Porters Four Generic Competitive Strategies Marketing Essay

Porters Four Generic Competitive Strategies Marketing Essay The company that I has chosen is Dean Foods Company. Dean Foods Company is a leader in the quality branded dairy business in United States. Dean Foods Company was founded in the 1925 by Samuel E.Dean and is headquartered in Dallas, Texas. The company was formerly known as Suiza Foods Corporation and in December 2001 its changed its name to Dean Foods Company .Its operating as food and beverage company in United States and also knows as multinational corporation their divided their company into 2 segments which is DSD Dairy and WhiteWave-Morningstar which is different company target on different market .like DSD Dairy which target on markets, and distributes various branded and private label dairy case products such as whipping cream, dairy coffee creamers, and ice cream mix and other.The WhiteWave-Morningstar company is target on dairy related products, soy products such as silk soymilk and milk and so on. (http://finance.yahoo.com/q/pr?s=df). In year 2006 Dean Foods Company have been added into standard and poors 500 index(http://en.wikipedia.org/wiki/S%26P_500) and it also in the ranking number 6 in the top 100 food processing company in year 2009 (http://www.foodprocessing.com/top100/) and manage to earn $ 12,454,613  as total revenue in year 2008. (http://finance.yahoo.com/q/is?s=DFannual),ConAgra ,Dairy Farmer of America and Kreadt Food which is the competitor od the Dean Foods Company (http://www.answers.com/topic/dean-foods-company). The corporate vision of Dean Foods Company is Healthy Foods, Healthy Families, Healthy Business and creating value for our owners in long and short-term, by means of profitable dairy activities; to develop, produce and market a broad range of reliable, natural and nutritious dairy products that contribute to well-being and vitality of life; and to recognize that know-how, quality, dedication and leadership of our employees are the most crucial assets to achieve our targets and make stable growth in their business. (http://www.deanfoods.com/our-company.aspx). This is a very important for an organization that in the beginning of the process strategies analysis it should analysis environment. Environmental analysis should be continuous and feed all aspects of planning. The organizations environment analysis is composed as follows 1.0 Internal analysis 1.1 SWOT Analysis SWOT Analysis is plays an important role to evaluate environmental opportunity in relation to the strength and weakness of the organization resources and it relation to the organization culture. (http://deep-swot-analysis-software.smartcode.com/screenshot.html) By using the SWOT analysis we can know the strengths and weakness internal of organization and also The opportunities and threats presented by the external environment to the organization (http://en.wikipedia.org/wiki/SWOT_analysis) ,SWOT Analysis with the PEST can be used as a basic for analysis if business and environmental. Because all company are aim for maximizing the profit so that SWOT analysis is normally using for general business planning. Normally SWOT Analysis is creating the value for the company then creating the customer for this value we need to know why we can survive in this market what make us become so special or unique compare to our competitor. What customer need remain unfulfilled in this market and why they will purchase our competitor product and so on. Opportunities are area to add value to our product like doing the promotion and advertisement so that our product will be better known in the market and the threat is how u losing your customer .( http://www.sales-and-marketing-for-you.com/swot-analysis.html). For the example as we know Wal-Mart is a powerful retail brand and also is a value for money, convenience and a wide range of products all within the scope of a stores reputation. Even Wal-Mart is the worlds largest food retailers and the control of the Empire, despite its technological advantages, will make some parts of the country, due to large span of control is weak. This is the main weakness o f the company .they have the opportunity to take over, merger, or other forms of strategic alliance of global retailers, focusing on specific markets such as Europe and the Greater China region because the a the largest food retailer company in this world . But they need always change with time because their competitors not only in the local and also global. (http://marketingteacher.com/SWOT/walmart_swot.htm). 1.2 Value Chain Analysis Value chain analysis is how we create the competitive advantages through adding value in any functional area of business and how it might be using for evaluating competitive advantages. (http://www.businessdictionary.com/definition/value-chain-analysis.html) Sources: http://www.remnet.com/porter.html All primary activity will support by the supporting activities which plays an important role in create and maintaining a competitive advantage in current market and it will support by the firm-wide infrastructure. For example McDonalds goes into a win-win relationships with Pret à   manager, a UK sandwich chain which is concentrating on each partners competences. Sources: adapted from American marketing association (2001),Farnham (2001) .case refer to Appendix 1. Through the analysis it will help firm to achieving competitor advantages in different ways which is cost advantage, differentiation and linkages within value activities within the organization and outsourcing activities. Beside that the firm can determine the value of the system in the industry, the various actors in the potential of strategic alliances, its will helps firms to identification of cost drivers by reducing costs and finding ways to optimize the return on the entire value chain links. In addition, the value chain analysis can help firms understand the issues of cost management. For example firm can introduce a new production processes or different sales approach to reducing the cost beside that the firm also can create the differentiation with their competitor by procurement of inputs and make the final product become more unique or either increasing the service level ,finding a cheaper or better suppliers, improve the reliability and flexibility and improve the business processing such as reduce the manufacturing costs, lead time inventory, and avoid the risk in investing in specialized assets . By using this analysis the firm can save a lot of cost and it will increase competitor advantage in the food industry market. 1.3 BCG matrix BCG Matrix is helping the enterprise to determine the product line, analysis their business unit and also allocate resources. Normally it using to analytical tools in brand marketing, product management, strategies management and portfolio of the company. (http://krikor.info/2008/11/bcg-matrix/) (Sources: http://krikor.info/2008/11/bcg-matrix/) Basically the BGC matrix is using to rank the product on the basic of their relative share market and growth rates into four quadrants which show in diagram above. Each represents a different type of business with different strategies and resources requirements. (http://www.maxi-pedia.com/BCG+matrix+model) (http://www.12manage.com/methods_bcgmatrix.html) This model have various advantages which is à ¢Ã¢â€š ¬Ã‚ ¢ à £Ã¢â€š ¬Ã¢â€š ¬ Enables management assesses the organizations present and future potential and provided base for the management to decide and prepare the next action should be taking. à ¢Ã¢â€š ¬Ã‚ ¢ à £Ã¢â€š ¬Ã¢â€š ¬ Provides analysis and comparison to multinational companies framework. à ¢Ã¢â€š ¬Ã‚ ¢ à £Ã¢â€š ¬Ã¢â€š ¬ Provides a good foundation for the formulation and marketing objectives to develop a specific international market. à ¢Ã¢â€š ¬Ã‚ ¢ à £Ã¢â€š ¬Ã¢â€š ¬ Easy to understand decision-makers through a convenient graphical form à ¢Ã¢â€š ¬Ã‚ ¢ à £Ã¢â€š ¬Ã¢â€š ¬ Enables management to make informed decisions. à ¢Ã¢â€š ¬Ã‚ ¢ à £Ã¢â€š ¬Ã¢â€š ¬Provide access to opportunities and issues related to specific product may be useful insights. à ¢Ã¢â€š ¬Ã‚ ¢ à £Ã¢â€š ¬Ã¢â€š ¬Enables management to assess the strength of a company. (http://www.oppapers.com/essays/Bcg-Matrix/164421) By using BCG Matrix analysis, PepsiCo able to market their products and increase their market share and market growth the strategies. In the other hand ,BCG matrix results for PepsiCo is also considered to be inspired by the branding strategy of the company for enhancing the market share and growth of their brands like Frito-lay, Pepsi, Quaker, Tropicana and Gatorade. ( http://ivythesis.typepad.com/term_paper_topics/2009/03/boston-consulting-group-matrix-bcg-on-pepsi-co.html) 2.0 External analysis Is an analysis looking from the outside resources from the company and it might affect the operation of the company. 2.1 PEST Analysis PEST analysis is analysis the external macro-environment that will affect to the entire firm. Its is the short form of politic, economic, social and technology. Its plays an important role to consider by the firm before the organization is starting a marketing process, because some of the factor is no under control of the corporation themselves. ( http://www.netmba.com/strategy/pest/) PEST analysis can be used for business and marketing and strategic planning, product and business development and the research about the market thru the product. The diagram below it shows how PEST analysis can be used for delivery to you from any department or individuals view point of view of the market thru the service and product of the company. (Sources from: http://www.projectsmart.co.uk/pest-analysis.html) PEST analysis has several advantages which is Simple structure Provides an understanding of the business environment. Encourages the development of strategic thinking. May raise consciousness of threats to a project and make the organisations earning profit from it. Can help an organisation to look forward to future difficulty and take action to avoid or minimise their impact Can help an organisation to mark opportunities and make it successfully. (http://www.accessmylibrary.com/article-1G1-141751393/carrying-out-pest-analysis.html) For example Coca Cola Company is using political analysis which is selling the non alcoholic beverage. Beside that they also using the social analysis by introduce the diet coke to the whole world which nowadays are practicing healthier lifestyles in this action their manage to get 43% of all household in the us citizen to buying their product instead of beer or mineral water (http://www.scribd.com/doc/22274938/Swot-n-Pest-Analysis-of-Nestle-and-Coca-Cola) 2.2 Porter 5 forces It uses the concept of the development of industrial organization economics to derive five kinds of forces to determine the intensity of competition, develop a broad and sophisticated analysis of competitive position and the markets attractiveness. In this regard, the appeal refers to the profitability of the industry. This model can help us to define the threats and opportunities in surroundings our business and creating the strategies or decision about the organization. The diagram below is shows about the how the process and what should we focus when we making decision of the porter 5 forces: (http://www.maxi-pedia.com/Five+Forces+model+by+Michael+Porter) By using this analysis it can bring some benefit to the corporation which is Understanding the competitive forces in your industry. Assessing the attractiveness of, and growth opportunities within, a new industry. Developing effective strategies to raise your profitability, power, and competitive (http://www.strategy4u.com/assessment_tools/info.php?s=2) 2.3 Scenario Analysis Scenario analysis typically focuses on how to estimate the portfolios value will fall if the adverse events, or worst case, a reality. Scenarios involving different rates of reinvested earnings are expected to a horizon, we will re-investment return on investment. (http://www.investopedia.com/terms/s/scenario_analysis.asp) Even the scenario analysis doesnt tell you what should do to meet the customer needs and wants but they can help you understand the potential impact and benefits of different methods. Lets put in front of you all the possible results can help you make the best decision. This analysis has some advantages which is: Multiple scenarios can alert organisation when their facing some uncertainties planning which for future. scenarios help to overcome the tendency to be overconfident and base construction planning on a best guess about the future, scenarios raise the quality of strategic thinking and broaden perspectives, Scenarios help to develop robust strategies regarding different possible futures. (Sources: http://www.projectmara.com/134.0.html) 3.0 Introduction Strategy formulation is vital to the well-being of an organization, it using three phases to analysis the strategy management process which is diagnosis, formulation and implementation to help the corporation to achieve organizational goal. In the three aspects of strategy formulation it can dividend into various level of strategies which is business level strategies, corporation level strategies and international strategies. Each strategy was a different focus, need to address the strategic development and management phases and it support and affect between each other. It should be consistent for a mutually supportive way, constitute an integrated together hierarchy of strategies. 3.1 The relationship between corporate level strategies, business level strategies and international level strategies. The corporate level is thinking about what business are we in? How we created by the value of your business and ensure your business will successful in long-term period by managing your portfolio of business. To ensure that all operations are compatible, we need to develop the business units, and sometimes to make sure each business in your portfolio are compatible with each other. The business level is thinking about how we achieve the goal or an objective which was set by the corporate level. Normally this level will support by the functional to ensure it will be success. The international level is how we finding a new opportunity or other resources to our corporate to ensure it can be survive in the long term period and make sure it have the competitive advantages among our competitor. In other to come up with strategies, there are 2 approaches we need to consider which is 3.2 Resources based approach The two fundamental reason for making the resources and capabilities of the firm are Internal resources and capabilities which provide the basic direction for a firms strategies and resources and capabilities which are the primary sources of profit for the firm. Normally the resources based view will base on internal strength of the organization and compete with external environment. The diagram below is outline the framework of 5 stages to procedure which analysis the strategies formulation of the firm based on the resources based approach (http://books.google.com.my/books?hl=enlr=id=Pv3wzZ0z7R0Coi=fndpg=PA135dq=resources+based+approach+to+strategies+formulationots=E0iz50x-w-sig=FBf9lP-Lv1qJkXrVAj4lIx9bAU8#v=onepageqf=false) RBV explains that a firms sustainable competitive advantage is reached by virtue of unique resources which these resources have the characteristics of being rare, valuable, inimitable, non-tradable, and non-substitutable as well as firm specific. (Sources: Barney 1999 cited by Finney et al.2004, p.1722) For example McDonald using the Resources based approach to ensure their become more unique compare to their competitor and gain some competitive advantages in the market. In order to have a unique ability they use the M as their logo, so that all customers know that this is a glance of the McDonalds restaurant. They prepare French fries and hamburgers as their trademark in the other hand, McDonalds, it is obvious they have the courage ability to face the fact that competition with other international fast food chains. With its enormous market share and the experience in this industry for many years, other companies that they have strengths and the other party is difficult to imitate by other companies (http://www.mightystudents.com/essay/Use.Resource.Based.49020) 3.3 Porter 5 force 2.0 Business Level Business strategy and framework to achieve a specific level of the enterprise and make the organization become successful. Usually involves the company will decide how to compete in our chosen business or strategic business units. (Strategy Formulation benefits http://www.referenceforbusiness.com/encyclopedia/Str-The/Strategy-Formulation.html#ixzz0lqGsD9b3) Adopted from Michael E. Portel(1980) Competitive strategy is about being different. It means deliberately choosing to perform activities differently or to perform different activities than rivals to deliver a unique mix of value 2.1 Porters Four Generic Competitive Strategies Porters Four Generic Competitive Strategies is about how to make become so unique in the market and how to make the product got competitive advantage .Four strategies involved, and to what extent the wide range of activities of enterprises, and how to make their commercial products to distinguish themselves. Differentiation strategy will usually charge higher prices to increase product value, using the value-added features, service, convenience, quality customer. Such as the Mercedes-Benz car company, the premium price for the customer to buy a car, because it makes the buyer willing to pay that there is significant value to the car. ( http://tutor2u.net/business/strategy/competitive_advantage.htm) Cost leadership strategy is how to provide low-cost products and services than their competitors. This strategy is often used when a similar product or substitute products in market and price competition in the market is dominated by the price-sensitive buyers. Through sustained, exceptional efforts to reduce costs, and ensure that these strategies can be used successfully in the market. For example, Tescos competitors will do their shop daily price surveys to ensure that their products sold in cheaper prices to the other. ( http://www.tesco.com/todayattesco/pricecheck.shtml) Cost focus is a strategy which concentrates in a narrow focus and customer segments to the lowest price competition, and strives to lower costs than the competition advantage. For example a small shop on a side -street in a town in which they will order the clothes at lower price, or the cheapest electronic equipments which made in china. Different focus strategies is emphasis is concentrated in a narrow customer base, and competition through a variety of different features for example a high -fashion womens handbag ,clothes ,shoes and other. 2.2 Market positioning The key concept of the market positioning is how to make your product and service become unique and competitive advantages in the market by using pricing, quality, service, distribution and packaging. For example the product Nyquil was conceived as an excellent cough during the day but it will make people become sleepy after consume it. Because of the side effect of sleepiness, the company has be repositioning it and it become the night machine and help the company gain a cold remedy market .(http://www.tenonline.org/art/mm1/9305.html) 3.0 Corporate levels Corporate level is the scope of the different industries and markets the organization and considers what changes and strategies should be made in the growth of our goals or objectives. In the corporate level it got three components are useful which is 3.1 Growth strategies Ansoff matrix is a tool that helps business decides which strategy should be used and set the strategic direction for the business. It can be shown in the following chart: (http://tutor2u.net/business/strategy/ansoff_matrix.htm) In particular, the risk factors have increased further the strategy moves away from the known quantity, therefore, product development and marketing generally involves greater risk than `infiltration and diversity generally carries the greatest risk. 3.2 Portfolio analysis Portfolio analysis is concerned with making decision about the portfolio of lines of business or strategies business unit but not the companys portfolio of individual product. BCG growth share matrix model, which can help us analyze, as an industrial exhibition in the industry growth and market share related to the relative attractiveness of competitiveness indicators. McKinsey matrix is that it can be considered by both the industry attractiveness and competitive strategy customized composite variable. Single business strategy is very successful by using this method for example the early strategies of McDonalds, Coca-Cola company some of the advantage using this strategies is less ambiguity about who are and what we do ,concentrate the efforts of the total organization ,focus on long-term profits. 3.3 Corporate parenting This is a multi-related business, which involves the allocation of resources and management capacity, and in the whole portfolio of business activities. it need making some decision for business in below How to allocated the resources The critical factors make each business unit success and how to improve it Coordination of activities and ability to transfer between business units 4.0 International levels International strategy can also serve as global business, is close to the current market to the global market. Through the international strategy it will help companies creating new sources of competition, opened up new opportunities in the existing market. This is the 3 basic reasons why nowadays company will going international In order to increase sales and profits, multinational companies can expand market outlets, to open up development opportunities. Overseas sales can absorb additional capacity, reduce unit costs. They can also spread the risk of a wide range of market economy In order to gain a competitive advantage, multinational companies can find low-cost production facilities shut down and raw materials or cheaper labor. They can expand their distribution channels and access new technologies through joint ventures. In order to ensure raw material resources, transnational corporations engaged in global exploration, processing, transportation and marketing, raw materials (http://www.marcbowles.com/courses/adv_dip/module11/chapter7/amc11_ch7_two.htm) 4.1 Type of international strategies As we know they got 4 types of international strategy which is global strategies, transnational strategy, international strategy and multi-domestic strategies different strategies also got pros and corns which will show in the chart below Type of international strategies Global strategies Transnational strategies Multi-domestic strategies International strategy Advantages -Local economies. -Scale economies -Core competencies exchangeable. -Experience and location economies. -Locally responsive. Confers almost total local responsiveness on the products / services -Core competencies are exported to gain cost advantages through lower labour and transportation costs. -Limited local responsiveness Disadvantages -Unresponsive to local demand -Difficult to implement. -The term transnational may be used differently from person to person. There is no universally agreed definition. -Limited transfer of core competencies. -Limited experience and location economies. -Tends to produce a form of local autonomy which makes the local unit unresponsive to corporate headquarters -Limited local responsiveness. -Limited flexibility because of limited experience and location economies. Example Electronic goods such as TV and VCR. Motor vehicles. Shell, Unilever, Caterpillar Older MNEs of European origin Computers Foods Pharmaceuticals (Adopted from Zaleski, J. E. 2004, A lesson to learn: How automakers survive globalisation, Bangkok Post , 18 May, p. 2.) (Adopted from Hill 2005, Chapter 12, pp. 427-433.) 4.2 Franchising Top of Form Bottom of Form A commercial organization, which has been in charge of a company in exchange for a successful product or service to continue to work with other businesses operating under the franchisors trade name, and under the guidance and the franchisee, usually a contract relations . (http://www.investorwords.com/2078/franchise.html) For example McDonald after they selling the franchising to the local company their will provided the training to the staff in the restaurant and teaching them how to organize the business. ( http://www.mcdonalds.com.my/abtus/franchise/faq.htm) 4.2 Licensing Licensing is a business arrangement, one of the companies to another companys license to manufacture its products for a specified payment. By licensing patents, trademarks, copyrights, design your business, and other intellectual property rights to others. For example about 90 percent of the $160 million a year in sales at Calvin Klein Inc. comes from licensing the designers name to makers of underwear, jeans and perfume. ( http://www.entrepreneur.com/encyclopedia/term/82376.html) http://www.netmba.com/strategy/pest/ http://www.quickmba.com/strategy/pest/