Sarah Carpentier 2016_PG41_07 Strategic Management
27 janvier 2016
Executive summary « What is strategy ? » Porter
Operational effectiveness is not strategy
First of all, we have to distinguish two concepts: operational effectiveness from strategy.
Operational effectiveness is of course necessary for a company, but it is not sufficient: each company needs its own strategy.
A strategy is a plan for the company, which has to establish a difference with its competitors, and has to preserve it in order to create a greater value. Strategy positioning is choosing different ways to achieve similar activities from the competitors.
Operational effectiveness means performing similar activities better than the competitors can do.
We now have to
…show more content…
Choosing a strategy is choosing a different set of activities from its competitors, it is trying to be different from them. Strategic positions can be based on 3 sources :
variety-based positioning in which the company produce a subset of an industry’s products or services
needs-based positioning in which the company satisfy all needs of a segment of customers
access-based positioning in which the company satisfy different segment of customers according to their customer geography or customer scale.
Strategy positioning can be define as a difference on the supply side, that is to say a difference in activities. By choosing a strategy, the company chooses a unique and valuable position, with different activities from its competitors.
A sustainable strategic position requires trade-offs
Nonetheless, defining a unique position can’t be sufficient, because the competitors can copy this position (they can reposition themselves or they can straddle).
Each company has to take into consideration an important point: the risk of trade-off. They occur when a company tries to perform incompatible activities. Due to trade-off, the companies have to make some
‘Strategy is the direction and scope of an organisation over the long term, which achieves advantage in a changing environment through it’
Michael Porter states that strategy is about being different. It is about finding new ways to offer unique value to customers in a market. Many managers believe that operational effectiveness is strategy, but this is not true. Though operational improvements can be effective, focusing on improving every part of an organization can cause a company to distance itself further from a sustainable competitive position. Management must focus on strategic positioning, which occurs when a company is performing different activities from its competitors or they carry out similar tasks but in a different way. Strategic positions come from three sources. The first is variety-based positioning. This is focused on the variety of products and services
competitors be able to compete in the market or not. Thus, if two market leaders conclude a contract, risk that other competitors will fail to get profit and develop is very high.
The hypothesis is that a competitive position is what gives organisations competitive advantage. The business directory defines competitive position as a “Position a firm occupies in a market, or is trying to occupy, relative to its competition”.Competitive positioning is about defining how you’ll “differentiate” your offering and create value for your market. It’s about carving out a spot in the competitive landscape, putting your stake in the ground, and winning mindshare in the marketplace – being known for a certain “something.”(Marketing Mo Consulting).
Strategy is a set of complicated tactics formulated by the executives of a company directed towards the achievement of company’s goal (Salmela, 2002). It is about all the path ways that a company would follow to reach its ultimate goal. It is a company’s strategy which helps to identify what it does better than the other companies in the industries, which may be different from what it does best. For successful strategy formulation and implementation, a company should know the needs of customers and should have knowledge of its competitors. Through a good strategy a company would identify that opportunity which makes it different from the others (Thompson, 2005).
Jack Trout lectures on the importance of positioning. How positioning is a way of differentiating one thing from another, making it desirable. His main argument in the video is geared towards companies adjusting the minds of prospects away from the competition and towards their own products and services. This is done by knowing who the prospects are, what they desire, and what they need then applying that knowledge towards differentiating the product
Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value. And also he has states that the “choosing activities to perform differently than competitors’ do as the essence of strategy”. If not strategy is nothing more than a marketing slogan that will not withstand competition.
Strategy is a plan or method, which is developed to bring about a desired future, such as a goal or solution. Strategies are also linked with attainting or maintain a position of advantage over competitors. ExxonMobil’s strategy is to identify, evaluate, selectively pursue, and capture the highest quality resources opportunities before the competition does. (ExxonMobil, web) ExxonMobil works to increase their production and efficiency while maintaining high product quality. Since oil and gas are commodities,
Alfred Chandler(1963) defines strategy as ‘ the determination of the long-run goals and objectives of an enterprise and the adoption of courses of action of an enterprise and the adoption of courses of action and the allocation of resources necessary for carrying out these goals’. And Michael porter(1996) sees it as ‘Competitive strategy is about being different. It means deliberately choosing different set of activities to deliver a unique mix of value’.
The key to a winning strategic position is a well thought out strategy. Recognising how to gain a distinctive strategic position, requires understanding of the key concept of strategic position and strategy. (Mazzucato, 2002) discussed that Strategic Position is carving out a niche by performing different activities to surpass rivals. Subsequently, Johnson et al. (2014) recognised that the prime focus of strategic position are the effects on strategy to opportunities and threats posed by the environment; strategic capability which dictates the organisation’s strengths and weaknesses; strategic purpose that defines the organisation’s mission, vision, values and objectives; and culture, composed of the beliefs, behaviors and paradigm. Understanding the impact of these factors is useful in evaluating future strategies. Moreover, defining strategy can be difficult; it connotes different things depending on the aspects of key issues affecting the organisation. Even strategy theories have differing ideas such as organisation’s involvement to different activities to create unique position, or determination of long-term goals and objectives and patterns of decision (as cited in Johnson et al., 2014). Further, (Carter, Clegg, Kornberger, 2008) suggests that providing direction through changes secures growth and sustainability. Consequently, organisation’s strategy formulation must be
• variety-based positioning - based on producing a subset of an industry's products or services; involves choice of product or service varieties rather than customer segments. Makes economic sense when a company can produce particular products or services using distinctive sets of activities. (i.e. Jiffy Lube for auto lubricants only)
‘Any time rivals can readily duplicate successful strategy features, making it difficult or impossible to out strategize rivals and beat them in the marketplace with a superior strategy, the chief way to achieve lasting competitive advantage is to out execute them.’
A company 's strategy consists of the competitive moves and business approaches that managers are employing to grow the business, attract and please customers, compete successfully, conduct operations, and achieve the targeted levels of organizational performance.
A strategy is said to be a plan that is made for the long term success of a product or brand. It is extremely important to have a strategy in order to figure out a direction towards which any company is able to focus all its resources efficiently and achieve desired outcomes. Formulating effective strategies is a considerably long process in itself that combines analysing several factors, situations and issues that are already present in a company and looking to improve on them alongside trying to implement various innovations and ideas to collectively create a direction towards which they can move and direct the resources available to them.