Michael E. PorterHarvard Business

School

What is Strategy? Harvard Business ReviewNovember – December, 1996

Operational effectiveness

OE :practices, reducing defects, developing products faster

STRATEGY:different activites, different ways

1. Operational Effectiveness is no Strategy

“A company can outperform rivals only if it can establish a difference that it can preserve.”

Michael Porter, What is Strategy?

With OE staying ahead of rivals gets harder and harder

Competitive Advantagerequires Sustainable Difference

“Competitive Strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value.”

Michael Porter, What is Strategy?

2. strategy rests in unique activities

SouthWest airlines

IKEA

Unique set of activities

Strategic positions can be based on:Customers’ needsCompany’s products or servicesWay of Accessing Customers

The dimensions of aStrategic Position

Choosing a unique position, does not guarantee a sustainable advantage.

Imitation –STRADDLINGContinental Airlines

3. A Sustainable Strategic PositionRequires Trade-offs

Occurs when activities are in compatible Continental Airlines Trade-offs create and limit what company

offers. Honda- Civic, Toyota- Corollapositive Trade-offs Neutrogena

Trade-offs

“Strategy is about combining activities”

Michael Porter, What is Strategy?

Fit locks out imitators by creating a chain as strong as its strongest link

What is southwest's core competence?One activities cost is lowered by other

4. Competitive Advantagerequires “fit” among activities

The growth trap: desire to grow blurs strategic position Maytag Corp: washers and dryers Neutrogena :mass merchandising ,variety

of products

Profitable growth: distinctive

5. REDISCOVERING STRATEGY

“Strategy renders choices about what not to do as important as choices about what to do.”- Michael Porter, What is Strategy?