Compare approaches to the development of strategy of Michael Porter and H I Ansoff

Document Type:Essay

Subject Area:Management

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at least 400 words) Michael Porter argues in his generic strategies that an organization pursues competitive advantage in their particular market. As a result, organizations analyze and choose a strategy that would grant them an opportunity to outdo their competitors in the market whereby it seeks to operate on a lower cost than any other in the industry so as to increase its profit margin regardless of lowering prices. In order to achieve a low cost, the company may engage economies of scale, raw material preferential access, and even advanced technology. Porter also argues that a company uses differentiation strategy in order to get gain competitive advantage. In this case, the company chooses to major on one of the highly regarded attributes by customers. This positions the company better in the market. The focus part of the generic strategy argues that a company chooses a particular and narrow scope in the industry in order to gain competitive advantage. By narrowing down, the company builds specialized expertise. The company may choose a segment of the market to serve dedicatedly. This locus has two variants; cost focus whereby the company chooses to gain cost advantage by focusing on its target segment, and the differentiation focus whereby the company works to achieve differentiation in its targeted group. On the other hand, Ansolf’s growth vector matrix is a strategy that guides a company in market development, diversification, market penetration, and product development in order to gain competitive advantage. In market development, Ansolf argues that the company selects and targets various market segments and uses marketing mix to reach out to the potential customers to get a better positioning.

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Diversification entails selling different commodities to new customers. Market penetration entails the use of marketing strategies to attract more customers while product development involves producing various brands or repackaging the existing ones to meet the needs of the customers. One similarity between the approaches is that strategy is developed from a choice (Gerry, et al, p17). However, before the choices are made, organizations have to undertake a thorough analysis of the various factors that influence the performance of the organization including the competition, supply chain sustainability and customer preferences and demographics among others. Michael Porter and H. I. Ansolf argue that strategy drive the scope of the organization (Gerry, et al, p16). More importantly, it gives direction to the organization. On the other hand, Porter argues that the generic strategies approaches are all encompassing and requires little changes.

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value chain refers to the idea that a company is a chain of activities for transforming inputs into outputs that customers value. ” (C W L Hill & G R Jones, ‘Strategic Management Essentials’, 2009, South Western) “The value a company creates is measured by the amount that buyers are willing to pay for a product or service. ” (C W L Hill & G R Jones, Theory of Strategic Management’, 8 edition, 2009) What part does Value Chain Analysis play in the creation of value? (A BRIEF description and diagram of the value chain is required). at least 400 words) Value chain analysis plays an important role in the value creation in any organization. During the analysis of the operations, the organization determines the effectiveness of the processes and technology involved (Gerry, et al, p75). Moreover, organization is able to identify particular areas that require improvement in order to increase value.

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Customers would be willing to buy again and again from a particular firm depending on the kind of service and value they get for their money. Therefore, value chain analysis allows the organization to retain customers by offering them better value for their money while making profits. The analysis of the value chain helps in identifying those activities which destroy value such as increased management costs and adding bureaucracy in the management processes especially businesses with a parenting aspect (Gerry, et al, p190). The most powerful shareholders in the organization are usually defined by the number of shares one has. The higher the number the number of shares, the more powerful the shareholder is in the company and therefore, their interests and proposals are majorly adopted. The lower the number of shares one has in the organization, the lower their power in the organization.

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As the powers of the shareholders increases, they tend to be more influential on the adoption and implementation of plans within the organization (Gerry, et al, p107). If such people have poor planning skills and have unrealistic expectations, the organization end up in crisis. On the other hand, shareholders would initiate or authorize plans to engage customers for purposes of retaining them. Such activities may be defined by the corporate social responsibilities. The shareholders review the costs involved in such activities and give recommendations accordingly. Diversification can help a company create greater value. C W Hill and G R Jones, ‘Essentials of Strategic Management’, 2008. As a company diversifies, it creates opportunities to utilize their resources maximumly to add value (Gerry, et al, p179). For example, Samsung Electronics is one of the companies that are diversifying over time.

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Currently, the company has ventured in the production of electric car batteries better than the Tesla’s. This diversification gives the company an opportunity to operate in the car industry and market. Diversification gives organizations higher chances of survival in the competitive markets. Diversification, also, creates loopholes for large losses and reduced costs especially where a conglomerate is created (Gerry, et al, p181). Some of the managers in the various business units may become reluctant in decision-making and execution thus leading to poor performance. The effects of poor performance in one business unit are usually felt throughout the entire organization since other units have to chip in to assist. Works Cited Gerry, Johnson, et al.  Fundamentals of strategy.

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