Generic vs. Hybrid Strategies by Andrew Isherwood

All the strategy tools previously mentioned are aimed at looking at the environment and organisation and positioning / re-positioning the organisation within that competitive environment. Can organisations use the strategic...

All the strategy tools previously mentioned are aimed at looking at the environment and organisation and positioning / re-positioning the organisation within that competitive environment. Can organisations use the strategic planning tools to create new strategies for markets that are not yet created? Kim & Mauborgne (2005)1 think not, and argue the existing tools are not suitable for creating strategies to move into uncontested market spaces. Porter (2001)2 reiterates that the so-called new rules of the internet have not actually changed the tools required for strategy; he argues that his 5-forces and generic competitive strategies are still applicable as you still have suppliers, buyers, substitutes, barriers to entry and competition. Also the basic ways of competing by either being a low cost or differentiating organisation, be that in a niche or in the general market are still the main ways to compete. However for markets that don’t exist there is little supplier power, no rivalry, no buyer power, probably lots of barriers to entry and threats of substitution.

However do these types of tool help the strategist to come up with new creative ideas? Again Kim & Mauborgne (2005)1 think not, they believe that an organisation should reduce costs and differentiate their offering especially in today’s hyper-competitive global market. This is in agreement with the extension of Porter generic competitive strategies by Bowman’s “Strategic Clock” (Bowen & Faulkner 1996)3 which concentrates on Price v Value and suggests this hybrid model.

This hybrid strategic approach has been criticised by many; Thornhill & White (2007)4 declared:

“…our study of 2,351 businesses finds a significant relationship between strategic purity and performance. Purity does appear to pay” Thornhill & White (2007) 4

However Reitsperger et al (1993)5 suggest that few organisations follow a generic strategy as business is much more complex in practice and a hybrid model is the norm, especially in markets of strong competition:

We conclude that truly generic strategies, applicable to any industry, are probably inappropriate, as is an emphasis on narrowly focused strategies.” Reitsperger et al (1993) 5

The generic competitive strategies and strategic clock, even with its hybrid strategy are only pointing the strategist in the direction that they can move. Kim & Mauborgne (2005)1 believe by creating a unique hybrid strategy an organisation is differentiating itself from any competition while at the same time reducing its costs (not necessarily price) and hence direct competition is reduced.

They also advocate tools to help to creatively decide which strategies to follow. As the greatest issue with any hybrid strategy is to choose which elements to differentiate and which to reduce costs/price. Their Blue Ocean Strategies (BOS) do just that (Kim & Mauborgne 2005)1, especially in today’s hyper-competitive environment and globalisation, they propose a method of deciding on an specific hybrid strategy individually tailored to the organisation and potential market.

One of the objectives of Kim & Mauborgne (2005) 1 was to create a set of tools that can be used for both creating, validating and communicating the strategies. As such they are a very visual and almost gimmicky tool set.

However BOS has its critics: namely the tools have not been ‘tested’ and proven to work. In all the examples given BOS has been applied afterwards and therefore has huge issues with survivor and selection bias (Venkat 2007 & TRU Group nd)6. However, the time it takes an organisation from the initial use of the BOS tools to be classed as successful and the exact criteria of this success means studies will take considerable time to run and report findings if this criticism of survivor and selection bias is to be combated. Early evidence that these tools are helpful is now being created:

Aspara et al. (2008)7 ran a survey in Finland of 568 CEO’s and found:

“…companies creating new market opportunities by utilizing blue ocean strategies in their business model transformation were found to have an advantage in the profitable growth of their sales activities” Aspara et al. (2008)7

Kim C. et al. (2007)8 case study follows a successful company CJ-GLS who used BOS.

Burke et al. (2009)9 as one of the more interesting studies found by studying the Dutch retail industry, companies who used BOS were more likely to be successful long term, however they also note, short term strategy favoured Competitive Strategies. The other main finding of this research was to recognise companies used both Blue Ocean and Competitive strategies to succeed. BOS strategies are normally followed by companies who have successful competitive strategies.

In summary Kim & Mauborgne (2005) ((Kim W.C. & Mauborgne R. (2005), “Blue Ocean Strategy”, Harvard Business School ( Book Review ) )) are advocating a tools set to create a unique hybrid strategy, to be the first to enter a new constructed market.

 

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  1. Kim W.C. & Mauborgne R. (2005), “Blue Ocean Strategy”, Harvard Business School ( Book Review ) [] [] [] [] []
  2. Porter M.E. (2001), “Strategy and the Internet”, Harvard Business Review, March 2001 pp. 62-78 []
  3. Bowen C. & Faulkner D. (1996), “Competitive and Corporate Strategy”, Irwin []
  4. Thornhill S. & White R.E. (2007), “Strategic Purity: a multi-Industry Evaluation of Pure vs. Hybrid Business Strategies”, Strategic Management Journal 28: 553–561 [] []
  5. Reitsperger WD, Daniel SJ, Tallman SB, Chismar WG. (1993), “Product quality and cost leadership: compatible strategies?”, Management International Review, Special Issue 33: 7–21. [] []
  6. VENKAT (2007), “Book Review: Blue Ocean Strategy” Available at http://www.ribbonfarm.com/2007/08/06/book-review-blue-ocean-strategy/ [Accessed 16 Dec 2010] []
  7. Aspara J., Hietanen J., Parvinen P. & Tikkanen H. (2008), “An Exploratory Empirical Verification of Blue Ocean Strategies: Findings from Sales Strategy”, Paper presented at: Eighth International Business Research (IBR) Conference, Dubai, United Arab Emirates, 27-28 March, 2008 [] []
  8. Kim C., HoonYang K. & Kim J (2007), “A strategy for third-party logistics systems: A case analysis using the blue ocean strategy” Omega The International Journal of Management Science, Available online 23 May 2007 []
  9. Burke A., van Stel A. & Thurik R. (2009), “Blue Ocean versus Competitive Strategy: Theory and Evidence”, SCALES-initiative []

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