Management

The History of the Management in Business

Porter’s Five Force model is a set of analytic techniques to develop a strategy by looking at five competitive forces to position an organization and its activities so that its product or service is different and cannot be imitated by rivals or potential rivals. Of these, three forces are acting on Kao’s failure to grow its Western markets: bargaining power of buyers (Kao’s cheap image and reputation as a novice), threat of substitutes, and intensity of rivalry (competitors better at marketing high-end/high priced products). Porter then recommends that an organization choose one of three generic strategies – over-all cost leadership, differentiation, or focus – so it can compete and achieve sustainable profitability. How can we explain Kao’s success in cost leadership and differentiation? An explanation is its value chain, a framework introduced by Porter to analyze an organization’s internal capability to support and reinforce a chosen generic strategy. Kao’s internal capabilities and competencies (as we shall next see) helped it succeed in two generic strategies, although its failure to make buyers want its product means that it needs to make adjustments. Kao can satisfy the buyer’s bargaining power by improving its image through advertising and marketing, minimise the threat of substitutes by introducing quality but lower-priced products using its cost leadership and product differentiation advantages, and match the intensity of the rivalry….
buyers (Kao’s cheap image and reputation as a novice), threat of substitutes (similar products familiar to the market), and intensity of rivalry (competitors better at marketing high-end/high priced products). Porter then recommends that an organisation choose one of three generic strategies – over-all cost leadership, differentiation, or focus – so it can compete and achieve sustainable profitability. How can we explain Kao’s success in cost leadership and differentiation An explanation is its value chain, a framework introduced by Porter5 to analyse an organisation’s internal capability to support and reinforce a chosen generic strategy. Kao’s internal capabilities and competences (as we shall next see) helped it succeed in two generic strategies, although its failure to make buyers want its product means that it needs to make adjustments. Kao can satisfy the buyer’s bargaining power by improving its image through advertising and marketing, minimise threat of substitutes by introducing quality but lower-priced products using its cost leadership and product differentiation advantages, and match the intensity of rivalry by deploying trained managers who know the culture to market products in the west.
Using the so-called RBV (resource-based view) of strategy, which proposes that competitive advantage can stem from firm-specific skills and resources6, we see Kao as a collection7 of productive resources8 (brand name, quality products, employee loyalty), capabilities9 (unique combination of cross-functional business processes, Hansha information system, the way its workers interact, and how its management leads by example), and competences10 (intuitive learning environment and long-term focus). Kao must use these resources, capabilities, and competences in developing

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