...Porter’s Generic Strategies Porter’s notion on “stuck in the middle” or “hole in the wall” is debatable, it being mutually exclusive. It might be true in some cases but not all the time. Even beyond Porter’s generic strategies, Toyota has been operating and already proven that it’s possible to be a low cost producer of a differentiated product. It was able to achieve leadership in North America, surpassing General Motors. They continuously find ways to reduce production costs and at the same optimize its process so that it could introduce new models faster than its competitors. They’re known for their Toyota Production System (TPS) which other vehicular companies were trying to mimic. This TPS is the main reason why there’s Just-In-Time (JIT) and Lean Manufacturing system in the manufacturing industry today. Toyota used these two manufacturing methods to gain competitive advantage over competitors. In JIT, Toyota build vehicles based on immediate market demands rather than anticipation on future market demands. There’s no overstocking. This strategy results in efficiency and quality. It is mentioned above that cost leadership gains competitive advantage through efficiency while differentiation gains its competitive advantage through quality. This is a proof that cost leadership and differentiation are not mutually exclusive. And so is true with Lean Manufacturing. Its concept is eliminating those processes that will not add value (differentiation) to the product that a customer...
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...A CRITIQUE OF PORTER’S COST LEADERSHIP AND DIFFERENTIATION STRATEGIES Y. Datta Ph.D., State University of New York at Buffalo Professor Emeritus College of Business Northern Kentucky University Highland Heights, KY 41099 (USA) 7539, Tiki Av. Cincinnati, OH 45243 USA Tel: (513) 984-1032 [Home] Fax: (513) 984-1032 E-Mail: datta@nku.edu A paper accepted for presentation at the 9th Oxford Business & Economics Conference to be held in Oxford, England, June 22-24. Table of Contents A Critique of Porter’s Cost Leadership and Differentiation Strategies 4 ABSTRACT 4 Key Words 4 INTRODUCTION 5 COST LEADERSHIP STRATEGY 5 Major Reliance on Modern Capital Equipment 7 Relying on the Experience Curve to Underprice Competition Risky 7 A Cost Leader Cannot Ignore Differentiation 8 No Such Thing as a "Commodity": Everything Can Be Differentiated 9 High Market Share a Prior Condition for Cost Leadership? 10 Porter Identifies High Market Share with Cost Leadership Strategy 10 Differentiation--Not Cost Leadership Alone--Behind GM’s and Whirlpool’s Success 11 “Low-Cost” or “Low-Price” Strategy? 12 Thompson and Strickland’s Low-cost Provider Strategy 14 Internal Orientation of Cost Leadership Strategy 14 DIFFERENTIATION STRATEGY 15 Superiority of Differentiation over Cost Leadership Strategy 16 Porter: Differentiation and High Market Share Incompatible 17 Differentiation Compatible with High Market Share--and Low Cost...
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...scheme consisting of three general types of strategies that are commonly used by businesses to achieve and maintain competitive advantage. These three generic strategies are defined along two dimensions: strategic scope and strategic strength. Strategic scope is a demand-side dimension (Michael E. Porter was originally an engineer, then an economist before he specialized in strategy) and looks at the size and composition of the market you intend to target. Strategic strength is a supply-side dimension and looks at the strength or core competency of the firm. In particular he identified two competencies that he felt were most important: product differentiation and product cost (efficiency). He originally ranked each of the three dimensions (level of differentiation, relative product cost, and scope of target market) as either low, medium, or high, and juxtaposed them in a three dimensional matrix. That is, the category scheme was displayed as a 3 by 3 by 3 cube. But most of the 27 combinations were not viable. In his 1980 classic Competitive Strategy: Techniques for Analysing Industries and Competitors, Porter simplifies the scheme by reducing it down to the three best strategies. They are cost leadership, differentiation, and market segmentation (or focus). Market segmentation is narrow in scope while both cost leadership and differentiation are relatively broad in market scope. Empirical research on the profit impact of marketing strategy indicated that firms with a high market...
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...year in 2010. They had plenty of manufacturing problems in different countries around the world. So the company needs to recall lots of cars. The incident brought to Toyota big losses. Porter’s Five Forces Perspective and PEST analysis are from different area. Porter’s Five Forces Perspective is used for the analysis of competitive strategy, and can effectively analysis customs of the competitive environment. PEST analysis is a macro-environment analysis. Its’ macro-forces is refers to the impact on all industries and enterprises. Its’ macro-environment can be focus on various situations. The first part is focusing on these two theories that using I chosen the company of Toyota as an example to overview and critique these two theories. Then compare and contrast these two theories. At last, conclusion this report and given some advises for these two theories. 2. Overview and Critique of theory 1 2.1 Overview the Porter Five Forces Perspective Porter five forces perspective has also known as Porter’s five competitive model. This model was first used by Michael Porter (Porter) made. This model was published in 1979 on the "Harvard Business Review" entitled "How to build competitive strategy” and the same mean is “How Competitive Forces Shape Strategy”. Then later in his published "Competitive Strategy" has in the further development and refinement of this model. He recognized that...
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...Academic report summarizes 6 Learning Arrangements in regards to Strategy & Communication. LA 1; Introduction to Strategy LA 2; Conducting a Situational Analysis LA 3; Developing a Strategic Direction LA 4; Formulating a Strategy LA 5; Implementing a Strategy LA 6; Monitoring & Evaluating Strategic Performance Purpose The purpose of the report is to give an in depth view on the case company ‘Dienst Facilitaire Bedrijven’ of Tilburg University, and formulated a strategy with could improve the current situation. Recommendations The main recommendations are; reformulating and reviewing the current mission and vision in addition to setting a strategy in which a niche is filled. Focusing on customer intimacy which follows the slogan; DFB does it, just the way you like it!! DFB will be changing its generic strategy from Cost Leadership to Differentiation Focus. Table of content 1.Introduction to Strategy 4 1.1 Strategy 4 2. DFB 5 2.1 Mission 5 2.2 Vision 5 2.3 Values 5 3.Conduction a situational analysis 6 3.1 Situation analysis 6 3.2 SWOT 6 3.3 The 3 C’s by Ohmea 7 3.3.1 Corporation 7 3.3.2 Customer 7 3.3.3 Competition 7 3.4 DESTEP 7 3.4.1 Demographic 7 3.4.2 Economic 7 3.4.3 Social 8 3.4.4 Technological 8 3.4.5 Ecological 8 3.4.6 Political 8 4.Formulating a Strategy 9 4.1 Porters generic strategies 9 4.2 Critical Success Factors 9 5.Implementing a Strategy 11 5.1 Eight Step Process by Kotter 11 6.Monitoring and...
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...3H Strategy & International Business 2001-2002 Session 8 – Positioning & RBAs compared A. INTRODUCTION TO SESSION The past two Sessions have outlined a series of models and frameworks that provide insights into the external environment and the strategic capabilities possessed by organisations. Many of these models and frameworks have developed as a consequence of a twenty-year debate over the way in which organisations seek to develop sustainable competitive advantage. In broad terms, two distinct approaches have emerged from the debate about this central issue within strategy content: the positioning approach and the resource-based approach (or more accurately, approaches). Much of the debate has concentrated upon two key questions: • Is competitive advantage achieved by concentrating on either low cost or differentiation or should a strategy seek to exploit both low cost and differentiation? • Does an organisation develop strategy to respond to or shape the environment in which it exists – is strategy outside-in or inside-out? As the primary purpose of the tools of strategic analysis is to help organisations to develop and implement successful strategies, then an understanding of the underlying context in which these models and frameworks can be applied is an important requirement. By exploring the development of these competing approaches to competitive advantage and the debate between them, this Session sets out to provide this contextual understanding...
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...Design/methodology/approach – This paper analyzes the concepts of strategic positioning and sustainable competitive advantage and their interrelation. The qualitative study of three beverage producers is conducted. Cases are analyzed based on the theoretical models discussed in the first part of the paper. Findings - This paper provides comparison of positioning strategies and SCA of three international beverage producers. The theoretical framework on determinants of these concepts was developed and applied for case study. The concepts of SCA and SP are interchanging, but from the case study it was not possible to conclude whether one leads to another. There is no single theory found which would be universal in explaining the success of the brands. Companies are complex structures and their success depends on many different elements which should be analyzed in combination. Research limitations/implications – The findings are based solely on the case analysis of three unique beverage companies. To generalize conclusions the research of other companies in food industry on possession of SCA and their positioning strategies is needed. Not all firsthand information was possible to get from all companies. Therefore it cannot be guaranteed that factors beyond the scope of this study did not have an influence. Practical implications – The BIONADE and Supermalt brands represents an interesting cases for companies aiming to develop strong premium brands with a limited marketing budget for...
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...QuickMBA / Strategy / Porter's 5 Forces Porter's Five Forces A MODEL FOR INDUSTRY ANALYSIS The model of pure competition implies that risk-adjusted rates of return should be constant across firms and industries. However, numerous economic studies have affirmed that different industries can sustain different levels of profitability; part of this difference is explained by industry structure. Michael Porter provided a framework that models an industry as being influenced by five forces. The strategic business manager seeking to develop an edge over rival firms can use this model to better understand the industry context in which the firm operates. Diagram of Porter's 5 Forces | SUPPLIER POWER Supplier concentration Importance of volume to supplier Differentiation of inputs Impact of inputs on cost or differentiation Switching costs of firms in the industry Presence of substitute inputs Threat of forward integration Cost relative to total purchases in industry | | THREAT OF NEW ENTRANTS Barriers to Entry Absolute cost advantages Proprietary learning curve Access to inputs Government policy Economies of scale Capital requirements Brand identity Switching costs Access to distribution Expected retaliation Proprietary products | | THREAT OF SUBSTITUTES -Switching costs -Buyer inclination to substitute -Price-performance trade-off of substitutes | | BUYER POWER Bargaining leverage Buyer volume Buyer information Brand identity Price sensitivity...
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...CHAPTER I INTRODUCTION 1. Background of Case Study Selection Differentiated strategy is the strategy pursued by the company to produce products that are different or unique compared to competitors' products. Researchers are interested in doing research on the company because researcher wanted to learn more about controls for differentiated strategies, both theoretical and practical. Minnesota Mining & Manufacturing Corporation (3M) is one of the companies that have successfully implemented differentiated product strategy that gives priority to innovation as a competitive advantage offered. This company believes that innovation to be the cornerstone of 3M’s future success. Current management has continued to embrace and expand these policies and philosophies. That is why researchers interested in evaluating policies and 3 M that philosophy is based on the innovation in the implementation of the strategy of differentiation 2. Motivation Motivation researchers conducted a study of control for differentiated strategies in Minnesota Mining & Manufacturing Corporation (3M) because the researchers wanted to know more about the factors that influenced the design of the system and also the policies and philosophy rooted in the innovations made by 3M Corporation. By studying and examining the existing policy and philosophy that is rooted in innovation from the company, researchers can get a clearer picture of how to do a proper evaluation and what steps...
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...environment is of a high quality, it encourages people to engage eith the brand and repeatedly. Before aldi stores were darker to save electricity. 92, 93% of fresh produce is sourced in Australia now Fairfax online – covers Australian financial review and business review weekly Australian and new zealand reference centre – library database The Australian – daily newspaper Ad news – factiva WW (key competitor) site – media material and annual report Wesfarmers (coles) site Mitre 10 is owned by metcash – go to their site Micro – according to porter: if you can create efficiencies, lower the costs through your supply chain and delivery/distribution systems, you can get your products to customers at a lower cost DO NOT suggest that Aldi go online in the assignment! Have already tried it in the UK – clear statement about it adding to their cost base and they want to minimise the prices on the...
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...BUSINESS STRATEGIES Strategic management involves the formulation and implementation of the major goals and initiatives taken by a company's top management on behalf of owners, based on consideration of resources and an assessment of the internal and external environments in which the organization competes.[1] Strategic management provides overall direction to the enterprise and involves specifying the organization's objectives, developing policies and plans designed to achieve these objectives, and then allocating resources to implement the plans. Academics and practicing managers have developed numerous models and frameworks to assist in strategic decision making in the context of complex environments and competitive dynamics.[2] Strategic management is not static in nature; the models often include a feedback loop to monitor execution and inform the next round of planning.[3][4][5] Harvard Professor Michael Porter identifies three principles underlying strategy: creating a "unique and valuable [market] position", making trade-offs by choosing "what not to do", and creating "fit" by aligning company activities with one another to support the chosen strategy.[6] Dr. Vladimir Kvint defines strategy as "a system of finding, formulating, and developing a doctrine that will ensure long-term success if followed faithfully."[7] Corporate strategy involves answering a key question from a portfolio perspective: "What business should we be in?" Business strategy involves answering the...
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...Has strategy contributed to BMW’s success in UK’s premium car market? (Word count: 3000) Executive Summary Owing to the ever increasing competition in today’s business environment, strategy plays a very critical role in ensuring the success of a company. This report gives a limelight on the extent to which strategy has contributed to the superiority of BMW in the UK automobile industry. In analysing this, the report will begin with an evaluation of BMW as a premium car manufacturer. The report then employed the use of PESTEL and Porters five forces to analyse the external car industry environment. The internal environment are analysed by use of value chain analysis. Bowman’s Strategy Clock is also explored in understanding the marketing strategy used by BMW Company. Finally, Resource/ competence framework has also been explored in understanding the key competencies and resource capabilities that has enabled the BMW to maintain market leadership position. In compiling this report, major sources of information used were journals, empirical literature and the internet. The findings of this report show that strategy has played a pivot point in BMW’s overall performance. Generally, the report shows that unstable political environment in the UK and the global market is greatly affecting the industry. Moreover, socio-cultural environment greatly affect the industry as consumers are becoming more environment conscious....
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...Introduction: In 1979, Harvard Business Review published “How Competitive Forces Shape Strategy” by a young economist and associate professor, Michael E. Porter. It was his first HBR article, and it started a revolution in the strategy field. In subsequent decades, Porter has brought his signature economic rigor to the study of competitive strategy for corporations, regions, nations, and, more recently, health care and philanthropy. “Porter’s five forces” have shaped a generation of academic research and business practice. With prodding and assistance from Harvard Business School Professor Jan ‘ Rivkin and longtime colleague Joan Magretta, Porter here reaffirms, up-dates, and extends the classic work. He also ad-dresses common misunderstandings, provides practical guidance for users of the framework, and offers a deeper view of its implications for strategy today. In essence, the job of the strategist is to understand and cope with competition. Often, however, managers define competition too narrowly, as if it occurred only among today’s direct competitors. Yet competition for profits goes beyond established industry rivals to include four other competitive forces as well customers, suppliers, potential entrants, and substitute products. The extended rivalry that results from all five forces defines an industry’s structure and shapes the nature of competitive interaction within an industry. As different from one another as industries might appear on the surface, the underlying...
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...Table of Contents Major Problems or Issues…………………………………………………………Page 2 A. Organizational Purpose, Objective, and Current Strategy…………………………..…...Page 3 ANALYSIS B. SWOT Analysis…………………..………………………………………………………Page 3 C. Competitive Analysis………………………………………………………………….…Page 5 D. Financial Analysis…..……………………………………………………………………Page 7 E. Implementation Issues/Problems………………………………………………………..Page 10 F. Evaluation/Control Procedures……………………………………………………….…Page 14 ALTERNATIVE SOLUTIONS TO PROBLEMS /ISSUES………………………………Page 15 RECOMMENDED COURSE OF ACTION/JUSTIFICATION…………………………..Page 17 IMPLEMENTATION PLAN………………………………….…………………………..Page 18 MAJOR PROBLEMS OR ISSUES Ann Taylor (NYSE ticker = ANN) was founded in 1954 based upon the corporate mantra of providing professional, yet fashion conscious, business women access to quality, yet affordable, attire. During the last fifty-four years Ann Taylor has become very well known for its offerings, especially “the classic basic black dress and women’s power suit”, and has maintained itself as a leader and innovator within the specialty retail sector. Ann Taylor’s strategic management has maintained its comparative advantage by successfully and accurately predicting client fashion preferences and meeting these preferences through three, diversified, retail divisions (AT, LOFT and FACTORY). The instigation of each division was an effort to meet the broader specialty retail challenge that accompany changing consumer demographics, buyer habits...
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... Graduate School of Business COURSE NAME: STRATEGY AND COMPETITIVENSS (SEMESTER 2014/2015) COURSE CODE: ZCZB6523 (SET 5) CREDIT: 3 HOURS TRIMESTER: 7th FEB 2015 The course starts on 7th February 2015. The first class will be a full lecture session. The subsequent classes will require groups (of two students) to make their respective presentations on their selected company. Most classes are on Saturdays from 8.30 -11.30 am 1.0 COURSE OBJECTIVES and LEARNING OUCOMES: This course focuses on some of the important elements of strategic management. It will concentrate on strategy development and competitive advantage. It is consciously designed to highlight the significant emerging trends in strategic management. The course provides students with a practical approach to the formulation and implementation of corporate, business, and functional strategies. The course is also meant to give graduate students the skill to derive strategies rationally for the organizations that they are currently working for or have chosen for their analysis. There are no strategic decisions that are perfect under the current turbulent business environment. Therefore, a rational approach to strategic decision-making is deemed most appropriate. However, the strategy developed may not survive in its original form upon execution. Accordingly, these strategies have to be adjusted to meet the current challenges. Emergent strategies that were unplanned would also need to be exploited...
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