What is

Strategy?
 Which one is a strategy

 Improve product quality

 Increase production efficiency

 Do Total Quality Management

 Focus on niche customers

 Benchmark with customers

 Cut expensive service to reduce cost

 Concentrate on customers in rural area

Operation Effectiveness (OE) VS Strategy

OE Strategy
 Improve product quality  Focus on niche customers

 Improve production efficiency  Cut expensive services to reduce

cost

 Do TQM
 Concentrate on customers in
rural area
 Benchmark with customer
OE is necessary, but not sufficient

 OE means performing similar activities better than rivals

perform them

 Have better quality and lower cost

 However, only few companies have competed successfully

on a basis of OE over an extended period

 Why?
 OE is a zero-sum game

 Technology and best practice diffuse across the board very

fast

 Everybody implement the same practice, and have the

same result

 You have a higher quality than before, but not higher than
your competitors anymore

 You have a lower cost than before, but not lower than your
competitors anymore
 What is strategy?

 Competitive strategy is about being different

 Choosing different set of activities to deliver a unique mix

of value

 Tesco Lotus VS 7-Eleven

 Origin of strategic position

 Variety-based positioning

 Needs-based positioning

 Access-based positioning
 Variety-based positioning

 Focus on particular subset of an industry’s product or

services

 IBM

 Coach
 Needs-based positioning

 Service to most or all needs of a particular group of

customers

 Home Depot

 Tesco Lotus
 Access-based positioning

 Anything that requires a different set of activities to reach

customers in the best way

 7-Eleven

 Fruit cart
 Strategy needs trade-off

 A strategic position is not sustainable unless there are

trade-offs with other positions

 Trade-offs create the need for choice and protect against

repositioners and straddlers

 Make it costly for others to follow

Which strategy that requires trade-off?

 Inconsistency with company’s image or reputation

 Reflect inflexibilities in machinery, people, or system

 Limitation on internal coordination and control

 Generic strategy

 Cost leadership

 Differentiation

 Focus
 Fit is the core part in strategy

 Strategy is about combining activities

 Fit locks out imitators by creating a chain that is as strong

as its strongest link

 Competitors can copy one activity, but it is hard to copy all

activities
 3 levels of fit

 Simple consistency

 Activities are reinforcing

 Optimization of effort
 Simple consistency

 Every activity align with the strategy

 Consistency ensures that the competitive advantages of

activities cumulate and do not erode or cancel themselves
out
 Activities are reinforcing

 Not only each activity align with the strategy, it also

support each other

 E.g. using point-of-sale activity, heavy TV advertising, and

packaging changes to create extra buying impulse
 Optimization of effort

 Optimize every activity to support the strategy

 E.g. restocking the warehouse daily to reduce the stock

volume when the company focuses on basic items with
limited variety
 What is strategy?

Strategy is the creation of a unique and valuable position,

involving a different set of activities.

Strategy is making trade-offs in competing

Strategy is creating fit among a company’s activities.

Strategy is not a one-time process

 Strategy needs readjustment when the environment

changes

 Strategy can form as well as be formulated

 Strategy may be developed from the environment

Strategic planning cycle