Summary: What is Strategy?

Michael E Potter It is a present so called formula that companies should be competitive and get accustomed with the changes in the market. Bench marking continuously in comparison to the competitors at the top positions, outsourcing to gain more competence, being a strong competitor to the rivals and also not utilizing the power of positioning as earlier because all these can be initiated by rivals and will fail to fetch any profits to the company. All these lead to hyper competition which is nothing but something that is induced by us. The root problem is to distinguish between operational effectiveness and strategy. Many different types of management tools like outsourcing, total quality management, bench marking has taken the place of strategy. We can always say that superior performance is equivalent to Strategy plus operational efficiency. Operational effectiveness means performing activities like creating, producing, selling and delivering a product or service in a faster and better manner with less inputs and defects in contrast to the rivals. A company can always stand out in the crowd only if it has something unique which can be preserved for a long time. The uniqueness may achieve a cost advantage over the rivals. At times this can be achieved by bringing small differences or changes like motivating employees better, advanced technology, eliminating wasted effort. For example Japanese are always known for their operational effectiveness by offering lower cost and of superior quality at same time. Continuous improvement in operational effectiveness is important for superior profitability. So some requirements in operational effectiveness are Capital investment, Different personal and ways of managing etc. Origins of strategic positions are as follows: Variety based position It is based on choice of products or service varieties rather than customers segments. Need based positioning- This comes closure to traditional thinking about targeting a segment of customers. Access Based positioning- In this segmenting customers can be accessible in different ways. After discussing about positioning, Strategy means creating unique and valuable positioning which involves activities which are different from the rivals. It is said that if there was only one idea there would be no strategy to perform. This can also be referred to as choosing activities that are different from that of the rivals. Strategies should be sustainable .Sustainable strategic positioning requires Tradeoffs. Only choosing a unique position doesnt guarantee sustainable advantage because a valued position can be definitely copied. The competitors start repositioning themselves to match the successful superior performers. For Example JC Penny has raised itself to an upscale fashion oriented one. Now there is another process called Straddling which refers to imitating. What a straddle does is it tries to match the benefits of a successful player while maintaining its existing position i.e. it adds services, features and technology to the ones it already has. Competitors can copy any market position as said in the early pages of the article. Continental airlines are a beast example of straddling. It seems like any airlines can imitate any airlines services like they can buy similar planes, lease the gates and match the menus etc. So continental airlines started straddling and came up with a new airlines service called Continental Lite. This all was done in response to straddling done by Southwest Airlines.

But the strategic position doesnt sustain unless there is Tradeoffs. So the players can find a combination of its services. And tradeoffs create the option for choice and prevent repositioners and straddlers because the player practicing these things undermines their existing services. And for continental lite also it came to a low phase as it lost most of its business and even the CEO lost his job. For example Neutrogena, its marketing strategy is more like a drug rather than a soap maker. To reinforce its position in the market it has solely focused on distribution in the drug stores and avoided price promotions. Trade off generally arises from three factors: 1. Inconsistent in image or reputation. 2. Arises from activities themselves. 3. Arises from internal coordination and control. What Continental airlines did is it tried to compete in two ways like having all its existing services and providing low cost services on some routes which it couldnt manage. Absence of trade off lead to all this fate of Continental. So managers have improved the operational effectiveness and internalized that tradeoffs are to be eliminated but if there is no tradeoff companies wont have a sustainable advantage and will have to run faster to be in place always. Now comes the concept of Fit which brings in Sustainable and Competitive advantage. This tells about how each activity is related to each other. Operational effectiveness is achieving success in individual activities while Strategy is combining the activities. Like Southwests rapid turnaround made frequent departures possible and more usage of the aircrafts was the result which combined all the activities together. Fit prevents imitators by creating a strong chain. Types of Fit indicate: Simple consistent between each activity (Premium technology and good marketing approach) Activities are reinforcing (neutrogena example) Benefits consistency (bic example) 2-This fit reduces cost: Competitive advantage grows out of the system Strengths cut across many parts

Strategic fit is fundamental among various activities like sustainability and competitive. Activity system maps are used for examining and activity system cost. A question should guide the process. The more the companys positioning rests on activity system such as second and third the more sustainable it would be. Any competitor who seeks matching an activity seeks to gain little. Companies with strong fit among these activities are rarely inviting markets. When activities benefit from one another rivals try to benefit from imitation unless they successfully match the whole system. The most viable positions are those whose activity systems are in compatible because of tradeoffs. Finally Strategy is creating fit among companies activities- success depends on doing many things and not just few strategic things. Generally threats to strategy are seen to spread outside company because of change in technology and behavior of competitors. Among all other influencers desire to grow has perhaps the most pervasive effect of strategy. Most companies owe to their initial strategic position involving clear tradeoffs. Attempts to compete in several ways at once create confusion and undermine organization motivation and focus. Many companies after a decade of restructuring and cost cuttings are turning to attention of growth. Deepening position make companies position stronger, distinctive and communicate strategies. Better to those customers who value it. The challenge of developing a clear strategy is often primarily an organizational one and depends on leade