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Porter versus Ansoff

Introduction

The essence of business development and commercialisation can be said to be market and growth strategies. Porterʼs Generic Framework theories and Igor Ansoffʼs Product / Market matrix are two strategic frameworks that can be used for this purpose. A well thought out market strategy can minimise risk and increase profits, which is of key importance especially for start up companies with little funding and resources. In order to grow, companies need to adopt other strategic frameworks, which can if understood and used in the right way, help the company decide on their next step in the market place.

In this paper I will first give a brief introduction to Porterʼs Generic Framework theories and Ansoffʼs Product / Market matrix with examples where the different theoretical frameworks could be used. Second I will discuss the differences and similarities and last, I will discuss advantages and disadvantages for using these two and other theoretical frameworks in business development and commercialisation projects.

Porter’s generic framework theories

According to Michael Porterʼs book “Competitive strategy: Techniques for analyzing industries and competitors” from 1980, one can use Porterʼs generic framework theories to find the optimum position for a company within an industry. Often, a determinant of a companyʼs profitability can be said to be the attractiveness of an industry in which it operates. This mean that companies that manage to place them self correctly can generate more profits than companies who have not thought about their optimal position. The framework is called generic because it is not industry dependent.A company should reflect on its strengths and weaknesses in order to find its competitive advantage, and this unique strength should be leveraged. Michael Porter argued that a companyʼs strength ultimately could be placed into two categories: cost advantage or differentiation. Application of those strengths in either a broad (industry wide) or narrow (market segment) scope results in three generic strategies according to Porter: Cost leadership, differentiation and focus. These three strategies are supposed to be applied on a business unit level, which I will discuss later under “A Combination of Generic Strategies”.

Figure 1: Porterʼs Generic Strategies (QuickMBA 2007b)

Cost Leadership Strategy

Cost leadership means that the company wanting to adopt this strategy is trying to be the producer with the lowest production cost in an industry. The results of such a strategy is that the company who try to be the cost leader sells products at an industry average to earn higher profits than competitors or goes below the industry average to steal market shares from rivals. If a company has sufficient strength to go below competitor products in price, this can be of advantage in order to grab market shares from the opposed, weaker company. This strategy usually targets a broad market, which in my view makes sense, as one need to sell higher volumes in order to maintain a healthy level of profits.One of the helping factors playing into a successful cost leadership strategy is that the market one is selling in to should, according to Murray (1988), have a relatively high level of price sensitivity. This according to Murray is because greater price sensitivity increases the advantage a cost leader has over other firms.

There are many examples of how a company can acquire cost advantages in the literature (Burns 2008; Akan et al. 2006; Porter 1980; QuickMBA 2003-2007b). This can for example be by improving production efficiency, buying lower cost materials in volume, outsourcing, vertical integrations or cutting costs in other elements of the business. The main point to take away from these examples are that cost leadership is often dependent on access to capital, as the company needs to make investments in production, changes in procurement or temporary losses in order to gain leadership. A company wanting to adopt this strategy also needs to consider its access to distribution channels. One can think that a plausible scenario could be that a company would go through all the appropriate steps to gain leadership, but would have no channels to push a higher volume through, hence failing to succeed.

An example of a successful cost leadership strategy within a company can be found in Akan et al. (2006), with the example of the U.S. retail company Home Depot. They have used retail cross docking to minimize their distribution costs. The concept of retail cross docking means that the company avoids putting products into a warehouse or intermediate storage before sending it to their retail stores or other outlets. Home Depot has contracted the management of its distribution centres to third-party logistics providers. One of these distribution centres serve 135 retail stores on average, and each store pull one shipment from the distribution centre every day instead of having several shipments throughout the day. The goods that need to be replenished are calculated from each storeʼs database, which are sent to the distribution centres – so that the process is automated further reducing the cost of managing the process.

Differentiation Strategy

A differentiation strategy is when the company develops a product or service that offers unique attributes that are valued by customers and that customers perceive to be better than or different from the product of the competition (QuickMBA 2003-2007b). The uniqueness of the product allows for the company to charge a higher price. The higher price also reflects the fact that with a differentiation strategy the customer base will usually be smaller and the production costs might be higher. Therefore, some of the costs are passed on to the customers.

In order to succeed with a differentiation strategy there is a need for a unique internal strength within the company. This can be a strong sales force that can communicate the strengths of the product, access to leading research and development teams and good corporate reputation.

In a research study carried out by Akan et al. (2006), it was found that companies that were successful in their differentiation strategy had three tactics which were significantly related to organizational performance. These included innovation in marketing technology and methods, fostering innovation and creativity and focus on building high market shares.

Marketing technologies is a field that has given new opportunities for companies wanting to connect more closely with their customers. With the emergence of technology like the Internet, companies are able to track and interact with their customers and to nurture their relationships in an effective way. According to Akan et al. (2006), research agree it is eight to ten times more expensive to find new customers than it is to market to existing ones. This means that effective marketing and relationship marketing becomes increasingly important for a company that wants to use a differentiation strategy. From a personal point of view, the company Apple is an example of an organization that has successfully managed to use a differentiation strategy. From being an outsider compared to other computer brands in the 90ʼs they managed to re-invent themselves with a more attractive design and with computers that are perceived to be more stable than some of the competitor products. They constantly try to innovate as can be seen with the iPod, iPhone and iPad which are all technological iterations based on the same technology. They have also managed to tailor their marketing with new and innovative methods such as the ʻgeniusʼ function in iTunes, which gives the user suggestions from their own store based on the customerʼs preferences.

My conclusion is that in order to succeed with a differentiation strategy a company needs to be able to be new and creative both in terms of understanding customer needs and connecting with their customer in order to differentiate themselves from the competition and to create better customer value.

Focus Strategy

A focus strategy is concentrated on a narrow market segment where the company tries to achieve either cost advantage or differentiation. According to Porter, a focus strategy means that the needs of the group can be better serviced. This often results in a higher degree of customer loyalty, which gives the companies successfully using a focus strategy an advantage in that it discourages direct competition.

Akan et al. (2006) identified four tactics that appear to be critical for organizations adopting a focus/low cost strategy. These are providing outstanding customer service, improving operational efficiency, controlling the quality of products or services and extensive training of front-line personnel. From this I found that these changes are actions or focuses that put emphasis on changes internally in the organization to improve the offering to the customer. It seems to me to be changes that are geared towards making a cohesive and holistic offering of a particular kind that serves the customer need. For example, if a focus/low cost company in the hotel industry wants to differentiate themselves they have little to ʻplay aroundʼ with in terms of the product value, but can train their staff to be exceptionally customer service orientated throughout the organization, so that customers develop a relationship with the particular hotel.

From the same paper as mentioned above (Akan et al. 2006), two significant tactics for success in a focus/differentiation strategy is mentioned. These are producing specialty products and services and producing products or services for high price market segments. The findings from this is that in order to succeed with a focus/differentiation strategy the company needs to know their customers particularly well as selling in this segment often mean that the product range is narrow but of high quality or tailored to a specific taste or need. This also has resonance in other literature. According to QuickMBA (2003-2007), firms that succeed in a focus strategy are able to tailor a broad range of product development strengths to a relatively narrow market segment that they know very well. The luxury car market is an example of a market segment that usually has a focus/differentiation strategy. In Sweden we have Koenigsegg which caters for the rich, speed hungry customer and other famous brands within Europe include Ferarri, Bugatti, Rolls Royce and so on. These car brands are only achievable to buy for the wealthy and cater to a specific taste or need.

A narrow market focus means that the companies using this strategy will sell lower volumes and hence have less bargaining power with their suppliers (see appendix 1 for Porterʼs five forces). Companies with a differentiation focus strategy might however pass on some of the production costs to their customers.

The main risks associated with focus strategies include the danger of imitations; for example a company with higher bargaining power taking on a company with an imitation product and a cost leadership strategy. It can also include changes in the target segments such as change in

taste, fashion or the like. Competition-wise other companies operating in this segment might be able to narrow down their focus even more to serve their target groups better and achieve an advantage.

A Combination of Generic Strategies

A company that tries to mix these generic strategies will most likely fail according to Porter. This is because some of the strategies are inherently incompatible. For example, if a company wants to be differentiated as having very unique products and charge a high price accordingly, they cannot at the same time try to become a cost leader as this might affect the quality of the product and also the image of the company.

There is however an alternative to companies trying to mix their focus Porter argues, and that is to create separate business units for each strategy. This will at least decrease some of the risks of becoming “stuck in the middle” of these strategies. I believe that this is something that is often found in the restaurateur trade as transferring internal skills of staff of one specific successful restaurant to a new concept often proves to be difficult. I am then specifically thinking about niche restaurants rather than more transferrable concepts such as coffeehouses or takeaway restaurants where the output is very much reproducible.

One can argue that in some cases a single generic strategy is not always best. Customers today often seek multi-dimensional satisfactions such as a combination of quality, style, convenience and price. In the clothes retail business for example, H&M is seen as having a mix of all these mentioned multi-dimensional satisfactions. In the U.K. the clothes retailer Primark successfully took market shares from H&M and other convenience retail stores in the industry - as they adopted a cost leadership strategy where they had lower quality products but satisfy style, convenience and price dimensions. Porterʼs generic strategies can be matched to Porterʼs five forces (found in appendix 1), and each have attributes that can be used to defend against these five forces (appendix 2).

Ansoff’s product / market matrix

H. Igor Ansoff (December 12, 1918 – July 14, 2002) was a Russian American, applied mathematician and business manager. He is known as the father of strategic management (Wikipedia 2010b).The Ansoff Product-Market Growth Matrix by Igor Ansoff portrays alternative corporate growth strategies. It was first published with his article "Strategies for Diversification" in Harvard Business Review (1957). It focuses on the companyʼs present and potential products and markets. The matrix is meant as help for companies to understand what actions need to be carried out given current performance. Ansoff's matrix is shown below:

Figure 2: Ansoffʼs product / market matrix (QuickMBA 2007a)

As an example of a suitable scenario for implementation on Ansoffʼs product/market matrix could be a company that is in need of a strategic change in order to maintain growth. This could be illustrated with figure 3 below (Proctor 1997) where the company has a vision to be high on the growth curve but will have declining profits if a strategic change is not implemented. According to Macmillan and Tampoe (2000), “choice and strategic choice refer to the process of selecting one option for implementation.” In relation to Ansoffʼs product/market matrix this means that a company need at some point in their growth phase to make a decision as to what products or services they should offer in which markets.

Figure 3: Gap between profits (Proctor 1997)

For example, a car manufacturer could recognize that the technology and market demand for more environmentally friendly cars which both consume less fuel and emit less CO2 are likely to have an impact on future product requirements. The manufacturer has to examine its current position if they see a strong current or future trend towards consumers wanting this type of car. If they do not start producing cars that meet these requirements they might start loosing sales – the

company then has to predict when the changes are likely to occur and what impacts these will have on its sales and profitability.

Looking at where the companyʼs current products are in the lifecycle can be said to be the ʻnowʼ point in figure 3 above. If there is a gap between what the company want to achieve in terms of sales/profits and what it is likely to achieve based on what the company is currently doing – strategic choices has to be made. The actions made at this point should be evaluated in terms of return on investment generated by the new action. The Ansoff product/market matrix can help a company in making this choice but ultimately it is just a framework that can be used for evaluating options on how to reduce this potential gap.

Market Penetration

According to the original Ansoff text (1957),

“Market penetration is an effort to increase company sales without departing from an original product-market strategy. The company seeks to improve business performance either by increasing the volume of sales to its present customers or by finding new customers for present products.”

The market penetration strategy is said to be the least risky (QuickMBA 2003-2007a) since it uses and builds upon the companyʼs existing resources and capabilities. If the market is growing, a company maintaining market share can experience growth. If for example, competitors reach capacity limits, this should be an opportunity for other companies to take market shares. It is important to point out that market penetration has its limits, because of market saturation. If the market saturates, companies must use another strategy in order to continue their growth.

Reflecting on this, companies often penetrate markets in one of three ways: by gaining competitors customers, improving the product quality or level of service, attracting non-users of the products or convincing current customers to use more of the company’s product, with the use of marketing communications tools like advertising etc. Proctor (1997) argues that if the market is expanding expenditure should be geared towards persuading more first-time buyers to buy the product, whilst if the market is saturated extra sales may only be generated as a result of an increased market share. In my view this argument makes sense, as the focus would be to retain customers if the market is crowded – which in practice means making your customers spend more or use your product / services more. If the market is growing, the efforts can be spent on persuading more first time buyers for the company’s products or services.

For a company that already has built up a customer base, retaining existing customers is cheaper than attracting new ones (Blattberg and Deighton 1996), and hence “growing a business can therefore be framed as a matter of getting customers and keeping them so as to grow the value of the customer base – to its fullest potential”. According to Blattberg and Deighton (1996), it was said that returning customers at McDonald’s accounted for 77% of their sales in 1995. McDonald’s strategy was to target these returning customers to come more often rather than focusing on getting new customers. Such a strategy can be achieved through relationship marketing activities to retain customers. In figure 4 below, this suggested model for viewing the

optimal retention spending in relation to customer equity can be used to illustrate the correlation between cost and value of the customer.

Figure 4: Customer equity and retention spending (Blattberg and Deighton 1996)

Market Development

According to the original Ansoff text (1957),

“Market development is a strategy in which the company attempts to adapt its present product line (generally with some modification in the product characteristics) to new missions. An airplane company which adapts and sells its passenger transport for the mission of cargo transportation is an example of this strategy.”

A market development strategy means that the company moves beyond its immediate customer base towards attracting new customers for its existing products. A good example of this is the baking soda from the US company Arm & Hammer, which expanded their product range to include both household and personal care items. Some of the new product developments included applications for cleaning of the house, keeping the pool clean, keeping food in the fridge fresh, personal care (oral hygiene) and many more (Ogilvy 2008). The products were launched through an extensive customer awareness campaign by the marketing agency Ogilvy in 2006. As a result, the campaign increased the sales of the products with 6% in one year. This is in my opinion, a prime example of new uses for the companyʼs products and services. Other

aspect of this strategy often involves the sale of existing products in new international markets, exploration of new segments of a market, or moving into new geographical areas.

A more critical view on the market development strategy has been taken by Proctor (1997), who says that the discovery and entry to new markets does not guarantee long- or short-term profitability. He argues that economies of scale obtained in producing for the market or in supplying the market will contribute to profitability. This in effect means that when production is scaled up, unit costs decrease and this is where some of the key to a profitable and effective market development strategy lies. This of course depends on in there are buying customers out there to meet the increased output.

One aspect to take into account when considering a market development strategy are barriers to entry, which has relation to one of Porterʼs five forces (Porter 1980; see appendix 1). These barriers to entry to the market may exist which might have implications for the short and long- term contribution to overall profitability. As described in the Arm & Hammer case (Ogilvy 2008), there were many competitors to match the new developments of their new product range. Whereas other brands like Dove competes in many categories but all within personal care, Arm & Hammer competes in numerous categories within household and personal care. In my view, the challenge for Arm & Hammer will be to retain those customers they gained with their successful campaign as the market can be said to be crowded in both the household and personal care categories. Size and strength of the competition in the market may also be a barrier to entry as it might be difficult to achieve similar profit margins or return on investment to firms already serving the market. In the case of Arm & Hammer I think that brand loyalty could be essential to their success as customers already using the products with satisfaction in one area might just as well buy products for other applications if the brand is trusted. However, if the brand was a new entrant to the market this point could have had negative consequences, as the competition could reduce price levels for a period in order to push the new entrant out of the market.

Product Development

According to the original Ansoff text (1957),

“A product development strategy, on the other hand, retains the present mission and develops products that have new and different characteristics such as will improve the performance of the mission.”

It is argued that this strategy will be most effective if the companyʼs strengths are related to its specific customers rather than to the specific product itself (QuickMBA 2003-2007a). The reasons for wanting to implement a product development strategy can be to utilise excess production capacity, counter competitive entry, maintain the companyʼs reputation as a product innovator, exploit new technology, and to protect overall market share. One appropriate step in developing a new product to its existing customers could be to identify a customer need either by looking at competition or discovering a need-opportunity. This strategy is said to carry more risk than attempting to increase market share for example. It is however argued by for example Lynch and O'Toole (2003) that the cost of new product development can be reduced by involving the customers in the new product development. By actively involving the customers in

the development process it is argued that the chance of success is increased, as the user requirements are pin pointed to match their exact needs and wants.

Others, such as Proctor (1997), also say that the introduction of new products can have a positive impact on sales growth, but indicate a danger during the initial period of time following the launch of new products. This is because there might have been substantial research, development and launching costs associated with the new product(s), which have to be recouped within a specified period of time. In my view, a successful product development strategy has to be weighed with what resources the company has that they can utilise towards the development of the product – and what can they gain over both a short and long term return on investment. Short term a new product development will effect cash flow because of the investment involved, and especially if one wants to involve customers in the development process. Looking at a longer term rate of return on investment I think that in order to grow, and then maybe particularly in segments where there are a high rate of development on products such as computers and mobile phones to take one example, there is a real need for innovation in order to stay in business and to always match the customer requirements which are ever more demanding. Successfully implemented, a product development strategy can in my opinion lead to customer retention increased brand loyalty, especially if customers are involved in the process.

One example from Norway is the dairy producer Tine that sells their products in most convenience shops. At the Universities they have a campaign where the students can send in suggestions for a seasonal variation on the flavour of their milk shake brand ʻLitagoʼ, which is combined with an online marketing strategy. According to the marketing agency jimmyroyal.no (2009) the campaign was successful, engaging 130.000 users to participate in the campaign. The seasonal flavour is now in sale at Universities and high schools in addition to their traditional chocolate and strawberry flavouring.

Diversification

According to the original Ansoff text (1957),

“Diversification is the final alternative. It calls for a simultaneous departure from the present product line and the present market structure.”

The diversification strategy is described in all the relevant literature reviewed for this paper as being risky. Moving simultaneously into new products and new markets is a risky strategy, but with careful selection of the right kind of business considerable improvements in profitability can be achieved (Proctor 1997).

It is important to note that diversification may be into related and unrelated areas. Related diversification may be in the form of backward, forward, and horizontal integration. These are described in greater detail in appendix 3.

Since the diversification strategy is deemed as risky, there are many failures rather than success stories. However, three examples from Wikipedia (2010a) are quite descriptive of well-established companies that has had success with diversification:

Virgin Media moved from music producing to travels and mobile phones Walt Disney moved from producing animated movies to theme parks and vacation

properties

Canon diversified from a camera-making company into producing an entirely new range of office equipment.

An immediate observation is that all these three companies mentioned all have a lot of capital and resources to carry out a successful diversification strategy. A conclusion from this might be that a diversification strategy is more suitable for well-established, capital strong companies. However, according to Proctor (1997), there may be some synergy to be gained from moving into related markets. The synergy may be in marketing or even in production. This should give an indication that a diversification strategy might be successful even for smaller businesses with less capital than their competitors, and indeed attractive if the high risk is compensated by the chance of a high rate of return. According to QuickMBA (2003- 2007a), other advantages of diversification include the potential to gain a foothold in an attractive industry and the reduction of overall business portfolio risk.

As a final point, diversification into related products may be achieved through internal development but more often it is easier and advisable to do so through a process of acquisition and merger or simply by forming a strategic alliance with another producer.

Short summary of Ansoff’s product/market strategies

According to Ansoff (1957), each of the above strategies describes a distinct path which a business can take toward future growth. Ansoff also mentions that in most actual situations a business would follow several of these paths at the same time. As a final argument he claims that simultaneous pursuit of market penetration, market development, and product development is usually a sign of a progressive, well-run business and may be essential to survival in the face of economic competition. It is the diversification strategy stands apart from the other three. While the first three strategies are usually followed with the same technical, financial, and merchandising resources that are used for the original product line, diversification generally requires new skills, new techniques, and new facilities. As a result, it almost always leads to physical and organizational changes in the structure of the business which represent a distinct break with past business experience.

Differences and similarities of Porter and Ansoff’s theoretical frameworks

One could argue that all business strategies have similarities to them, as they all have one objective - that is to place a business in optimum position for generating profits and growth. From a broader perspective Porterʼs generic strategies seems to me to be more suitable to use in the early stages of a company and can be used as a tool to understand, and place the company in the right industry. Ansoffʼs product/market matrix focuses on the growth stages of a company and the next steps that need to be taken in order not to loose out in the growth phase. In Ansoffʼs matrix, one step can be taken to move out of the current market with the diversification strategy. It is interesting then to see that a full circle might be made between the two strategies. One scenario one could think of is that a company using the diversification strategy moves into a

completely new market with a new product – then they could make use of Porterʼs framework to again analyze where they should position this new product within the industry. According to Nozeman (2009) Porterʼs generic strategies are from a “from what basis” and Ansoffʼs strategies can be seen as “from what direction”. Taking this view it can be natural to place Porterʼs generic strategies in front of Ansoffʼs when looking at the strategic planning process from a directional perspective.¨

However, when specifically looking at the individual choices of the two frameworks discussed in this paper, Porterʼs cost leadership versus Ansoffʼs market penetration strategy has some similarities to them. They both have the aim to increase market share but with a slightly different approach. Whilst cost leadership usually entails pushing larger volumes and reducing prices, market penetration focuses on selling to current customers or finding new customers for the same products. Both strategies are the least risky in both frameworks as the change is usually in marketing, by cutting internal costs or change in production methods.

Similarities can also be found between Porterʼs differentiation strategy where “the company develops a product or service that offers unique attributes...” and Ansoffʼs product development strategy where the company “retains the present products that have new and different characteristics such as will improve the performance of the mission.” As we can see, both entail product development and both aims to be a unique offering to the customer where the company can charge a higher price. The difference between the two is that it is not explicitly mentioned if products within the differentiation strategy are new or can be new features such as in Ansoffʼs strategy. If the focus is gaining higher market shares, there are similarities between Porterʼs differentiation strategy and Ansoffʼs market penetration strategy. Both argues that using marketing technologies is one way of offering a unique service and that customer retention is a big part of gaining market shares.One last conclusion from looking at the two frameworks is that it seems to me that Porter takes a more external view on the company within the industry whilst Ansoff is both external and internal at the same time. Ansoff saw the company and product in relation to the market and seems to me to be a more flexible strategy than Porter who looks at the market and how the company is best placed within this space. In many ways Porterʼs generic strategy seems to me then to be more rigid as he says cannot be mixed, whilst as I touched upon Ansoffʼs strategy seems to be more flexible as he says it a healthy sign if a company think about these strategies at the same time.

Advantages and disadvantages of using theoretical frameworks for strategy

To discuss the advantages and disadvantages of using Ansoffʼs and Porterʼs theoretical frameworks it is natural to go back to mentioning what the objective of a strategy is. In the view of Proctor (1997), “the corporate strategy of a business reflects its objectives and goals, usually set within a time framework, and specifies the main policies and plans for attaining those goals.” As we can see from the above statement there are many ways of failing when implementing a strategy. Broken apart, the statement indicates that there should be a plan with a clear objective and goals, which is set within a given timeframe. Therefore it is in my view easy to see that within an organization there needs to be consensus that the plan will also be implemented after it has been written down and agreed upon. It is then natural when discussing using theoretical

frameworks to take a look at how a company can either benefit or come out with a worse result as a consequence of strategic choice.

In my view, all businesses have a strategy, whether it is written down or not, or clearly defined. At the end of the day strategy has to do with decision-making, and on how to get from A to B without taking too much risk. A strategy needs to be fluid (Marren 2010), as the competition will most likely adapt to the most successful company in your industry, so will the strategy need to change in order to meet this adaptation. One of the keys to why there is a need for strategy is that every industry has an element of competition. Burns (2008) argues that research indicates that low growth firms have the least understanding of their competitors. In my view, this means that companies need to find a competitive advantage, and strategic tools can help to gain focus in the process.

Implementation of strategies is the point that seems to be the most critical aspect of any strategic planning. According to Akan et al. (2006), one of the problems with implementing Porterʼs generic strategies is that managers does not know which tactics that are associated with the different strategic directions. It is argued that managers lack insight on which specific tactics to implement at the operational level of their organization when following a chosen generic strategy. Mangers have essentially been left to interpret Porterʼs theory and then determine implementation on their own. In my opinion, this might be a problem with other strategies as well as they have to some extent been fashionable ʻbuzzʼ words rather than strategies that companies successfully think about and actively implement. In the article “Nailing strategic jello to the wall” from Marren (2010), this is a point extensively discussed. In Holloway (2009) the challenges of implementing strategies is also discussed with the point made that “regardless of how you document your strategy, people will need to interpret its narrative. After all the meetings, presentations, and keynotes, your team will choose their tools and start to work.” In the view of Marren (2010), Ansoff saw strategy as being at the corporate level, above individual businesses. What I take on board from that view is that Marren (2010) tries to depict that a generic strategy cannot be seen as individual-specific, as lies within the term ʻgenericʼ. Marren (2010) takes this view one step further and discusses the need for a cohesive implementation of strategies: “If we see the activities of a business as a hierarchy, with the CEO at the top and the mailroom at the bottom, where do we draw the line as to what is ʻʻstrategicʼʼ and what is not? ....” These two points above illustrates the importance of clearly communicating how the strategy should be implemented and employees in the business should to some extent be followed to see if they are in line with the decision makerʼs intentions. In my view, it is the business as a whole that needs to have direction, so the whole business needs to be somewhat aligned to the strategy if it is to be successfully implemented.

Other strategic tools can be used at different stages of the life of a company. As a company matures it is natural to think that different strategies are more aligned with the phase that the company is in. I have tried to depict this in figure 5 below, where I give a suggestion on what phase of company maturity a company could use the different strategic tools that are available. This suggestion should not be viewed as a rigid suggestion as all the tools can be revisited when a company is more mature. A short summary of these strategic tools can be found in appendix 4 of this paper. In the view of this paper the tools I have not discussed are those more suitable at a ʻmatureʼ stage of a company such as the Boston Consulting Groupʼs product portfolio method. In

this matrix products are named “dogs, problem children, cash cows and stars” which each is an indication for how well the product is doing in its life cycle (Wikipedia 2010c). Other mentions of strategic tools and frameworks are the GE / McKinsey matrix that is similar to the BCG growth-share matrix in that it maps strategic business units on a grid of the industry and the strategic business units position in the industry. The BCG matrix and GE / McKinsey matrix are strategic tools meant to be used by larger companies that already have some maturity and products (even different business units) in place.

Figure 5: Suggestion for phases to implement strategic tools

It can be argued that a sense of direction is very important for an organization, and strategy gives a framework to place this sense of direction in. If there is an over-emphasis on strategic planning as opposed to implementation it can also in my opinion kill creativity as the focus goes away from ʻdoingʼ to ʻthinking about doingʼ. It seems to that the ability the company has for implementation is the crucial issue if strategies are successfully implemented or not. Aptly put by Macmillan and Tampoe (2000), “Good strategic choices have to be challenging enough to keep ahead of competitors but also have to be achievable.” The last statement summarize what

will be my final point of this paper, which is that having a strategic plan is necessary in order to know your company and to keep up with the competition, but thought should be put into how it should be implemented and if it is indeed achievable.