Porter’s “What is Strategy”

Class Discussion

Questions

1. What is the “root of the problem”? Failure to distinguish between operational effectiveness and strategy. Management tools aimed at improving OE have taken place of strategy.

2. Is operational effectiveness important? Why? Why isn’t it “sufficient” for maintaining long-term competitive advantage? (long-term superior profitability). What happened to productivity gains? Rapid diffusion of best practices. Competitors can quickly imitate. Especially generic solutions – which can diffuse the fastest. Benchmarking makes competitors look alike (“competitor convergence”).

2.a. So what ISN’T strategy?

3. Why does Porter claim Japanese companies lack strategy? Do you agree? What evidence is there? Most Japanese companies in ‘70s and ‘80s were oriented toward OE, TQM, continuous improvements. Ignored strategic positioning. Managers are consensus oriented, try to please all customers.

4. What does strategy require? Being different. Different activities or performing them differently than competitors. It’s about choice. Choosing to be different.

5. What company examples does Porter give to illustrate strategic positions? Compare SWA to full-service airlines. What does SWA do differently? What

does IKEA do differently from full-service furniture stores? What does Jiffy Lube do differently? Vanguard? Bessemer Trust? Carmike Cinemas?

6. Who has the edge in creating/exploiting new positions, new entrants or old players? For what reasons?

7. What is strategy? Creating a unique and valuable position involving a different set of activities from competitors. Also, creating fit among activities. (Although I would say that is implementation of strategy.)

8. Why can’t competitors easily copy unique positions? Because of trade-offs, different activities, activity systems, reputation and credibility. Probability of exactly copying 1 activity is less than 1 (say, .9), then multiply this in activity systems and it’s very unlikely that unique position can be copied. Think in “themes” (like Sutculuk) to describe activity systems/unique positions.

8a. What are trade-offs and why do they exist? (1) Create inconsistencies in image and credibility; (2) Different activities require different configurations of operations, expertise, equipment, employee behavior, skills, management systems, etc…; and (3) Limits on internal coordination and control (strategy as decision making support, knowing how to act and what decisions to make, what priorities to emphasize, consistency and unity of purpose).

8b. What is the problem of “straddling”? Being caught in the middle between two strategically different positions. Continental Lite trying to imitate SWA unsuccessfully.

Neutrogena versus Ivory Soap example.

9. Evaluate the statement: “If there are no trade-offs companies will never achieve a sustainable advantage.” Agree/disagree? Why?

10. What is “fit” and why is it good? Three types of fit: (1) First order: consistency, when activities are consistent with a strategy, can be easily

communicated and improves single-minded adherence and coordination; (2) Second order: activities are reinforcing, they build on each other, create synergies, help increase each activity’s effectiveness or efficiency; (3) Third order: optimization of effort, reduces overall effort, increases efficiency of operations through coordination and information exchange (by doing some activities well, other activities/efforts can be reduced).

It’s good because when activities complement and support one another, they reinforce a position, enhance a position’s uniqueness, amplifies trade-offs, and give efficiencies and effectiveness.

Sutas example: controlling value chain, integration along “Sutculuk”, training leads to better productivity, better milk, fresher and tastier products, longer shelf lives. And all this can be communicated externally as well as internally to enhance coordination.

10a. How does “fit” apply to SWA?

11. What are obstacles to strategy?

Seeing operational effectiveness as most important.

Failure to make choices (sometimes limiting is as important as expanding).

Growth trap: trying to grow at any cost, ending up straddling positions as new markets/consumers/needs are served, creating compromises and inconsistencies.

11b. How to grow successfully? Recommends to grow deep, emphasize strategic position, strengths, rather than broadening it.

12. How can we “reconnect” with strategy? (These are great questions for a consultant to ask.)

Key Questions (p. 76).

12b. Why does strategy require “constant discipline and communication”?