What is strategy porter group 4 sec a


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  • Operational Effectiveness (OE) Is Not Strategy Managers fail to distinguish between OE and StrategyStrategy replaced, bit by bit, by management tools; small gains not sustainably profitableNecessary but not sufficientThe arith- metic of superior profitability then follows: deliver- ing greater value allows a company to charge higher average unit prices; greater efficiency results in lower average unit costs.productivity frontier that constitutes the sum of all existing best practices at any giv- en time. Identify and reject reject false trade-offs1. OE competition shifts productivity barrier outward, mutually destructive as lowers profit and raises bar for everyone2. OE diminishes differentiability -----------------Strategy Rests on Unique Activities - Perform activities differently than rivals do (Southwest and Ikea)The Origins of Strategic Positions:1. Variety-based positioning - Subset of needs and wide array of customers(Vanguard and Jiffy Lube)2. Needs-based positioning - Most needs and particular group of customers (Ikea and Bessemer Trust company)3. Access-based positioning - Similar needs but customer accessible in different ways-----------------A Sustainable Strategic Position Requires Trade-offsTrade off incompatible activitiescreate need for choice and protects against repositions and straddlers (Neutrogena and Southwest)Arise due to three reasons:Image inconsistencySpecific ActivitiesLimited internal coordination and controlNo Trade off; no sustainable advantageEssence of strategy: choosing what not to do
  • What is strategy porter group 4 sec a

    2. 2. SUMMARY • Managers fail to distinguish Operational Effectiveness (OE) and Strategy. • Strategy being replaced by OE and is not sustainably profitable. • Managers to Identify and reject reject false trade-offs. • Perform unique activities differently from rivals. • Strategic Positions (Variety/Needs/Access based). • A Sustainable Strategic Position Requires Trade-offs. August 3, 2013 Indian Institute of Management Raipur 1
    3. 3. SUMMARY CONTINUED • Trade off incompatible activities for sustainable advantage • Essence of strategy: choosing what not to do. • Fit Drives Both Competitive Advantage and Sustainability • Types of Fit/Sustainability • Rediscovering Strategy • The Failure to Choose • The Growth Trap • Profitable Growth • The Role of Leadership August 3, 2013 Indian Institute of Management Raipur 2
    4. 4. INDIAN DOMESTIC AVIATION SECTOR AIRLINES INDIGO KINGFISHER JET AIRWAYS FACTORS Airport Charges Same Same Same Fuel Cost Same Same Same Regulatory Environment Same Same Same Profit/Loss (In Rupees) 650 Crores -2328 Crores -1236 Crores August 3, 2013 Indian Institute of Management Raipur 3
    5. 5. STRATEGY IMPLEMENTATION INDIGO  Need based positioning: Low Cost and “On time is a wonderful thing.”  Trade-off - Premium Segment vs Growing Middle Class.  Simple consistency; low cost KINGFISHER & JET AIRWAYS  Diffused positioning.  Trade-off - Not very clear.  No fit between activities. August 3, 2013 Indian Institute of Management Raipur 4
    6. 6. DIFFERENTIALACTIVITIES INDIGO  Similar aircraft in fleet (A320 Air bus); younger fleet(2.3 years old)  Connecting metros with 2-tier cities (33 destinations/day), better synchronization and fit.  Multi-source revenue (Ads, Food, and Onboard Merchandising)  Best in market OTP (93%), Load Factor (83.9%), and Cancel Rate. KINGFISHER & JET AIRWAYS  Diverse aircrafts in fleets; No fit between strategies and activities.  Connecting metros to metros and metros with 2-tier cities, less synchronized and low fit. August 3, 2013 Indian Institute of Management Raipur 5
    7. 7. LIMITATION(S)  Time is a big constraint: Long-term strategies may span to over 10-15 years. During this time, the business environment may not turn out to be different from what was predicted. This will create hazards for the company.  Successful strategies are imitated by other companies. Hence, no business will survive on just one business and need to strive towards better strategies.  Dynamic business environment may call for urgent managerial decisions. Adopted strategy may constrain the management to take conflicting decisions.  High degree of government regulation can render long term strategies useless. (like insurance, financial, telecom, and aviation sectors)  Operational Effectiveness itself can be a strategy where the technology is slow moving. August 3, 2013 Indian Institute of Management Raipur 6
    8. 8. THANK YOU. August 3, 2013 Indian Institute of Management Raipur 7