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Strategic Management Paper1

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Strategic Management Paper1
Contents

Question 1 Porter 's generic strategies
Page 3

Question 2 Components of a vision and mission statement
Page 5

Question 3 Alternative strategies
Page 10

Question 4 Value chain analysis, different functions of management
Page 14

Question 5 Value of resources, the resource based view
Page 20

Research / Bibliography
Page 23

Question 1

Michael Porter is considered the mastermind of competitive strategies application. Starting in the early 1980s, he published three books that developed and outlined successful strategies and how to apply them. His most popular books cover his three theories of generic strategy, cost leadership, differentiation, and focus.

The first generic strategy is cost leadership where a firm organises its value adding activities so as to be the lowest cost producer of a product or service in its industry.
The product does not need to be special or different; instead, the attractiveness to the consumer is the price. For instance, Shoprite employs a cost leadership strategy. Its stores are very basic, located in low rent areas and carry a limited range of products. This enables the company to charge a lower price than competitors.

Firms that focus on applying cost leadership must work to cut down on costs in all areas; by combining and sharing resources already in-house. Using firm leverage across all departments is also a strong cost-saving measure, and cutting back on waste must be a company-wide goal. Another angle to costs advantages would be to improve process efficiencies, and to make wise outsourcing decisions. A strong point of this strategy is gaining market share by charging lower prices than the competitors, whilst the main weak point would be competitor-copying, (due to high research and development costs) meaning an overall lowering of price across the market.

The second strategy is differentiation, which emphasises the creation of unique product or service features which persuade



Bibliography: Fred R. David, (2005) Strategic Management Concepts and Cases, 10th Edition, Pearson Prentice Hall Porter, Michael, The Competitive Advantage of Nations, The Free Press, NY, 1990 Wheelen, T. J., & Hunger, J. D., Strategic Management and Business Policy, 10th Edition. Upper Saddle River, New Jersey: Pearson Inc. Illustrations taken from

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