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Porter's Five Forces, Value Chain, Balanced Score Car

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Critically evaluation of Porter's five forces, Value Chain Analysis, Balanced Scored Card

Given the demands of today's competitive and dynamic environment, it is quite challenging to understand strategic issues facing organizations and develop the capability for long term organizational success. This report aims to present a critically analysis of three frameworks across organizations: Porter's Five Forces, Value Chain and Balanced Scorecard. Such critical evaluation includes identifying the benefits and limitations of three frameworks and considering some implementation issues within organizations.

As powerful strategic management tools, Porter's Five Forces, Value Chain and Balanced Scorecard frameworks are linked and interacted each other in a wide circle of business in context. Porter's Five Forces and Value Chain both help strategic managers to make decision on the basis of organizational external environment and internal analysis. The two frameworks are especially valuable for managers to develop and implement long-term strategy for organizations so as to build and maintain competitive advantages in the long run. And Balanced Scorecard can ensure and monitor the executions of strategy made by managers in a set of well-structured measures.

However, beyond the linkage between them, these three respective frameworks do have its own particular emphasis which is applied in different directions among organizations. Porter's Five Forces mainly focuses on the industry structure analysis in the organizations external environment. It reveals the source of competition in an industry and external influence including the threats and opportunities of the industry that organization has to face to obtain competitive advantage. Value Chain highlights the explorations of internal analysis of a chain of business activities. It explores the role and contribution of organization's resources corresponding to primary and support activities in a cost-effective way to gain cost advantage. As for the Balanced Scorecard, it emphasizes the evaluation of organizational overall performance by integrating financial measures with other key performance indicators. And measuring overall performance in organization's balanced scorecard is directly linked to its strategy to make profits in the long run.

All in all, it is important to be aware of their benefits and weakness as well as the potential problems of three approaches when applying them real business operations, and it largely relies on successful implementation by senior managers in organizations.

Introduction In today's dynamic and competitive business environment, survival, growth and profitability are the essence goals of all industries. Nowadays, Porter's Five Forces, Value Chain and Balanced Scorecard frameworks are currently being adopted as the powerful management tools of choice by many organizations. The essence of these three frameworks is that they can help senior managers to make right decision and build and sustain competitive advantages in the organization level. This report presents the overview approach of these three frameworks across organizations. And critically evaluation of three frameworks mainly focused on identifying the benefits and limitations of three frameworks and exploring some perceived issues or problems regarding implementation. Finally the linkage and dissimilarities between three frameworks are concluded in the last section of this report.

Porters five forces, as a powerful analysis tool, enables managers in corporations to analyze the current situation of their industry in a structured, easy-to-understand way. From a strategic management perspective it is useful for managers in any organization in the same industry or sectors to understand the five competitive forces acting on and between organizations in the same industry and or sector since this will determine the attractiveness of that industry and the way in which individual organizations might choose to compete( Johnso and Scholes, P.116).

2.1Claimed benefits First of all, Porter's five forces framework provides one simple approach to analyze industry structure. The five forces analysis helps in identifying and determining the attractiveness of an industry, the source of competition. And because Porter's five forces reveal insights on profitability, it can inform important decision decisions about whether to leave or enter industries or sectors. Moreover, the model can be used to compare the impact of competitive forces on the own organization with their impact on competitors. Competitors may have different options to react to changes in competitive forces from their different resources and competences (Pearce and Robinson, P.92). This may influence the structure of the whole industry.

The five forces framework can be used to gain insight into the forces at the work in the business environment of a strategic business unit which need particular attention in the development of strategy. Porter's five forces framework is of great importance in developing strategic options to improve relative performance in the industry or influence relative position in industry. (Johnson and Scholes,P.119).Because strategic choices need to take account of the external environment especially pay attention on Porter's Five Forces in which the organization operates: competitive advantage may be eroded as substitute products due to technology changes or as new competitors enter market.( Porter, 2001) For example: a leading manufacturer of vacuum tube with strong position in the electronic product industry unthreatened by potential entrants will gain low returns if it competes with silicon chip or new semiconductor. In this circumstance, how to compete with the substitute product becomes the first strategic priority for the leading manufacturer of vacuum tube to maintain competitive advantage.

And another value of five forces is as a thought provoking theory to help strategic managers arrive at a shared understanding of the threats and opportunities facing the firm to gain competitive advantage (Porter, 2001).Within Porter's framework, a strong competitive force can be viewed as a threat since it depresses profits. And a weak competitive force can be regarded as an opportunity for organizations to earn great profits. The strength of the five forces may change through time because of factors beyond a company's direct control. In such circumstances, it is crucial managers to recognize opportunities and threats when they arise and formulate appropriate strategy to alter the strength of one or more of the five forces to its advantage (Hill and Jones, 1995).

The Porter Five Forces Analysis offers a good



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