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Compare and contrast porters generic strategies and Bowman's strategic clock.

- Explain the two strategies.
- compare their similarities.
- Contrast the difference between the two.
- Draw your conclusion.

The role of the resources based view in sustaining competitive advantage.

Porter's Generic Strategies

Michael porter has developed generic strategies stating the 3 ways in which an organization can compete with its competitors to provide customer satisfaction. These 3 ways are cost leadership, product differentiation and Focus.

  • Examples of companies using cost leadership are Walmart, South west Airlines, IKEA, Tesco. These companies have achieved highly efficient internal business processes, uses economies of scale and thus able to sell the material at a lower cost than the market and still able to make decent profit margins as they has reduced the costs of running business
  • Some of the organizations that have adopted differentiation approach are Zara, Google, Facebook, Apple as their products and services are quite unique in the market (Haley, & Boke, 2014). These organizations have the products that looks superior to competitors and also deliver more value. For instance, there are large number of search engines but undoubtedly Google retrieves the most accurate results. Apple mobile phones have different look and feel and thus they look more attractive as compared to Samsung’s mobile phones  
  • Some of the organizations that are focus are McDonald’s, Boeing, Pepsi co, High end hotels like four seasons. These organizations have identified very niche markets and fully concentrate their resources to fulfill the needs of that market and thus are quite focused 

This model is the successful adaptation of the porter’s generic strategies model after the porter model was criticized for its non-flexibility and non-explanation about stuck in the middle approach followed by the organizations. This model was also used by the organization while defining their business strategy and compare its position with those of competitors in terms of the products and services. As per porter, organizations can be either follow cost leadership strategy or differentiation however there are different combinations of cost leadership and differentiation that different organization can follow (Hodgkinson, 2015). Bowman added more details into porter model and defined 8 strategic options that organizations can follow. They are as follows:

Companies do not want to operate in this segment however some products have become commodities and consumers do not care about any other attributes of the product except the price. Companies in this segment sustain by keeping their volumes high without giving any though to differentiation and customer loyalty.

Organizations that operate in this category are cost leaders like Walmart and South west Airlines. These companies exploit economies of scale and thus able to thrive even when their margins per products are very low. Such companies needs to have large volumes to sustain. Some new comers also enters in this area which triggers a price war but as volume is not large, they eventually shut down (Ceptureanu, 2016).

Organizations that operate in this area offers products and services at a low price but their products have higher perceived value that other low cost competitors. IKEA follows this strategy. Costco supermarket also follow this strategy where you will find only few brands of the particular product as against products but all those brands have high turnover.

Organizations in this segment offers unique products and services to the consumers and thus commands a high price because their perceived value is much higher. Zara, United Colors of Benetton, Nike, Adidas operate in this segment.

Organizations in this segment offers products and services for very niche groups Like Armani, Rolls Royce and thus commands high price due to high perceived value of the products and services.

This strategy of high margins without much perceived value is not sustainable because it will soon be discovered in competitive market and customers will no longer buy the products with similar perceived value as low cost products but much higher price.

Bowman's Strategic Clock

This strategy is adopted by the monopoly companies or oligopoly forming cartels. Though they do not offer high differentiation or perceived value but still charges high price as the consumers do not have other options. They do not last longer unless they are owned by the State or government authorities.

Organizations that are using this strategy will gradually decline because it became difficult for the company to sell the low perceived value to the customers at a standard price.

                                                      

                                                                                                Figure 1: Bowman's strategy clock 

The purpose of both the strategies is similar to help the organizations to understand their relative position and derive appropriate marketing strategy. Also, porter generic strategies are subset of Bowman’s strategic clock as Bowman clock has additional options of strategy while porter has strict extreme combinations.

The organizations which are using different combination of differentiation and cost leadership are difficult to map in the porter’s models but Bowman’ strategic clock has clear cut combination. For instance, IKEA has cost leadership as well the percevi4ed value of its products is much higher. It is difficult to map this using Porter’s model but it can be easily mapped to Hybrid model using Bowman’s clock.

Generic strategies focuses on broad market at a very high level while the Bowman’s strategic clock is much more detailed and thus accurate (Panwar, et al., 2016).

Conclusion

Both the models have their own relevance. Though Bowman’s strategic clock is much more useful and practical than generic strategic model but the important point is that the Bowman model is the refinement and excellent adaption of generic strategies model by making it more flexible and practical in real life situations.

References:

Ceptureanu, E. G. (2016). Competitive Intensity and Its Implication on Strategic Position of Companies. Journal Of Applied Quantitative Methods, 11(1), 57-62. 

Haley, U. C., & Boje, D. M. (2014). Storytelling the internationalization of the multinational enterprise. Journal of International Business Studies, 45(9), 1115-1132. 

Hodgkinson, G. P. (2015). 10 The Behavioural Strategy Perspective. Advanced Strategic Management: A Multi-Perspective Approach, 201. 

Resource Based View (RBV)

Panwar, R., Nybakk, E., Hansen, E., & Pinkse, J. (2016). The effect of small firms' competitive strategies on their community and environ

Every organization is made of various resources. Resources acts as inputs to firm production process or help in generating the output that commands a price in the market. These resources can be tangible resources like People, machinery, assets, capital, buildings as well as intangible resources like brand value, reputation, credibility. Unlike tangible resources, intangible resources generally associated with a company and built over a long period of time and cannot be purchased from outside. It is important to identify the key resources for each organization so that they can be exploited and leveraged to achieve as well as sustain the competitive advantage. The RBV (Resource based view) is the framework that help the organizations to determine their key resources so as to achieve the sustainable competitive advantage by developing capabilities and competencies using the resources (Madhani, 2010). This framework can be used with other strategic management tools Like SWOT analysis, PESTEL analysis, BCG Matrix, Value chain analysis. While PESTEL analysis is used for assessing the external environment and applicable for the entire industry, Resource based view is internal to organization and is applicable for that particular organization.

The 2 main assumptions of the Resource based view are that resources must be heterogeneous and immobile. As far as Heterogeneous assumption is concerned, it says that the different organization possess different resources and this is the reason of their competition (Lin, & Wu, 2014). For instance, consider if 2 organizations have exactly same set of resources, then no matter what the one organization, it is easy to adapt to that by other organization but in reality each organization has difference in resources at least to some extent. Consider, there are so many automobile companies exists like Volkswagen, Toyota, Suzuki, Ford and at high level, it looks like each has access to same set of resources like people from top universities, similar suppliers, production capabilities but still there is huge difference in their results when they compete in similar external environment. The reason being that each organization some superior key resources and compete on that. Some have access to good suppliers, some have brand value advantage, some have very efficient business processes that makes a difference and set each company apart. Another example is of Apple and Samsung. These 2 companies operate in same external market, target similar customers, and have similar suppliers and distribution centers but still there is differences in performances of both. The simple reason is Apple has a huge brand reputation which is established over a period of time and thus it is a key resource that Samsung do not possess as of now.

Immobile As per this assumption, resources of the organizations cannot move from 1 organization to another in a short run and thus it is not possible to copy the strategy of any organization by its competitors at an immediate basis. For example, if any company has very good leaders and managers to guide the direction of the organization, they will not be easily available to competitors. Changing the company will take some time for them and also they need to understand the ecosystem, policies and cultures of the other organization, before they can take some key decisions for the organization (Ketokivi, 2016).

The resource based view also proposes a guidelines that help the organization to categorize its resources in various buckets. In the same area, there is a popular VRIN (Valuable, Rare, Inimitable and Non substitutable) analysis developed by Barney in 1991 that is commonly used by the organizations to categorize its resources among Valuable, Rare, Inimitable and Non substitutable aspects. If there are resources that satisfy all the 4 criteria’s, then those are resources that will help the organizations in sustaining competitive advantage (Butler, et al., 2016). This framework was later on changed from VRIN to VRIO where ‘O’ stands for if organization existing environment supports the resources and if it is possible for the organization to use it effectively. Below are the dimensions of VRIO framework:

  • Valuable - It is the valuableness of the resource and if the resource adds any value to the services and operations of the company or not. It is important to apply this dimension continuous basis because resources may become valuable or lose their valuableness by the external business environment. Such resources help in increasing the differentiation factor. Also, if the resource is not valuable, it can be outsourced to specialists.
  • Rare - it refers to how easily the resource is available or the supply of the resource with respect to its demand. If the resource it not easily available and only few organizations have those resources, those are rare resources. And if those rare resources are central to customer experience/needs, they become the core competency of the company.
  • Inimitable - Some resources can be easily copied and offers temporary competitive advantage but some resources are very difficult to be copied and thus can generate a long term value. Resources that are difficult to copied are like legacy of the organization, history of the organization, causal ambiguity as well as culture and values of the company. Also, if the resource is valuable and rare but easy to imitate, then it will add little value for temporary period only.
  • Non-Substitutable - When the substitute of the product or service or resource is not available at the same or lower cost, then the resource offers non – substitutable advantage.

The resources which fulfils all the 4 criteria are actually the source of sustained competitive advantage and organization must protect them as well as exploit them to gain the competitive advantage.

References:

Butler, T. D., Armstrong, C., Ellinger, A., & Franke, G. (2016). Employer trustworthiness, worker pride, and camaraderie as a source of competitive advantage: Evidence from great places to work. Journal of Strategy and Management, 9(3), 322-343. 

Ketokivi, M. (2016). Point–counterpoint: Resource heterogeneity, performance, and competitive advantage. Journal of Operations Management, 41, 75-76. 

Lin, Y., & Wu, L. Y. (2014). Exploring the role of dynamic capabilities in firm performance under the resource-based view framework. Journal of business research, 67(3), 407-413.

Madhani, P. M. (2010). Resource based view (RBV) of competitive advantage: an overview.

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