Case-1

MKT 460

Section: 4

Faculty: Samy Ahmed

Student name Student ID

Zahidur Rahman Mamoon ID: 071 347 030

Kazi Tanzim Rashed ID: 073-497-030

Tonmoy Ahmed ID: 071 057 030

Salman Mahmud ID: 072 269 030

Sadi M. Arefin ID: 051 326 030

NORTH SOUTH UNIVERSITY

We are discussing in here a famous report named “What is strategy” of
Michael E. Porter, Harvard Business School Professor and world renowned
expert on strategy. From the report we have come to know what should be
the strategy for a company. Most of the business experts think operational
effectiveness is mostly needed for a company but from this report we got to
know only operational effectiveness is not the only strategy. Here we found
that not all business decision are strategic, where decisions can consider as
strategic if they involve consciously doing something differently from
competitors and if that difference results in a sustainable advantages. If the
business cannot imitate or difficult to do so, then business can considered as
sustainable. Company concentrates just on operational efficiency will lose
their competitive advantage. Author claims that strategic decision-making
requires managers to decide what.

I. “Operational effectiveness is not Strategy”:

Strategy is the direction and scope of an organization over the long-term:

which achieves advantage for the organization through its configuration of
resources within a challenging environment, to meet the needs of markets
and to fulfill stakeholder expectations.

Operational effectiveness refers to the effectiveness of the operation of

internal control procedures.
Operational activities means doing similar activities better than rivals but
Strategic positioning means doing different activities from rivals or doing
similar activities in different ways. That is the Key difference.

According to Michael E. Porter, Harvard Business School Professor and world-

renowned expert on strategy, success requires both the right strategy and
operational effectiveness.

. Porter’s point is succinctly expressed by describing operational

effectiveness as a necessary but not sufficient condition for organisational
success. And, of course, the same thing can be said of strategy. So, as the
diagram below illustrates, strategy and operational effectiveness sit side by
side as equal partners in the game of enterprise.

The relationship between these two factors goes a little deeper than simply
mutual dependency. They inform each other. Operational effectiveness is
about having functions in the organisation that work well. These functions
are, of course, the organisation's skill sets or 'core competencies' and
therefore, as Porter points out, must fit together and work together to
implement the strategy. On the other hand, the possible strategies available
to an organisation are constrained, at least in the medium term, by the skill
sets available to implement them.
Porter say’s Operational effectiveness may also create the opportunity for
strategy development by inventing new technologies or methods.

OE is about continuously improving functional performance. To do this,

managers lead and control the functional activities within the organisation,
measure and improve the processes that they are responsible for, and
leverage those processes through standardisation, communication and
automation to then close the loop to provide ever increasing efficiency and
effectiveness. It is strategy’s role to mould these functions into a coherent
organisational whole that will succeed in the chosen markets.

Zahidur Rahman
Mamoon

ID: 071347030

II. “ Strategy Rests on Unique Activities”

"Competitive strategy is about being different. It means deliberately

choosing a different set of activities to deliver a unique mix of value.

According to Porter, the essence of strategy is choosing to perform

activities differently than rivals do. Strategy is the creation of a unique and
valuable position, involving a different set of activities.

The Origins of Strategic Positions:

Strategic positions emerge from three sources, which are not mutually
exclusive and often overlap.

First, positioning can be based on produce a subset of an industry’s

products or services. It is based on the choice of product or service varieties
rather than customer segments. For most customers, this type of positioning
will only meet a subset of their needs. It is economically feasibly only when a
company can best produce particular products or services using distinctive
sets of activities.

Second, positioning is that of serves most or all the needs of a particular

group of customers. It is based on targeting a segment of customers. It
arises when there are a group of customers with differing needs, and when a
tailored set of activities can serve those needs best.

Third, positioning is that of segmenting customers who are accessible in

different ways. Although their needs are similar to those of other customers,
the best configuration of activities to reach them is different. 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.

Whatever the basis-variety, needs, access, or some combination of the

three-positioning requires a tailored set of activities because it is always a
function of differences in activities. Positioning is not always a function of
difference on the customer side. For example, variety and access positioning
do not rely on any customer differences.

Kazi Tanzim Rashed

ID: 073-497-030

III. “A Sustainable Strategic Position Requires Trade-offs”:

In this part author Michael E. Porter stated that strategic position needs
trade-offs. Trade-off is a situation that involves losing one quality or aspect
of something in return for gaining another quality or aspect. It implies a
decision to be made with full comprehension of both the upside and
downside of a particular choice.

Here Porter says,

Trade-offs arises for three reasons:

1. For Image or Reputation: Sometimes a company known for delivering

one kind of value may lack of credibility or confuse customers or its
reputation will increase if it delivers another kind of value.

2. From activities themselves: Many trade-offs reflect inflexibilities in

machinery, people or system.

3. From limits of internal coordination and condition: By clearly choosing

to compete in one way, senior management makes organizational
priorities clear.

Positioning trade-offs are pervasive in competition and essential to strategy

because:

- Positioning trade-offs create the need for choice and purposefully limit
what a company offers.

- They deter straddling or repositioning.

If there are no trade-offs companies will never achieve a sustainable

advantage. Trade-offs adds a new dimension to strategy which makes it as
“making trade-offs in competing" where without trade-offs there would be no
need for choice and thus no need for strategy. Performance depends on
operating effectiveness.

Tonmoy Ahmed

ID: 071 057 030

IV. “Fit Drives Both Competitive Advantage and Sustainability”

Operational effectiveness is about achieving excellence in individual

activities or functions but strategy is combining activities. In this article the
author trying to say that, a company must maintain a good fit among its
functional and operational activities to get competitive advantage and
sustainability. Fit lock-out imitators by creating a chain among the activities.
Rivals can easily copy company’s one activity, but it is difficult or impossible
for them to copy the whole. I also agree with the opinion because in the most
companies with good strategies, their one activity’s cost is lowered because
of the way other activities are performed. Similarly, one activity’s value to
consumers can be enhanced by a company’s other activities. That is the way
strategic fit creates competitive advantage and superior profitability. Fit is
important because discrete activities often affect one another. Like, if a
company wants to produce high quality products and market it, there must
be a well understanding between production department and raw material
suppliers. But Fit among activities is genetic and applies to many companies.
So most valuable fit is strategy specific fit because it enhances positions
uniqueness and amplifies trade-off.

In author’s point of view, there are three types of fit, although they are not
mutually exclusive. First one is simple consistency between the activities and
the overall strategy. That means, all activities of the company will be main
strategy centered. For example if

a company’s main strategy is low-cost-strategy, then all the other activities

like, distribution, pay scale, advertising should be follow a low cost strategy.
It makes the strategy easier to communicate to customers, employees and
shareholders.

The next fit is reinforcing. Here one business reinforces another business. If a
company has several businesses, then they can use this reinforcing strategy
and can lowering total marketing cost.

Third-order fit goes beyond activity reinforcement which is called

‘optimization of effort’. The main idea is to reinforcing the activity of a
business. For example gap restocks its basic clothing almost daily out of
three warehouses, thereby minimizing the need to carry large in store
inventories. In all three types of fit, the whole matters more than any
individual part. So I thing the fit among activities substantially reduce cost
and increase differentiation.

In another part of the article author is saying that, strategic fit is also
important to hold the sustainability of the advantage. It is true because if
rivals identify the relevant interconnections among the activities, they will
have difficulty replicating them. One reason is, achieving fit is difficult
because it requires the integration of decisions and actions across many
interdependent sub-units.

Salman Mahmud
 072 269 030

V. “Rediscovering Strategy”:

The failure to choose:

In this part of the article author identifies some reasons for companies’
failure to have a strategy or making strategic choices.

Here author mentioned, most of the people think that threats to

strategy come from outside a company because of changes in technological
and competitors behavior. But the greater threat to strategy can often come
from inside the organization. So people shouldn’t only emphasize on external
factors.

According to this article sometime managers become confuse about

making choices. Sometime it seems that there is no need to trade off. For
example when a company work far from productivity frontier, then if the
company is well run then it seems that it can defeat its rivals easily. So they
ignore to analyze trade off.

On the next part author mention that sometime managers become too
busy to imitating their competitors without thinking any strategic choices. I
agree wit this and I think when race of competition between companies
become too much intense then we see such mistakes.

Growth Trap:
 In this part author said that trade off and limits appear to constrain
growth. It’s true because most of the time it’s not possible to serve
everybody. So maybe we plan to serve one group and to serve this group we
may exclude other groups. For example if we target young people we may
exclude old people from our target market and this will limit our revenue
growth.

The Role of Leadership:

According to author leaders goal is not only take care of operational

improvement and making deals. The leader needs to decide what to do when
industry change and customer preference changes. In the organization
leader teach other about organization’s strategy.

SADI M. AREFIN

I.D : 051 326 030

So in conclusion we can say that, improving operational effectiveness is a

necessary part of management, but it is not strategy. We must clearly
distinguish operational effectiveness and strategy. Both are essential for a
successful business. In operational effectiveness a company must maintain a
constant change, flexibility, and relentless effort to best practice. But in
strategy we need to define a unique position, making clear trade-offs and
tightening fit. A company has to change their strategy if there are any major
changes in the industry and also must continually improve its operational
effectiveness to success in business.