A Sector Matrix Gives a Better Strategic Understanding of Product Markets Than the Concepts of Product - Case Study Example

Porter’s idea of the value-chain model and his argument concerning the competitive strategies prior to obtaining a competitive advantage receive remarkable critique in the academe. Not only that, as his ideas were remarkably linked to the strategic understanding of product markets, there are therefore modern alternative views that try to challenge his perspective of the product or commodity concept in understanding the product markets. Product markets nowadays is very competitive and from time to time, the key players are trying to come up with something new, such as innovation of product or service offering, or even system innovation in order to become the cutting edge above the other. Porter may have reasonably pointed out that in order to stay on top, creating a remarkable competitive advantage is necessary. However, arguments prevail that competitive advantage may not take long, because other competitors are willing to challenge the existing competition and create other competitive strategies in the process. Porter himself agreed the possibility that the leading firm may not have the ultimate chance to hold the top for all eternity. Porter argued that when there are firms willing to challenge the first mover through product or service innovation, price wars will take place and destructive competition will devalue an industry or particularly a sector (Loosemore, 2013, p.133). Here at this point where there is a need to explicate this point further. It is important to take into account as to how far the sector matrix can give a better strategic view of product markets than the concepts of product or commodity chains. A meaningful example through the case of Wal-Mart is presented in the work at hand in order to illustrate this concern. Therefore, prior to the discussion, understanding first the case of Wal-Mart is an essential task, which will not only give meaningful example of the main argument in the work at hand, but to further extend the concept of sector matrix and the product or commodity matrix. The Case of Wal-Mart The case of Wal-Mart is a good example that can illustrate whether sector matrix gives a better strategic understanding of product markets than the concepts of product or commodity chains. Wal-Mart is known as a brand success. Thus, the scale brand (Haig, 2011, p.72). For as long as Wal-Mart is considered a big store, the opportunity to generate big discounts from its suppliers cannot be overlooked. In return, Wal-Mart will take the opportunity to use its discount in order to promote lower price for its product offerings. According to Porter, this is a remarkable competitive advantage, considering that the overall cost leadership is a generic competitive strategy prior to reaching at the competitive edge. In addition, Wal-Mart’s enormous size is a plus factor prior to sustaining its competitive advantage, but it does not stop there. Wal-Mart is known to employ a human element in its store through relationship marketing. In fact, there are other important strategic moves that Wal-Mart is doing, but the ultimate strategy that gives it a way to become renowned in its industry is its implementation of becoming the leader in cost, giving it the opportunity to become the scale brand. It is here where most of the arguments are considered. For this work at hand, it is also important to take the discussion under this specific example in order to expound more the idea of sector matrix and concepts of product or commodity chains. Wal-Mart remarkably built its stores larger each year. This is eventually part of its plan for growth and ultimate survival in its industry. As the leading firm in its industry, Wal-Mart cannot afford to lose its chance in the competition and the opportunity to provide high value for its customers. At some point, many scholars are trying to take a look at this from the point of view of value chain, where product or commodity is the ultimate center of discussion when it comes to the prevailing success of Wal-Mart. In fact, it is better to look at it from the point of view greater than the value-chain model or other relevant concepts pertaining to Porter’s generic strategies leading to competitive advantage. Whatever may be the actual point existing in this argument, it is important to consider that Wal-Mart and its prevailing competitive advantage in its industry is a remarkable example to present the point as to the advantage of sector matrix to give better strategic understanding of product markets than the concept of product or commodity chains. Thus, in the next section, this point is put into analysis with the prevailing ideas associated with the value chain and sector matrix framework. Analysis Sector matrix is a new breed of business view that attempts to look a better perspective particularly in financial aspect far beyond the point of view of value chain and industry (Froud et al., 2006, p.105). For this reason, firms in the sector matrix fused income coming from varying activities in different sectors (Haslam et al., 2000, p.87). Concerning this, the sector matrix does not eliminate the point that there might be other existing forces to exist in the industry sectors. Alternative forces within the industries and industry sectors may potentially emerge over time that may also influence the competition (Wale et al., 2010, p.213). This is a remarkable argument against Porter’s models including the value chain, the five forces of industry and the generic strategy matrix. Porter’s argument has essential justification prior to the view by which it stands. When it comes to the institution of network of labour and processes involved in production, the ultimate point of these economic activities is the finished commodity leading to the idea of commodity chain model. In this regard, value chain analysis has been used as a methodology for the analysis of commodity chain. Value chain includes range of activities necessary to produce the product or service and deliver it to the final consumer or target market (Kannegiesser, 2008, p.40). Product chain is therefore an integral component of the value chain. According to Porter, in order to create a competitive advantage in the market, competitive strategies are necessary, which could be in their generic forms such as overall cost leadership, differentiation and focus (Porter, 1980, p.35). Wal-Mart as a common view may have employed what Porter’s called a competitive strategy, because based on his main argument, a firm trying to establish competitive advantage may have to be aware of the prevailing competitive forces in the industry, and so the need to implement strategic moves is necessary. One such move should be viewed within the value chain, where the actual product will have to be considered in great detail prior to its distribution to the actual target market. However, the argument of sector matrix promotes the point that every sector is trying to establish a more meaningful financial consideration. Thus, this kind of consideration is a remarkable inclusion of product creation, interaction between the key players in the industry and the involvement of other parties essential for the achievement of success of a firm. In other words, the sector matrix is a general consideration of what is actually taking place in the entire industry or sector. This means that in the case of Wal-Mart, the sector matrix contains the general consideration of the entire industry, which covers the idea of value chain and product concept. After all, the ultimate point of why a business like Wal-Mart sustains its competitive advantage is because it is able to sustain its financial objectives at the bottom line. This is a remarkable point of sector matrix. In fact, this is the main argument of Froud et al, and it stands against the ultimate model of Porter to explain or understand the product markets. In addition, the sector matrix is composed of the general view of what is eventually happening in the product markets. It seeks to understand or promote the thought that there are other essential components that will have to be taken into account aside from looking at the product and commodity concepts. For instance, in the case of Wal-Mart, it does not only consider the actual value of the product, but as stated, the company also considers relationship marketing. Although, Porter remarkably presents the point that in the actual value chain, there are supporting entities that also work hand on hand in order to produce the actual product or service offering, what is clear is that these entities are also significant components of the sector matrix in great general detail. Therefore, what made the sector matrix capable of giving more meaningful strategic understanding of product markets than the concepts of product or commodity chains alone is its general covered concepts. The sector matrix, which primarily looks into the financial performance of an entity, also tries to consider the actual inclusion of value chain at the most specific level. For instance, in the case of Wal-Mart, the related firms connected to Wal-Mart’s success have no other most important objective in mind, but to create a more promising financial output. This is in the first place is the common objective of profit firms. That is why these firms will look ahead into the future and consider how they can create more meaningful advantage in terms of earning. In fact, Porter’s idea of differentiation has the bottom line intention of creating more revenue and eventually profit. It is about creating sustainable advantage in the industry. Scale is also a specific point of achieving or maintaining sustainable advantage. For this reason, Wal-Mart is tied up to its financial objective, and in order to stick to it for good, it has to maintain a sustainable strategy. However, the ultimate point of creating that sustainable strategy and advantage is not only giving more value for customers, but the bottom line is to excel financially in the long run. In other words, the best way to say why the product markets evolve over time is because also of the evolution of the sector industry. The varying sectors have definite goal in mind, and that is to grow their business, but that will only be meaningful if financial considerations are met. Thus, there is no question as to why sector matrix is significantly linked to financial concerns of a sector. Based on the above analysis and the given example using the case of Wal-Mart in the product market, Porter’s idea of product and commodity chains can only stand as vital subsets of the main consideration of the sector matrix. This therefore provides an essential view that sector matrix is far better than the concepts of product or commodity chains in giving a better strategic understanding of product markets. Product markets are eventually motivated to earn more, from the economic standpoint. Thus, the ultimate way of achieving it is tantamount to the actual models and ideas that Porter presented. It is in this reason that Porter’s models and ideas cannot be separate entities of the sector matrix, but significant components of it at the most specific level. Conclusion In a nutshell, the work at hand just presented the important point as to why the sector matrix is far better than the concepts of product or commodity chains in giving a better strategic understanding of product markets. The most important examples where illustrated by employing the prevailing case of Wal-Mart as a firm leading in its industry due to the implementation of strategic moves that will lead to competitive advantage. As found, sector matrix and product or commodity chains are interrelated, but the latter are important subsets of the former. Therefore, the former can be generalized and will give a more generic understanding of the overall issues linked in the actual existence of a firm, industry or sector. For this reason, if one will want to know the product markets, the good way of looking at it is through the sector matrix, because this essentially will also cover the points that Porter was trying to emphasise in his model. References Froud, J., Johal, S., Leaver, A., and Williams, K. (2006) Financialization and Strategy: Narrative and Numbers. London: Routledge. Haig, M. (2011) Brand Success: How the World’s Top 100 Brands Thrive and Survive. 2nd ed. London: Kogan Page. Haslam, C., Neale, A., and Johal, S. (2000) Economics in a Business Context. London: Cengage Learning EMEA. Kannegiesser, M. (2008) Value Chain Management in the Chemical Industry: Global Value Chain Planning of Commodities. Berlin: Springer. Loosemore, M. (2013) Innovation, Strategy and Risk in Construction: Turning Serendipity Into Capability. New York, NY: Routledge. Porter, M. E. (1980) Competitive Strategy. New York, NY: Free Press. Wale, D., Robinson, P., and Dickson, G. (2010) Events Management. Oxfordshire: CABI. Read More