In today’s business environment, it is important organisations makedecisions that increase competitive advantage (Partridge, 1999). The modelshighlighted below should be considered when making strategic decisions:Porter’s Diamond Model, VRIO framework and Ansoff’s matrix. Porter developed the Diamond model to analyse an organisation’scompetitive position (Chikan, 2008). There are four factors to competitiveadvantage: firm strategy and rivalry; demand conditions; related and supportingindustries; and factor input conditions (Porter, 1990). Zhang and London (2003) argue the model is the favourite competitivenesstheory used by organisations. Lall (2001) agrees stating it is beneficial whenanalysing how to translate current strengths into international advantages, to helpformulate strategic goals (Ahlstrom and Bruton, 2012). An organisation consistent with this model is Volkswagen shown by theirposition in Germany’s car manufacturing industry. Tran (2016) indicates the industryhas a regional advantage due to demand conditions of consumers.
Their sophisticationincreases quality required from Volkswagen and competitors such as Audi (Jürgens, 2000). Furthermore, Grant (1991) states the naturalresources in the iron and steel industry lent themselves to development of the industry.Lastly, German universities focus on producing skilled engineers coupled withinvestment from the Government into innovative technology such as the hybridcar benefits Volkwagen (Proff, 2000) who uses their strengths to pursue successin other countries, in line with corporate strategy to deliver efficient and innovativeproducts globally (Volskwagen, 2016). The model is criticised for an excessively domestic focus and is toogeneral for national competitiveness construct (Fainshmidt, Smith and Judge,2016). Davies and Ellis (2000) state there are other ways to increasecompetitiveness which lead to a more accurate approach. Fainshmidt et al (2016)argue these have not been tested and declare many scholars have used the model includingPorter and Ketels (2003); and Hoefter (2001). Griffiths and Zammuto (2005) arguePorter focused on ten countries when developing the model and does not takeinto account multinational organisations influence on success of nations. Nonetheless,the model is still widely used by successful organisations, including Volskwagen,to create informed decisions.
However, the model should not be used inisolation when looking to gain competitive advantage and managers shouldconsider other factors such as MNE penetration and governance quality(Fainshmidt et al, 2016). Another model that can be applied togain competitive advantage is Barney’s VRIO framework which is an improvementof the VRIN model (Barney, 2014). The framework asks whether a firm’s resourcesand capabilities are: valuable; rare; costly to imitate; and organised tocapture value (Kauerhof, 2017). Wernerfelt (1984) argued VRIO is the basis forinternal analysis and is the foundation of the resource-based view of anorganisation. Rothaermel (2015) later said it benefits managers when decision-makingby evaluating current capabilities.
As shown in appendix 1, whenapplied to Starbucks and their global presence the organisation meets all four criteria.For example, it is valuable in the coffee industry to be globally available toconsumers to increase revenue and market share. Whilst many coffee chains areglobal, Starbucks is the most popular and it would be difficult for competitorsto imitate this. Starbucks has exploited this and their latest strategyrepresents their plan to further build on global partnerships (Starbucks,2017). This capability highlights to Starbucks their competitive advantage to maximise potential,which Mizik and Jacobson (2003) state drives value in decisions. Another resourceis their specialty coffees; however, it only has competitive parity because itis not limited to Starbucks and can be imitated, despite this Starbucks arestill renowned for their coffees.
Knott (2015) states this as a limitation of VRIOas it fails to evaluate a resource disadvantage and the risk of pursing it. Therefore,for Starbucks to evaluate the risk of their specialty drinks, Knott (2015) acknowledgesthey will have to consider other factors. Guo (2007) states VRIO ischaracterised by simplicity and clarity and is the starting point inunderstanding how to move forward. Sanchez (2008) said for a deeperunderstanding of competitiveness, VRIO should be accompanied with otheranalytical techniques. Caldart (2011) argues the PESTEL framework complementsthe model and gives greater understanding of the macro-environment.
This alsoovercomes further criticisms of VRIO stating it does not consider theever-changing economy. Another model useful for analysingstrategic growth options is Ansoff’s Matrix which proposed four potentialstrategies: market penetration; market development; product development; anddiversification (Ansoff, 1980). Graham (2007) states it closes the gap betweenaims of an organisation and required results, as gives focus to managersthrough identification of new strategies for future products to stake out acompetitive position. Coca-Cola has used this model asrepresented in Appendix 2. For example, Coca-Cola launched Diet Coke in 1982(Staff, 2017) but have used market penetration to adapt aspects to meet changingcustomer needs and as such has been highly successful. Vrontis and Sharp (2003)state Coca-Cola used market development through sale of their share-size 1.25litre bottle, after growing demand from households of 1-2 people, helping to targetnew areas of their existing market. Coca-Cola also extended their product rangethrough creation of Fanta after consumers wanted a new flavour drink (Coca-Colacompany, 2017).
Finally, the launch of PowerAde was a risk for Coca-Cola due toits distinctiveness. Siegemund (2008) states the model illustratesrisk associated with each strategy: each time a business moves into a newquadrant of the model risk increases, and therefore for businesses looking toincrease their competitive advantage managers can consider impact of anydecision made. Ward (2005) argues the model does not evaluate which risks areworth pursuing; therefore, the model is a starting point for identifying growthoptions.
McKinsey (2008) created the nine-box matrix which offers a moresophisticated approach, see appendix 3, and is favoured over the Ansoff matrixby some marketers as it priorities strategies amongst business units incompetitive scenarios (Morrison and Wensley, 1991). Recent theorists agreestating the matrix helps to better address decision-making issues linked todifferentiation of products (Amatulli, Caputo and Guido, 2011). Some theorists state Ansoff’smatrix can result in overuse of analysis.
Ansoff (2008) recognised too oftenthe model resulted in “paralysis by analysis”, he encourages flexibility when planningto ensure an informed decision is made. Alam (2006) says despite it being simplisticthe model has a role in decision-making and is effective for showing opportunitycost. For businesses looking to increaseand sustain competitive advantage, it is essential to consider relevantstrategic management frameworks including the models discussed above. Analysisin the business environment, including market trends and competition, helps to giveunderstanding to managers enabling them to implement informed strategicdecisions on a corporate level.