Strategy - Environment or Resource based?

Empirical evidence points to the fact that the industry environment does not explain inter-firm profitability differences. Robert Grant's view is that models like Porter's '5 forces' should not therefore be used alone as an analysis tool for strategic planning. Grant prefers his resource based view (RBV) which "offers a superior explanation" (OU 2007) of why some firms are more successful than others. This is a complex area and I am sure Porter and Grant would agree on the need to analyse both the environment and resources as part of a strategy setting process. One powerful point made by Grant is that the forces in the industry environment are themselves often resource based. For example, 'barriers to entry' is an often quoted force controlling market entry. Industry barriers are often the size, power, distribution base, IP, etc. of the industry players and these are the resources of particular firms. The resources are therefore the root causes of other effects that control industries, their attractiveness and the profitability of key players.
Strategies should therefore make the most effective use of a firm's resources. Hamel & Prahalad make a good point in arguing that, further, strategy should stretch a firm's resources in order to ensure that these continue to develop and sustain a competitive advantage.

Second Module of OUBS MBA

Having finished B713 (fundamentals of snr mgt) I am now starting B820 strategy - a 6 month module with 3 TMAs (assessments) and a final exam to complete. Looks interesting so far and I am beginning to understand the course structure and therefore also how to approach questions of strategic analysis and formualtion. The basic structure is Strategic Analysis (Macro to Firm level) then Strategic Options (based on competitive diff) and finally Strategy Implementation (I assume based on project and change management). For each part and sub-parts there are many applicable models. The choice and use of the right models is the core of the course. For analysis it starts with the Macro environment (so STEP or STEP(LE)): for industry, Porters's 5 Forces and Strategic Groups/Spaces; and for firm, Resource Based View (Grant), Porter's Generic strategies, Game Theory, Value-Net model etc.
After this course there is one more compulsory module (Making a difference - 12mths) and 2 * 6 month options that can be taken in // or series. I am tending towards Marketing and Finance options in // to the compulsory module but will make this decision later.
I continue to recommend the OUBS MBA to colleagues based on content and opportunity to apply ideas instantly to your daily managerial role.

Marks & Spencer (UK retailer)

I was interested to see that M&S has delivered a 25.6pc increase in pre-tax profits and a 10.1% rise in sales. This seems to be a direct result of Stuart Rose's leadership and strategic course. M&S seems to have clarified their strategy as a quality retailer. All their publicity is providing the right consistent messages, whether for food or fashion. The previous team, led by Luc Vandevelde, tried to 'save' the company with aggressive cost cutting and downsizing. Porter would say that this is not a strategy but a series of operational objectives. Now that the company is pursuing a strategy again everything is falling into place. So the lesson is to make a profit, first decide which market(s) you want to be in and then position yourself in a unique space.

Is Porter right?

Porter (Harvard Business Review, 1996) described strategy as 'the creation of a unique and valuable position'. He dismisses the concept of increasing market turbulence as being a driver for 'flexibility' and calls 'hypercompetion' a 'self-inflicted wound'. The idea is that no matter what the environment, organisations need a strategy to set their course, define their constraints and create a unique position. The Southwest airline model is frequently used as an example. For Europeans Ryanair and Easyjet are better still. Who would have thought some 10 years ago that Europe's 3rd biggest airline (passenger numbers) would be an Irish start-up and that in 3 years time Ryanair may be the biggest European airline surpassing Air France-KLM and Lufthansa! Ryanair owe their success to the Southwest example but also to a relentless focus on their low cost strategy and its achievement as intended. Meanwhile the established airlines with no particular strategy, except to meet operational targets, struggle to survive. The lesson is to separate strategy formulation from managing operations. Targets set out in terms such as revenue, cost, margin, passenger miles or similar are not strategy (they may become constraints). Strategy is what you are and what you want to be. Successful strategy is what sets you apart. I agree with Porter.

A warning to keep in mind...

Brien's First Law:

At some time in the life cycle of virtually every organization, its ability to succeed in spite of itself runs out.

This explains why managers need to learn. There are models of
strategy that say that the differences in performance achieved
by organizations with similar resources are due to the quality
of management. Managers working in Pam Am, Sony, Kodak and Polaroid
probably thought that their companies' were great - until the fall came.

Incidentally I have seen this quoted as Brien's and Brier's first law.
I am not sure who he/she is, which name is correct or if there is
a second law...