An Overview of Strategy Development Models and the Ward-Rivani Model

An Overview of Strategy Development Models and
the Ward-Rivani Model

corresponding author:
Dr. David Ward, European School of Economics, Via Chiaravalle 9, 20100 Milan, Italy.
All correspondence to Dr David Ward, Via Fornari 46, 20146 Milan, Italy email: daward@tin.it
co-author: Elena Rivani, Via Orsoni 41, 40068, San Lazzaro di S. (Bo), Italy.

Abstract
Numerous models for developing strategy, defining and aligning competitive advantage have
been proposed over the years (and even centuries if we consider Arian, Sun Tzu etc.)
including probably the most famous of all, the 5 forces model by Porter (P5F). With
publications in the field of strategy now in the thousands it is difficult to get an overall
picture of how to classify and appreciate strategy tools and models.
Mintzberg et al. have developed schools of thought to help alleviate and categorise this
problem but this approach lacks a comparison of the models found in industry e.g. BCG, 7S
McKinsey, ANSOFF etc.
Consequently at academic level (but not only) we see models like P5F, etc. predominate
while tools like SWOT, PEST, ARC etc. populate the consultancy arena and operative levels
of the organisation. The purpose of this paper is therefore to provide an overview and
comparison of selected models used in the development of business strategy together with a
brief discussion of schools of strategic thought.
Judging by the bibliography searched and, perhaps, the major appeal of this paper, is that a
selection of common strategy development models and tools are compared systematically for
the first time in one single paper. In fact it was found that models, at least in Italy, are rarely
compared and if they are, it is on a one-to-one basis. The intent is to at least start to bridge
and compare models and show how new models can be realised.
The paper closes with the proposal of a new model, the Ward-Rivani model, which does not
claim to be the most universal rather a complementary and perhaps useful platform for future
work on strategy.
Keywords: Strategy, Models, Porter, Ward-Rivani model
Introduction and Background – The strategic approach to Industry Analysis
Companies are often chased internally or externally to examine their strategic position within
a given business, marketplace or industry. To this end a multitude of theories and models
have been developed (Koch, p. xiii, 2000) with the intent to determine, develop and
disseminate systematically competitive advantages for the company. The overall intended
outcome is to strengthen the company’s position in industry and help maintain, if not
improve, their competitive position within it.
In this context, perhaps the most famous of all models has been Michael Porter’s five forces
model (Porter, 1980). This model has become a standard of comparison for most (if not all)
new theories and models that look at the external environment of a company and therefore
the industry in which the company competes.
Inspite of this ‘standardisation’ the authors found that new models are rarely compared across
a cluster of other models and indeed comparisons are usually limited to ‘look-alikes’ or 1-to-
1. Moreover, the same authors have found very little (if any) intentional linkage between
forces and tools. A good starting point for an overview of models can be found at the Value
Based Management website (www.valuebasedmanagement.net).
This paper sets out to provide a comparison between 8 models, starting from Porter’s 5F
model (P5F) and ending with the SWOT model. These models were chosen because of their
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popularity in Italy and compatibility with one or more Porters five forces. However, similar
popularity has been found in both academic and non-academic environments.
While developing this comparison it also became evident that new models can be generated
from this comparison and therefore in this sense the paper provides a framework for future
and broader or even narrower models.
To this end the authors propose a new hypothetical model, the Ward-Rivani model, that
attempts to combine as many of the main criteria found across models and with the goal to
provide a complete ‘strategy package’.
Another key finding in the development of this paper has been the almost total lack of a
complete or partial view of how the P5F model, underlying tools and schools of strategic
thought are linked. In fact we found very little trace of links between these three areas and the
proposed model provides an overview of how these three levels are linked.
In the work that follows we have attempted to achieve the following objectives:
• Explain what the P5F model is, what it is intended for and its position in company
strategy development
• What tools can and are used by managers and upper management and how these link
to the forces described by Porter. We have taken Italy as the reference country
because of greater familiarity with the national economic and business world (Rivani,
2005).
• Tackle and link schools of thought to the P5F model and relative tools in order to
leverage all three of the above mentioned levels of strategy development and
deployment.
• Provide a convenient and concise comparison of models and show how new models
can be generated or old ones adapted-updated.
The Five Forces Model of Porter
The Five Forces Model (P5F) and the framework behind it dates back to the early 80s and
was the work of Michael Porter, a scholar working and teaching at the Harvard Business
School.
This model (see figure 1), as declared by its creator, was able, at that time, to fill a void, in
the management field corresponding to the development of a new discipline, Competitive
Strategy. It came at a time when down-sizing, re-engineering etc. were elements of strategic
choice. The intent of Porter was to provide an overall model that would help enterprises
realize the impact of external scenarios (that he calls forces) on their overall performance.

Figure 1 – The five forces model by Michael E. Porter
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One fatal attraction of the P5F model was that it finally allowed companies to assess
simultaneously the industry in which it was competing thus indirectly understanding its
competitors, and subsequently decide and implement a competitive strategy. It also coincided
with a marked acceleration of competition in the USA. It was, and still is considered to be a
unique, simple, easy-to-understand, intuitive, structured framework for company strategy.
The P5F model also helps develop a competitive company position along side adequate
strategies to create value and therefore outperform its rivals: in essence it provides the
helicopter view of the industry environment in which the company operates and competes.
The five forces of the Porter model are summarized as follows:
- F1 - Threat of new entrants: this is the easiness with which a new company could enter
the industry thus impacting the profitability of the industry and the competitive position of
the enterprise. This force should qualitatively and, ideally, quantatively measure the status
of Barriers of Entry especially those factors that make it costly for companies to enter the
industry (Hill et al. 2001). Examples of significant entrance barriers (Bain, 1956 cited by
Hill et al. 2001) are:

Brand Loyalty (Clifton et al., p.95, 2003)

Absolute cost advantages

Economies of scale (Saloner et al, p.340, 2001)

Switching costs (Hill et al. 2001)

Government Regulation (Hill et al. 2001)
F2 - Rivalry among established companies (Grant, pp.78-80, 2002): This force
evaluates the overall competitiveness of the industry. It takes into consideration the status
of the players, their size and how the industry’s characteristics foster or discourage the
creation of competition.
The drivers of this force can be identified as follows (Hill et al. 2001):
Concentration
Industry
growth
and
demand
Product/service
differentiation

Ratio of fixed costs to variable costs
High
exit
barriers
Diversity
of
Competitors

High strategic stakes
F3 - The Bargaining power of Buyers (Johnson and Scholes, pp.117-118, 2002): By
buyers one intends both the clients (e.g. trade partners) and customers (e.g. end-users),
Clearly the bargaining power of this group and force establish, among other things, price
and product/service expectations.
F4 - The Bargaining power of Suppliers (Johnson and Scholes, pp.117-118, 2002):
Suppliers are nowadays very much integrated in industry especially when corporations,
multinationals etc have strategic supplier agreements in place. Nevertheless suppliers can
condition industry and company performance, especially those that supply raw materials
or fundamental parts (e.g. Intel, Shell etc.), and are therefore considered quite rightly as a
key element in the P5F model.
F5 - Threat of Substitutes (Cullen, pp.162-181, 2001): The cloning of products and the
possibility that substitutes flood the market is a real threat to an industry, especially if the
substitutes are of better quality and lower price. This is especially true for products that
compete on price and have limited differentiation. In the context of this paper one
considers this fifth force particularly true for the final stages of the PLC i.e. company
vunerability increases in the third (maturity) and final (decline) stages of product life
cycle.
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Many authors have analysed the P5F model or one or more of it’s forces, starting from a
position of amiration and total acceptance to one of need of renovation. Based on over 170
publication searches1, four stages appear to have surfaced since its arrival in the early 80s,
this is depicted below:

Figure 2 – The P5F model from Introduction to Integration
The fact that it has not been scrapped or replaced by other models is testimony to its appeal
and robustness. However, a lot of academics have criticized this model arguing that certain
elements are not contemplated and that such a flaw merits at least another force.
For example, Grove (2001, p. XX) proposes the addition of a sixth force to include
Government and Legislation levers. Others suggest the introduction of the so called
‘Complementor’ (Hill et al. 2001, p.82), a sort of middleman that may hinder or favour a
company, just as a in-store salesman conditions the customer in a shop. They argue that
complementors are able to influence the marketability of the product and hence also the
competivity of an enterprise.
Some scholars signal an inadequateness of the model due to the birth and dissemination of
new technologies e.g. internet, biotechnology etc. or view the P5F model as a static
framework that is incapable of capturing the changes of the industry or adapting
multinational strategy to local (national) organization (Cullen, pp.282-284, 2001).
Porter, in his book “Competitive Strategy” (2004, p.XX) argues that the model can still hold
for the emerging new technological economies, as it changes only the drivers of the forces.
Although the authors of this paper agree that internet, for example, conditions the drivers of
the forces (e.g. F3 and F4) it is equally true that internet creates a new external overlapping
and virtual environment. Similarly globalization changes the external environment by
expanding it just like dough can either be a loaf of bread or spread out like the base of a
pizza.
Porter also argues that criticism of his P5F model is rooted in a general misunderstanding of
the model and, in the specific case of change, he says that “the framework reveals the
dimensions of change” (Porter, 1980, p. xiii). In the same text he indeed dedicates several
chapters that deal with a learning and changing environment, thus we consider it to be unfair
to say that Porter does not take into account the factor of change. However, rather than see
the expansion of the environment the dimensions of change act on the ingredients, not how
thick or spread the dough is.
Porter’s model provides a general overview of the external environment but how high (and
good) the view is, depends not only on the quality of the analysis (i.e. completeness of
drivers) and the capability of company management to use it but also the fostering of the
helicopter view (or even better a satellite view) of both the present and future external
environment.
These views provide a powerful assessment tool for a company’s upper management, almost
as if the noise of an electrical signal can be removed with different levels of attenuation
without modifying the behaviour of its waveform. Clearly the higher the view the less
practical value for lower levels in the organisation (e.g. middle or junior managers). Indeed in

1 A selection of which is provided in the bibliography. After this search a total of 46 publications were analysed.
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our experience, at least in Italy, it is quite worthless to promote the helicopter (or higher)
views, as the P5F model does, without providing also the necessary (lower level) and more
operative tools. As an example of this discrepancy we may take the case of communication.
Predicting and preaching the importance of effective communication without providing
adequate tools like video conferencing, face-to-face single or group meetings, specialist
communication training etc. inevitably leads to a mismatch between the overall goal (e.g.
better performance) and everyday achievements necessary to reach that goal.
This leads us to an important conclusion, summarized and visualized in figure 8.
In order for the complete and durable deployment and dissemination of a strategy it is
essential that three layers of action and view are in place. That is to say external environment
monitoring (as in the P5F model), the tools (SWOT etc.) and strategic school of thought
(Positioning school etc.) all need to be synchronized in order to maximize company (and
industry) performance.
From Porter to other models-tools
Several Italian companies (see table a1 in appendix) were contacted, most of which were
family or locally run but nevertheless either International in terms of customer base or local
branches of multinationals. It was found that managers and upper management were unaware
of the multitude of strategic tools, models etc. available and in many cases they did not
realise that they were evaluating one or more of the forces described by Porter. There was
also a lot of evidence that specific models like SWOT, BCG, Parts of the 7S model etc. were
dominant in company culture and usage, essentially because external consultancy agencies
had used and disseminated them for their past analysis of the company and relative industry.
In most cases individuals within the company were aware of at least one of the eight models
cited (see table 6) and actually were pushing for their application to align company strategy
with industry competition. However, at a upper management level (i.e. owner level) there
was no direct evidence that models (or parts of them) had been selected and compared before
deliberately or subconsciously employing them.
During several interviews when the interviewees (usually upper or middle managers) realised
that they were using unknowingly tools to strengthen company position they were either
flattered or surprised to know that these tools were used by the competition or in the
company.
Clearly Porter’s model is not the only model used by companies to assess their
competitiveness and industry environment, and indeed many great consultancy companies
have been formed on the basis of this fundamental need. The difference is that these
companies have satisfied a need by lower levels in the enterprise, that is, to fill the gap
between the P5F model and school of thought. Not surprisingly do we see these tools or
models being much more operative and therefore practical and/or deterministic. Surprisingly
it was found that such tools and models often took on a much higher view of the industry and
even compete or replace the P5F model. We believe that this probably derives from the
nature and culture of the enterprise, which as stated, was more family-run minded and
managers knew very little else.
Further, according to the authors of this paper, the essential difference between the P5F
model and other models is that the first provides the overall or helicopter view (and without
other models-tools is also poor in detail and pretty worthless) while the other models take a
much more closer look at inside one or more of the 5 forces. In some cases they focus, albeit
generally, on the drivers, e.g. the 3C model (Ohmae).
In general one may state that the forces and relevant models are leveraged in three ways:
1. Defensively: The models are used to protect and conserve the approach and culture of
the enterprise.
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2. Offensively: The models are used to drive the correct offensive measures and thus
attack the competition.
3. Exploiting change: Especially by anticipating trends before the competition does or
riding the waves as soon as possible.
We will return to this finding later in the paper but for the time being it may be said that
companies will often recognise the P5F model in their firm they are much more inclined to
refer to specific models. This is probably due to the need to picture scenarios quickly and
effectively and solve the fundamental issues. The downturn is that the actions tend to be
stand-alone and are not integrated with the overall view of the industry, which is what, in our
opinion, the P5F ends up doing.
We will now endeavour to describe a selection of models to emphasise the difference
between satellite, helicopter and battleground views.
The models have been selected on the following criteria:
Degree of acceptance and acknowledgement by companies and managers
The flexibility, durability and applicability in-field
Their notoriety and diversity
Their relationship with one or more of the P5F model forces.
The Ansoff Matrix
The Ansoff Matrix is a marketing tool that was first published in the Harvard Business
Review in an article called ‘Strategies for Diversification’ (1957). It is used principally by
marketers with the objective of growth and may be correlated to at least 2 of the five forces,
namely rivalry and threat from entrants. Although the intent is not to monopolize it must be
said that in order to govern the rivalry and entrant forces, a dominant position in the
marketplace and industry is needed. It may also be seen as an aspect of counteracting the
substitutes force. The Ansoff matrix is particularly strong in those enterprises where market-
pull is the predominant way of competing. In this sense it promotes a battleground-helicopter
view. The matrix (shown in figure 3) consists of four quadrants as follows:
1. Market Penetration
Here existing products are marketed more effectively to existing customers. Hence revenues
are increased by, for example, promoting the product, repositioning the brand, and so on.
2. Market Development
Here the existing product range is launched in a new market. This means that the product
remains the same, but it is marketed to a new audience. Exporting the product, or marketing it
in a new region leads to the development of new markets.
3. Product Development
This is where new products are marketed to existing customers. Here the scope is to develop
and innovate new product offerings to replace existing ones. A good example is when
existing models are updated or replaced and then marketed to existing customers e.g. as in the
car industry.
4. Diversification
This is where completely new products are marketed to new customers. There are two types
of diversification, namely related and unrelated diversification. Related diversification means
that one remains in a market or industry with which one is familiar. For example, a foodstuff
or beverage in the food industry. Unrelated diversification is where the enterprise has little or
no previous industry or market experience. For example a soup manufacturer invests in the
rail business.

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Figure 3 – The Ansoff Matrix
BCG Growth-Share Matrix
The BCG matrix is the oldest (dating back to the 70s) and perhaps most renowned of all the
matrices. Based on our experience it is perhaps the most common portfolio matrix to be
taught around the world.
The BCG Matrix, like the Ansoff Matrix, is generally used to analyse the standing of single
business unit or company enterprise. It can, however, be extended to include more than one
SBU2 as in the case of business portfolio analysis. In this sense it provides a helicopter view.
The analysis is based on the combination of two dimensions: Business Growth and Market
Share. The idea is that the bigger the market share the product has, the more cash it can earn,
and the faster the product growths, the more investments are needed. The BCG Matrix
(www.bcg.com) tackles four types of scenario: Star, Cash Cow, Dog and Question Mark, as
shown below.

Figure 4 – The BCG Matrix
The creation of value of a company, following this model, is given from the best composition
of the product portfolio of it. Hence it may be considered as a useful tool to counteract the
substitutes and rivalry forces. The scope in the long-term is to ensure value creation by

2 SBU – Strategic Business Unit or division
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combining product offering while generating the largest amount of cash at the lowest level of
capital investment. In this way the same tool highlights those products that demand high
investment efforts for low-growth products (valuebasedmanagement.net, 2004) and that
should be avoided
7S McKinsey Model
The 7S McKinsey model is essentially a Value Based Management (VBM) model that is
intended to provide a company with a framework with the intent generate value within its
overall organisation. It is more general and holistically conceptualised when compared to the
previous two models and closer to the generic view of the model of Porter. However, with
respect to the P5F model it takes into account both the internal and external environments.
The model considers the organization of a company as a mix of 6 dimensions that function
around a seventh one, i.e. the Shared Values of a Company (see figure 5 below).

Figure 5 – The 7S McKinsey Model
The six dimensions are: Strategy, Structure, Systems, Style, Staff and Skills
(valuebasedmanagement.net, 2004). The Strategy is the only dimension that takes into
consideration the external environment like competition and customers although it could be
argued that at least the Structure dimension should (could) reflect the external ambient as
well. It provides a mix between the helicopter and battleground views.
The other 5 dimensions focus on the internal organisation of the company and especially how
the units (divisions, departments etc) are structured and which systems and processes they
adopt. Interestingly HR components such as skills, staff and style are contemplated here
(albeit separately) something which is not in the P5F. In fact one of the criticisms to the P5F
model is a lack of evaluation of company cultural components, which is particularly
important for corporations and multinationals.
GE-McKinsey Matrix
The GE/McKinsey Matrix is again a model built to assess Strategic Business Units (SBU)
and is essentially a revised version of the BCG Matrix. It is built on two dimensions: Market
Attractiveness and Competitive Strength thus providing a satellite view.
The main differences are:
• Market Attractiveness replaces the Market Growth in the BCG Matrix. This is
considered an improvement because it includes more factors upon which the degree of
the attractiveness of an industry can be determined.
• At the same time the dimension of Competitive Strength replaces the Market Share and
includes more factors that determine the strengths of an industry in addition to the firm’s
market share.
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• The GE-McKinsey Matrix (depicted in figure 6) also has three degrees of assessment
(high, medium, low) hence allowing for more nuances in the results compared to the two
degree version in the BCG matrix i.e. only high or low (valuebasedmanagement.net,
2004). It could be argued that three degrees make it harder to compare with the BCG
results and, moreover, greater discrepancy occurs because interpretation by managers is
higher. However, the finer detail provides better visualization of direction for managers,
especially upper managers.


Figure 6 – The GE/McKinsey Matrix
Some of the drivers that can be included under the two GE/McKinsey Matrix dimensions are:
Typical factors that condition Market
Typical factors that condition Competitive
Attractiveness Factors
Strength
- Market size
- Strength of assets and competencies
- Market growth rate
- Relative brand strength
- Market profitability
- Market share
- Pricing trends
- Market share growth
- Competitive intensity / rivalry
- Customer loyalty
- Overall risk of returns in the industry
- Relative cost position (cost structure compared
- Opportunity to differentiate products and
with competitors)
services
- Relative profit margins (compared to
- Demand variability
competition)
- Segmentation
- Distribution strength and production capacity
- Distribution structure
- Record of technological or other innovation
- Access to financial and other investment
resources
Table 1 – Drivers of the GE/McKinsey Matrix dimensions
The 3C`s framework of Kenichi Ohmae
Kenichi Ohmae, the famous Japanese strategist and management guru, developed a model,
known as the 3C framework, with the intent to link three key elements he considered
fundamental for a firm’s competitiveness (www.valuebasedmanagement.net).
The three factors, denominated, the Corporation, the Customer and the Competition
produced what is now known as The Strategic Triangle, with a C in each corner of the
triangle as depicted in figure 7.
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Corporation







Customer
Competition

Figure 7 – The 3C model or Kenichi Ohmae’s Strategic Triangle
As the name suggests Kenichi Ohmae’s model generates an overall strategy, the scope of
which is to provide at least a helicopter view. The model may be described as follows:
Customer-based strategies: he argues that a company should focus primarily on the
satisfaction of its customers before the shareholders (even though modern managerial and
fianancial schools and stock markets would disagree here) because by “taking care” of the
first, the interests of the second will be fulfilled automatically. The underlying concepts are:
•
Segmenting by objectives
•
Segmenting by customer coverage
•
Re-segmenting the market
•
Changes in the marketing mix
Corporate-based strategies: are based on the identification of the functional aspects related
to the operation of BSUs, departments, facilities etc. For example:
•
Selectivity and sequencing
•
Cases of make or buy
•
Improving cost-effectiveness
Competitor-based strategies: these are strategies intended to beat or compete against the
competition. They are based on the identification of those capabilities that allow the company
to differentiate itself with respect to competition, the scope being to become best-in-class.
Kenichi’s speaks of:
•
The power of an image
•
Capitalizing on profit- and cost-structure differences
•
Tactics for flyweights
•
Hito-Kane-Mono (people-money-things/assets)
Although this model appears to have little in connection with the P5F model it has several
modern elements of addressing industry competitiveness (see also ARC model by Podolny et
al.). For example, the fact that shareholders take a second seat is, in itself, a stark contrast to
what most companies proclaim today. Modern CRM theories (Peppers et al, 1999) in fact not
only push for more focus on the customer, but also on the stakeholder, before satisfying the
shareholder. The reasoning is that if a stakeholder is enthusiastic (e.g. a worker) then this will
be reflected in his/her work, this in turn produces a more satisfied customer which will lead
to more regular custom and better, more stable, company performance. In this way the
shareholder is satisfied and the competitveness circle is completed: this is also what the
Kenichi Ohmae model is saying and was often confirmed in our interviews.
Moreover, companies that put the shareholder first are mystifyingly stubborn to realise that
the shareholders are the most unrealiable and the most speculative when it comes to
maintaining company and industry competiveness stability. The authors will return to this
point when the Ward-Rivani model is discussed.
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