WHAT IS STRATEGY? BY Michael  E.   Porter Presented by: IDREES WARIS  3095
Operational Effectiveness <ul><li>It is the process of producing faster or with fewer inputs and defects than rivals. </li...
Strategic positioning <ul><li>Strategic positioning means doing things different from competitors. </li></ul><ul><li>Strat...
↓   costs +  ↑  prices  =  ↑  profitability
OE is necessary but not sufficient:  Weaknesses <ul><li>Competitors can quickly imitate management techniques, technologie...
<ul><li>Strategy Rests On Unique Activities </li></ul>
STRATEGY <ul><li>“ Competitive strategy is about being different” </li></ul><ul><li>Doing thinks differently than rivals d...
Competitive  Advantage  Examples  <ul><li>Strive to be the industry’s low-cost provider </li></ul><ul><ul><li>Southwest Ai...
Competitive  Advantage  Examples (cont)  <ul><li>Develop expertise, resource strengths, and capabilities not easily imitat...
The Origins of Strategic Positions <ul><li>Strategic positions can be based on: </li></ul><ul><ul><li>1)  Variety based po...
Variety based positioning <ul><li>Based on the choice of product or service varieties rather than customer segments. </li>...
Need based positioning (serving board needs of few customers) <ul><li>Serving the most or all the needs of a particular gr...
Access based positioning <ul><li>Segmenting customers who are accessible in different ways. </li></ul><ul><li>Access can b...
<ul><li>A Sustainable Strategic Position Requires Trade-offs </li></ul>
Unique position is not enough  to guarantee a sustainable  advantage. <ul><li>A competitor can choose to reposition itself...
Trade off  <ul><li>Trade off occur when the activities are incompatible.(mismatch) </li></ul><ul><li>Trade off create the ...
Trade off arises for 3 reasons <ul><li>Inconsistencies in image or reputation </li></ul><ul><li>Example: ivory soap, inexp...
Trade offs <ul><li>Trade-offs create the need for choice and protect against re-positioners and straddlers.  </li></ul><ul...
<ul><li>Fit drives both sustainability and competitive advantage </li></ul>
Operational effectiveness <ul><li>Operational effectiveness is about achieving excellence in individual activities. </li><...
Sustainable Competitive Advantage <ul><li>Unique competitive position for a company. </li></ul><ul><li>Activities tailored...
Three TYPES OF FIT <ul><li>Simple consistency </li></ul><ul><li>Activities are reinforcing </li></ul><ul><li>Optimization ...
Simple consistency <ul><li>Consistency between each activity and the overall strategy. </li></ul><ul><li>Example: vanguard...
Activities are reinforcing <ul><li>Fit occur when the activities are reinforcing. </li></ul><ul><li>Example: Neutrogena, m...
Optimization of effort <ul><li>Coordination and information exchange across activities to eliminate redundancy and minimiz...
Fit  and sustainability <ul><li>Strategic fit among activities is fundamental not only to competitive advantages but also ...
Rediscovering strategy <ul><li>Failure to Choose: </li></ul><ul><li>External changes can pose a threat to a company’s stra...
The Growth Trap <ul><li>Companies often grow by : </li></ul><ul><ul><li>Extending their product lines ( e.g.: Neutrogena e...
Profitable Growth <ul><li>Deepening a strategic position by: </li></ul><ul><ul><li>Distinctive activities </li></ul></ul><...
What should companies and leaders do ? <ul><li>They should reevaluate their strategies and challenge themselves to start o...
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Strategy by idrees waris IUGC

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  • Strategy by idrees waris IUGC

    1. 1. WHAT IS STRATEGY? BY Michael E. Porter Presented by: IDREES WARIS 3095
    2. 2. Operational Effectiveness <ul><li>It is the process of producing faster or with fewer inputs and defects than rivals. </li></ul><ul><li>How is achieved ? </li></ul><ul><li>Eliminate wasted efforts. </li></ul><ul><li>Employ advanced technology. </li></ul><ul><li>Motivated employees better. </li></ul><ul><li>Greater insight into managing particular set of activities. </li></ul><ul><li>Operational effectiveness is necessary to compete but not sufficient to win. </li></ul>
    3. 3. Strategic positioning <ul><li>Strategic positioning means doing things different from competitors. </li></ul><ul><li>Strategic position are often not obvious and finding them requires creativity and insight. </li></ul>
    4. 4. ↓ costs + ↑ prices = ↑ profitability
    5. 5. OE is necessary but not sufficient: Weaknesses <ul><li>Competitors can quickly imitate management techniques, technologies, input improvements and superior ways to meet customer’s needs. </li></ul><ul><ul><li>Eg: Japanese companies (1970-1980) enjoy substantial cost & quality advantages (productivity frontier). Now they need to learn strategy. </li></ul></ul>
    6. 6. <ul><li>Strategy Rests On Unique Activities </li></ul>
    7. 7. STRATEGY <ul><li>“ Competitive strategy is about being different” </li></ul><ul><li>Doing thinks differently than rivals do. </li></ul><ul><li>So, strategy is not serving customers but serving them better than others do by deliberately choosing a set of activities to deliver a unique mix of value . </li></ul><ul><li>Example: southwest airline. </li></ul>
    8. 8. Competitive Advantage Examples <ul><li>Strive to be the industry’s low-cost provider </li></ul><ul><ul><li>Southwest Airlines </li></ul></ul><ul><ul><li>Wal-Mart </li></ul></ul><ul><li>Outcompete rivals on a key differentiating feature </li></ul><ul><ul><li>Johnson & Johnson – Reliability in baby products </li></ul></ul><ul><ul><li>Rolex – Top-of-the-line prestige </li></ul></ul><ul><ul><li>Mercedes-Benz – Engineering design and performance </li></ul></ul>
    9. 9. Competitive Advantage Examples (cont) <ul><li>Develop expertise, resource strengths, and capabilities not easily imitated by rivals </li></ul><ul><ul><li>FedEx – Next-day delivery of small packages </li></ul></ul><ul><ul><li>Walt Disney – Theme park management and family entertainment </li></ul></ul><ul><ul><li>Toyota – Sophisticated production system </li></ul></ul>
    10. 10. The Origins of Strategic Positions <ul><li>Strategic positions can be based on: </li></ul><ul><ul><li>1) Variety based positioning (product/services) </li></ul></ul><ul><ul><li>2) Need based positioning ( Customers’ needs) </li></ul></ul><ul><li>Way of accessing customers ( serving the broader needs of customer in a narrow market) </li></ul>
    11. 11. Variety based positioning <ul><li>Based on the choice of product or service varieties rather than customer segments. </li></ul><ul><li>feasible only when a company can best produce particular products or services using distinctive sets of activities. </li></ul><ul><li>Example: jiffy lube international, specializes in automotive lubricants and does not provide other maintenance services. </li></ul>
    12. 12. Need based positioning (serving board needs of few customers) <ul><li>Serving the most or all the needs of a particular group of customers. </li></ul><ul><li>It is based on targeting a segment of customers </li></ul><ul><li>Example: IKEA seeks to meet all the home furnishing needs of its target customers, not just a subset of them. </li></ul>
    13. 13. Access based positioning <ul><li>Segmenting customers who are accessible in different ways. </li></ul><ul><li>Access can be a function of customer geography or customer scale or of anything that requires a different set of activities to reach customers in the best way. </li></ul><ul><li>Example: Carmike cinemas </li></ul>
    14. 14. <ul><li>A Sustainable Strategic Position Requires Trade-offs </li></ul>
    15. 15. Unique position is not enough to guarantee a sustainable advantage. <ul><li>A competitor can choose to reposition itself to match the superior performer. </li></ul><ul><li>A competitor can seek to match the benefits of a successful position while maintaining its existing position (known as straddling). </li></ul><ul><li>Example: continental airlines decided to straddle. </li></ul>
    16. 16. Trade off <ul><li>Trade off occur when the activities are incompatible.(mismatch) </li></ul><ul><li>Trade off create the need for choice and protect against repositioners and straddlers. </li></ul><ul><li>Example: Neutrogena's marketing strategy looks more like a drug company’s than a soap maker’s. </li></ul>
    17. 17. Trade off arises for 3 reasons <ul><li>Inconsistencies in image or reputation </li></ul><ul><li>Example: ivory soap, inexpensive soap. </li></ul><ul><li>Trade offs arise from activities themselves </li></ul><ul><li>Example: IKEA activities lowering the cost by having its customer do assembly and delivery less satisfied the customers. </li></ul><ul><li>Trade offs arise from limits on internal coordination and control. </li></ul>
    18. 18. Trade offs <ul><li>Trade-offs create the need for choice and protect against re-positioners and straddlers. </li></ul><ul><li>So strategy is defined as making trade-offs in competing. </li></ul><ul><li>The essence of strategy is choosing what not to do. </li></ul>
    19. 19. <ul><li>Fit drives both sustainability and competitive advantage </li></ul>
    20. 20. Operational effectiveness <ul><li>Operational effectiveness is about achieving excellence in individual activities. </li></ul><ul><li>Strategy </li></ul><ul><li>Strategy is about combining activities. </li></ul>
    21. 21. Sustainable Competitive Advantage <ul><li>Unique competitive position for a company. </li></ul><ul><li>Activities tailored to strategy. </li></ul><ul><li>Clear trade-offs and choices vis-à-vis competitors. </li></ul><ul><li>Competitive advantage arises from fit across activities. </li></ul><ul><ul><li>And sustainable barriers to entry </li></ul></ul><ul><li>Sustainability comes from the activity system, not the parts. </li></ul><ul><li>Example: one activity’s cost is lowered because of way others are performed and vice versa. </li></ul>
    22. 22. Three TYPES OF FIT <ul><li>Simple consistency </li></ul><ul><li>Activities are reinforcing </li></ul><ul><li>Optimization of effort. </li></ul>
    23. 23. Simple consistency <ul><li>Consistency between each activity and the overall strategy. </li></ul><ul><li>Example: vanguard align all with its activities with its low cost strategy. </li></ul>
    24. 24. Activities are reinforcing <ul><li>Fit occur when the activities are reinforcing. </li></ul><ul><li>Example: Neutrogena, markets to upscale hotels eager to offer their guest a soap recommended by dermatologists. </li></ul>
    25. 25. Optimization of effort <ul><li>Coordination and information exchange across activities to eliminate redundancy and minimize wasted efforts. </li></ul><ul><li>Example: product design choices can eliminate the need for after sale service. </li></ul>
    26. 26. Fit and sustainability <ul><li>Strategic fit among activities is fundamental not only to competitive advantages but also to the sustainability of that advantage. </li></ul><ul><li>Example: continental lite’s disastrous attempt to imitate southwest. </li></ul>
    27. 27. Rediscovering strategy <ul><li>Failure to Choose: </li></ul><ul><li>External changes can pose a threat to a company’s strategy </li></ul><ul><li>A greater threat to strategy often comes from within the company </li></ul><ul><li>Do not understand the need to have a strategy </li></ul><ul><li>Conventional wisdom </li></ul><ul><li>Risking blame for a bad choice </li></ul>
    28. 28. The Growth Trap <ul><li>Companies often grow by : </li></ul><ul><ul><li>Extending their product lines ( e.g.: Neutrogena extended product line, in which it was not unique) </li></ul></ul><ul><ul><li>Adding new features </li></ul></ul><ul><ul><li>Imitating competitors’ popular services </li></ul></ul><ul><ul><li>Matching processes and </li></ul></ul><ul><ul><li>Making acquisitions </li></ul></ul><ul><li>Compromises and inconsistencies in the chase of growth eventually erode the competitive advantage of a company and their uniqueness with their rivals </li></ul>
    29. 29. Profitable Growth <ul><li>Deepening a strategic position by: </li></ul><ul><ul><li>Distinctive activities </li></ul></ul><ul><ul><li>Strengthen fit </li></ul></ul><ul><ul><li>Communicating strategy in a better way </li></ul></ul><ul><li>Globalization often allows growth that is consistent with a company’s strategy </li></ul>
    30. 30. What should companies and leaders do ? <ul><li>They should reevaluate their strategies and challenge themselves to start over. </li></ul><ul><li>They should refocus on the unique core and realign the companies activities with it. </li></ul><ul><li>Evaluate the vision of the founder and reexamine the original strategy. </li></ul><ul><li>Leaders should be in charge of defining and communicating the company’s unique position, making trade-offs and forging it among activities. </li></ul>
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