Internal Versus External Forces and Strategy Essay

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Kaplan vs. Porter

The author of this report has been asked to compare and contrast two very popular models when it comes to strategic business decisions and the management involvement surrounding the same. One of those two approaches is the work of Kaplan and Norton while the other is that of Porter. Kaplan and Norton had a "notion," per the assignment parameters, of a strategic management system while Porter's work as come to be known as the Five Forces. The two frameworks are similar in some ways but they are also very different in other ways. This brief report shall compare and contrast the two approaches in several ways so as to reveal what makes them different and what makes them the same. While the two approaches being compared and contrasted in this report are different, they are both aligned toward the same overall goal and are centered on the same basic premise of strategic decision-making and business situational awareness.

Analysis

The centerpiece of the Kaplan and Norton approach has come to be known as the strategy map. It is basically a workflow diagram that is centered on strategic decision making. A strategy map using the Kaplan and Norton framework has four basic levels, those being the financial perspective, the customer perspective, the internal perspective and the learning/growth perspective. It was introduced to the business and scholarly world in 1992 via the Harvard Business Review publication. It was meant as a performance measurement system and a strategic management system. At its heart, the strategy map is a diagram that helps describe and delineate how an organization creates values by connecting the different strategic objectives that they have. To be more specific, there is a linkage of items that have a cause and effect relationship with each other and the underpinnings of the diagram is always going to be the balanced scorecard approach. This is where the four foci come from, actually. Indeed, strategy maps are an outgrowth and part of the overall balanced scorecard approach (VBM, 2013).

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The facets of a strategy map are pretty basic and so is the creation of the same. All of the information for the final strategy map is contained in one page and it thus enables fairly easy strategic communication for the people that use the map. As noted before, the four balanced scorecard facets are present, those being financial, customer, internal and learning/growth. The basic premise of the financial perspective is to create long-term shareholder value. It is meant to build a productivity strategy of improving the overall cost structure of the business and a utilization of assets that is aligned with growth and expanding the opportunities that the business has. These opportunities are meant to increase shareholder value. Strategic growth is driven by things such as price, quality, availability, selection, branding, functionality, service and business partnerships. In terms of the internal perspective, operations and customer management process should be creating product and service attributes. Concurrent to that, innovation, regulatory and social process and so forth help with relationships and the business image of a firm. All of the processes mentioned above are held up and supported by the proper and timely allocation of human resources, information resources and organizational capital. Organization capital is the confluence of company culture, leadership, alignment and teamwork. One major part of the strategy map diagram is that cause and effect relationships are connected by arrows (VBM, 2013).

On the other hand, there is the Porter Five Forces model. The Kaplan model was based on the internal environment and the Porter model is based on the internal environment. Even with this major difference, they are similar in that the Porter model is also well-represented by a diagram. Most commonly, the diagram is manifested by a circle or other shape in the center that represents competitive rivalry. Exterior to that but all influencing rivalry would be the threat of new entry, buyer power,….....

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