1) The document summarizes Porter's 1996 paper "What is Strategy?" which defines strategy as creating unique activities that are valuable and difficult for rivals to imitate. It aims to differentiate strategy from operational effectiveness. 2) The paper discusses how many managers focus on operational effectiveness like benchmarking and outsourcing rather than developing a unique strategy, leading companies to be unable to sustain profits. Strategy requires choosing a unique position and making trade-offs that competitors cannot easily copy. 3) A strong leader is needed to develop and clearly communicate a strategy while maintaining discipline and focus on customers as industries change. Strategy and operational effectiveness are different and both are needed but strategy should not be replaced by a focus only on effectiveness.

1. ASSIGNMENT 2: REVIEW
OF PORTERS’ PAPER
“WHAT IS STRATEGY?”
CORP 3501: Strategic Management
Amana Hussain (p15086434)
Lan Vy Nguyen Thi (p15087795)
Lecturer: Sabrina Abdullah
Date: 28 January 2016
De Montfort University (UK) and Niels Brock College
(Denmark)

2. Page 1 of 6
Introduction
What is Strategy? Porter (1996, p68) defines strategy as “something which is
created in a unique way and is valuable, applying different set of activities from
rivals”. Strength of the strategic positon requires trade-offs, something which is
different to rivals and targeting limited group of people to get the value for
money. The whole idea is that strategy rests on uniqueness of activities in a
way that it cannot be imitated so easily, (Porter, 1996).
1. Purpose
The purpose of this articles is that Porter (1996) would like to send an accurate
message about strategy to managers because operational effectiveness is not
strategy. Without a right strategy definition, managers can get lost. From past
many year managers have been working on different set of rules like companies
must be flexible to adopt the new changes in the market to outperform their
competitors. To increase productivity, they must outsource which can be
progressive for the company and must have few more core competencies for
competition (Porter, 1996, p61).
The root of the problem is to differentiate between operational effectiveness
and strategy. In order to keep profitability and maintain the position ahead of
rivals’ managers need to keep improving operational effectiveness.
Competitors can easily imitate the management style and techniques used to
make relative cost, input improvements, and ways to inspire customers’
demands. Many companies have been unable to make a sustainable profit out,
due to their inability to utilize these techniques and tools (benchmarking, time-
based competition, outsourcing etc.) as their main focus rather than the
strategy. And managers are drifted away from the main concept of sustained
profitability, levels of differentiation and also viable competitive positions
(Porter, 1996, p61-64).
Porter (1996, p62) further discussed that a company can only generate
sustainable profit if it creates something more unique than its competitors. It
preserves offering low cost or high quality products to make a difference. Some
companies make the best use of their employees by eliminating the non-
required, outsourcing the best fit employees for a particular role, motivates

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employees, using more advanced technology, managing particular activities in
a right manner, which puts a positive effect on the company generating the
profit and level of differentiation among the rivals. Therefore, operational
effectiveness is necessary but alone cannot replace the strategy to implement
particular activities in a unique way (Porter, 1996, p64).
2. The contribution to subject area
When globalization has become a certain trend and all businesses have been
aware of the role of their own strategies in more and more difficult competitive
environments, Porter with his paper tried to shape the most accurate and
sufficient definition of strategy. Many people still could not comprehend entirely
what exactly their strategy should be and how to make it practical. Thus, this
paper tends to re-identify “strategy” meaning clearly with a specific direction
that is “uniqueness”, and for the particular subjects as managers, rather than a
firm (Porter, 1996, p64).
While Barney (1991) suggested that a firm should find out some general things
as firm attributes to be sustainable by resource-based model, in this article
Porter (1996) let managers to determine their choices including what they must
do and what not to do in the strategy. Strategic management area indicated the
necessity of analysis about industrial environments including five force model
(Porter, 1979) and resource-based model (Barney, 1991). But after analyzing
all five forces, SWOT, or firm resources, some managers got lost in choosing a
good competitive strategy to gain long-term profits and customers’ loyalty.
Managers knew that firms must be distinctive, but did not know how to make
competitive advantages become sustainable, then they made the same
mistake: imitating what competitors did.
In addition, the world industry has gone through many development for some
decades and one of the beginning theory as Taylorism has changed the level
of efficiency in production (Vliet, 2015). Many managers have focused on how
to utilize inputs (machines, workers, materials) better than other firms to
increase operational effectiveness (OE), and let OE replace strategy.
Therefore, this article contributed to draw the right mindset about the
appropriate strategy for sustainable advantage purpose. Strategy is a choice of

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being different with competitors in the whole fit process of actions, but still
attached with trade-offs that can prevent rivals from imitation (Porter, 1996).
There is no best thing that suits all people, which leads to Porter’s confirmation
about strategic positions. Each business should provide the most appropriate
products or services for a targeted group of customers with the similar demand
that is called “positioning”. Each one should just let competitors fulfill other
groups of needs, because satisfying all people at once is impossible.
Positioning could depend on three sources: variety-based, needs-based and
access-based (Porter, 1996, p66). For instance, Chanel is known as the luxury
brand that focuses on first class females who love high-quality products with
elegant fashion and have high income to spend, but not likely to lower prices,
because price-sensitive customers should be served by other brands, not
Chanel (Cariers, 2002).
Strategic positions would not be enough to avoid being duplicated without
trade-offs which means adding one more requires to remove another. Thanks
to trade-offs’ barrier, competitors are unable to copy and combine two
inconsistent strategies simultaneously. Because doing both leads to customers’
confusion and brand names to be damaged, none of these can help (Porter,
1996). For example, K-mart failure has risen from the attempting to adapt too
many different needs at the same time, and lack of a clear positioning,
compared to Walmart with low price orientation, so customers found no reasons
to spend (Leinwand & Mainadi, 2010).
Moreover, building a harmonic and consistent set of activities could guarantee
firms’ sustainable advantages, when each activity can supports others and the
whole set cannot be imitated perfectly by rivals. Being unique not only means
different products, but all other relating services, functions and equipment are
also connected for that different style (Porter, 1996, p69).
3. Findings and conclusions of the article
Why do managers fail to choose strategy and why it gets so hard for them to
make the right choices? Basic threat commonly a company faces is the
origination of strategy that comes from outside, the change in technology or
behavior of competitors. It’s not essential that the threat is external only, it can

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be internal also and that is really challenging. Even a strong strategy can be
failed because of the desire to grow, not being clear about the competition and
international organizational failures (Porter, 1996, p75). From past many years,
managers are under a pressure to deliver tangible results showing progressive
improvements. Although, programs in operational effectiveness produce
reassuring progress, but the profitability still remains untraceable. Therefore,
the managers do not realize the importance of strategy.
The growth trap is the first factors. Trade-offs and serving the limited group of
customers excluding the other group does constrain growth and effect the
revenue growth. Targeting the broad group emphasizes low price results and
low sales as customer sensitive to price, services and features cannot afford it.
The second reason is profitable growth, many companies are cutting down on
cost increasing the profitable growth. It’s good to make profit but in actual being
unique is getting blur in the race of being more effective than rivals (Porter,
1996, p76-77).
As a result, the role of a leader plays an important role in developing clear
strategies to be implemented which requires constant discipline, commitment
and clear communication. The leader must provide discipline, know the needs
from customer’s point of view, and make industrial changes accordingly without
organizational distractions. Thus, strategy requires a good strong leader with
discipline and clear communication so employee can understand better and act
appropriately.
Hence, it is concluded managers must distinguish between operational
effectiveness and strategy as both are different. A good leader should require
to provide clear instructions to have a suitable strategy and lead the whole
organization making profitable growth, but also maintain the rapport when
industry structure changes in this dynamic world.
4. Critical Appraisal
Undoubtedly, global competitive pressure has influenced many key decisions
from managers about committing to the end with their core strategy. Thus,
Porter’s paper (1996) has maintained its meaningful value about strategy
selection for two decades. The more world competition changes, the more each

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company should be outstanding in its unique position. As Coco Chanel used to
state “Fashion changes, but style endures”, Chanel always preserves its own
tradition for clothes: elegance and simplicity, instead of following new
fashionable trends as rivals do (Stackelberg, 2015).
Some reasons such as financial expansion lead firm to failure (Porter, 1996),
which can still be applied nowadays. One recent concerns for firms is to focus
or diversify their strategy, when merges and acquisitions has been a hot
tendency. Some corporations acquired other businesses then fail, while some
could recover from downturn periods. Ken Favaro (2015) confirmed that the
right reasons for diversification were to strengthen core business or to exploit
special competences, rather than following attractive sectors and growth
desire. As a result, modern leaders should obtain Porter’s suggestion (1996) in
strategic decisions.
In addition, a strategy can make a firm success or fail, so responsibility of
leaders is very important. They should set long-term vision, focus on strategy,
communicate with all staff and departments rather than keeping secrets, and
keep them to work efficiently in a consistent process [Joel DiGirolamo 2010
cited in Sathuraman and Suresh (2014)]. It is also true that industrial
environment can change thanks to technology advance or consumers’ new
habits, so leaders should be flexible to cope with the new trend. According to
five forces (Porter, 1979), if any changes in power of suppliers, buyers, rivals,
or barrier of new entrants appear, the structure of industry will become different
(Porter, 1996). Then, leaders cannot be too preservative and must create other
adaptable strategy with a new position.
In conclusion, good strategy helps companies make the best use of distinctive
competences to achieve profit goal and survive sustainably. Managers make
choices for the firm’s destiny, and poor decisions would lead to the collapse.
They should maintain firm uniqueness and stay with it until the industrial
structural change. This article approaches the practice of business
management, and suggests many useful directions that both managers and the
whole firm can improve.

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Reference
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Advantage', Journal of Management, Vol.7 (No.1), p.99-120.
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CHANEL have been positioned in their respective markets', Grin website,
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