Strategy – Part 1

Gary Hamel, C. K. Prahalad, Michael Porter and Renee Mauborgne count among the most pre-eminent gurus who have revolutionized management practices around the world through their perceptions of researches conducted into various aspects of Strategic Business Management.

All of them carry high credentials and are well acclaimed great thinkers of the world. They co-create today, the “best practices for tomorrow”. All of them are recipients of high accolades from such prestigious and influential business magazines/websites as Wall Street Journal, Fortune Magazine, Thinkers50.com, Amazon.com and many more. The receipts of their accolades have mainly coincided with respective times of publication of some of their groundbreaking works; and sometimes over several years consecutively.

• Strategic intent according to Hamel & Prahalad is a passion or an obsession built into the vision of a firm as to encourage leveraging resources to achieve seemingly impossible goals. E.g., the post war period saw a dramatic rise in Japanese companies that carried and sustained obsessive ambitions over long periods that would have been considered highly unrealistic in the Western countries, given their limited resources and undeveloped capabilities.
• Core Competency is the initial brainchild of Michael Porter put forward as part of “Porter’s Five Forces”. It deals with crucial factors that give added value to a firm enabling it to gain and sustain a competitive advantage over its rivals. In 1980, Porter looked at it from an “outside-in” angle (where the starting point comprise of the combination of the factors of the market, competition and the customer) whereas in 1990, Hamel and Prahalad looked at it from an “inside-out” perspective (starting from the core competencies in the possession of a firm). Hamel and Prahalad argue that since a firm’s ability to keep producing at a lower cost ahead of its rivals is the key factor in fighting and beating market competitiveness in the long run, it should be the point from which to start building forward. An organization scores a competitive advantage over its rivals by the way it coordinates and integrates multiple core competencies in providing consumer benefits. The extent to which it can be widely leveraged to different products and markets, and in ways that is difficult for rivals to imitate, count a lot.
• The “Value Chain” is another significant concept created by Porter, and is a way of looking at how a competitive advantage may be developed by a firm. The “chain” comprise of “primary” and “support” activities that culminate in contributing to the creation and building of total value. It is an integral part of Core Competencies.

Renee Mauborgne co-authored “Blue Ocean Strategy – How to Create Uncontested Market Space and Make the Competition Irrelevant” with Chan Kim (2005). It sold over 2 million copies and has been translated into 41 languages (most foreign languages ever achieved). She is the highest placed woman on Thinkers 50, which ranked her among the top ten most influential business thinkers in the world in years 2007 and 2009.

Whereas almost all business gurus hitherto concentrated on how to fight the competition posed by rivals, she pioneered research on how to eliminate competition!

Blue Ocean Strategy
Firms fight one another for a competitive advantage and a better market share over a pool of shrinking profits. These “red ocean strategies” offer less favorable possibilities of growth for future years.

Conversely, “blue ocean strategies” work on the concept of avoiding competition by creating new demand by innovating entirely new products/services with ample uncontested free market space for growth over the next many years. This is also called “value innovation”.

(i) By introducing the assembly line, Ford replaced skilled workmen with unskilled laborers. The efficiency of this new innovation helped Ford to reduce the assembly time of a particular model of car from 21 days to 4 days and cut labor hours by 60%. Innovations can eliminate competition by creating and shifting demand.
(ii) Deccan Airlines introduced a new scheme of low priced ticketing for Indian Airlines, thus creating a new uncontested space for growth. With other airlines also gradually imitating their low pricing scheme, competition gradually return making it a red ocean. It shows that companies need to be innovating continuously to maintain the blue ocean status.
(iii) Automobile giants were engaged in a fierce battle for making a more fuel-efficient car with less environmental pollution when Reva introduced an electric car creating a blue ocean for itself.
(iv) Aravind Eye Hospital introduced a very low cost eye surgery scheme by getting their doctors to perform a very high number of operations to keep the cost per patient down. It resulted in netting in many new patients by making it possible for low-income groups also to enter private hospitals for medical treatment.

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