Evaluating strategic models

Evaluating strategic models

1. Five Forces model - Michael Porter

   • Use for analysis of Near Environment
     • Can be from perspective of incumbent
     • Can be from perspective of potential new entrant
   • Key characteristics which organisations can identify, understand and develop strategic responses to
     • Threat of new entrants
     • Buyer power
     • Supplier power
     • Substitutes
     • Barriers to entry
     • Rivalry
   • Gives detailed understanding of operating environment
     • Clues about the types of opportunities available and can identify potential threats
     • Criticisms
       • Organisations within an industry are identical in terms of their strategic resources and the strategies they pursue
       • If resource heretogenicity is present in an industry, then that heretogenicity will be short-lived, and advantages will be temporary
       • Needs a sixth force - Government

2. STEP Analysis - Fahey & Narayanan

   • Criticisms
     • So much information that analysis could take a long time and generate too mush data to draw meaningful conclusions
     • Difficulty answering the So What? question
   • Involves making a judgement about what is significant
   • Need to scan environment effectively, look for relationships between different factors, use So What?
   • Traditional STEP model has been expanded
     • Acknowledges extra factors which were difficult to locate in STEP and no have increased importance
       • Legal (L) - specific legal factors distinct from political factos
       • Environmental (E) - important environmental or social responsibility issues differentiated from social or political issues
       • Ethical (E) - specific ethical issues rise of corporate social responsibility
   • Use for analysis of Far Environment

3. Strategic Group Analysis - McGee & Thomas

   • Use for analysis of Competitive Environment
     • View the far environment as a system
       • Each factor is (potentially) related to and (potentially) affects every other factor
   • Use for analysing strategic and operational levels
   • Various elements of the model link together
   • Explains current behaviour of organisations
   • Offers predictions about possible future behaviour of groups
   • Recognises potential for organisations to adopt very different competitive strategies in same broad industry
   • Requires a strategist to look for groupings of organisations pursuing same strategies, 'clusters', within boundaries of an industry
     • Organisations within clusters will be more alike than other organisations within the industry
     • Group-level effect on performance but differences within a group as differences in resources and capabilities
     • Select variables to underpin groupings
   • Criticisms
     • Understanding a strategic group depends on critical characteristics of industry exaining
       • Configuration of group resources and capabilities determines group membership, imposing entry and mobility barriers on membership