Three of the most widely read books on competitive analysis in the 1980s were Michael Porter’s Competitive Strategy, Competitive Advantage, and Competitive Advantage of Nations. In his various books, Porter developed three generic strategies that, he argues, can be used singly or in combination to create a defendable position and to outperform competitors, whether they are within an industry or across nations. The strategies are (1) overall cost leadership, (2) differentiation, and (3) focus on a particular market niche. Cost Leadership, Differentiation, and Scope These strategies are termed generic because they can be applied to any size or form of business. We refer to them as trade-off strategies because Porter argues that a firm must choose to embrace one strategy or risk not having a strategy at all. Overall lower cost or cost leadership overall cost-leadership strategy, a strategy in which an organization attempts to gain a competitive advantage by Continue reading
Strategic Management Basics
Greiner’s Model of Organizational Growth – Phases of Organizational Growth and Crisis
All organizations pass through various stages of growth and at each stage the organization is required to solve some specific problems. A very useful model of organizational growth has been developed by Larry E. Greiner. In his 1998 Harvard Business Review article entitled “Evolution and Revolution as Organizations Grow,” Greiner outlined five phases of growth punctuated by what he termed “revolutions” that shook up the status quo and ushered in the successive stage. Greiner’s Model of organizational growth is based on certain assumptions about the organization which are as under: First assumption is organisations are rigid, bureaucratic, control-centric, and centralized entities. Second, organisations fail to see that the future success of an organisation lie within their own organisation, and also fail to assess their evolving states of development. Therefore inability of a management to understand its organisation development problems can result in organisation becoming frozen in its present stage of Continue reading
Steps Involved in Strategic Management Process
Strategic management is a particular course of action that is meant to achieve a corporate goal. The Strategic Management Process defines the goals and objectives for a business, it creates the action plan so that a company can reach them and then it follows the plan. There are nine steps in Strategic Management Process which managers need to follow; which are defined as under: Identify the Organization’s Current Mission, Objectives and Strategies: It is important to identify the goals and objectives of the company. It defines the present purpose of the organization as a mission and the strategies currently being followed. The mission statement becomes the identification of an organization so it is very much necessary to identify it. Analyze the Environment: It is a process of monitoring the organizational environment to identify competitor’s actions and to confirm if it is suitable to let the firm goes to already set Continue reading
Advantages and Disadvantages of having a Mission Statement
Mission statement is a summary statement of a company’s or organization’s purpose about what it wants to accomplish in the larger environment. Mission statement is playing an important role with the overall strategic planning of an organization. All of the strategic planning of an organization should base on the mission of an organization that had been set. Strategic planning include all the long-range plans, strategic plans and also annual plans which include decision making about the human resource management, production and operation, finance and it is also concerned about the marketing planning. A well-defined mission statement is very important to guide people in the organization, clearly defines who the customer is and what services and products the businesses are intended to provide. A good mission statement should contain some criteria. First, a good mission statement should be market-oriented. A market-oriented mission statement focuses on satisfying customer’s needs. A mission statement Continue reading
Porter’s Five Forces and Three Generic Strategies
The long development of Porter’s Five Forces Analysis has brought to the fact that those forces become the determinants of the industry’s competition. These five forces are treat of new entry, rivalry among existing firms, treat from substitute products, bargaining power of buyers, and bargaining power of suppliers. Furthermore, five forces analysis is treated by the organization to measure the level of competition, besides that, it is used as a strong first step in understanding how one industry compares to another and also to determine industry profitability because they influence the prices, costs, and required investment of firm in an industry. In order to be competitive enough, a normal company that seeks profitability would have to understand how they work in its industry and how they affect the company in its particular situation. Therefore, Three Generic Strategies were implemented to establish a strategic agenda for dealing with these five forces. Continue reading
Porter’s Five Forces and Corporate Strategy
Porter’s Five Forces Framework Porter’s Five Forces Framework introduced back in 1979 by Michael E. Porter from Harvard University in his first book “Competitive Strategy”. It becomes international best seller, and considered by many to be a definitive work on corporate strategy. The book itself had been published in nineteen languages and re-printed almost sixty times, changes the way business leaders thought and remains a guide of choice for strategic managers the world over. It has become an important tool for analyzing an industry structure and strategy process. The tool provides a simple perspective for assessing the position and competitiveness of a corporation or business organization within the industry. Porter points out five forces which the upturn and downturn, will affect the profitability and existence for a corporation or business organization. The development of Porter’s Five Forces Framework is based on the idea of attractiveness of an industry. As for Continue reading