Strategic Management - Critics, management models
Porter's Five Forces model is designed with a focus on factors that built up the competitive advantage of a firm within the market (Afuah, 2003). It has achieved significant success in analyzing the industry in general and forms a very useful tool for assessing a company's own stability through the SWOT analysis. Its success in providing market insights increases within deregulated markets. Presently, there has been a drop in its popularity amongst managers, economists and scholars. Why is it this so?
It is clear that the globalization of markets has led to a paradigm shift in how organizations-and especially multinationals-conduct their business operations. The deregulation of national and regional markets has led to eradication of bottlenecks to cross border trade leading to increased competition for the vast and diverse, global markets. Porter's competitive model was build based on the prevailing economic conditions of the eighties. It assumed the classical perfect market conditions of intense competition and a relatively stable market structure that is subject to cyclical developments. Therefore, by design, this model loses significance in the modern global market.
[...] The models provide a foundation for which decisions on policies and strategies can be made so as to enable drive the organization's activities towards achieving its set targets and goals. Secondly, the development of these models provided effective managerial tools useful indecision making in the economic conditions of the time. Reference Dears, A company Models: A premeditated managing Approach. Irwin/McGraw-Hill. Akaya, M Managerial Economics & company Strategy. Irwin/McGraw- Hill. Gaoah, H Organization Change. Prentice CITY hall. [...]
[...] The main conceptual foundation blocks for the Blue Ocean model are value innovation, fair process and strong, competent leadership. The building block of Porter's competition model is market dominance. In the former, strategy formulation and execution is engineered in a manner that strategy informs structure and where innovation follows an integrated approach at the systems level i.e. innovation is enshrined through the model's systematic and reproducible processes In the latter model, structure informs strategy and where innovation is seen as an experimental process where spin-offs and entrepreneurs are key drivers. [...]
[...] Strategic Management - Critic of management models Critic of management models Porter's Five Forces model is designed with a focus on factors that built up the competitive advantage of a firm within the market (Afuah, 2003). It has achieved significant success in analyzing the industry in general and forms a very useful tool for assessing a company's own stability through the SWOT analysis. Its success in providing market insights increases within deregulated markets. Presently, there has been a drop in its popularity amongst managers, economists and scholars. [...]
[...] The disposal and optimization of loss making assets or ventures can be easily identified using this model. On the down side, the model, the model's application is often limited to a scope of a year. The model lacks the ability to provide a long-term picture of the market conditions and thus strategy development towards achieving the firm's overall long-term goals becomes very challenging. The BCG assumes a direct relationship between market shares, seems irrelevant in the current global market. There are small businesses in the small market segments especially within the information technology segment that have surpassed even the largest multinational corporations in profitability (Kaplan & Norton, 2000). [...]
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