Porters five forces model and the balanced scored card
This chapter deals with the background of the study and theories. It contains a statement of the problem, purpose of the study, research questions and research hypothesi. The contribution of this research, its limitations, definition of terms and overall overview of the entire dissertation is represented. Porters five forces and balanced score card are the best strategies that available for companies to have competitive advantage over others. Globalization represents new challenges to businesses therefore the use of Porters five forces and balanced scorecard.
The challenges associated with collaboration and globalization of businesses is unique since they are moving from one country to another. 1. 1 Statement of the problem A company will be out performing its rivals in the market and their strategic position is well stabilized if proper strategies are adapted. The debts levels of the company are always kept low if they want to be successful in the market. The key reasons for successes of companies are that they focus on their weaknesses and strengths, threats and opportunities they also try to minimize them.
However threats related to economy and competition always remains major factor to most companies. A company should continue to offer products and services to consumers at competitive prices and also capturing new customers to gain market share. Companies should have strong brand products which reduces the barriers of entry and helps them to enter foreign markets in all continents, to achieve organization’s international strategic objectives however it has been very difficult to operate at first because product should be launched in all languages in order to gain them market share.
However the level of competition will be high because the international market has many competitors. There should be diversifying in range of its products to meet the users’ needs across the world using the following key success factors. Objectives of This Study To identify the strategies that are implemented by companies and how they are developed. Assess the relative merits of porter’s theory and balanced scorecard in organizing companies. ?Develop a Marketing strategy that is most advantageous form companies. Significance/Importance of the Study
My research study will be of great value to future researchers, management of companies, investors, educators and others because: • To highlight the important role that market growth strategies play on the company market share. • It highlights how growth strategies are made and how these strategies affect the company market share. • It helps the management in strategic decision-making. Research Questions • Which strategic market types implemented by companies and how they have developed them? • ? what are the advantages of each form of growth strategies?
• What can you say about the past and present market situation of the companies who have adapted these strategies in term of market growth and market share? Limitation of the Study This research project is on a session of the entire theories. In carrying out this project, certain constraints will inhibit effective study: 1. Time factor will render certain aspects not to be investigated in details because of the deadline period to finish this thesis, 2. The study assumes that effective and efficient management and application of the strategies are the sole determinant of performance and greater market position.
However, in economic reality, there are features that affect performance and market position such as Capital deployment, employee’s motivation, organizational structure, organization capacity, supply chain management and technology. This study does not consider these factors (Mumford& Ajang, 2007) CHAPTER 2 LITERETURE REVIEW PORTER’S FIVE FORCES Porter, the Father of Competitive strategies identified five forces that drive competition within an industry (Porter M, 1986). He listed them and explained how they are applied in the industry.
These strategies include (1) the threat of entry by new competitors into the industry: this is main problem of the competition. A new competitors comes in there are chances that he will go with some of the buyers. Another related problem is entering new market either through geographical or vertical expansion. (2) The intensity of rivalry among existing competitors that the change of strategies: the current competitors and the task of staying competitive in current market were identified by Porter as another problem that needed strategies. (3) Pressure from substitute products.
(4) The bargaining power of buyers. (5) The bargaining power of suppliers. No matter which competitive force is to use the most important thing to keep in mind is the relationship between profit margins or returns and the intensity of competition. The higher the intensity of competition, the low is profits (Varadarajan p and Cunningham H, 1995), 2. 6. 1 Porter’s Five Forces Analysis 1. Buyer Power The companies face the threat of buyers shifting their loyalty to other rival companies’ products while operating in a certain market. This phenomenon according to porter is referred to as backward integration.
To curb this threat, the companies operating in the market have to come up with three generic strategies to counter this threat. a) Cost leadership: – Here the companies have to reduce the price of there products. Cost leadership provides the best method of companies and remaining competitive in the market. b) Differentiation strategy: – The Companies in a specific industry have to come up with alternative products that are differentiation of products from the rival firms. These products should be economic and are environmental friendly in terms of pollution and acceptance in the market in question.
The customers should be analyzed to know there likings and disliking and the product sold in the market should be able to give the customer a value for there money. This is the major reason why the pricing of a product is done. The consumer’s decision to purchase a particular product is usually measured by the total value of the sum of utility and replacement values brought by the transaction. The utility value represents the quantity that is needed by the consumer to satisfaction. While utility value is the customers expectation of the product which is measured by the potential need satisfaction as per perceived by the customer.
The influence of price on the customer is extremely important and it is up to the company’s management to determine the price that will attract the consumer. If the product does not have a good utility value then we expect such a product to loose the purchasing customers, therefore the purchasing power of the customer is important. 2. Supplier Power Companies are faced with the threats of the suppliers being able to control the price of some of the materials they supply.
Some may form curtails and come up with stringent price control measures that will affect the performance of the industry. The labor laws are also stringent and the workers are so unionized that treating of employees in a fair and equitable manner is inevitable. To counter this force, the companies extend its supplier chain making the prices of materials. The generic strategies adopted by the companies against supplier power are by increasing the price of their products. In essence, the extra prices charged for the raw materials are borne by the customers. This is the differentiation strategy.
Another strategy to insulate itself from this force is that of focus. Because of the higher material prices, companies have taken on the differentiation-focused strategy. In this strategy, the methodology has been improving the quality of their products. By so doing, the prices can be increased without harm being made to the customers. 3. Barriers to Entry The other force challenging the businesses is entry of new companies with similar products or even more products. This would pose the threat of neutralizing the company’s profits as well as its market share. The generic positions that the companies have taken has been cost leadership.
Through lowering their production costs and increasing operational efficiencies, companies have been able to lower its products prices while maintaining its profitability. This has deterred potential investors/ entrants into the market (Staw, B. , Sandelands, L. & Dutton, J. , 1983). 4. Rivalry This force emanates from other companies within the same industry. The threat here is that these companies capturing the market. However, the company’s framework/ strategy should be to reduce prices whenever faced with such a threat. Prices are then reverted to normal after the exit of that company the specific market segment.
Lastly, the companies are faced with the threat of rival companies accessing their premises and imitating their production methods. However, the companies should have their headquarters, inaccessible to foreigners in order to safeguard their patents and copyrights. In addition, their employees are well compensated therefore; they do not have thoughts of leaving for rival companies. 5. Threat of Substitutes From the economist point of view, threat of substitutes arises when the demand of that good is likely to be affected when the price of the substitute changes.
This elasticity of price has formed a real force that the companies have to fight if they have to be sustained in the near future. To reduce the strength and danger of this force, the companies strengthen their differentiation generic strategy as their frameworks. Customers would then be loyal to the uniqueness of their products. 2. 2. Balanced score card This is a tool which is used by businesses for measuring and improving performance in businesses. The tool is used in measuring financial success of a firm by highlighting the required financial ratio to be calculated.
The score card is developed through considering a number of factors or score cards such as; – financial aspects of the company, innovation and collaboration process and customer. A strategy and vision is laid down and the following perspectives in business emerges, this include;- • Financial perspective; – this involves coming up with ratios and other performance indictors which are common in the industry in order to be used for performance measures in terms of finance. The company in question uses the ratios and standards that are a requirement and an agreement of the industry.
In the same time the measures that are used include: – health ratios, profitability ratios, activity ratios, and liquidity ratios. The goals to be attained are also set so that there is a means of performance measure within the organization for it to be used. • Innovative: – this is concerned with training and development of human resources, sharing of information within the organization and recruitment and selection. It also involves product differentiation through research and development; at the same time it includes collaboration which increases the shareholders wealth.
Innovation goes together with collaboration for success of business in the world today. This ensures there are regular changes in creation of value and the use of resources efficiently and effectively. • Process: – another critical point in vision and strategy is the process at which things are done is also redesigned, the process is used in modifying the product that is being sold and it ensures there is quality and timely production. Efficiency is improved leading to cost reduction. The internal systems of the organization are improved using these formulae.
This is at times called designing process. A number of steps are used in designing the score card. • Customer: – the score card also is used in setting goals on how the marketing department will reach the required market share, the value they will offer to the customer and how they will satisfy the customers. This considers people as the most important in the chain of capabilities. There is a strife to satisfy the customers in the production, in this case one will be able to keep the customers leaving the competitors to keep the information, this can be expressed in a simple diagram such as:-
CHAPTER 3-METHODOLOGY This research paper is concerned with the theory of porter and the score card as prepared by porter and Kaplan. The data was collected and analyzed using research methods of qualitative nature. The aim of the research is to give the leader positive effects of believing that actually the research was done. A deductive and inductive approach was adopted in this data. The research was majorly done though vannel and library research using qualitative methods of data analysis. There are two methods of research that are used in qualitative and quantitative analysis.
Deductive approach of research realize on theories which are used in this paper mostly. There is no research carried out in respect to this but other peoples work has been used in the analysis. We have found out connectivity between the findings of the research and the methods that was used. The method of the research influences the results conclusion and recommendation made from the results. There is always a connection between the findings from a research and the method used since the method influence the conclusion and recommendations made.
In this research qualitative method is more appropriate as compared to quantitative. Qualitative method is concerned with people s attitude opinion perception and feelings. It usually uses interviews observations and analysis of the exiting data from various researches. Quantitative technique is concerned with collecting facts and analyzing them. It’s concerned with the collection of data, statistically preparing them and discussing the results. Even though this method will be used it offers little benefits to this research paper.
As stated quantitative and qualitative methods will be utilized in this research paper because qualitative will be used in evaluating the processes people customers and operations that are made in use for this process. The data for this research will be collected from internet search entry and a few reply sources where qualitative analysis is necessary. Qualitative analysis approach will be employed and the data from the internet and there will be development of inductive and descriptive reasoning. Research Approach:
The research approach that develops the methodology explained below is based on descriptive research theory and inductive reasoning. This is important to develop the foundation by which the research will be designed, conducted and consequently analyzed. Firstly, it is important to establish the research approach in order to create a significant qualitative methodology. The research approach undertakes a specific design that is “the overall strategy chosen to obtain the information required answering the research question” (Ghauri and Gronhaug p 47, 2002).
The research approach will review the types of research design and data collection methods. The research approach is built on logical relations and not just beliefs. Descriptive research is used when the research question is understood (Ghauri and Gronhaug 2002). In the research approach, the data measurements are dependent on the obtainment of required information and the quality of the information. The outcome of the research, therefore, is dependent on the measurement procedures used in the collection of the data, and this in turn is dependent on the types of data collection (Ghauri and Gronhaug p 47 2002).
CHAPTER 4- RESULT From research which has been carried out, it has been found that the strategies such as balanced scorecard and porters five strategies are useful for decision making. Strategic decisions revolve around two key theories of Porters five forces and balanced scorecard. The study identified that Porters five forces and balanced scorecard are market growth strategies that are implemented by companies for their strategy development process and how the strategy is formulated and the effect of the strategy to its market competitiveness.
Every business executive and managers wants to move forward should take this study serious. The main purpose of businesses is the maximization of goals. In order for companies to achieve these goals in this era of corporate sustainability, there is need to move towards diversification and expansion. Companies need to develop strategies that will lead them to grater heights in the world stage market. CHAPETER 5 Every business executive and managers wants to move forward should take this study serious. The main purpose of businesses is the maximization of goals.
In order for companies to achieve these goals in this era of corporate sustainability, there is need to move towards diversification and expansion. Companies need to develop strategies that will lead them to grater heights in the world stage market. Therefore, to accommodate the rapid changes occurring in business world, quick decisions about growth strategy is made. Geographical expansion, vertical integration and product development are some of strategies that have helped multinationals survive in these hard economic times.
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