(1999) highlights for an organisation to be competitive they need to be
different. In today’s business environment, it is important for organisations
to make the correct decisions to increase their competitive advantage. The
three models highlighted in this essay should be considered by managers when
trying to make strategic decisions: Porter’s Diamond Model, the VRIO framework
and Ansoff’s matrix.
Porter developed his Diamond model which is a tool often used to analyse an
organisation’s competitive position within the global industry (Chikan, 2008).
There are four factors of national competitive advantage as follows: firm
strategy and rivalry, demand conditions, related and supporting industries and
factor input conditions (Porter, 1990).
London (2003) argue the model is the most favoured competitiveness theory used
by organisations. Other theorists such as Grant (1991) and more recently Lall
(2001) agree with this stating the model can be beneficial to managers when
analysing how they can translate their current strengths into international advantages.
This consideration of strengths will help to formulate strategic goals
according to Ahlstrom and Bruton (2012).
An example of
an organisation that this model is consistent with is Volkswagen as shown
through their position in Germany’s car manufacturing industry. According to
Tran (2016), Volkswagen meets the four factors in the model meaning the German car
industry has a regional advantage as shown by the demand conditions of the German
consumers. Their sophistication and specific needs drive up the quality required
in the products produced from Volkswagen and competitors such as Audi and
2000). Furthermore, Grant (1991) states the related and supporting industries
as shown through the natural resources in the iron and steel industry lent
themselves to development of the industry. Lastly, the focus from German
universities on producing skilled engineers benefits Volkswagen on top of investment
from the Government into research & development projects into innovative
technologies such as the hybrid car (Proff, 2000) which has had a major role in
the Germany car industry having competitive advantage over other markets. Volkswagen
were able to take these strengths and pursue their success further in other
countries, the push in the car industry in Germany enabled the company to
create innovative products in line with their corporate strategy to deliver
efficient, innovative and sustainable products globally (Volskwagen, 2016).
the model has been criticised for an excessively domestic focus and its generalisability
for the national competitiveness construct (Fainshmidt, Smith and Judge, 2016).
For businesses looking to increase their competitive advantage Davies and Ellis
(2000) dispute there are other ways to achieve competitiveness which may lead
to a more accurate approach. However, Fainshmidt et al (2016) argue these
claims have not been empirically tested and declare that many scholars have
used the Diamond Model to examine competitive advantage including Porter and
Ketels (2003) and Hoefter (2001) in line with Porter’s original approach. Griffiths
and Zammuto (2005) have dismissed this approach arguing that Porter focused on
10 countries when developing the model and therefore does not take into account
the role of multinational organisations in influencing the success of nations.
Nonetheless, the Diamond model is still a widely used model by successful
organisations such as Volskwagen that use the model to create informed
strategic decisions. However, the model should be used in isolation when
looking to gain sustainable competitive advantage and managers should consider
other factors such as MNE penetration and governance quality (Fainshmidt et al,
Another model that can be applied in business management to
gain competitive advantage is Barney’s (1995) VRIO framework which Barney
(2014) states is an improvement of the VRIN model. The VRIO framework stands
for a set of four questions and asks whether a firm’s resources and
capabilities are: valuable, rare, costly to imitate and organised to capture
value (Kauerhof, 2017). Wernerfelt (1984) argued the VRIO framework is the
basis for internal analysis and is the foundation of the resource-based view of
an organisation. Rothaermel (2015) later said it can benefit managers when making
decisions through evaluation of current resources to generate competitive
As shown in appendix 1, when applied to Starbucks and their
global presence the organisation meets all four criteria’s. For example, it is
valuable in the coffee industry to be globally available to consumers to
increase revenue and market share. Whilst many coffee chains are global,
Starbucks is the most widely recognised and therefore in the short term it
would be difficult for any competitors to Imitate this. Lastly, the
organisation has exploited these advantages and their latest strategy
represents 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 creates and drives value in strategic decisions.
another capability of the firm is their specialty coffees, however the firm
only has competitive parity on this resource because it is not limited to Starbucks
and consequently is not rare and therefore can be imitated. However Starbucks
are still renowned for their specialty drinks. Knott (2015) disputes this as a
limitation of the model stating it fails to evaluate a resource disadvantage and
the risk to the organisation if they choose to pursue it. Therefore for
Starbucks to evaluate the risk of pursuing their specialty drinks further,
Knott (2015) acknowledges they will have to consider other factors.
Guo (2007) states the VRIO framework is characterised by
simplicity and clarity and is the starting point in understanding how to move
an organisation forward. Sanchez (2008) said for a deeper understanding of
competitive advantage, the model should be accompanied with other analytical
techniques. For example, Caldart (2011) argues the PESTEL framework complements
the model and gives greater understanding in monitoring the macro-environment.
This helps to also overcome further criticisms of the VRIO framework which
state it does not take into consideration the ever-changing business economy.
A model that has been said to be useful for analysing
strategic growth options is Ansoff’s Matrix who proposed four potential
strategies for selection: market penetration, market development, product development
and diversification (Ansoff, 1980). Graham (2007) states Ansoff’s matrix helps
to close the gap between the aims of an organisation and the required results,
as the model assists in giving focus to managers through the identification of
new strategies for future products or marketing activities to stake out a
An organisation that has demonstrated the use of this model
is Coca-Cola as represented in Appendix 2. For example, Coca-Cola launched Diet
Coke originally in 1982 (Staff, 2017). However, the company have used the
approach of Market Penetration to adapt aspects of Diet Coke to meet changing
customer needs and as such has been a highly successful product for the
company. Vrontis and Sharp (2003) also say Coca-Cola used market development
through sales of their share-size 1.25 litre bottle, after growing demand from
households of 1-2 people, helping to target new areas of their existing market.
Coca-Cola also extended their product range through creation of Fanta after
consumers wanted a new flavour drink (Coca-Cola company, 2017). Lastly, the
company took a huge risk after the launch of PowerAde which was a completely
different product and reached out to different consumers.
Siegemund (2008) states the model illustrates the risk
associated with each strategy with the theory being each time a business moves
into a new quadrant of the model, the risk increases and therefore for businesses
looking to increase their competitive advantage, managers can carefully
consider the impact of any decision made. However, Ward (2005) argues the model
does not help to evaluate which risks are worth pursuing and therefore they
state the model is a great as starting point for identifying growth options. McKinsey
(2008) came up with the nine-box matrix which offers a more sophisticated
approach, see appendix 3, and is favoured over the Ansoff matrix by some
marketers as it priorities strategies amongst business units in competitive
scenarios (Morrison and Wensley, 1991). More recent theorists agree with this
stating the matrix helps to better address decision-making issues linked to
differentiation of products (Amatulli, Caputo and Guido, 2011).
Some theorists have said that the Ansoff matrix can result
in the overuse of analysis with Ansoff (2008) recognising that too often the
model resulted in “paralysis by analysis” and therefore he encourages
flexibility in the planning approach to make sure an informed decision is made.
Alam (2006) has said despite the model being simplistic it still has a role in
strategic decisions and is an effective framework for showing the opportunity
cost to stakeholders.
For businesses looking to increase and sustain their
competitive advantage, it is essential they take into consideration relevant
strategic management frameworks including the three models discussed above.
Analysis into the business environment, including market trends and
competition, helps to give understanding to managers to enable them to
implement informed strategic decisions on a corporate level.