blue ocean is the four-action framework. It is used for value addition to the strategic canvas curve of the blue ocean. It consists of the following areas:
The strategy canvas is another tool for the blue ocean strategy. It can be used by organizations in diagnostic aid and as an action framework. It is used to get an understanding and analysis of current market situation and understand factors, which lead to competition. It also a way that helps organisations to initiate action and come up with better alternatives than competitors.
Figure 6. Blue Strategy Canvas
4.Critically Discuss about Stakeholder Mapping. (Primary Stakeholder and Secondary Stakeholders)
Stakeholders are the parties that have an influence to our business either directly or indirectly. They can be primary or secondary stakeholders. Primary stakeholders have a direct influence and include employees, supplier and board members. Secondary stakeholders are people like the government and communities around who can be affected by the business in one way or another.
Mapping of stakeholders involves identification, analysis, prioritising and evaluating people and companies who have a stake in the organization or in a certain project. It assists organizations in coming up with project requirements and managing and communicating effectively with stakeholders.
Figure 7. Steps of Stakeholder Mapping
Identification –This step involves identification of anyone who has an interest or stake in the organization. Some projects usually generate large community interest and their impact is high. Stakeholders either can contribute to a project or be affected by the project. Some stakeholders can fall into both categories as they can contribute to a projected but are also affected by it in other ways. Projects or strategies can be delayed if the organisation does not identify stakeholders.
Figure 8. Typical Stakeholders
Analyse – This steps involves an organization analysing stakeholders by defining their roles and expectations. Stakeholders are not equal and some have a greater impact than others do. A matrix should be used by the organisation and this will help in classifying stakeholders in terms if their effect on a project and their importance.
Figure 9. Stakeholder Influence Matrix
Prioritise – Once stakeholders are understood, their needs can be prioritised. They can be mapped as necessary and put in appropriate levels. This will greatly help when the company wants to come up with a stakeholder communication plan.
Engage – It is a final step and involves winning stakeholder support and understanding. It forma a basis for the communications plan. It assists the organisation to involve stakeholders as necessary.
5.Critically Discuss Schools of strategy. Both Prescriptive and Descriptive. Also, explain why a planned strategy may not be realized in the way that management have envisaged.
Henry Mintzberg came up with the ten schools of strategy as follows:
Figure 10 Schools of Strategy
There are two styles of strategic management, prescriptive and descriptive. In the prescriptive the upper management make decisions and direct reports do not participate in the decision making process as they follow what is laid out by management. The descriptive school however values the contribution of direct reports in the decision-making process.
Strategy formulation also differs in these styles. In prescriptive styles, managers focus on formulation of strategy in terms of following the correct process while in the descriptive school, higher emphasis is laid on the content rather than the process.
Prescriptive managers have a belief that strategy must be planned and do not take conditions that change into account. Descriptive managers look at the fact that decision-making can be very unpredictable hence are flexible and do not stick to one particular plan. Prescriptive managers look at coming up with strategies which enhance perfomance. Descriptive managers are more concerned with looking at the survival of the company and they believe in learning from experience, as it will help the organisation succeed.
A planned strategy may not be realised due to different reasons. The reasons may be either internal or external. Sometimes a strategy can be hampered by the external environment. These can be political, economic, social, technological, legal or environmental factors. Internal factors can be things like unsuccessful change management processes, lack of enough resources or lack of adequate human resources.
6.Compare and Contrast the blue ocean strategy and porter’s generic strategies
The porter’s five forces model focuses more on what makes an organization become competitive in the red ocean and is mostly connected with micro-environmental factors, which affect business in the same industry. Blue ocean strategy on the other hand is a strategy that organizations take in a very new dimension that competitors have not ventured into.
Porters model explains that competitive strategy should be based on industry understanding and the way they change due to different factors. Porters have five forces, which shape each industry and market. The forces are a determinant of the intensity of competition and hence the attractiveness of the industry. Organizations should come up with strategies that modify these forces to improve their position (Porter & Heppelmann 2014). The blue ocean strategy looks at the fact that innovation should enable an organization to create a new market space and tap into consumer demands that have not been satisfied. The organizations aim to get uncontested market space. Competition becomes very irrelevant. The market space is yet to be explored.
References
Porter, M.E. and Heppelmann, J.E., 2014. How smart, connected products are transforming competition. Harvard Business Review, 92(11), pp.64-88.
UNC-Chapel Hill, 2013. ECON 125 | Lecture 24: Michael Porter – Strategy. [Online Video]. Available at : https://www.youtube.com/watch?v=KvYwKM5bY0s [Accessed 30 October 2017]
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