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What is Strategy?

Michael E.Porter-Harward Business Review

Mohsin Butt

on 25 February 2014

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Transcript of What is Strategy?

Michael E. Porter
What is Strategy?
What is Strategy?
A sustainable strategic position requires trade off:
• Choosing position is not enough to guarantee a sustainable advantage.
• A value able position attracts imitators who are likely to copy it in 1 or 2 way.
 -First, A competitor can reposition itself to match the superior performance.
 -Second and far more common type is straddle. A straddler seeks to match the benefit of successful position while maintaining its existing position.

Operational Effectiveness: Necessary but Not Sufficient
-Similar activities better than rivals.
-Eliminate wasted effort, employ more advanced technology, motivate their employees better.
-Japanese challenge to Western companies.
-New inputs shifts the productivity frontier outward and for everyone when rivals imitate others.

Strategy Rests on Unique Activities!
Choosing a different mix of activities.
Establish a difference that it can preserve.
Performing similar or different activities in different ways.
Example of South West Airline.
Example of Ikea Furniture.

Operational Effectiveness Is Not Strategy!
-Failure of management to distinguish between operational effectiveness and strategy.

-Quick copy of new market positions.

-Productivity, quality,
and speed has produced remarkable tools and techniques.

-Mohsin Zahid Butt
-Bushra Shakil
Presentation By
Creation of a unique and valuable position
Choosing what to do as well as what not to do.
Deciding which target group of customers, varieties, and needs the company should serve

The Origins of Strategic Positions!
Variety-based positioning
specialize in a subset of an industry’s product

Needs-based positioning
groups of customers with differing needs.

Access-based positioning
segmenting customers who are accessible in different ways.
• Example Southeast airline versus Continental airline.
• Trade off occur when activities are incompatible.
• Trade off safeguard from repositioner and straddle.
 Neutrogena soap
• Trade off occurs because of three reasons.
 Inconsistency in image or reputation
 Activities(e.g ikea, overdesigned or under designed,)
 Limit in internal coordination and control.
• False trade off between cost and quality
• Simultaneous improvement of cost and differentiation
 Honda and Toyota
• Manager noticed no trade off then no advantage
 Continental airline

Fit drives both competitive advantage and sustainability
• Positioning choice determine that
 Which activities company will perform
 How it will configure individual activities
 And how activities relate with one another
• Example of south airline that how it coordinate activities
• Fit lock out imitator by creating chain of activities
• Type of fit
Manager have tuned to
 Core competency
 Critical resources
 Key success factor

1. Simple consistency
 Vanguard low cost strategy

2. Activities are reinforcing E.g. Neutrogena soap in hotels

3. Optimization of efforts Gap a retailer of casual clothes

• All 3 fits show importance of coordination of whole system
• Fit lead to not only competitive advantage but also sustainability
• Whole new setup requirement for
 Straddler
 Repositioners
 New entrants
• Poor performance in 1 activity lead to poor performance in others and vice versa.
• When activities complimenting one another, then rival get less benefit.
• Strategic position should have horizon of decades or more.
• Frequent shift in positioning are costly.

Rediscovering strategy
 The failure to choose
 Why do so many companies fail to have a strategy?
 Why do managers avoid making strategic choices?
 Commonly, threats to strategy are seen to originate from outside a company.
 However, a greater threat to strategy often comes from within.

A sound strategy is under mind by:
A misguided view of competition
Mangers have become confused about the necessity of making choices. By hyper competition managers increase its likehood by imitating every thing about their competitor.
-Organization Failure
OE is seductive and so caught up in the race for OE managers simply do not understand the need to have strategy.
-Desire to Grow
Trade-offs and limits appear to constraint growth and mangers are constantly tempted to take incremental steps.

2. The growth Trap
• Extending their product lines.
• Adding new features
• Popular services
• Matching process
• Making acquisition
3. Profitable growth
Deepening a strategic position by:
• Distinctive activities
• Strengthen fit
• Communicating strategy in better way
Globalization often allows growth that is consistent with the company’s strategy.

 The role of leadership
• The challenge of developing or reestablishing a clear strategy depend on leadership.
• Strong leaders willing to make choices or essentials
• Setting limits is another function of leadership
• Strategy requires constant discipline and clear communication which the leader should ensure.

Harward Business Review
Full transcript