Porters’ generic competitive strategies

According to Porter's generic competitive strategies, in order for a firm to succeed, it is important for it to grasp the size of its target market, whether it be a vast market or a small niche. In terms of its competitive scope, this defines firms. Additionally, in order for a company to have a competitive advantage over its rivals, its managers must decide how the company will compete in the chosen or selected market; they can either offer their customers products and services that are unique or they can reduce operational costs while still offering products that are similar to those of their rivals ( Poter 1985). The old electronics company ‘stuck in the middle’ had relative defender strategies in its operationalization and activities. An analyst without an innovation strategy may give this business a benefit of doubt in revitalizing itself since as a ‘middle company’; it has the opportunity to venture in similar products as its upcoming competitors. It is the small niche of competition it once had in offers, that outlines its competitive advantage amidst other business firms. Burton in his book defines strategy as the operationalization of an organization’s goals in efficiency and effectiveness. Structure is what helps to achieve these goals. Hence, for Burton, the success of a business depends on three essential elements; its environment, the operational design and its strategy (Burton & Obel, 2004). For the electronic shop, the business has a chance of surviving in the burgeoning competitors if it deploys the use of different features in the electronics being produced and sold. Since the resources in the market are assumed to be finite, firms need to be different so as to reduce competition in resources; this is likely to reduce competition levels between firms (Deephouse, & Carter, 2005). These electronics could bear some unique feature such as a high sound amplifier, long battery sustainment or even water resistant abilities. The company, in essence, should strive to have some form of differentiation in the goods and services delivered to its consumers- differentiation strategy. Differentiation of goods and services in a competitive environment as in the case study above can help create some unique features that the upcoming competitors cannot match up to (Sauder, 2012, Deephouse, & Carter2005). And of course, different is intriguing, at least for most consumers.

Still utilizing its defensive strategy, this helps the firm distance itself further from its competitors by maintaining the competitive advantage gained prior. This process helps in keeping the advantage close by, once it has been attained by firm managers. When the electronic company begins providing distinctive features, the charges undertake the premium trajectory making prices go higher for goods and services. Porter suggests the differentiation can not only be based on the products uniqueness, it can also be on some unique feature in the firm’s product so as to increase performance. Examples of realms the product can bear uniqueness include its customer services, brand recognition, its design and/or its superior quality. This can be done my manipulating features such as consistency, durability, reliability, style, design and reparability. Since the electronics company had the design strategy of cost, the problem of incurred extra costs for premium services can be covered, for a while until the firm catches up. Producing products those different from competitors help prevent the entry of other competitors in the market niche. Therefore, the management at the electronic firm can also differentiate in terms of hiring and training in order to thrive in the harsh environment of competition. Deephouse in his book posits that differentiation influences a company’s competitive environment. Most organizational defensive strategies fail to present the potential profits anticipated because most of the strategies organizations use are easy to imitate for outsiders (Porter 1985). Strategies such as technology and digital efficiency are easy to imitate, but the activities a company undertakes in operating its defensive strategies are unlikely to be imitated which paves way for survival in a competitive environment (Kim, & Mauborgne, 2005). Trying to imitate the human resource management of a company may prove elusive because the source of advantage or gain may be elusive for the imitator or outsider. For example, employers can pay attention to workers by monitoring their commitment and performance which can offer the company competitive advantage. The electronic company therefore can revise its Human resource policy on performance management in order to thrive and adapt in the volatile environment .This differentiation in the type of services offered and performance management helps employees stay in the frontline even when the consumers seem dissatisfied with the services. Another way the company can differentiate itself in the competitive electronics market is by differentiating itself from its competitors by making its CEO recognizable. A recognizable CEO has the ability to make the company stand out from the rest even amidst intense competition. (Aithal et al., 2015).

Being different, the company therefore has the competitive advantage of attracting more consumers based on its unique features in products and services. The different ways in operationalization and activities in the human resource department also reduces chances of imitation which is likely to lead to similar production of goods and services. (Botha et al,. 2014). When products are similar, competition between firms become intense and any firm without a solid grip in strategies is likely to fall in the pitfall of business collapse. Firms should be similar so that they can achieve their superior performance. Being similar will also help the company evade legitimacy challenges that consequently hinder acquisition of resources (conformity proposition). More elaborately, when the electronic company is similar to others in the market, legitimate challenges imposed on them by institutional forces such as rules and regulations concerning taxes, loans, are more likely to be avoided. This, for most of the part, leads to high performance. As for differentiation and similarity among competitors, both conformity and differentiation is important in firms. Thus, for the performance of an organization, both conformity and differentiation is important in ensuring its performance since it ensures a state of balance between competitors (Deephouse, & Carter2005). Since middle statuses firms have low levels of similarity, the differential proposition shows that the electronic company faces competitive new threats for targeted resources; and consequently, they should raise prices for a monopolistic strategy. This is the only way the company can maintain its pedestal in the face competitive environment of electronic products and services.

Q2.

What if the electronic company could cruise in its own lane or league? Instead of competing and struggling to fight for the same resources, what if the company just decides to focus on its pace, create its own unique products and profit from new markets? This, in the simplest form described above, is the blue ocean strategy by Kim and Ranee. The blue ocean strategy or theory supposes that businesses are better searching, creating and settling for a new market instead of searching for ways to gain access in the already overflowing competitive environment. The two founders assert that sometimes businesses are better off in an environment with zero competitions instead of viciously competing with other companies. The strategy emphasizes that competing companies are likely to face their doom unless they create ‘blue oceans’ of uncontested market space for their growth (Kim, & Mauborgne, 2005).

Middle status companies refer to companies with sizeable yearly revenues falling centrally within the market environment. On broader sense, it refers to firms straddling between large and small business enterprises. While the limits defining this type of business aren’t set, some scholars argue that the lower limit should be as low $10 in terms of revenue while others set as high as high as $500 . These companies are commonly known to employ a moderate number of employees ranging from 100-2000 workers (Cusumano et al,. 2015). In the US, middle market companies form the pillars of its economy since they partake in a fair share in creating jobs. Additionally, they form one of the fastest growing companies with regards to revenue. Interestingly, the cumulative revenues accrued have a substantial impact in rivaling the influence of dominant and competitive firms in the marketplace (Kravets & Sandikci, 2014). Chances are that, the electronic company is likely to take the blue ocean trajectory in countering the competitive firms presenting themselves as threats. This is because, while middle status (electronic company) companies may deploy the strategy of differentiation and move a stretch, away from its rivals, they risk pulling out of business when resources fly out of the window without the blue ocean strategy. In fact, creating its new market environment lends the company better chances of creating a new consumer base not under a middle class company but as a high market company amidst almost zero competition. It won’t be long until the company is depleted of its resources and funds while fighting for more space in the competition niche (uncontested market space) if differentiation alone, is used to counter the competitiveness. (Cooper, 2016). 

References

Aithal, P. S., Shailashree, V. T., & Kumar, P. M. (2015). Application of ABCD Analysis Model for Black Ocean Strategy.

Botha, A., Kourie, D., & Snyman, R. (2014). Coping with continuous change in the business environment: Knowledge management and knowledge management technology. Elsevier.

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Carroll, G. R. (1993). A sociological view on why firms differ. Strategic Management Journal, 14(4), 237-249.

Cooper, A. F. (Ed.). (2016). Niche diplomacy: Middle powers after the Cold War. Springer.

Cusumano, M. A., Kahl, S. J., & Suarez, F. F. (2015). Services, industry evolution, and the competitive strategies of product firms. Strategic management journal, 36(4), 559-575.

Deephouse, D. L., & Carter, S. M. (2005). An examination of differences between organizational legitimacy and organizational reputation. Journal of management Studies, 42(2), 329-360.

DiMaggio, P., & Powell, W. W. (1983). The iron cage revisited: Collective rationality and institutional isomorphism in organizational fields. American Sociological Review, 48(2), 147-160.

Kim, W. C., & Mauborgne, R. (2005). Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant: Harvard Business School Press. Boston, MA.

Kravets, O., & Sandikci, O. (2014). Competently ordinary: New middle class consumers in the emerging markets. Journal of Marketing, 78(4), 125-140.

Miles, R. E., Snow, C. C., Meyer, A. D., & Coleman, H. J. (1978). Organizational strategy, structure, and process. Academy of management review, 3(3), 546-562.

Porter, M. E. (1985). Competitive advantage. New York, 13.

Porter, M. E. (1996). What is strategy. Published November.

Sauder, M., Lynn, F., & Podolny, J. M. (2012). Status: Insights from organizational sociology. Annual Review of Sociology, 38, 267-283.