The choosing of the most effective planning model is an important factor influencing the results of particular project. Some of the planning models are commonly used and prove to provide the highest level of accuracy. These models are Michael Porter's five forces, Adrian Slywotzky's value migration, W. Chan Kim and Renee Mauborgne's blue ocean strategy. Nevertheless all these models still have specific pros and con that are analyzed in this paper in order to propose the most efficient planning model.
Michael Porter's Five Forces
The premise and main advantages Analysis of the five forces is commonly applied method of studying the market probabilities associated with new product or service. The competition theory of Michael Porter suggests that there are five driving forces that determine the possible level of profit on the market. Each force in this model determines:
bargaining power of buyers
bargaining power of suppliers
the threat of invasion of new members
the danger of the emergence of substitute products
the level of competitive struggle or intra-industry competition
This model helps to determine the intensity and severity of competitive forces within the industry, to find the position in which the company will be most protected from the influence of competitive forces and will be able to control the market situation. The main rule of the Porters theory: the weaker the impact of competitive forces, the more opportunities to get high profit in the industry has company. Conversely, the greater the impact of competitive forces, the higher the probability that no company is able to ensure high profitability on investment.
Specific features of implementation The model is usually implemented in strategic management and marketing. It is useful in conducting SWOT analysis of the company and creating detailed competitive analysis. The model implementation does not require significant preparations and is mainly based on data that are widely available.
Pros and cons The pros of the model is that it identifies the opportunities and risks in the external environment systematically and assesses the prospects of new activities. Using data analysis, the company can strengthen its position among other companies in the industry.The disadvantages are as following. It analyzes the already established market relations without regard to their changes. In the model there is no possibility to trace the dynamics of the factors. In addition, it does not bear in mind the regulatory influence of the state that may sometimes act as competitive force.
Adrian Slywotzky's Value Migration
The premise and main advantages The model of value migration is relatively new. It was suggested by Adrian Slywotzky’s and purports to propose explanation of the rapid changes of competitive positions on the market. The value begins to migrate from obsolete business models to new ones that can best handle the most urgent needs of the clients. The main assumption of the model is that the company may be going through one of the three stages of migration such as value inflow, value stability and value outflow. In order to understand the scale of value migration it is necessary to apply key measurable parameters. The model measures the ability of the business to create and retain value. The two basic parameters of this model are the amount of profit and time of value migration between various stages. In general the model contributes to the general theory of the product lifecycle.
Specific features of implementation This model may be applied to measure the performance of particular companies as well as economy sectors within the context of value migration. The defining of the specific stage is crucial for conduct the economic and financial analysis. The three stages may be used to explain the instability of value migration.
Pros and cons The model may be applied not only for analyzing the particular companies, but for the industrial sectors. It explains the situational changes on the market efficiently and provides practical tools of choosing the strategy based on two simple parameters. The minus of the model is that it is difficult to systematically list the general factors influencing the value migration. Therefore it is hard to classify the companies on basis of the three stages determination. The only determinant of this model is systematic evaluation of the company; nevertheless the shareholders still make rather subjective conclusions.
W. Chan Kim and Renee Mauborgne's Blue Ocean Strategy
The premise and main advantages Blue ocean model refers to creating new attractive industry for the company with no competitors. The company stops to compete on the red markets (already developed market structures with definite number of competitors) and tries to set up demand for the new product or service in framework of the new market. The development of this strategy is based on the following principles: rebuilding of the market boundaries, focusing on the overall situation, not statistics, reaching beyond existing demand, and right implementation of the model. The formulation of these principles shall apply the tools such as four-action framework, strategic canvas, pioneer-migratory-settler map, map of buyer utility.
Specific features of implementation The strategy implementation is shaped by study of 150 strategic moves presented by main competitors of the thirteen industries since 1880 to 2000. This strategy may be used not only by newly-established companies, but also by red strategists that operate on the contested market space.
Pros and cons The application of this model leads to higher returns than other similar strategies. The lower cost and additional value may be offered to customers as the result of reconstructing the existing industry. Moreover the model is supported by effective tools that are able to reduce risks, the supply-based analysis applied in the model helps to meet the demand better. At the same times the disadvantages of the model are its focusing more on formulation than implementation, sometimes it is impossible to find uncontested space, the reinvention may lead to loosing the existing gains and benefits. At the same time the innovations and reconstruction are usually associated with financial inputs.
Among three models discussed the value migration strategy is most likely to ensure continuous process improvement in the organization from a production and operations management perspective. At the same time for one single industry the Porters model is also aimed to presume stability by risk reduction. From business finance and accounting perspective the effectiveness of the strategy will be measured by return on investment, growth of sales and net profits that are to be recalculated quarterly. The conflict and motivation issues will be resolved by the way of creating highly adaptable corporate strategy and implementation of HR branding system.
The chosen strategy requires the creation of competent staffing system by the way of motivation and implementation of social programs. The employee relations should be based on long-term basis in order to reduce the level of staff flow. For this end it is necessary to provide the employees with efficient system of training. The staff shall be compensated for extracurricular work additionally in order to enhance the overall performance. It should be noted that the work of HR department should be restructured on basis socially-oriented business model.
As the result of this research, it would be fair to conclude that the application of each model depends on various factors that are associated with internal and external environment of the company. The model proposed by Porter purports to minimize risks for the company on the basis of analysis five probable scenarios, the model of value migration is mainly used in innovative companies, the strategy of blue ocean is aimed at creating the following market. At the same time bearing in mind the universal nature of the Porters model, it is the best one to be chosen by the team of strategic planning.
References
Kim, W. M. (2005). Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant. Boston: Harvard Business School Press.
Porter, M. E. (1980). Competitive Strategy. Free Press.
Porter, M. E. (2008). The Five Competitive Forces that Shape Strategy. Harvard : Harvard Business Press.
Rumelt, R. P. (2011). Good Strategy / Bad Strategy. Crown Business.
Slywotzky, A. J. (1995). Value Migration: How to Think Several Moves Ahead of the Competition. New York: Harvard Business School .
