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What is Strategy?

What is Strategy?. Michael E. Porter. Operational Effectiveness is Not Strategy.

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What is Strategy?

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  1. What is Strategy? Michael E. Porter

  2. Operational Effectiveness is Not Strategy • Positioning — once the heart of strategy — is [now] rejected as too static for today’s dynamic markets and changing technologies. According to the new dogma, rivals can quickly copy any market position, and competitive advantage is, at best, only temporary • Only half true! • The root of the problem is the failure to distinguish operational effectiveness from strategy • Management tools have taken the place of strategy Professor Aron S. Spencer

  3. Operational Effectiveness:Necessary but Not Sufficient • Operational effectiveness and strategy are both essential to superior performance…but they work in very different ways • A company can outperform rivals only if it can establish a difference that it can preserve • It must deliver greater value to customers or create comparable value at a lower cost or do both • Overall advantage or disadvantage results from all a company’s activities, not only a few Professor Aron S. Spencer

  4. Operational Effectiveness v. Strategic Positioning Nonprice buyer value delivered High Productivity Frontier (state of best practice) Low Low High Relative cost position Professor Aron S. Spencer

  5. Strategy Rests on Unique Attributes • Competitive strategy is about being different • Examples • Southwest Airlines • IKEA Professor Aron S. Spencer

  6. The Origins of Strategic Positions • Variety-based positioning • Based on a subset of an industry’s products or services • Needs-based positioning • Serving most or all of the needs of a particular group of customers • Access-based positioning • Segmenting customers who are accessible in different ways Professor Aron S. Spencer

  7. Finding New Positions: The Entrepreneurial Edge • Strategic Positions are often not obvious, and finding them requires creativity and insight • New entrants often discover unique positions that have been available but simply overlooked by established competitors Professor Aron S. Spencer

  8. The Connection with Generic Strategies • The bases for positioning – varieties, needs, and access – carry the understanding of those basic strategies (cost leadership, differentiation, and focus) to a greater level of specificity • Avoid being caught between incompatible strategies and positions. Professor Aron S. Spencer

  9. Sustainable Strategic Position Requires Tradeoffs • Trade-offs occur when activities are incompatible • Example: Continental/Continental Lite v. Southwest Airlines • If you try to be everything to everyone, you will end up being nothing to noone Professor Aron S. Spencer

  10. Fit drives both Competitive Advantage and Sustainability • Positioning determines which activities a company will perform, how they are configured, and how they relate to each other • Strategy is about combining activities • The activities fit and reinforce one another Professor Aron S. Spencer

  11. Alternative View of Strategy Professor Aron S. Spencer

  12. Rediscovering Strategy • The Failure to Choose • The Growth Trap • Profitable Growth • The Role of Leadership Professor Aron S. Spencer

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