Strengths And Weakness Of ‘Six Forces Model’: Delta Airlines

There are several strategies that can help the company determine its strategic progress over the course of time. The strategic models include; SWOT analysis, BCG analysis and competitive analysis. However, one of the strategies that incorporates both profitability and competitive outlook of the company is the six forces strategy. The strategy is an extension of the Porter’s five forces model that was proposed by Michael Porter in 1979 when he published in the Harvard Business Review (Porter, 1979). The additional component, complementary products, was included in the mid 1990s to show the impact of related goods on the company (Hil et al, 2014). The current ‘forces’ in the model include; competitive force of the company, New Entrants into the industry, end users or the buyers, the suppliers, substitutes and the complementary products.The choice of this model is due to its overall outlook into the attractiveness of the company in the industry, focusing on the external factors that might affect the company in medium to longterm. It also looks at the profitability of the company from an external perspective.

The model has several advantage. First,  it is the most commonly used and known type of model, used by both the organisations and for academic purposes. The extensive use of the model is a great advantage as it creates a universal model for strategising by companies. The model also gives a wholistic picture of the important aspect of the business. For example, the analysis of new entrants into the Airline industry is important for a company like Delta airlines, as this helps it anticipate future competition.

According to (Grundy,2006), the model also explains the movement of goods from the supplier to the consumer or in this case services offered to the consumer. Delta Airlines using this model, can analyse the quality, affordability and sustainability of services and goods it offers to its consumers, right from the suppliers. The model, unlike other models it gives weight to the importance of customers and suppliers in the industry.

Six forces model also shows the ease of exist and entry into the industry through the analysis of the attractiveness of the business. The model can also be used as a basis for other models and strategies like differentiation strategies and valuation strategies. Delta airlines after analysing its macro-environment, incase it finds a threat through substitutes, the company can come up with a differentiation strategy to counter this threat. Delta airlines can also use the model together with SWOT model and PESTLE to determine trends in the airline industry and come up with long-term strategies like investing more in international markets or business class.

An important aspect of Six Forces Model as explained by (Rice,2010) is the recognition of macro-environment as in important aspect in the profitability of a business. The relevance of the external environment is presented in a structural way, that makes the model the first step in analysis of a business. The use of this model as the first step can help Delta Airlines recognise opportunities and threats in the airline industry by analysing current situations like the Britains Exit from the European Union or the Green drive by government to formulate a long term strategy.

However, the model possesses some weakness in its strategic outlook. First, (Baron,1995) citicizes the model as being too static and doesnot change as fast the macro-environment changes. The model assumes the external environment of Delta Airline to be stable not taking into account that the strategies of other competitors like American Airlines  and government, keep changing. According to (Baron,1995), he also sites the lack of recognition of the industry structure as a major shortcoming of the model.

Lack of empirical evidence to support the model is also another criticism levelled against the model. The fact that pronspensity to buy of consumers and that of suppliers are made equal as other factors is sited as a weakness. The propensity of buyers and suppliers to buy or supply respectively should not be given the same weight as substitute goods especially for companies that depend on consumers’ loyalty like Delta Airlines.

Delta airlines has co-operated with some of its competitors like the North-West Airlines to grow its business. However, in Six Forces model, this is considered a disadvantage yet, it proved to be an advantage to the airline as it increased it market share. The model does not recognise innovation nor the human aspect in developing a strategy. Although, a company like Delta airline has built its brand and competitive advantage through the success of its employees and human interaction with its customers. The introduction of loyalty and innovation of alternative fuel is another key strategy that six forces model does not recognize in its analysis.

In conclusion, although the six forces model which is an extension of the Porter’s five forces model, has several weaknesses like lack of empirical evidence, it is static and lacks to recognise key aspect in the formulation of a strategy for a company that would lead to its success, it is still a good strategy. It is a good strategy because of its universal usablity, giving information on attractiveness of business and can be used with other models to develop a better and more robust strategy.

An Analysis of Different Types Of Strategic Innovations

Strategy innovation as defined by (Markides,1997) is the capacity to reconceive the existing industry model in ways that create new values for customers, wrong foot competitors and produce new wealth for stakeholders. From this definition, it is important to differentiate strategic innovation from Blue Ocean Strategy and Differentiation strategy. The former only eliminates, reduces, adds or raises certain aspect of the firm while the latter creates a product that sets it apart from its competitors but not necessarily creates a new product (Kim & mauborgne,2014). From the definition above we gather that the product innovated must give the company new customers that are not with other business and give it profitability. A good example is the introduction of google which has given it new market and customers that set it apart and also made a profit.

The focus is in the sustainable development innovation which most times is driven by science that is not neccessarily accepted by the political or managerial class. SDI has led to many companies changing their strategies (Poole et al, 2004) from the traditional in-ward looking type of innovation to the demand or consumer driven type of innovation. Strategic innovation through the SDI has brought opportunities to firms that have changed their strategies to suit the new demand for certain products due to changes in industry factors and firm factors. However, the product development of different companies vary with some using the traditional product development while some that have taken the risk use the New Product development (NPD) strategies (Dodgson,2018). 

The NPD takes into consideration criteria that include; product uniqueness, market feasibilty, technical feasibility and intuitions. Companies also look at what they consider important to achieve both their short-term and long-term goals. Some are cost driven while some are customer driven. According to (Tidd& Bessant,2014) this has led companies to form a strategy of staging, aligning, exploring, creating and mapping with one key goal; making profits.The strategies mentioned above have created two sets of principles; the open innovation principle and the closed innovation principle. 

In the traditional closed innovational principle model, the innovation and the research and development is done by special department within the firm which is passed to passive consumers to either reject or accept. Though it is important to note that this type of innovation is incremental. Traditional closed innovation is used in highly sosphisicated sectors or industries that are sensitive like in medicine development. In this case the company develops the medicine or vaccine inhouse. Although some are reviewing this type of model.

The open innovation principle model is where the innovation is more interactive. The user driven innovation is one type of an open innovation. In this instance new ideas are created outside the company, where the user is passionate about the product. The company and the user are co- creators in this type of model. A good example of this type of model is the innovation of the mountain bike.

The other type of model is the free revealing model. In this model the company takes the lead role with the help of the lead users as they use the core market to assess the feasibily of the product. This type of innovation is a hybrid system which uses both the closed and open. The two types of paradigm that fall within this type of model is the traditional manufacture – centred paradigm and the user centred innovation paradigm. The first instance is where the company takes the lead like in journalism, where the journalist produces news and the audiences gives comments on what they would like done. Tbe second instance is where the innovation is more interactive like in blogs where the blogger and the audience can interact to try and develop better content.

The difference the two types of innovation strategies is that in the open innovation principle the innovation made are usually functional like the development of a new blogpost or development of an application to help the consumer access services faster. However, in the closed innovation principle, the innovation is usually a merit improvement, where the company develops the product to make it better. An example is making the application work better for the consumer.

In conclusion, strategic innovation are meant to give the company a better competitive advantage and make the company profitable. The use of user- centred innovation is the best for companies as they are economically efficient and easier to implement compared to the other two types of strategic innovation. Traditional closed innovation increases the cost of products through the running and maintaining of a research and development department that might not meet the needs of the consumer.

References

Grundy, T. (2006). Rethinking and reinventing Michael Porter’s five forces model. Strategic Change, 15(5), 213-229.

Hill, C. W., Jones, G. R., & Schilling, M. A. (2014). Strategic management: theory: an integrated approach. Cengage Learning.

Porter, M. E. (1979). How competitive forces shape strategy. Strategic Planning: Readings, 102-117.

Rice, J. F. (2010). Adaptation of Porter’s five forces model to risk management. DEFENSE ACQUISITION UNIV FT BELVOIR VA.

Baron, D. P. (1995). Integrated strategy: Market and nonmarket components. California management review, 37(2), 47-65

Markides, C. (1997). Strategic innovation. Sloan management review, 38(3).

Kim, W. C., & Mauborgne, R. A. (2014). Blue ocean strategy, expanded edition: How to create uncontested market space and make the competition irrelevant. Harvard business review Press.

Poole, M. S., & Van de Ven, A. H. (Eds.). (2004). Handbook of organizational change and innovation. Oxford University Press.

Dodgson, M. (2018). Technological collaboration in industry: strategy, policy and internationalization in innovation. Routledge.

Tidd, J., & Bessant, J. (2014). Strategic innovation management. John Wiley & Sons