Summary 1 of the article: "The five competitive forces that shape strategy"

Reference: Harvard Business Review by Michael Porter

The basic idea of the five competitive forces allows managers to look beyond the everyday problems and helps them prepare for new problems that may arise. The five forces say that you're competing with your direct competitors, but there are unforeseen competitors that are trying to sneak in on the profits of your firm. Some of these other competitive forces are savvy customers that can force your prices down by playing you against your rivals, powerful suppliers that have the ability to restrain your profits by raising prices, new entrants that offer similar products and lastly substitute offerings. Every industry is slightly different, but the underlying drivers of profitability stay the same. If managers can investigate and examine the five competitive forces, it will give you a complete depiction of the factors that are influencing profitability in your specific industry.

Porter suggests that management must position their company where the forces are weakest. He gives the example of the heavy machine company Paccar. At the time, the heavy truck industry buyers were driving down truck prices. All heavy truck must be made to regulated standards and offer similar features, which makes prices very stiff. Also, the unions were exercising supplier power and the buyers were using substitutes and making deliveries with the use of trains. Paccar decided that to remain relevant in their industry that they needed to focus on the weakest force. The one customer group that was the weakest was with the individual independent drivers that owned their trucks. Paccar catered to this group by offering sleeper cabins, plush leather seats, and sleek exterior styling. The buyers were given the ability to fully customize their trucks to their needs and wants. Paccar charged a 10% premium on all sales and they continue to profit 68 years later.

Another way to develop a strategy for enhancing your company's long-term profits is to look for and exploit any changes within the five forces. If management can identify the changing trends before their competitors, then it gives them the opportunity to exploit them early which allows you to use them to your own benefit. If management can comprehend the how five forces can influence the profitability of their company or industry, they can develop relevant strategies that will enhance the long-term sustainability of the company. Porter gave the example of how the internet became a digital distribution for music. The illegal downloading of music became a substitute for buying records from the record companies. Record companies tried to make and develop platforms, but rivals refused to interact or cooperate with each other. Steve Jobs stepped in with the Apple iTunes and the iPod and become the concierge between the record labels and digital music downloads.

Next, Porter says that companies need to reshape the forces to their favor. He suggests that firms use tactics that are specifically designed to decrease the amount of profits that they are losing to rivals. Porter gives the example of standardizing specifications for your parts to neutralize the suppliers power to control prices and the freedom to switch vendors as needed.

Another strategy is to expand the firm's services which makes it harder for customers to leave and will neutralize their power as well. By investing in unique and desirable changes to your products, it will separate your firm from your competitors' products.

Porter says to scare off new entrants you must elevate fixed costs of competing. Porter says, "Incumbents seem likely to cut prices because they are committed to retaining market share at all costs or because the industry has high fixed costs, which make a strong motivation to drop prices to fill excess capacity." (Porter, p.29)

Lastly, Porter says to limit the threat of substitutes. Your products must be more available and accessible and offer better value for customers. Customer are loyal to firms offering differentiated products. The uniqueness of the firm's products reduces the sensitivity of the buyers to price changes. The higher the firm raises the margins and shields the firm from losing profit to more powerful suppliers. Customers brand loyalty to differentiated products will also deter new entrants from entering the market. Lastly, customers are less likely to switch to substitutes when they are brand loyal to a differentiated product.

Summary 2 of the article: "The Core Competence of the Corporation"

Reference: Harvard Business Review by C.K. Prahalad and Gary Hamel

The Core Competence of the Corporation urged leaders to rethink the concept of the corporation itself - from a portfolio of businesses managed and optimized independently, to a portfolio of competencies spanning across individual businesses and delivering real and sustaining competitive advantage.

Nurturing core competencies requires thinking and operating differently "When the organization is conceived of as a multiplicity of SBUs, no single business may feel responsible for maintaining a viable position in core products nor be able to justify the investment required to build world leadership in some core competence. In the absence of a more comprehensive view imposed by corporate management, SBU managers will tend to under invest.

"The paper also provides a word of caution to those who are looking at the current economic environment as an ideal one in which to go acquisition shopping: leaders should evaluate and execute an acquisition for the purpose of building a core competence.

Finally, it challenges the current push toward more decentralized businesses. "The fragmentation of core competencies becomes inevitable when a diversified company's information systems, patterns of communication, career paths, managerial rewards, and processes of strategy development do not transcend SBU lines," the paper explained. Although there might be efficiency to be gleaned from decentralization, perhaps more credence should be given to their prediction that companies will be judged by their ability to "identify, cultivate, and exploit the core competencies that make growth possible." Instead of fruitlessly trying to leverage core competencies into new businesses while protecting new ventures from corporate orthodoxies, "Individual imagination must become corporate imagination." They outlined four elements which enable the corporate imagination:

1. Instead of viewing every new opportunity through the lens of existing businesses, managers must think outside of current boundaries and explore the white spaces which lie between existing businesses. This is where the core competency mindset helps.

2. Searching for innovative product concepts. Standard approaches to market analysis are not likely to yield ground breaking innovations. An understanding of needs and functionalities must replace the more conventional view of customers and products. "Asking 'innocent' questions (why does the product have to be this way?), understanding what the current product concept doesn't do for customers, and imagining how functionalities could be unbundled and re bund

are just some of the means through which managers can escape the orthodoxy of conventional product concepts," the paper advises.

3. Overturning traditional price/performance assumptions. Thinking about price and performance in linear terms limits the potential for radical innovation. Instead of using existing product concepts as the starting point for new product development, managers might do well to challenge existing assumptions in the category about price/product trade-offs.

4. Getting out in front of customers. "Simply being customer-led is not enough." Particularly in technology categories, customers often can't even imagine what is possible. Companies must lead customers where they want to go - before they even know it themselves. The expeditionary marketing part of the paper was about minimizing the risks of creating new markets and entering into new territory. Most companies approach their development efforts with a "home-run" mentality - that is, trying to improve the odds of each hit, making big bets with big investments, and expecting huge success. They advise companies to place many small bets in quick succession in order to increase the likelihood that one will hit the jackpot. Such an "expeditionary" approach involves minimizing the cost and time of new iterations, pursuing simultaneous development wherein technologists, manufacturing engineers, and marketers work together instead of as a relay team, and accumulating market knowledge through successive failures.

Summary 3 of the article: "Blue Ocean Strategy"

Reference: by W. Chan Kim and Renee Mauborgne

According to Kim and Mauborgne, Blue Ocean is a strategy that is used by companies to raise the demand for a commodity, "demand is created rather than fought over" (p. 77). Moreover, the strategy has been in existence for a long time even though most people are unaware of that. Furthermore, Blue Ocean is regarded as the engine of economic growth and can be created in two ways. The first one is when a company decides to come up with a completely different industry that produces commodities that are new in the market. Alternatively, the industry can generate a blue ocean by altering the boundaries of an industry that is already in existence.

With the Blue Ocean strategy in place, "Companies have a great capacity to create new industries and to re-recreate existing ones" (Kim and Mauborgne, 78). Most importantly, the strategy has resulted in technological advancement, an element that does away with most factors that were believed to hinder economic growth in the past. Moreover, technological advancements have led to industrial productivity. The same advancements have also led to communication whereby industries are now capable of marketing their products and services beyond physical boundaries. As a result of the strategy, niche markets are constantly being eradicated, an element that leads to uniform competition in the market. Additionally, the strategy has also led to the creation of a situation that "has inevitably hastened the commoditization of products and services, stocked priced wars, and shrunk profit margins" (Kim and Mauborgne, 80).

The three most critical issues for this reading

One of the critical issues in this reading is that companies that adopt Blue Ocean as a strategy don't solely rely on the competitive advantage, instead, they try to make competition irrelevant. This is done by trying to produce more value for their product or service to a point where there is no need for competition. Another critical issue that is presented in this reading is that companies that adopt Blue Ocean as a strategy have the ability to create products of higher value at a higher cost or create commodities of reasonable value at a cost that is significantly lower.

Finally, imitation has always been a critical issue in the market. However, those industries that adopt Blue Ocean as a strategy have the ability to minimize the chances of imitation by other companies. This is made possible because the strategy creates cognitive and economic barriers that hinder imitation (Kim and Mauborgne, 83).

The three most relevant lessons learnt

The Blue Ocean strategy can lead to the creation of brand equity; this is because the adoption of the strategy leads to the creation of a particular brand (Kim and Mauborgne, 80). Brand equity can still be noted years after it was established. This is true as some of the big industries that we have in the 21st century came into existence before most of us were born, for instance, the Compaq company in the computer industry. Such companies are believed to have adopted Blue Ocean as a strategy.

The other lesson learnt from the creation of Blue Oceans is that "Blue Oceans are a product of strategy and as such, is very much a product of managerial action" (Kim and Mauborgne, 81).

The third lesson learnt from the article is that Blue Ocean as a strategy "rejects the fundamental tenets of conventional strategy" (Kim and Mauborgne, 82). The latter suggests that a tradeoff must exist between the cost and value of a product".

The three most important best practices

There are several practices that are associated with Blue Ocean as a strategy. Industries that have adopted this as a strategy strive to create market spaces that are uncontested by any other industry. Secondly, such industries strive to make any competition in the market irrelevant. Finally, such companies strive to make and capture new demand in the market (Kim and Mauborgne, 81).

QUESTION: Compare and contrast the three articles above.