What is Strategy?

What is Strategy?

 Strategy is;

 creation of unique
 valuable position
 involving a different set of activities.

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Operational Effectiveness Is Not Strategy

 Must be flexible to Strategy and OE

respond rapidly to
competitive and market
changes.
 They must outsource
aggressively to gain
efficiencies.
 Positioning—once the
heart of strategy.

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 Vision and Mission

External Analysis Strategic Choice Internal Analysis

Opportunities and Threats SWOT Strengths and Weaknesses

Business Strategy

Strategy Implementation/Tactics

Organizational Succession Designing Control

Structure Planning Systems

Feedback
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Operational Effectiveness Is Not Sufficient

 It must deliver greater  Reducing defects in

value to customers. products.
 To charge to higher  Developing better
average unit prices products faster
 Particular activities more
 Strategic position
efficiently than
competitors.

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 Operational Effectiveness versus Strategic
Positioning

High
Productivity Frontier
(state of best practice)
Quality or Lead-Time

JIT
TQM

Low
High
Cost Low
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Cont…

 TQM  Japanese companies

 Time-based competition rarely developed
 Multiple dimensions of distinct strategic
performance at the same position.
time.  Strategic Position
 Competitors can quickly  Southwest Airlines
imitate. serves price and
 Learning Organization convenience-
sensitive travelers.

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Strategy Rests on Unique Activities
 According to Porter, is  Ikea, the global
choosing to perform furniture retailer.
activities differently than
rivals do.  Customization
 Strategy is the creation of  Delivering within 6 to
a unique and valuable 8 weeks.
position, involving a Strategic Position
different set of activities.
 Low cost
 For examples. Southwest
Airlines company.

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 The Origins of Strategic Positions

 Strategic positions emerge from 2. Needs-based

three sources positioning
Customization
1. Variety-based positioning
3. Access-based
positioning
 Example: Vanguard provides an
array of common stock, bond,
 Example: Operates
and money Market funds movie theaters
exclusively in cities
and towns with
populations

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 A Sustainable Strategic Position Requires
Trade-offs
 "A trade-off means that more of
one thing necessitates less of
 Trade-offs occur
another" when activities are
 Competitors will imitate a incompatible
valuable position in one of the
two following ways: 1. Trade-offs arise from
1. A competitor can choose to limits on internal
reposition itself to match the coordination and
superior performer. control.
2. A competitor can seek to match
the benefits of a successful 2. Trade-offs arise from
position while maintaining its activities
existing position. themselves.

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 A Sustainable Strategic Position Requires
Trade-offs
3. A company known for delivering
one kind of value may lack
credibility and confuse customers.
 Examples: Ivory soap (No.3)

 Ikea has configured its activities.

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 Ikea’s Activity System
.

High-
Self- traffic
transport Suburban store
Explanato Location Impulse
ry labeling layout buying

Limited Self-
service Most
Customer
Easy Limited Selection items in
Service stock
transport sales staff
Self On-site
-assembly inventory
Customer
Flat Modular loyalty Year-
packing Low Mfg round
Designs
kits Cost stocking

Wide Long-term
variety Easy to Design
focused on
make Business Strategy suppliers
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low cost
 Value chain

.
Marketing/ Inbound Operations Outboun After Sales
Sales Logistics d Service
Logistics
Human Resources
Margin
Technology

Infrastructure

Procurement

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 Role of Leadership

 Organization strategy  Strategic continuity

depends on leadership.  To ability to find new
 Make a company unique
position trade-offs and take
 Making trade-offs sustainable
 Analyze customers needs advantage.
 Analyze industry changes

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 Fit Drives Both Competitive Advantage and
Sustainability
 Fit locks out imitators by
creating a chain that is as
strong as its strongest link.
 There are three types of fit,
which are not mutually
exclusive:
1. First-order fit: simple
consistency between each
activity and the overall
strategy.
2. Second order fit. Occurs
when activities are
reinforcing.

3. Third-order fit. optimization

of effort .

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 Tests of a good Strategy

1. A unique value proposition compared to

competitors
2. A different, tailored value chain
3. Clear tradeoffs, and choosing what not to do
4. Activities that fit together and reinforce each
other
5. Continuity of strategy with continual
improvement in realization.

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