Generic model of the Value Chain
The Generic Value Chain involves the transformation of inputs both primary and support activities into outputs that satisfy the needs of customers. The satisfaction of customer needs translates to profits for businesses. The first step in the value chain is the laying of the primary activities such as research and development, production, marketing and sales and customer service in place. Next the managers must ensure they put n place support activities such as information systems, materials management, appropriate company structure and enhance the human resources to aid in the transformation of inputs into valuable outputs.
Model for the Roots of Competitive Advantage
Managers use this model to create more value for the company along its value chain by increasing the transformation of inputs to outputs. Managers identify the competency areas of their companies among the inputs and find ways to use them to obtain competitive advantage over its competitors. The steps involved to gain competitive advantage are combining and building on available resources and capabilities to create distinctive competencies for the company. The distinctive competencies shape the functional strategies such as efficiency, quality, and innovation among others. Appropriate functional strategies help the company to offer differentiated products at low prices, thereby enhancing its value which results in increased profitability.
Strategic Management Process
Strategic Management Process selects a corporate mission and setting of key corporate goals after which it analyses the external environment to identify its opportunities and threats and then identifies the strengths and weaknesses it has internally. The management then selects the strategies that build on the company’s strengths, corrects its weaknesses to take advantage of the external opportunities and counter threats. Next follows the implementation and evaluation of the selected strategy.
Michael Porter’s 5-Forces
The Porter’s Five Forces make it difficult for established companies to make profits. These forces are: the bargaining power of buyers, competition from new products entering the market, increased bargaining power of suppliers, the threat or competition from substitute products, and lastly the rivalry among established firms. The Five Forces Model helps managers strategize better to cushion their firms from adverse effects of the aforementioned forces.
The relationship between quality and an organization’s profit goals
The higher the quality of a firm’s products or services, the higher should be the organization’s profits goals. This is because the goods or services will be in higher demand translating to increased profits.
A business model is any establishment that is aimed at offering products or services with the aim of making profits. Management’s model of how strategy allows companies to gain competitive advantage and attain superior profitability. The elements of business models are functional level strategies, global strategies, business-level strategies and corporate level strategies. The model is based on a SWOT (strength, weaknesses, opportunities and threats) analysis of the company. A business could draw on competent workforce and lack of substitutes for its products as the basis of its business model.
Core competencies are the crucial aspects that a business must exude in order to remain relevant in its industry. Failure to exude these competencies significantly affects the profitability of a business. Some examples of core competencies include better after-sale service, skills in the manufacturing of high-quality product, expertise in the integration of multiple technologies to create new families of new products among others. Inimitable competencies in the other hand are those abilities that a company shows which can be replicated by other companies. Managers need to be wary of the two because while they seek to guard and build on their core competencies, they also protect their general competencies against replication by competitors.
Involves the setting ambitious goals that stretch a company and its staff and finding ways to build to attain those goals.
Difference between economies of scale, experience curves and learning curves
Economies of scale come about when fixed costs are spread over a large production volume thereby reducing the unit cost of production. The experience curve is the systematic lowering of the cost structure and the consequent unit cost reductions that companies enjoy during production life of a product for instance production of Aspirin tablets in mass as opposed to small quantities. Learning curves are determined by labor productivity and management efficiency.
Distinctive competencies and unique capabilities
Companies that have unique capabilities are hard to beat in the market regardless of the number of competitors. This is because they usually have a rare trait, competency or secret ingredient. Firms can create distinctive competencies by establishing effective recruitment and employee support programs thereby creating a highly productive workforce. This creates uniqueness in the company without usage of firm-specific and valuable resources. When managers identify what is unique to their companies they are able to guard and build on it.
Strategy, business model, strategic intent, strategic process and strategic plan
Strategy is action managers take to achieve one or more of an organization’s goals. Business model is management’s model of how strategies allow companies to gain some competitive advantage and attain superior profitability (Mintzberg & McGugh, 1985). Strategic process involves the selection of a corporate mission and key corporate goals, the analysis of a company’s external environment to identify opportunities, threats, Strengths and weaknesses. The managers then implement a strategy and evaluate the implementation process continually. Strategic Intent involves setting ambitious goals that stretch a company’s resources and finding ways to achieve those goals which are more specific as compared to mission-based goals. Strategic intent avoids the Fit Model which focuses too much on the current state. Strategic plan involves planning for the utilization of specified resources to attain crucial targets to position the company better and increase its competitiveness. We can distinguish between these terms by evaluating how they relate to the mission statement of a company.
Strategic plans are important and are not a waste of time. They guide the management of companies to exploit the full potential of limited resources in assets, human resources and raw materials therefore increasing the profitability of the company. In addition, strategic plans unify employees in an organization, increases teamwork and creates a more cohesive and productive workforce.
Mintzberg and McGugh, 1895. Administrative Quarterly, Vol. 30 (2).