DAM762: Strategic Operational Management

DAM762:
STRATEGIC
OPERATIONAL
MANAGEMENT
LO2: Critique a range of key

theoretical models and
apply them to case study -
based examples.
Graduate Diploma In Applied Management (Level 7)
Content
Michael Porters Five Forces of Industry Competition Model.
Michael Porters Value Chain Analysis.
Michael Porters Generic Strategies.
SWOT/TOWS Analysis.

Activity – Porters Five Forces of Industry
Competition Model
Working in small groups, produce a Porters Five Forces of Industry

Competition Model for a scenario provided to you by your DAM762
course tutor. A suitable template is provided on the next slide.
Each group will then present their Porters Five Forces of Industry
Competition Model to the class on the scenario provided to each
group by their DAM762 course tutor.

Activity – Value Chain Analysis
Kauri Cliffs Golf Course is an internationally known New Zealand golf

facility. It is not just an eighteen hole world-class golf course, it has a
five star hotel with 150 luxury rooms, private leisure centre, indoor
tennis courts as well as a top class restaurant.
On the next slide are a series of nine activities that add value to the
Kauri Cliffs Golf Course experience. Using the Value Chain Template
provided in two slides, place the appropriate letter (next slide) onto
the value chain template.
D. Fresh fruit and vegetables are delivered and prepared every day.
E. The hotel has an advanced room reservation system.
F. Kauri Cliffs is promoted through magazines targeted at wealthy and influential
individuals.
G. The experience is based upon high quality, professional service at every stage.
H. Limousines are available to take guests to airports as they finish their stay.
I. Kauri Cliffs has a series of contracts with local suppliers of meat and fish.
A. All staff are trained to the highest industry standards.
B. The hotel management team focus on goals set out in their strategic plan.
C. All golf course fairways are trimmed and watered daily.

Value Chain Analysis – The Secret Sauce
B
A
E
I
D C H F G
New Zealand Diploma In Business (Level 6)

Michael Porters Generic Strategies
Advantage
Target Scope
Low Cost Product Uniqueness
Broad
(Industry Wide) Cost Leadership Differentiation
Strategy Strategy
Narrow
Focus Focus
(Market Segment) Strategy Strategy
(Low Cost) (Differentiation)

Cost Leadership Strategy
Organisations that succeed in cost leadership often have the following internal
strengths:
• Access to the capital required to make a significant investment in production
assets; this investment represents a barrier to entry that many firms may not
overcome.
• Skill in designing products for efficient manufacturing, for example, having a
small component count to shorten the assembly process.
• High level of expertise in manufacturing process engineering.
• Efficient distribution channels.
Risks
For example, other organisations may be able to lower their costs as well. As
technology improves, the competition may be able to leapfrog production
capabilities, thus eliminating the competitive advantage. Additionally, several
organisations following a focus strategy and targeting various narrow markets may
be able to achieve an even lower cost within their segments and as a group gain
significant market share.
Differentiation Strategy
Organisations that succeed in a differentiation strategy often have the

following internal strengths:
• Access to leading scientific research.
• Highly skilled and creative product development team.
• A strong sales team with the ability to successfully communicate the
perceived strengths of the product.
• Corporate reputation for quality and innovation.
Risks
Include imitation by competitors and changes in customer tastes.
Additionally, various organisations pursuing focus strategies may be able
to achieve even greater differentiation in their market segments.

Focus Strategy
Concentrates on a narrow segment and within that segment attempts to

achieve either a cost advantage or differentiation.
• The premise is that the needs of the group can be better serviced by
focusing entirely on it.
• An organisation using a focus strategy often enjoys a high degree of
customer loyalty and this entrenched loyalty discourages other
organisations from competing directly.
Because of their narrow market focus, organisations pursuing a focus
strategy have lower volumes and therefore less bargaining power with
their suppliers. However, organisations pursuing a differentiation-focused
strategy may be able to pass higher costs on to customers since close
substitute products do not exist.
Focus Strategy
Organisations that succeed in a focus strategy are able to tailor a broad

range of product development strengths to a relatively narrow market
segment that they know very well.
Risks
Include imitation and changes in the target segments. Furthermore, it may
be fairly easy for a broad-market cost leader to adapt its product in order
to compete directly. Finally, other focusers may be able to carve out sub-
segments that they can serve even better.

Stuck In The Middle
These generic strategies are not necessarily compatible with one another.
If an organisation attempts to achieve an advantage on all fronts, in this
attempt it may achieve no advantage at all.
• For example, if an organization differentiates itself by supplying very
high quality products, it risks undermining that quality if it seeks to
become a cost leader. Even if the quality did not suffer, the
organisation would risk projecting a confusing image.
For this reason, Michael Porter argued that to be successful over the long-
term, an organization must select only one of these three generic
strategies. Otherwise, with more than one single generic strategy the
organisation will be "stuck in the middle" and will not achieve a
competitive advantage.
Stuck In The Middle
Porter argued that organisations that are able to succeed at multiple
strategies often do so by creating separate business units for each
strategy. By separating the strategies into different units having different
policies and even different cultures, a corporation is less likely to become
"stuck in the middle."
However, there exists a viewpoint that a single generic strategy is not
always best because within the same product customers often seek multi-
dimensional satisfactions such as a combination of quality, style,
convenience, and price.
• There have been cases in which high quality producers faithfully
followed a single strategy and then suffered greatly when another
organisation entered the market with a lower-quality product that better
met the overall needs of the customers.
Generic Strategies/Industry Forces
The generic strategies each have attributes that serve to defend against competitive forces.

Activity – Michael Porters Generic Strategies
Working in small groups, using the resources provided to you by

your tutor or by independent research, articulate on which Michael
Porter’s Generic Strategy the organisation in the case study provided
to you by your tutor has adopted.
Each group will then feedback to the class on which Michael Porter’s
Generic Strategy the organisation in the case study provided to you
by your tutor has adopted.
Criticisms of Generic Strategies
• Michael Treacy and Fred Wiersema (1993) modified Porter's three
strategies to describe three basic "value disciplines" that can create
customer value and provide a competitive advantage. They are
operational excellence, product innovation and customer intimacy.
• Several commentators questioned the use of generic strategies claiming
they lack specificity, lack flexibility and are limiting. Trying to apply generic
strategies is like trying to fit a round peg into one of three square holes:
You might get the peg into one of the holes, but it will not be a good fit.
• In particular, Millar (1992) questions the notion of being "caught in the
middle". He claims that there is a viable middle ground between strategies.
Many organisations, for example, have entered a market as a niche player
and gradually expanded.
• According to Baden-Fuller and Stopford (1992) the most successful
organisations are the ones that resolve "the dilemma of opposites".
Activity – SWOT/TOWS
Working in small groups, use the SWOT analysis of a recognised

global organisation provided to you by your DAM762 course tutor to
produce a TOWS analysis. A suitable TOWS template is provided on
the next slide.
Each group will then present their TOWS analysis to the class on the
organisation in the case study provided to each group by their
DAM762 course tutor.

Summary
Michael Porters Five Forces of Industry Competition Model.
Michael Porters Value Chain Analysis.
Michael Porters Generic Strategies.
SWOT/TOWS Analysis.

DAM762: Strategic Operational Management

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DAM762:

LO2: Critique a range of key

Michael Porters Five Forces of Industry Competition Model.

Michael Porters Value Chain Analysis.

Michael Porters Generic Strategies.

Graduate Diploma In Applied Management (Level 7)

Working in small groups, produce a Porters Five Forces of Industry

Graduate Diploma In Applied Management (Level 7)

Kauri Cliffs Golf Course is an internationally known New Zealand golf

Graduate Diploma In Applied Management (Level 7)

New Zealand Diploma In Business (Level 6)

Graduate Diploma In Applied Management (Level 7)

Organisations that succeed in a differentiation strategy often have the

Graduate Diploma In Applied Management (Level 7)

Concentrates on a narrow segment and within that segment attempts to

Organisations that succeed in a focus strategy are able to tailor a broad

Graduate Diploma In Applied Management (Level 7)

Graduate Diploma In Applied Management (Level 7)

Working in small groups, using the resources provided to you by

Working in small groups, use the SWOT analysis of a recognised

Graduate Diploma In Applied Management (Level 7)

Michael Porters Five Forces of Industry Competition Model.

Michael Porters Value Chain Analysis.

Michael Porters Generic Strategies.

Graduate Diploma In Applied Management (Level 7)

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