Management Consulting/porters force model
Has Porters competitive force model no relevance to the analysis of public sector organisations?
I understand that Porters force model helps in accessing where the power lies in a business situation and it letsou access current strength of your competitive position and the strength of the position that you are planning to attain. But what about if its gotta do with a public organization...such as the NHS, Police?
Question: Has Porters competitive force model no relevance to the analysis of public sector organisations?
I understand that Porters force model helps in accessing where the power lies in a business situation and it lets You access current strength of your competitive position and the strength of the position that you are planning to attain. But what about if its gotta do with a public organization...such as the NHS, Police?
Porter's Generic Strategies
Choosing Your Route to Competitive Advantage
Porter's Strategies can be applied to the public organization.
Which do you prefer when you fly: a cheap, no-frills airline, or a more expensive operator with fantastic service levels and maximum comfort? And would you ever consider going with a small company which focuses on just a few routes?
The choice is up to you, of course. But the point we're making here is that when you come to book a flight, there are some very different options available.
Why is this so? The answer is that each of these airlines has chosen a different way of achieving competitive advantage in a crowded marketplace.
The no-frills operators have opted to cut costs to a minimum and pass their savings on to customers in lower prices. This helps them grab market share and ensure their planes are as full as possible, further driving down cost. The luxury airlines, on the other hand, focus their efforts on making their service as wonderful as possible, and the higher prices they can command as a result make up for their higher costs.
Meanwhile, smaller airlines try to make the most of their detailed knowledge of just a few routes to provide better or cheaper services than their larger, international rivals.
These three approaches are examples of "generic strategies", because they can be applied to products or services in all industries, and to organizations of all sizes.
Porter called the generic strategies
-"Cost Leadership" (no frills),
-"Differentiation" (creating uniquely desirable products and services) and
-"Focus" (offering a specialized service in a niche market). He then subdivided the Focus strategy into two parts: "Cost Focus" and "Differentiation Focus". These are shown in Figure 1 below.
The terms "Cost Focus" and "Differentiation Focus" can be a little confusing, as they could be interpreted as meaning "A focus on cost" or "A focus on differentiation". Remember that Cost Focus means emphasizing cost-minimization within a focused market, and Differentiation Focus means pursuing strategic differentiation within a focused market.
The Cost Leadership Strategy
Porter's generic strategies are ways of gaining competitive advantage – in other words, developing the "edge" that gets you the sale and takes it away from your competitors. There are two main ways of achieving this within a Cost Leadership strategy:
• Increasing profits by reducing costs, while charging industry-average prices.
• Increasing market share through charging lower prices, while still making a reasonable profit on each sale because you've reduced costs.
Remember that Cost Leadership is about minimizing the cost to the organization of delivering products and services. The cost or price paid by the customer is a separate issue!
The Cost Leadership strategy is exactly that – it involves being the leader in terms of cost in your industry or market. Simply being amongst the lowest-cost producers is not good enough, as you leave yourself wide open to attack by other low cost producers who may undercut your prices and therefore block your attempts to increase market share.
You therefore need to be confident that you can achieve and maintain the number one position before choosing the Cost Leadership route. Companies that are successful in achieving Cost Leadership usually have:
• Access to the capital needed to invest in technology that will bring costs down.
• Very efficient logistics.
• A low cost base (labor, materials, facilities), and a way of sustainably cutting costs below those of other competitors.
The greatest risk in pursuing a Cost Leadership strategy is that these sources of cost reduction are not unique to you, and that other competitors copy your cost reduction strategies. This is why it's important to continuously find ways of reducing every cost. One successful way of doing this is by adopting the Japanese Kaizen philosophy of "continuous improvement".
The Differentiation Strategy
Tools on Strategy:
• SWOT Analysis
• TOWS Analysis
• PEST Analysis
• Core Competence Analysis
• Value Chain Analysis
• Porter's Five Forces
• Porter's Generic Strategies
• Bowman's Strategy Clock
• Scenario Analysis
Differentiation involves making your products or services different from and more attractive those of your competitors. How you do this depends on the exact nature of your industry and of the products and services themselves, but will typically involve features, functionality, durability, support and also brand image that your customers value.
To make a success of a Differentiation strategy, organizations need:
• Good research, development and innovation.
• The ability to deliver high-quality products or services.
• Effective sales and marketing, so that the market understands the benefits offered by the differentiated offerings.
Large organizations pursuing a differentiation strategy need to stay agile with their new product development processes. Otherwise, they risk attack on several fronts by competitors pursuing Focus Differentiation strategies in different market segments.
The Focus Strategy
Companies that use Focus strategies concentrate on particular niche markets and, by understanding the dynamics of that market and the unique needs of customers within it, develop uniquely low cost or well-specified products for the market. Because they serve customers in their market uniquely well, they tend to build strong brand loyalty amongst their customers. This makes their particular market segment less attractive to competitors.
As with broad market strategies, it is still essential to decide whether you will pursue Cost Leadership or Differentiation once you have selected a Focus strategy as your main approach: Focus is not normally enough on its own.
But whether you use Cost Focus or Differentiation Focus, the key to making a success of a generic Focus strategy is to ensure that you are adding something extra as a result of serving only that market niche. It's simply not enough to focus on only one market segment because your organization is too small to serve a broader market (if you do, you risk competing against better-resourced broad market companies' offerings.)
The "something extra" that you add can contribute to reducing costs (perhaps through your knowledge of specialist suppliers) or to increasing differentiation (though your deep understanding of customers' needs).
PORTER’S FRAMEWORK CAN APPLY
TO NON-COMMERCIAL ORGANIZATIONS.
----SAY , POLICE FORCE.
Generic strategies apply to not-for-profit organizations too. A not-for-profit can use a Cost Leadership strategy to minimize the cost of getting donations and achieving more for their income, while one with pursing a
Differentiation strategy will be committed to the very best outcomes, even if the volume of work they do as a result is lower.
Local charities are great examples of organizations using Focus strategies to get donations and contribute to their communities.
Choosing the Right Generic Strategy
Your choice of which generic strategy to pursue underpins every other strategic decision you make, so it's worth spending time to get it right.
But you do need to make a decision: Porter specifically warns against trying to "hedge your bets" by following more than one strategy. One of the most important reasons why this is wise advice is that the things you need to do to make each type of strategy work appeal to different types of people. Cost Leadership requires a very detailed internal focus on processes. Differentiation, on the other hand, demands an outward-facing, highly creative approach.
So, when you come to choose which of the three generic strategies is for you, it's vital that you take your organization's competencies and strengths into account.
POLICE FORCE---FOCUS STRATEGY
Use the following steps to help you choose.
Step 1: For each generic strategy, carry out a SWOT Analysis of your strengths and weaknesses, and the opportunities and threats you would face, if you adopted that strategy.
Having done this, it may be clear that your organization is unlikely to be able to make a success of some of the generic strategies.
Step 2: Use Five Forces Analysis to understand the nature of the ORGANIZATION you are in.
Step 3: Compare the SWOT Analyses of the viable strategic options with the results of your Five Forces analysis. For each strategic option, ask yourself how you could use that strategy to:
• Reduce or manage supplier power.
• Reduce or manage COMMUNITY power.
• Come out on top of the PROBLEMS.
• Reduce or eliminate the threat .
• Reduce or eliminate the threat of new OBSTACLES.
Select the generic strategy that gives you the strongest set of options.
Porter's Generic Strategies offer a great starting point for strategic decision making.
Once you've made your basic choice, though, there are still many strategic options available. Bowman's Strategy Clock helps you think at the next level of details, in that it splits Porter's options into eight sub-strategies. You can also use USP Analysis and Core Competence Analysis to identify the areas you should focus on to stand out in your marketplace.
According to Porter's Generic Strategies model, there are three basic strategic options available to organizations for gaining PERFORMANCE advantage.
Apply This to Your POLICE FORCE
• Ask yourself what your organization's generic strategy is. How does this affect the choices ?
• If you're in an organization committed to achieving Cost Leadership, can you reduce costs by hiring less expensive staff and training them up, or by reducing staff turnover? Can you reduce training costs by devising in-house schemes for sharing skills and knowledge amongst team members? Can you reduce expenses by using technology such as video conferencing over the Internet?
• If your organization is pursuing a Differentiation strategy, can you improve COMMUNITY service?
Customer Experience Mapping may help here. Can you help to foster a culture of continuous improvement and innovation in your team?
• And if you have chosen a Focus strategy, what knowledge or expertise can you use or develop to add value for your COMMUNITY SERVICE that isn't available?
YOU Can also apply
CONTINGENCY THEORY FACTORS
Some examples of such constraints (factors) include:
The size of the organization.
How the orgainztion adapts itself to its political environment.
Differences among resources and operations activities.
Assumptions of management about employees.
Technologies being used
1. CONTINGENCY THEORY ON THE ORGANIZATION
1. There is no universal way or one best way to manage an organization.
2. The design of an organization and its subsystems must 'fit' with the environment.
3. Effective organizations not only have a proper 'fit' with the environment, but also between its subsystems.
4. The needs of an organization are better satisfied when it is properly designed and the management style is appropriate both to the tasks undertaken and the nature of the work group.
The following questions can help develop contingency plans:
What events may occur that require a response?
What disasters might happen during execution of the plan?
What is the worst case scenario of events for the situation?
What scenarios are possible for the situation?
What event would cause the greatest disruption of current activities and plans?
What happens if costs of the plan are excessive? what happens if delays occur?
What if key people leave the organization?
What are the expected moves of antagonists and competitors?
Who or what might impede implementation of the plan?
The theory states that each of these styles will be effective in some situations but not in others. It further states that the relationship between a leader’s style and effectiveness is dependent on the following variables:
• Employee characteristics: These include factors such as employees’ needs, locus of control, experience, perceived ability, satisfaction, willingness to leave the organization, and anxiety. For example, if followers are high inability, a directive style of leadership may be unnecessary; instead a supportive approach may be preferable.
• Characteristics of work environment: These include factors such as task structure and team dynamics that are outside the control of the employee. For example, for employees performing simple and routine tasks, a supportive style is much effective than a directive one. Similarly, the participative style works much better for non-routine tasks than routine ones.
When team cohesiveness is low, a supportive leadership style must be used whereas in a situation where performance-oriented team norms exist, a directive style or possibly an achievement-oriented style works better. Leaders should apply directive style to counteract team norms that oppose the team’s formal objectives.
What are the contingency factors that can help management decide how much authority and responsibility should be delegated?
The delegation process
Effective delegation proceeds through four
stages, although it does not always unfold in
an orderly fashion from one step to the next.
The delegation process
TRANSFER TASK AUTHORITY REJECT
CREATION OF RESPONSIBILITY
In the first stage, the delegator identifies
a block of work to be transferred from one
area in the organisation to another and
assigns this activity to an employee or group
of employees, that is, clarifies the
In the second stage of the delegation
process, the delegator transfers authority -
the organisational right to command - to the
delegatee. Until this point, the delegator
is the active participant, assigning
activities and transferring authority. The
subordinate is passive, listening to the
delegator’s request and receiving authority.
It is important that the subordinate’s range
of discretion is understood.
At the third stage, the delegatee either
accepts or rejects the task assignment and
the accompanying authority. One of the best
ways to decide how much authority will be
necessary to accomplish a task is to allow
the subordinate to participate in the
The fourth, stage in the process is the
creation of an obligation on the part of the
subordinate to perform the assigned tasks and
its accompanying authority properly. By
accepting the assignment and its accompanying
authority, the employee becomes accountable
to the manager and is responsible for
completing the assigned work. At this stage,
both the delegator and the delegatee have
authority to complete the task, and both are
responsible for how the task is performed.
Then it is important to establish feedback
controls. These controls will monitor the
progress and increase the likelihood that
important problems will be identified early
and that the task will be completed on time
and to the desired specifications.
Contingency factors in delegation
How much authority should a manager delegate?
Should he or she keep authority centralised,
delegating only the least number of duties?
If not, what contingency factors should be
considered in determining the degree to which
authority is delegated? The following
contingency factors provide some guidance.
The size of the organisation. The larger
the organisation, the greater the number of
decisions that have to made. Because the top
managers in an organisation have only so much
time and can obtain only so much information,
they become increasingly dependent in larger
organisations on the decision making of
lower-level managers. Therefore, managers in
large organisations resort to increased
The importance of the duty or decision. The
more important a duty or decision is, the
less likely it is to be delegated.
Task complexity. The more complex the task,
the more difficult it is for top management
to possess current and sufficient technical
information to make effective decisions.
Complex tasks require greater expertise, and
decisions about them should be delegated to
the individuals who possess the necessary
Organisational culture. If management has
confidence and trust in subordinates, the
culture will support a greater degree of
Qualities of subordinates. Delegation
requires subordinates with the skills,
abilities, and motivation to accept authority
and act on it.
Barriers to effective delegation
In the real world, the delegation process
does not always go smoothly. Some of the
barriers to effective delegation reside in
the abilities and beliefs of the delegator.
Managers, for example, can be so poorly
organised that they are incapable of planning
the activities to be assigned. Even managers
who are fully capable of delegating may not
want to do so because they lack confidence in
the abilities of others to do the job well,
and they fear being held personally
accountable for the work of others.
Conversely, some managers may be afraid that
others will do the delegated task so well
that their success will be a personal threat.
Some managers want so strongly to dominate
and influence others that they resist
Another reason some managers do not delegate
is that they fear losing control should
conditions become turbulent. They pull back
the reins, reduce delegation authority,
rechannel information to themselves, and
attempt to take personal charge.
Some barriers to effective delegation reside
with those who would assume the new
responsibilities. Some employees feel that
they cannot handle this responsibility.
Others are reluctant to accept delegation
because they fear that their managers will
criticise them if they fail to execute the
task well. Still others simply do not want
any extra work.
Overcoming the barriers
There are a number of strategies that mangers
can employ to barriers to delegation. The
following list is not exhaustive but does
provide you with examples of the type of
options that are available to you.
1. Create an environment in which delegation
can be effective by encouraging managers
to release some of their personal hold on
authority and to inspire subordinates to
pick it up
2. Managers must be persuaded to give others
a chance to expand their organisational
3. Equip subordinates with the tools
necessary for the delegation process to
4. Managers should become resource providers
and part of a support system
5. Train employees to accept expanded
6. Managers should grant permission for
employees to experiment, to make
mistakes, and to learn from those
7. Employees must give themselves permission
to try new things, to make mistakes, and
to seek the guidance and resources they
need to succeed in their new roles.