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Essence of Strategy

In: Social Issues

Submitted By gavesh2309
Words 1180
Pages 5
According to Michael Porter (1996), the essence of strategy is choosing to perform activities differently than rivals do. Discuss.
Strategy is the direction and scope of an organization over the long term which achieves advantages for the organization through its configuration of resources within a challenging environment to meet the needs of markets and to fulfill stakeholder expectations.
According to Porter, the goal of strategy is to achieve a “superior long-term return on investment.” Economic value is created when customers are willing to pay a price for a product or service that exceeds the cost of producing it.
In many industries, hypercompetition is a self-inflicted wound. The root of the problem is the failure to distinguish between operations effectiveness and competitive strategy. Both are essential to superior performance and are the primary goal of any enterprise but they work in different ways.
Operational effectiveness (OE) means performing similar activities better than rivals perform them. OE includes but is not limited to efficiency. It refers to any number of practices that allow a company to better utilize its inputs, for e.g, reducing defects in products or developing better products faster.
Differences in OE among companies are pervasive. Some companies are able to get more out of their inputs than others because they eliminate wasted effort, employ more advanced technology, motivate employees better, or have greater insight into managing particular activities or sets of activities. Such differences in OE are an important source of difference in profitability among competitors because they directly affect relative cost positions and level of differentiation.
For at least the past decade, managers have been pre-occupied with improving OE. Through programs such as Total Quality Management (TQM), time-based competition and benchmarking, they...

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