Five Competitive Forces that Shape Strategy

Porter’s five forces is a competitive analysis model which helps us understand the nature of competition within the industry.  It helps us determine the competitive forces in the industry.  By using this model, one can shape strategies to get ahead of the competition. These are the five forces of  the framework developed by Michael Porter:

1.     The Bargaining Power of your Customers

2.     The Threat of New Entrants into your Industry

3.     The Bargaining Power of Suppliers

4.     Threat of Substitute Products or Services

5.     Rivalry Amongst Existing Firms

In my present job, I don’t think our school needs strategies to get ahead of the competition to acquire a large number of enrollees since it is a public school having a population of more than 8,000 enrollees. And with these, we lack  classrooms and teachers. Presently, there are around 300 teachers in this campus but still at the start of the school year, 60-70 students will be listed for a section. As a teacher , we would be glad if there is another public  secondary school opened nearby so that somehow our student population will be reduced which in turn lessen the number of students in a classroom from more than 60 to a much smaller number. And by then, a better quality education will be given to the students.

However, what will happen if the enrollees will dramatically drop to a very small number? Then, that’s a threat to our school budget subsequently a threat to the teachers  who might be transferred to other schools. We will badly need this Porter’s Five Forces Model by then. :-)

Core Competence of a Corporation

C.K. Prahalad and Gary Hamel coined the term core competencies, or the collective learning and coordination skills behind the firm's product lines. They made the case that core competencies are the source of competitive advantage and enable the firm to introduce an array of new products and services.

Some businesses focused on producing end products through their various business units. They failed to consider creating their core competence which would lead them to increase their market share.

By combining a set of core competencies in different ways and matching them to market opportunities, a corporation can launch a vast array of businesses.

Without core competencies, a large corporation is just a collection of discrete businesses. Core competencies serve as the glue that bonds the business units together into a coherent portfolio.

With their core competence developed, they could get into making their core products which can be used by other businesses in assembling various end products. Core competencies manifest themselves in core products that serve as a link between the competencies and end products. Core products enable value creation in the end products.

In our school, Digos City National High School, one of our core competencies are the expertise of teachers in their respective fields. Most of them are having masteral degrees in their fields of specialization. With our school having different programs Engineering and Science Education Program(ESEP), Special Program in Arts(SPA), Special Program in Sports(SPS) and Technical Vocational Education (TVE), it should have the capable workforce to cater the students the skills and knowledge they need to acquire in their chosen program. For example , for the TVE , the teachers who handle field of specialization such Baking and Pastries, Welding , PC Hardware Servicing are passers of National Competency II of TESDA. A teacher cannot teach a specialization without passing the NCII TESDA Certfication to ensure that quality education is afforded to the students.  With this core competence, the school will be able to produce its core products, students who are academically competitive especially those from ESEP program and technically equipped especially from TVE program which is in line with the vision and mission of the school.

Managing Organizational Change

To keep a step ahead of changing market conditions, new technologies and human resources issues, organizational innovation and change is needed. However, managing the change  is difficult.  It requires a very good transformation leadership. According to John Kotter ,some changes fail because of the 8 common errors leaders make in organizational change efforts : 1) allowing too much complacency 2) failing to create a sufficiently powerful guiding coalition 3) underestimating the power of vision  4) undercommunicating the vision 5) permitting obstacles to block the vision,6)failing to create short term wins, 7) declaring victory too soon and 8) neglecting to anchor changes firmly in the corporate culture.

To manage an organizational change a leader may go through the 8 stage change process by John P. Krotter. This is the 8 state change process:

Defrost a hardened status quo:

1.    Establish a sense of urgency

2.    Create the guiding coalition

3.    Develop a vision and strategy

4.    Communicate the change vision

Introduce new practices:

5.    Empower a broad base of people to take action

6.    Generate short term wins

7.    Consolidate gains and producing even more change

Ground the changes in the culture, and making them stick:

8.    Institutionalize new approaches in the corporate culture

However, most people don't like change because they don't like being changed. When change comes into view, fear and resistance to change follow – often despite its obvious benefits.

People fight against change because they fear to lose something they value, or don't understand the change and its implications, or don't think that the change makes sense, or find it difficult to cope with either the level or pace of the change. Resistance emerges when there is a threat to something the individual values. The threat may be real or it may be just  perception. It may arise from a genuine understanding of the change or from misunderstanding, or even almost total ignorance about it.

Passive-Aggressive Organization

With  the experiences I discussed in my previous blogs , that company could be considered as a passive-aggressive organization. Harvard Business Review describes a passive – aggressive organization to have possessed these characteristics: a)Unclear Scope of Authority       b) Agreement Without Cooperation      c) Misleading Goals  d) Ineffective Motivators  e) Unclear Decision Rights.

In this type of  organization, lines of authority are unclear, merit is not rewarded, and people have learned to smile, nod, and do just enough to get by.

Unclear Scope of Authority. Based on my experience with this type of organization, indeed, there was an unclear scope of authority. Some managers were given authorities to make some decisions which at any time can be interrupted by the President, the owner itself or by any personnel close to the owner. The scope of authorities were not well-defined.  Quality Control Department decides on some standards which are at any time can be altered by anybody from the top management.

Agreement Without Cooperation. With unclear scope of authority, subsequently, it led to agreement without cooperation. People tend to become passive of some implementations of the management.  Being confused of the different standards implemented, Quality Control Department where I belong became indecisive on some matters which later made the Quality Control Inspectors became passive of the some new quality standards created. This is because when a quality standard was imposed, at any time, such standard is altered by a “somebody” in the management. 

With these, the first two characteristics of a passive-aggressive organization are evident.

Misleading Goals. I have gone through the employment of these misleading goals on the same company.  At one time, Quality Control Inspectors were tasked to inspect a certain number of products in a day to cope up with the delivery target. Consequently, some inspectors were not concentrating on the quality but on the quantity of products they can inspect. As a result, there were a lot of customer complaints on the products.

Ineffective Motivators. On my blog, “Organizing for Empowerment”, I have stated my experience on that passive-aggressive organization. A passive- aggressive organization is poor at judging and rewarding individuals according to their business value to the organization. Many of my colleagues who were promoted were not given raise on their salaries, that includes me.  While some people in the senior positions who were doing less were given  an ample raise.  They spent a lot on meetings neglecting to include those high performers who have valuable insights but with no authority. Soon these employees’ healthy impulses to learn, to achieve and share  which are not encouraged  led them to develop gradually adaptive conduct. And when they became burnout, they soon ran away.

Unclear Decision Rights.  Since the job descriptions were not clear on this same company where I worked before, it followed that there were unclear decision rights. When a failure or complaint exist, everybody is taking a blame on somebody.

Organizational Transformation Concepts and Analysis

As an old adage says “Change is not a process for the impatient.” If an organization goes through transformation, it should be patient enough to tackle the practical application of the concepts involved the organizational transformation. It has to go through the process of transformation geared by a good transformational leadership.

Implementing transformation is not an option but essential  to cope with  ever-changing environment. The primary reasons why organizations need to undergo change include changes in the conditions of the environment that greatly  affects the performance of the organization and the gaps or discrepancies between the quality of performance exhibited by various organizations that raise the issue of competition and the need to survive amidst this particular struggle (Wischnevsky , 2004 , pp . 1-2 ).

MegaChange³ is a new capability-based approach to undergo organizational  transformation. These are the features of MegaChange³:

·         Capability Focused: MegaChange is based upon assumptions of human and organizational capabilities  rather than limitations.

·         Transformation: MegaChange is not a mere transition, it is cultural transformation of your organization.

·         Systemwide: MegaChange is not piecemeal, it is systemwide

·         Concepts, actions, and tools: MegaChange is produced using and integrated set of concepts, actions, and tools, not just tools without concepts.

·        Empowering: MegaChange affects everyone in the organization. It results in a joint optimization of organizational and individual performance, capability and satisfaction.

·         Cultural: MegaChange results in in new and changed ways of thinking, acting, and cooperating.

·         Theory for practice: MegaChange is not a theory or practice

·         Reformation: MegaChange is not about restructuring or reengineering, it is about reformation. It reforms structural concepts, actions, and tools necessary for creating organizations that achieve extraordinary levels of productivity and satisfaction by engaging human capability rather than denying it (http://www.1000ventures.com/business_guide/crosscuttings/change_organizational_transformation.html).

Organizational transformation capability can be defined as ability to sense the need to align resources, culture, process, and technology to achieve new forms of competitiveness. It is firm capacity that contributes competitive advantage in dynamic business competition. The notion of organizational transformation capability derives from dynamic capability paradigm. Dynamic capability can be defined as the firm's ability to integrate, build, and reconfigure internal and external competences to address rapidly changing environment (Teece, Pisano and Shuen, 1997).