Page 156 - DCOM506_DMGT502_STRATEGIC_MANAGEMENT

Strategic Management

Notes Resource-based View

In an earlier unit, we explored the arguments supporting this view of strategic analysis. They
also apply to strategy options and suggest that options based on the uniqueness of the company
rather than the characteristics of the industry are likely to prove more useful in developing
competitive strategy. The resource-based view does undermine much of Porter’s approach.

Fast-moving Markets

In dynamic markets such as those driven by new internet technology, the application of generic
strategies will almost certainly miss major new market opportunities. They cannot be identified
by the generic strategies approach.
Faced with this veritable onslaught on generic strategies, it might be thought that Professor
Porter would gracefully concede that there might be some weaknesses in the concept.

However, Porter hit back in 1996 by drawing a distinction between basic strategy and what he
called ‘operational effectiveness’ – the former is concerned with the key strategic decisions
facing any organisation while the latter are more concerned with such issues as TQM, outsourcing,
re-engineering and the like. He did not concede any ground but rather extended his approach to
explore how companies might use market positioning within the concept of generic strategies.

Given these criticisms, it should not be concluded that the concept of generic strategies has no
merit. As part of a broader analysis, it can be a useful tool for generating basic options in
strategic analysis. It forces exploration of two important aspects of business strategy: the role of
cost reduction and the use of differentiated products in relation to customers and competitors.
But it is only a starting point in the development of such options. When the market is growing
fast, it may provide no useful routes at all. More generally, the whole approach takes a highly
prescriptive view of strategic action.

Case Study Wal-Mart's Cost Leadership Strategy

n July 2, 1962, Samuel Moore Walton, a merchant with over 15 years of experience
in retailing, set up his first discount store in Rogers, a small town in the state of
OArkansas, US. The store offered a wide variety of branded merchandise at a
competitive price.

During the initial years, Walton focused on establishing new stores in small towns, with
an average population of 5,000. These towns were largely neglected by leading retailers
like Sears Roebuck & Company, K-Mart and Woolco, which concentrated more on larger
towns and big cities. In his efforts to attract people from the rural areas to his stores,
Walton introduced the concept of Every Day Low Prices (EDLP).

EDLP promised Wal-Mart's customers a wide variety of high quality, branded and
unbranded products at the lowest possible price, offering better value for their money.
Wal-Mart's advertisement describing EDLP said,

"Because you work hard for every dollar, you deserve the lowest price we can offer every
time you make a purchase. You deserve our Every Day Low Price.
It's not a sale; it's a great price you can count on every day to make your dollar go further
at Wal-Mart."
Contd...

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