write down the Primary post(200-250 words), and two responses to your fellow students(100-150words/each).
Michael Porter wrote a book, Competitive Advantage (New York: The Free Press, 1980), which became the standard text on corporate strategy during the 1980s and 1990s. In it, he claims that there are three sources of competitive advantage (1980, pp. 35-40):
(1) Overall cost leadership (you make something everybody else makes at lower unit cost)
(2) Differentiation (nobody else makes exactly what you make, and consumers are willing to pay a little extra to buy what you make rather than a substitute)
(3) Focus (you make a product or produce a service which is generally available, but focus on serving a narrow customer base and doing it better than anyone else)
Approach (3), if you think hard about it, is really just a combination of the other two, focused on a specific, often narrow customer base. You will have undoubtedly gathered the same from your readings of Drucker. These are really the only possible competitive strategies a business can apply.
The rest of Porterâ€™s book is a frameworkâ€”the 5 Forces Model and its applicationâ€”for assessing a businessâ€™s competitive situation, and how to direct its energies towards â€œwinning.â€ Now, watch the following video, which provides a great summary of Michael Porterâ€™s 5-Force Model for assessing competition in oneâ€™s industry.
Then view the following videos, which are part of this weekâ€™s required readings:
What are your thoughts about the usefulness of â€œBlue Ocean Strategyâ€? Under what conditions?
Porterâ€™s 5 Forces Model focuses on assessing a businessâ€™s competitive situation and how to direct its energies towards gaining competitive advantages. Blue Ocean Strategy refers to simultaneously pursuing differentiation and low cost to explore a new market territory and create new demand (Kim & Mauborgne). The major difference between the two schools of ideas is the relevance of competition. The 5 Forces Model assumes the material existence of competition and the model is established to understand and address the competition. However, the Blue Ocean Strategy does not concur with the 5 Force Model and argues that innovations in a new market make competition irrelevant.
In the real world, it is more common for companies to use both strategies as appropriate because each company has a different situation because of its industry and the company itself. According to the video clip made by Cranfield University, a study found that innovations in existing markets were more profitable than expected in the retail industry. This suggests that competition may not play such a significant role as described by Porter and innovations do not have to be in a brand new market to succeed. The Blue Ocean Strategy is aligned with Druckerâ€™s innovation strategies, but innovations in a new market are costly and not every company has the resources to afford it. However, this can be illuminating for large, leading companies to expand their scope of a business, getting out of the box.
Blue Ocean Strategy was written by W. Chan Kim and Renee Mauborgne. The key point for Blue Ocean Strategy is that the competition is irrelevant in the market, instead, company should focus more on innovations. And “Blue Ocean” represents for the unexplored new market areas. However, one of Michael Porter’s 5 Forces is “competition in the industry”, which assumes that there is a material competition exists in the market, and the other 4 forces related to the “competition in the industry”. For example, if the threat of substitute products is higher, the competition in the industry is higher. Company has less power for price setting and customers has more power for bargain price.
When it comes to me, I think it is really hard to say which strategy is better than the other. In my opinion, I think Michael Porter’s 5 Forces are more useful for those traditional industries, such as candy company. However, the Blue Ocean Strategy is more useful for modern industries, such as high-tech companies. For example, I think Blue Ocean Strategy is more useful for Apple or Google. In order to obtain the market shares and profits from competitors, Apple and Google needs to think out of the box and have some kinds of innovations on their products to attract customers’ attentions.