...What is Strategy? – Michael E. Porter I. Operational effectiveness is not strategy So in the quest to beat competition managers focus on improving quality, speed and productivity all related to operational effectiveness. But in this way, they move further away from viable competitive positions which can only be achieved by an appropriate strategy. Positioning which was once the way to go about beating competition is now rejected, since its too static. Rivals can easily copy the market position and competitive advantage. However, that is not entirely true as hypercompetition is a self-inflicted wound. It is important to watch out for what your competitors are doing, but improving operational effectiveness alone is not enough, and that cannot be your only strategy. Operational effectiveness and strategy are both important for superior performance which is what a firm aims for. A company can beat rivals if it can stand out, establish a difference it can preserve. Basically a company can either provide greater value to customers or comparable value at low prices, or both. Delivering greater value means higher unit prices, greater efficiency means lower unit costs. Cost arises from performing activities and cost advantage comes from performing activities more efficiently than your competitors. This can be in the choice of the activity or how the activity is performed. So activities are what creates competitive advantage. Operational effectiveness means performing similar...
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...Paper name: “What is Strategy?” Author: Michael E.Porter During the study process i have red few articles on company strategy planning importance and the process of it's implementation. The paper which is chosen as the base for this work goes under the title “ What is strategy?”, contributed by Michael E. Porter. The main idea of this paper is the importance of company's strategy and operation effectiveness for reaching the corporate goals. The author notes that both are essential for superior performance although they works in a different way. The difference of this two concerts is that operation effectiveness means performing similar activities better than the rival does, while strategy means perform different from the rival activities, or the similar activities in different way. Moreover, the article describes the ways of company activities imitations that could be used by the rivals. The author presents the number of tools and activities that should be regarded for strategy sustainability: unique activities, trade-offs and fit. The success of company strategy depends on entire system of activities. To my point of view, the best way to demonstrate understanding of red materials and my own vision on article presented concepts is to demonstrate good examples of perfect implementation of strategy. I tried to find some examples of strategies that become determined in companies success. The strategy highest priority is to be different from others, to have...
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...DISCUSSION OF MICHAEL E. PORTER’S “WHAT IS STRATEGY?” Discussion of Michael E. Porter’s “What is Strategy?” Key Issues In today’s business, managers are trained and encouraged to focus on effectiveness and benchmark all activities in their business segment. Major goals for department heads are to achieve goals, which are often defined as measurable; for instance expenses, revenues, production numbers, activities per day, and the like. By doing so a company is thought to stay flexible enough to react instantly to changes in the market. Furthermore, positioning a company is considered as being too static. Another belief is that competitive advantages are temporary only at best and cannot be sustained. Porter (1996) describes this current business culture as dangerous, based on half-truths, and believes that it ultimately will lead companies down a path a mutual destructive competition. The main failure is to distinguish between effectiveness and strategy. While effectiveness is necessary it alone is not sufficient to achieve sustainable profitability. This can only be realized with a company-wide strategy. A strategy, which defines unique activities will differentiate a firm from its competitors and position the company strongly in the market. A strategy, which is company-wide, will ensure that these unique activities create a fit by complementing and reinforcing each other. Porter (1996) defines the key issues of today’s business philosophy as follows: • Failure to...
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...What’s Strategy? Introduction The ability to sustain the business in the market is definitely a tough job. That explains why behind every company there is a strategist to come up with innovative ideas to achieve specific goals. The need for a structural organization to grow, a plan such as a unique strategy is needed. A strategy is a unique plan, a long term plan for a structural organization to achieve a targeted goal. It involves unique activities that enhance the organization to outshine from the competitors and still preserve it. There are different strategies to take into consideration but the definition of strategy that this essay will outline here focus on three questions below: 1. What forms of value do organization wants to create? 2. How to create that value? 3. How to manage that value? In answering these three questions we will then have a better understanding of what is strategy. What forms of value do organization wants to create? Firstly, why do organization wants to create something valuable to consumer? The value benefit the consumers, therefore organization create the value consumers’ desire. Value can be in a form of service, a product or other different forms of value. A market research need to be done to have a better understanding of the consumers’ needs. After the above source being gathered, organizations are able to match the consumers’ needs with the newly created value. A win-win situation should be established for consumers...
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...Case 1 – (information technology the internet and changing strategies in the fashion world) Question 1. What business model and strategies is Zara pursuing? Answer – Zara uses IT to manage the interface between its design and manufacturing operations efficiently. Zara’s designers closely watch the trends in the high fashion industry and the kind of innovations that the major houses are introducing. Then, by using their information system, which are linked to their supplier and the low cost manufacturers the company uses abroad, they can create a new collection in only five weeks and these clothes can then be made in a week and delivery to stores soon after where major fashion houses take six or more month for design. IT also gives Zara instant feedback on which of its clothes are selling well and which countries. Question 2. How has Zara’s business model changed the nature of industry competition? Zara’s business model changed the nature of industry competition like many of other design and retail companies have awakened to the threat posed by companies like Zara. Clothing designer like Ralph Lauren and Tommy Hilfiger have been forced to adopt similar approaches, bringing out new clothes collections several times a year and instituting price markdowns to sell inventory quickly. Question 3. What new strategies have emerged in the fashion industry as a result? Answer - Increasingly, many companies are realizing that a competitive advantage and superior profitable cannot be...
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...NAME: NGO VU GIA LINH ID: BABAIU11026 GROUP 1 ASSIGNMENT 1 Why operational effectiveness is not strategy?? The success of organizations is critical by operational effectiveness and strategy because it required better productions than competitors. The flexibility in organization always changes the business and use for benchmarking of measure success but OE can’t be called strategy for many reasons. OE mentioned how best the company can perform in specific activities to win the competitors. The organization achieves OE by doing the same tasks but compete who does the best. In contrast, strategy occurs when something new is created. Organization can implement both similar and same things but bring in different manners from competitors. It can be innovation, creation or maintenance of sustainable advantage in long term that competitors can’t copy. In the other word, strategy success is when organization creates some unique actions which bring value for customers better and it can’t be duplicated. What are the unique activities strategy needed to rest on? Why a sustainable strategic position requires trade-offs? Unique activities strategy included three positions: Variety-based positioning, Needs-based positioning and Access-based positioning. The first one is based on the more appreciated decision of customers with availability of various product or service than customers segments. In contrast, need-based positioning completely based on customers’ segments. It mentions...
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...Michael Porter is associated with the positioning school (Mintzberg 2002:23), who‟s analytical approach sees strategy making mainly based on a process to identify drivers(forces) of intra-industry competition and its corresponding barriers. His reasoning is based on the assumption that a company who deliberately choose a position within an industry and at the same time is able to combine activities in a different fashion, can create sustainable competitive advantages that will lead to profitability and with it sustain competition. Aside this more general position of Porter, in an article from 1996, he asks “What is Strategy” and discussed operational efficiency in connection with strategy making and he advised that those two things should not (can not) be used interchangeably. Below their is a summary of Porter‟s main arguments from his article and what he sees as main components on strategy and how to distinguish between operational efficiency and strategy. SUMMARY The ability the make an informed decision about how, when and where to target a customer group, facilitate resources and set objectives(limits) makes the difference between a manager who thinks from a strategic perspective in light of what might emerge in future. Anticipating those movements into current decision-making helps to set a stage to create sustainable advantages. Porter argues that positioning is still a notable way to shape advantages within a company and sees hypercompetition as rather...
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...disappointment of administration to recognize operational effectiveness and technique: Management instruments have taken the place of strategy. 1) Operational effectiveness is performing similar exercises superior to anything opponents perform them. Operational effectiveness incorporates however is not constrained to effectiveness. It refers to numerous practices that permit an organization to better use its inputs. Porter expresses that an organization can beat opponents just in the event that it can set up a distinction it can protect. It must convey more prominent worth to customers or make comparable value at a lower cost, or do both. Nonetheless, Porter argues that most organizations today contend on the premise of operational effectiveness. The productivity frontier is the aggregate of all current best practices at any given time or the greatest quality that an organization can make at a given expense, utilizing the best accessible technologies, abilities, administration methods, and acquired inputs. Hence, when an organization enhances its operational effectiveness, it moves toward the frontier. The frontier is always moving outward as new advancements and administration methodologies are created and as new inputs get to be accessible. To stay aware of the persistent moves in the productivity frontier, managers have received strategies like constant change, strengthening, learning organization, and so on. Rivalry in view of operational effectiveness alone is...
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...S8341201A BAM 1st Intake UMSD38 Strategic Management What is Strategy? Introduction Before we look into the above topic, we always need to question ourselves on why do we need strategy? To answer this question, we have to look into the values that organizations seek to create for their group of consumers. We will also look into how values are created and managed. Competition, an ongoing and endless journey for all organizations. Marketers got to constantly look out the market trend and changes as every action taken by or within the industry or any external factors will contribute a significant impact to each and every companies within the country, region or internationally. Companies will need to need understand and analyze on how to be proactive and reactive to such situations and best plan on how to respond and remain competitive or even better than what others are doing. However, many companies now constantly benchmarked themselves with competitors and outsourcing to strengthen their productivity, quality and speed as it is now a key fundamental to gain efficiencies to stay ahead of the competition. Never do the organizations and companies aware that the path way is leading to a mutually destructive competition. In today competitive world, different marketing strategy has been used by organizations and companies over the past thirty years. Throughout this discussion, we will also look into the different types of strategies adopted by different companies & organizations...
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...What is strategy? Strategy is the creation of a unique and valuable position, involving a different set of activities such as: * Few needs of many customers * Broad needs of few customers * Broad needs of many customers in a narrow market Today, in this globalized world, each and every sector of economy has been integrated into a single platform by technology. The businesses and markets are becoming dynamic and advancement in technology have questioned the sustainability of competitive advantage. All the industries and organizations all over the world are under tremendous pressure to improve productivity, quality and speed. In order to manage these factors, managers are using the tools such as TQM, benchmarking, and re-engineering. Operational improvements are taking place but it has not been able to provide sustainable profitability to the organizations. And gradually, these tools of measurement have taken the place of strategy. In his five-part article, Michael Porter explores how that shift has led to the rise of mutually destructive competitive battles that damage the profitability of many companies. As managers push to improve on all fronts, they move further away from viable competitive positions. Porter argues that operational effectiveness, although necessary to superior performance, is not sufficient, because its techniques are easy to imitate. In contrast, the essence of strategy is choosing a unique and valuable position rooted in systems of activities...
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...effectiveness is representative of outperforming competitors on similar activities such as product development or product delivery. It is beneficial to better allocate the resources and capabilities as well as to maintain the competitive advantages to achieve more profits. While operational effectiveness is not equal to strategy and the drawback of being imitated by rivals will threaten the companies’ best practices. Therefore to keep the sustainable competitive advantage companies should apply strategic positioning principles by retaining the most valuable and distinctive aspect of the company. There are three disciplines of strategic positioning: 1. Being different: Establish differences among competitors, which indicates the company either performs similar business activities differently or performs different activities to enhance the value perception to its customers. The sources of strategic positions range on the basis of variety need or access. 2. Making trade-offs: Strategic positions always attract rivals to imitate the success and reposition themselves to gain more benefits. Trade-offs are needed to preserve sustainability because by cutting down what the company could offer, it prevents competitors from copying the value or position because this will undermine the rivals’ core values. 3. Creating fit: Fit means to link and reinforce each activity to each other. Rivals could not easily to find a match when several activates mutually affect each other, thus it ensures...
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...Review of What Is Strategy Introduction The article---‘What is strategy’ is mainly concerned with exploring the definition of the strategy by distinguishing ‘operational effectiveness’ from ‘strategy’. To explore the real meaning of strategy, the author defines this term from three different perspectives: strategic position, trade-offs and fit. Main part Understanding of the article Some concepts of this article are based on theoretical foundations. Firstly, operational effectiveness is based on the Five Forces Frame Work (Porter, 2008), as its definition ‘performing similar activities better than rivals perform them’ (Porter, 1996) links with external environment, especially for the competitors. Another concept ‘strategic position’, performing different activities from rivals’ or performing similar activities in different ways (Porter, 1996), is related to RBV (Barney, 1991), because both them emphasize on the distinctiveness and uniqueness. The other two concepts ‘trade-offs’ and ‘fit’ are based on VRIO criteria (Barney, 2007), which is the basis of the company to generate sustained competitive advantage. The V of VOIR, value, is consistent with ‘trade-offs’, as they indicate that company should decide what to do and not to do. The ‘fit’ is line with the ‘I-inimitability’, since both of them stress that interlinkages among corporate activities makes difficult for organization to imitate. Wider context of strategy theory Besides, this article could also be...
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...What is Marketing Strategy? Marketing strategy is defined by David Aaker as a process that can allow an organization to concentrate its resources on the optimal opportunities with the goals of increasing sales and achieving a sustainable competitive advantage. Marketing strategy includes all basic and long-term activities in the field of marketing that deal with the analysis of the strategic initial situation of a company and the formulation, evaluation and selection of market-oriented strategies and therefore contributes to the goals of the company and its marketing objectives. Effective marketing starts with a considered, well-informed marketing strategy. A good marketing strategy helps organization define vision, mission and business goals, and outlines the steps need to take to achieve these goals. Marketing strategy affects the way organization run entire business, so it should be planned and developed in consultation with team. It is a wide-reaching and comprehensive strategic planning tool that: * Describes business and its products and services * Explains the position and role of products and services in the market * Profiles customers and your competition * Identifies the marketing tactics will use * Allows building a marketing plan and measuring its effectiveness. A marketing strategy sets the overall direction and goals for organization marketing, and is therefore different from a marketing plan, which outlines the specific actions you will take...
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...Business Strategies 14.1 Introduction business strategy describes how a particular business intends to succeed in its chosen market place against its competitors. It therefore represents the best attempt that the management can make at defining and securing the future of that business. A business strategy should provide clear answers to the questions: A s s s s What is the scope of the business (or offering) to which this strategy applies? What are the current and future needs of customers and potential customers of this business? What are the distinctive capabilities or unique competence that will give us competitive advantage in meeting these needs now and in the future? What in broad terms needs to be done to secure the future of our business? These questions should have been addressed during the process of strategy formulation. The processes and techniques and processes described in Part III may have contributed to answering them. In this chapter, we are concerned with some of the practical issues that arise when thinking and analysis leads into action and commitment. We are concerned also with what makes the difference between good and indifferent business strategies. We suggest that a good business strategy will meet six tests of quality: s s s s s s It will be correctly scoped. It will be appropriately documented. It will address real customer needs. It will exploit genuine competencies. It will contribute to competitive advantage...
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...Strategy evaluation is an attempt to look beyond the obvious facts regarding the short-term health of a business and appraise instead those more fundamental factors and trends that govern success in the chosen field of endeavor. Strategy can also be defined as a set of objectives, policies and plans that, taken together, define the scope of the enterprise and its approach to survival and success. Alternatively, we could say that the particular policies, plans, and objectives of a business express its strategy for coping with a complex competitive environment. A good business strategy can be broadly categorized into functions like consistency, consonance, advantage, and feasibility. A strategy that fails to meet one or more of these criteria is strongly in suspect. It fails to perform at least one of the key functions that are necessary for the survival of the business. Inconsistency in business is not simply a flaw in logic. A key function of strategy is to provide coherence to organizational action. A clear and explicit concept of strategy can foster a climate of tacit coordination that is more efficient than most administrative mechanisms. Organizational conflict and interdepartmental bickering are often symptoms of managerial disorder, but may also indicate problems of strategic inconsistency. It is no exaggeration that to say that competitive strategy is the art of creating or exploiting those advantages that are most telling, enduring, most difficult to duplicate. Competitive...
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