what is strategy

Q: What is operational effectiveness (OE)?

A: Performing similar activities better than competitors.

Q: What is strategy?

A: Performing different activities from competitors, or performing similar activities in a different way.

Q: Is operational effectiveness the same as strategy?

A: No. OE is necessary, but it is not sufficient for long-term competitive advantage.

Q: Why is OE alone not enough?

A: Competitors can quickly copy best practices, technology, and management techniques.

Q: What is competitive convergence?

A: Competitors become more alike because they imitate each other.

Q: What is the productivity frontier?

A: The best possible performance using current technology, skills, and management practices.

Q: What happens when a company improves operational effectiveness?

A: It moves closer to the productivity frontier.

Q: What are the basic units of competitive advantage?

A: A company’s activities.

Q: What is the main idea behind competitive strategy?

A: Being different from competitors.

Q: What is strategic positioning?

A: Creating a unique position through a different set of activities.

Q: What are the 3 types of positioning?

A: Variety-based, needs-based, and access-based.

Q: What is variety-based positioning?

A: Focusing on a specific type or subset of products/services.

Q: Easy way to remember variety-based positioning?

A: WHAT does the company offer?

Q: What company is a key example of variety-based positioning?

A: Jiffy Lube.

Q: Why is Jiffy Lube variety-based?

A: It specializes in oil/lubrication services instead of offering every type of car repair.

Q: What is needs-based positioning?

A: Serving most or all of the needs of a specific customer group.

Q: Easy way to remember needs-based positioning?

A: WHO is the company serving?

Q: What company is a key example of needs-based positioning?

A: IKEA.

Q: Why is IKEA needs-based?

A: It serves price-conscious customers willing to trade service for lower prices.

Q: What is access-based positioning?

A: Serving customers who are best reached through a different set of activities.

Q: Easy way to remember access-based positioning?

A: HOW are customers reached?

Q: What company is a key example of access-based positioning?

A: Carmike Cinemas.

Q: Why is Carmike access-based?

A: It served customers in smaller towns using a different low-cost operating system.

Q: What are Porter’s 3 generic strategies?

A: Cost leadership, differentiation, and focus.

Q: What generic strategy is Vanguard associated with?

A: Cost leadership.

Q: What generic strategy is IKEA associated with?

A: Cost-based focus.

Q: What generic strategy is Neutrogena associated with?

A: Focused differentiation.

Q: What is a trade-off?

A: Choosing more of one thing requires giving up something else.

Q: Why are trade-offs important to strategy?

A: They force companies to make choices and make strategies harder to copy.

Q: What is one of Porter’s most important ideas about trade-offs?

A: The essence of strategy is choosing what not to do.

Q: What are the 3 reasons trade-offs arise?

A: Image/reputation, differences in activities, and internal coordination/control.

Q: How can image or reputation create a trade-off?

A: A company may confuse customers if it tries to represent two conflicting types of value.

Q: How do activities create trade-offs?

A: Different strategies require different equipment, employees, skills, and systems.

Q: How does internal coordination create trade-offs?

A: Employees need clear priorities; trying to serve everyone can create confusion.

Q: What is straddling?

A: Trying to keep your existing strategy while also copying another company’s strategy.

Q: What is the main example of straddling?

A: Continental Lite.

Q: What was Continental Lite trying to copy?

A: Southwest Airlines’ low-cost strategy.

Q: Why did Continental Lite fail?

A: It tried to combine two incompatible strategies and activity systems.

Q: What is strategic fit?

A: When a company’s activities work together and reinforce one another.

Q: Why is Southwest a major example of fit?

A: Its low fares, short routes, fast turnaround, standardized planes, and limited services all reinforce one another.

Q: Does Southwest’s advantage come from one activity?

A: No. It comes from the entire system of activities.

Q: What are the 3 types of strategic fit?

A: First-order, second-order, and third-order fit.

Q: What is first-order fit?

A: Consistency between each activity and the overall strategy.

Q: Key example of first-order fit?

A: Vanguard.

Q: Easy way to remember first-order fit?

A: 1st = Consistency.

Q: What is second-order fit?

A: Activities reinforce one another.

Q: Key example of second-order fit?

A: Neutrogena.

Q: Easy way to remember second-order fit?

A: 2nd = Reinforcement.

Q: What is third-order fit?

A: Optimization of effort across activities.

Q: Key example of third-order fit?

A: The Gap.

Q: Easy way to remember third-order fit?

A: 3rd = Optimization.

Q: Why does fit make a strategy harder to imitate?

A: A competitor would have to copy the whole interconnected activity system, not just one feature.

Q: Which is more sustainable: one strong activity or a system of activities?

A: A system of activities.

Q: What happens when a competitor copies only part of an activity system?

A: It may gain little benefit or even hurt its performance.

Q: How long does Porter say a strategic position should generally last?

A: A decade or more, not just one planning cycle.

Q: Why is continuity in strategy important?

A: It allows activities, skills, capabilities, fit, and company identity to strengthen over time.

Q: What is the growth trap?

A: Expanding in ways that weaken or blur the company’s original strategic position.

Q: How can growth damage strategy?

A: Companies may add too many products, services, customers, or competitor features.

Q: Does Porter argue that companies should not grow?

A: No. Growth should reinforce and deepen the existing strategy rather than weaken it.

Q: What are common reasons companies lose their strategy?

A: Avoiding choices, fearing trade-offs, copying rivals, chasing growth, and focusing too much on OE.

Q: Why can benchmarking become dangerous?

A: Excessive benchmarking can make competitors increasingly alike.

Q: What was Porter’s concern about many Japanese companies?

A: They became excellent at operational effectiveness but often lacked distinct strategic positions.

Q: Why can new entrants sometimes find new strategic positions more easily?

A: They are less constrained by existing activities and trade-offs.

Q: What changes can create opportunities for new strategic positions?

A: New customers, new needs, new technology, new distribution channels, and new purchasing situations.

Q: What is a major responsibility of leadership in strategy?

A: Define and communicate the company’s unique position.

Q: What else must leaders do to protect strategy?

A: Make trade-offs, create fit, resist imitation, and say no to activities that do not fit.

Q: Why is saying “no” important in strategy?

A: Strategy requires limits and choices about what the company will not do.

Q: What often happens in emerging or high-tech industries?

A: Companies imitate each other heavily because of uncertainty.

Q: Can imitation be a sustainable long-term strategy?

A: No. Long-term success requires a unique competitive position.

Q: What is the easiest formula for remembering Porter’s entire article?

A: Unique Position + Trade-offs + Fit = Sustainable Competitive Advantage.