Posts Tagged ‘generic strategies’

The Shifting Language of Strategy

December 23, 2010

My post on International Business terms got me thinking about the shifting popularity of Strategic Management terms.

So, here we go with some comparisons.

Let’s start with the topic itself and its two main constituent threads (i.e. strategic management, corporate strategy, and business strategy):

All three terms boomed from the late 1970s, but it was business strategy (i.e. decisions about how to compete in markets) that screamed away from corporate strategy (what markets to compete in).  As with many of the IB terms, all the concepts have faded in recent years, perhaps as conversations became more specific (or even less-business focussed).

It doesn’t surprise that such corporate strategy has waned in a relative sense, as the orthodox rhetoric has been towards streamlined, focused organisations.  Looking at some of the typical such corporate strategy terms (diversification, mergers, acquisitions, outsourcing), shows a genuine plateauing in all terms, other than outsourcing which has raced up in the past decade (this no doubt reflects not just usage by strategy scholars, but also the critics thereof). Diversification peaked way back in the late 1980s (although this term has a considerably wider usage than its strategy meaning), which correlates pretty nicely with the decline in such behaviour (at least by Western firms):

The influence of Michael Porter, and his big ideas/tools (Five Forces, generic strategies) have proven surprisingly consistent in terms of usage, although they too have waned this millennium:

In terms of talking about competitive advantages, core competences/core competencies peaked in the early 200s, while dynamic capabilities are still on a steady rise (I get similar results with the singular versions of the terms):

What terms have I missed (conscious that comparing phrases with different word counts is not practical/tenable, nor does it make much sense to use terms with other common uses, such as resources)?

As this is likely to be my last pre-Christmas post, I wish you all a fun festive season and safe passge into 2011.



Beware of the Sticky Middle

August 21, 2009

One concept students (and scholars) of strategic management sometimes struggle with is the warning from Michael Porter about being stuck in the middle.  So too do businesses.

The idea is that firms who sit on the fence, differentiating somewhat while keeping costs at the lower end, will invariably struggle with the incompatibility of such goals, and thus fail.  More single-minded competitors will win out by pursuing EITHER (i) uniqueness that competitors value (and therefore pay for); OR (ii) cost efficiencies such that their products will have a low price advantage. 

Critics of Porter’s generic strategies have argued that he is too simplistic in his conceptualisation of markets and consumer behaviour, and that firms adhering to his gospel may miss a large, valuable middle ground of consumers where some slight differences and some best price offering will win out.

Source: The Economist (2009)Data presented in this Economist article (and the accompanying graph – right) would seem to support Porter’s arguments.  It shows the massive uptake in store brand groceries (a.k.a. private label or home brands), and the corresponding drop in sales for other brands in the German market over the past decade.

High end offerings and the most popular brand in a given category have held their ground. But elsewhere in a category, it is the more efficiently manufactured (due, in part,  to the enormous economies of scale guaranteed by retailer endorsement), lower priced products that have won out.

Message to firms:  be very, very good at what you do (that smells like the resource-based view to me)  and/or find an attribute consumers will pay considerably more for, or get extremely efficient at product manufacturing (thus winning the contract to produce a store brand). Otherwise, you will perish.