Thompson and Strickland Strategic Management Model

Michael Porter had major drawbacks of his Porter’s Five Forces Model. To solve the situation, Thompson and Strickland introduce another new strategic management model. This new model is called the Thompson and Strickland Strategic Management Model. The Thompson and Strickland strategic management model has been developed to analyze the industry, including competition. However, there is described the Thompson and Strickland strategic management model and its important principles.

Thompson and Strickland Strategic Management Model:


The seven factors of the Thompson and Strickland strategic management model are as follows. Such as:-

  1. Dominant Economic Features of the Industry
  2. Sources of Competitive Pressures and Strengths of Competitive Forces
  3. Driving Forces in the Industry
  4. Market Position of the Competitors
  5. Strategic Moves of the Competitors
  6. Industry’s Key Success Factors
  7. Finally, the industry Analysis Plan.

An analysis of these factors of Thompson and Strickland strategic management model reveals the industry’s competitive structure. Let’s discuss the factors one by one. The information generated through the analysis of these factors of Thompson and Strickland strategic management model would build an understanding of a firm’s surrounding environment and form the basis for the corresponding strategy to altering industry situations and competitive principles.

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Thompson and Strickland Strategic Management Model

Dominant Economic Features of the Industry:


It is the first principle of Thompson and Strickland strategic management model. And industry’s economic features are important because their implications for strategy making are great. Economic features of an industry generally include the scope of competitive rivalry (regional, local, etc.); market size; position and market growth rate; a state in the life cycle (rapid growth, takeoff, and early development, decay and decline, etc.); the number of companies industry; the number of customers; the extent of backward linkage or forward linkage (i.e., degree of vertical integration in the industry); ease of exit from the industry; ease of entry into the industry, level of differentiation of competitors products; types of distribution channels; technology or innovation; opportunities to realize economies of scale by the companies; capacity utilization; and industry profitability.

Thompson and Strickland strategic management model say that the industry’s economic features are relevant to managerial strategy making in various ways. Here are some examples. Market size’s strategic importance is that small markets do not generally attract large competitors, but big marketplaces do it. Entry barriers’ strategic importance is that high barriers shield current businesses’ market situation and profits, and low barriers invite more and more potential competitors to enter the industry. Similarly, gig capital requirements create barriers to the entry of potential competitors.

Sources of Competitive Pressures and Strengths of Competitive Forces:


It is the second principle of Thompson and Strickland strategic management model. An important component of industry analysis is the sources of competitive pressures and each competitive force’s strength. An understanding of the competitive character of the industry helps managers develop a successful strategy. Thompson and his colleague recommended the use of Michael Porter’s Five Forces Model to explore competitive compressions and the strong point of each force of race. Porter identified the five competitive forces that the state of competition in an industry. As already discussed, the 5 forces are suppliers’ bargaining power, the threat of new entrants, threat of substitute products, buyers’ bargaining power, and rivalry among the existing firms.

Driving Forces in the Industry:


The industry’s driving forces are the third one of seven forces (Thompson and Strickland strategic management model). Economic characteristics say very little about the ways in which the environment may be changing because of new developments in the industry. The industry takes place in new developments because important forces drive the suppliers, customers, and competitors to alter their actions. These forces in the industry are the major underlying causes of changing competitive conditions in the industry. These are called driving forces.

Depending on the industry’s nature, there may be various drivers of the industry and competitive change. The driving forces (Thompson and Strickland strategic management model) create pressure on competitors, suppliers, and customers to change their actions. In the industry’s competitive condition, they tend to change. Most of them originate in the industry environment, although driving forces are not uncommon in the general environment.

In Thompson and Strickland strategic management model, the popular force of driving changes in the long-term industry growth rate, marketing innovation, product innovation, technological change, changes in buyer demographics, entry or exit of major firms, diffusion of technological know-how, increasing globalization of the industry, changes in cost and efficiency, emerging buyer preferences, government policy changes, changing attitudes and lifestyles, etc.

Initial recognition of driving forces is conceivable through methodically and regularly perusing the industry situation and other outside issues, known as Environmental Scanning. This qualitative method of examining outward influences involves studying and monitoring present events, constructing scenarios, and identifying the driving forces. Many large companies, such as Coca-Cola, Motorola, and Shell Oil, employ environmental scanning continuously.

Under the Thompson and Strickland strategic management model, in any industry generally, you can adopt the following steps for the analysis of the driving forces:

  • Scan the environment and identify the driving forces. You need to identify the powerful driving forces that have dramatic impacts and less strong driving forces specific to your industry but have moderate impacts.
  • Scrutinize the driving forces systematically and define whether and how they are impelling the industry landscape, i.e., how they are making the industry attractive or unattractive or less attractive. This step is about the assessment of the impacts of the driving forces.
  • Finally, develop a strategy taking into account the impacts of the driving forces. At this step, you will determine the possible strategy adjustments needed to deal with the impacts of the driving forces.

Market Position of the Competitors:


The fourth force of Thompson and Strickland strategic management model is the market position of the competitors. In the industry, a competitor’s market position has a demeanor on the overall completion. And so, the forces of competitive forces need to be examined. Such examination is significant to determine the key foundations of competitive forces and how strong they are. The effort is created to study the marketplace situation of opposing companies.

One technique for revealing the competitive (market) positions of industry participants is strategic group mapping. It is most beneficial when a trade has so many entrants that it is not applied to scrutinize each one in seriousness—strategic group mapping endeavors to determine the strategic group for a company’s product. So, naturally, the question arises: what is a strategic group?

Strategic Group:

In Thompson and Strickland strategic management model, a strategic group is an important term. Businesses in an industry often are different concerning several issues: for example, distribution channels, quality of products, market segments, pricing policy, customer services, technological leadership, and booster policy and upgrade policy, etc. these differences lead to different groups consisting of a limited number of companies in the same industry. The same group companies are found to follow the same basic strategy, and some follow a strategy different from the companies in other groups. These groups are called strategic groups. The participants that trail similar strategic approaches and have parallel places in the market create a strategic group. For example, although the Maruti car is in the automobile industry, it is not a Civic Honda or Prado competitor. Subaru is not competing with Mercedes Benz or BMW.

You will find a resemblance in the companies in the same strategic group under the Thompson and Strickland strategic management model. Such as:-

  • Using the same kind of distribution channels
  • Selling at the same price or quality range.
  • Comparable product line breadth
  • On identical technological approaches
  • Offering buyers similar services and technical assistance

The implications of strategic groups mention here. Such as:-

  1. A company’s closest competitors are those in its strategic groups, not those in other strategic groups. A major threat to a company’s profitability can come from within its own strategic group.
  2. Porter’s five forces model can all vary in intensity among different strategic groups within the same industry.

Read more: Steps of SWOT Analysis in Strategic Management

Strategic Moves of the Competitors:


The fifth force of Thompson and Strickland strategic management model is it. Strategic moves refer to strategic steps or actions undertaken by a company. Every company must be informed of the strategic moves of its competitors. An analysis of their moves systematically, the competitors’ strategic moves can be obtained through information. For examples:-

  1. Identifying competitor’s strategies
  2. Watching the actions of the competitors
  3. Understanding their strengths and weakness and
  4. Lastly, anticipating what moves they will make next.

After scouting the appropriate counter-moves, to defeat the competitors, they can plan their own actions. It is simply impossible to outcompete a competitor without monitoring their actions and predicting their future moves.

When Thompson and Strickland’s strategic management model applies in a company, managers of a company can gather information about competitors’ strategies by the following things. Such as:-

  • Monitoring what the management of the competing companies is saying about their plans;
  • Trying to understand whether the competitor’s recent moves are offensive or defensive.
  • Directly visiting the competitor’s offices to get information about prices, wage, and salary levels, the introduction of new products, etc.
  • Searching through garbage dumpsters outside competitor’s officers.
  • Pumping competitor’s representatives at trade shows or exhibitions or trade fairs.

Read more: What is SWOT Analysis?

Industry’s Key Success Factors:


It is the sixth force of Thompson and Strickland strategic management model. There are sure factors in every single industry that fix a product’s achievement in the marketplace. These may comprise characteristics of the product, competitive capabilities, resources of the company, etc., these factors name is ‘Key Success Factors (KSF).’ A sound strategy incorporates industry key success factors. They are prerequisites for industry success. That is why entirely companies in the industry must recompense adjacent consideration to the KSF. For instance, Key Success Factors in the juice industry comprise the strong network of intermediaries, full utilization of juice-producing capacity, unique flavor and taste, etc… Even wrapping can be an achievement issue if the juice is battered to new groups.

KSF habitually diverges from industry to industry under the Thompson and Strickland strategic management model. The deviations happen mostly because of vagaries in the driving forces and competitive conditions in the industry. These certifications that the businesses’ managers need to give watchful consideration for detecting the foremost KSF and duck the slight ones.

More: Value Chain Analysis Model

Industry Analysis Plan:


The final and seventh force of Thompson and Strickland strategic management model is the industry analysis plan. Strategic makers in a company must be able to give the answer to the question: “Is the industry attractive, and what its prospects for above-average profitability are?” with the purpose of reply to this query, strategists’ evaluate the whole industry condition and develop rational inferences about the relative attractiveness or unattractiveness of the industry. The factors that they usually analyze for assessing industry attractiveness include. Such as:-

  • Industry’s growth potential
  • Favorable or unfavorable impact by the prevailing driving forces
  • Potential entry or exit of major firms
  • Stability and/or dependability of demand
  • The possibility of competitive forces becoming stronger or weaker
  • The severity of problems or issues confronting the industry as a whole
  • Lastly, degrees of risk and uncertainty in the industry’s future.

These are the seven forces of Thompson and Strickland strategic management model. The Thompson and Strickland strategic management model has been developed to analyze the industry, including competition. Thompson and Strickland strategic management models are the most important in the different strategic management models.

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