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ENTERPRISE STRATEGY –E3

Porter Models

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Summary of Enterprise Management (E3) – Strategic Level

Organization

• Culture – Cultural Web, Quality Culture (JIT,

TQM etc.)

• Types of organization structures

• 3 levels of Strategy – Corporate, Tactical and

Operational

• IT Strategy – Earl’s Model and McFarlon Grid

Strategy

Formulation

process

• Rational

• Emergent

• Freewheeling

Opportunism

Strategic Analysis Strategic Choice ImplementationReview and

Control

External Environment

Analysis

• Opportunities

• Threats

• Porters 5 Forces

• PESTEL

Mendelow’s

power interest

matrix

To resolve Stakeholder

conflict, we use the Cyert and

March Model

Internal

environment

analysis

(Strengths and

Weaknesses)

Gap Analysis

(Efficiency*, Expansion** and Diversification)

Based on

(a) Position Analysis

• Product Life Cycle

• Competitor

Analysis

(b) Strategic

Capability (R/C Grid)

SFA+S

Framework

Rewards and

Recognition

Change Management

• Triggers for change

• 4 blocker change

management grid

• Kurt Lewin’s change

management model

• Kotter & Schlesinger

model

• BCG Matrix

• Ansoff Matrix

• Porter’s Generic

Strategies

Fitzgerald and

Mood Building

Block Model

Performance

measurement mix

• Fin + Non Fin

• 4 CP’s of management

• Kaplan and Norton

BSC

• CSF’s (Lynch and

Cross Model)

• KPI’s

** Porter’s Diamond* Porter’s Value Chain

• Mission

• Vision

Porter’s Models and their applicability

Value

Chain

Generic

StrategiesDiamond5 Forces

Helps an

organization to

continuously

evaluate its market

position

• A mix of inward and outward

analysis of the activities

(primary + secondary)

• The aim is to continuously

identify and remove non value

added

• End result – Higher margins

• Useful framework for a company

to identify the target audience

for its products / services

• Determine pricing strategy

based on the scope of the

market (narrow or broad)

A useful framework to

understand and analyze the

competitive advantage of a

nation


Environmental Analysis - Porter’s 5 Forces

PESTEL is also used in addition to the Porter’s five forces for a comprehensive environmental analysis

Rivalry

against

competitors

Rivalry

against

competitors

New

Entrants

New

Entrants

Power of

Suppliers

Power of

Suppliers

SubstitutesSubstitutes

Power of

Buyers

Power of

Buyers

• Standardized product

• Too many small firms

• No Switching costs

• Essential input

• Few suppliers

• Branded product

• Switching costs

• Customers are fragmented

with little buying power

Largely depends on the barriers to

entry

• Economies of scale

• Capital requirement

• Access to distribution channels

• Differentiation

• Legislation

• Access to resources

• Stage of life cycle

• Lack of differentiation

amongst products

• Balance of competitors

Helps companies

continuously

analyze their

position in the

market

Role of

Government is the

6 force in addition

to 5 forces

suggested by

Porter


Inability of Honda

to predict the power

of buyers and

suppliers made it

loose to Vento

Nokia under

estimated the force

of new entrants

such as Micromax,

Samsung in to

mobiles

Government’s

measures to

promote the telecom

industry in India

attracted larger no

of entrants

Apple shortens the life

cycle of its products

by launching new

models which keeps

the product in the

growth stage

Google almost has

a monopoly in the

mobile software

space

Effective use of Porters 5 forces can help the company identify opportunities and

prevent threats

Environmental Analysis - Porter’s 5 Forces


Driving Efficiency – Porters Value Chain

Image taken from Google Image

Primary Activities – Direct

creation / delivery of products /

services

Secondary Activities – Activities

that support the primary

activities

How activities

contribute to an

organization’s

Competitive

Advantage

Each member of

the system uses

their position and

negotiation power

to drive margins

higher

Steps

• Analyze own value chain

• Analyze customer’s value chain

• Identification of

Value Created – Cost of creating

value = Margin

• Identification of sub activities for

primary and support activities i.e.

(a) Direct, (b) Indirect and (c)

Quality

Aim – Continuously identify opportunities to increase value and reduce non value adds


Pre implementation of Porter’s value chain – Automobile company procurement

process

Manufacturer of car

parts

Supplies

Parts to

Car manufacturer

Sends parts

Received to

Inspection team

If parts

Are good

Parts are used in cars

If parts are

not good

Post use of Porter’s value chain – Automobile company procurement process

Certifies s

supplierSupplies

Parts to car

manufacturer

No inspection required

and parts are directly

used in cars

Non value added activity relating to inspection has been done away with leading to reduction

in cost and increase in margins


Company needs to

continuously review

is value chain to

identify Non value

adding activities

Removal of non

value added

activities from a

process makes it

efficient

Efficient processes

help in reducing

cost and improving

margins


Porters Diamond – Competitive Advantage of Nations

Nation’s

Competitive

Advantage

Demand

Conditions

Structure,

Strategy

and Rivalry

Related

and

Supporting

Industry

Factor

Conditions

e.g. BRIC countries

Diamond affects 4

components that enable a

nation’s competitive

advantage

• Availability of resources

and skills

• Opportunities available for

companies to pursue

• Goals of individual

companies

• Pressure on companies to

innovate and invest

Rivalry Curve

Low initially and

Higher later

All the above factors

are interconnected

6th Force – Role of

Government

• Encourage companies to

raise performance

• Stimulate demand

• Focus on the R/C grid of a

nation

Porters Diamond – Competitive Advantage of Nations

India had a competitive

advantage of highest

number of English

speaking people resulting

in highest number of call

centers operating out of

India

China’s government focus

on making it the

manufacturing hub gave

China the competitive

advantage

Size of markets in the

BRIC countries make all

companies set up their

business in these

countries

Strategic Choice – Porters Generic Strategies

Cost Leader –

Broad Focus

Differentiation –

Broad Focus

Niche – Narrow

Focus

Depending on the product portfolio and strategy of a company, one or a combination of the

above can be used by a company for e.g. I phone offers all high end phones whereas Samsung

offers products both in the cost and differentiation category

• Price penetration helps to develop an existing market,

explore new market

• Develop new segment

• Earn high profits due to higher sales volume

• Defense against price wars and acts as a barrier to entry

• E.g. Future Group

• Higher margins (customer willing to pay a premium) and

inelastic demand

• Life cycle of a product extends

• Helps in building a brand

• Avoid price wars

• E.g. Samsung

• Price skimming is relevant

• Smaller segment

• Lesser competition

• Relatively smaller investment

• E.g. Harley Davidson

Thank You

KAPP Edge Solutions


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