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Strategic Management - Essay Example

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STRATEGIC MANAGEMENT Name: Institution: Instructor: Course: Date: Strategic Management Critic of management models Porter’s Five Forces model is designed with a focus on factors that built up the competitive advantage of a firm within the market (Afuah, 2003)…
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Strategic Management

Why is it this so? It is clear that the globalization of markets has led to a paradigm shift in how organizations-and especially multinationals-conduct their business operations. The deregulation of national and regional markets has led to eradication of bottlenecks to cross border trade leading to increased competition for the vast and diverse, global markets. Porter’s competitive model was build based on the prevailing economic conditions of the eighties. It assumed the classical perfect market conditions of intense competition and a relatively stable market structure that is subject to cyclical developments. Therefore, by design, this model loses significance in the modern global market. Modern global business is characterized by dynamic markets where industries have complex and multiple relations and product groups (Have, 2003). The upsurge of internet technology and e-business platforms has meant that the effectiveness of the model is in providing a still image of the industry. This is as opposed to providing holistic projections of future trends and developments that can be ably translate into strategy for the particular market segment. The model assumes the idea of competition based on a need for profitability and market survival only loses relevance in modern markets. It wrongly approaches some of the five factors i.e. suppliers and customers as a threat to the organization that needs to be addressed. Modern economics postulate that business strategies should be focused in incorporating, as opposed to reacting to these particular factors (Miles, 2011). The Boston Consulting Group (BCG) matrix was developed with a focus on the efficient allocation of resources within business enterprises. It adopts an evaluative criteria based on two prime factors i.e. market share and market growth has been widely used as a tool for portfolio planning, marketing and business strategy development. The basic principle in risk management is in diversification of assets through portfolio investments. The BCG model provides a useful pictorial comparison of the firm and its products versus the leading competitor and its products in the same market. The model, therefore, becomes a critical tool for implementing a firm’s short to medium-term profitability and growth objectives by providing forecast solutions of the market as it is now and as expected in the near future. In the short-run, the model is capable of providing strategies that are designed to provide quick-fix solutions to a firm. The disposal and optimization of loss making assets or ventures can be easily identified using this model. On the down side, the model, the model’s application is often limited to a scope of a year. The model lacks the ability to provide a long-term picture of the market conditions and thus strategy development towards achieving the firm’s overall long-term goals becomes very challenging. The BCG assumes a direct relationship between market shares, seems irrelevant in the current global market. There are small businesses in the small market segments especially within the information technology segment that have surpassed even the largest multinational corporations in profitability (Kaplan & Norton, 2000). The model also places an inaccurate reliance in market growth as a dominant factor in determine the attractiveness of a market segment. There are other factors such as aggregate market risk and regulation that equally influence ... Read More
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