Strategy Tripod Assignment Example | Topics and Well Written Essays - 1750 words

Strategy Tripod - Assignment Example 72). When it comes to global business, strategy is perceived in two dynamics, 1- strategy as action, and 2) strategy tripod. The ‘strategy as action’ perspective suggests that the essence of strategy is interaction because actions and reactions such as ‘competing aggressively’, ‘price war’, ‘attack’, ‘counterattacks’ etc lead to competitive advantage (Peng and Gokalp, 2011, p. 250). The ‘strategy tripod’ model sheds light on global competitive dynamic based on the major three perspectives, namely industry-based, resource-based and institution-based views. The Strategy Tripod The fundamental objective of the competitive strategy of a company is to gain sustainable competitive advantage in the industry. There has been a great amount of academic debates during recent years concerning competitive strategies to explain ‘why do firms succeed and often fail’. There are different approaches concerning competitive strategy such as SWOT, Porter’s five force etc. The strategy tripod is another approach to explain competitive strategy that states that a company’s competitive strategy derives from three main sources: the pressure of the industry the company operates in, the impact of the institutions that a company is surrounded by and the resources that a company possesses (Wallner, 2012, p. 12- 13). Peng (2008, p.14) identified the very fundamental four questions in strategy. They are: 1) ‘why do firms differ’? 2) ‘How do firms behave’? 3) ‘What are the main determinants of the scope of a firms’? 4) What are the main determinants of a firm’s success or failure? He elucidated the concept of ‘strategy tripod’ to answer ‘how do firms behave’. According to him, strategy tripod is a framework that states that a competitive strategy as a discipline has three ‘legs’, that are the basic three perspectives; industry-based, resource-based and institution-based views of a firm. Three leading strategy perspectives, namely industry-based view, institution-based view and resource-based view of the firm collectively lead to a strategy tripod. The industry-based view highlights the five-forces affecting an industry and explains that the strategic effort is meant to examine the five competitive forces namely competitive rivalry, threat of entry, threat of substitutes, bargaining power of suppliers and bargaining power of customers. The resource-based view concentrates on strengths and weaknesses internal to a firm, whereas the industry-based view focuses on the opportunities and threats that are external to a firm. Industry-based view thus concentrates on the O and T whereas the resource-based view concentrates on the S and W in the SWOT (Peng, 2008, p. 14). The institution-based view suggests that a firm and its competitive strategy conditions are influenced by the institutions that the firm is surrounded by. The three ‘legs’ of strategy tripod are explained in detail below: Industry-based view The industry-based view, which is pioneered by Michel Porter in early years of 1980s, emphasized that the primary principle of competitive strategy formulation is the relationship that a firm builds with its environment. External factors are the major determinants of a firm’s competitive strategy because these factors not only affect firm’s performance but also its way to achieving competitive advantage (Gao, Murray and Kotabe, 2010). Firms are largely depending on various external industry forces such as threats of substitutes and new entrants, bargaining power of buyers and suppliers and competition rivalry among the major counterparts.