Strategy and Operational Effectiveness Flashcards

Vocabulary flashcards identifying key concepts, company examples, and definitions based on Michael Porter's principles of strategy and competitive advantage.

Operational effectiveness (OE)

Performing similar activities better than competitors.

Strategy

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

Competitive convergence

The outcome when competitors become more alike because they imitate each other.

Productivity frontier

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

Activities

The basic units of competitive advantage.

Strategic positioning

Creating a unique position through a different set of activities.

Variety-based positioning

Strategic positioning based on focusing on a specific type or subset of products/services (answering 'WHAT does the company offer?'). Example: Jiffy Lube.

Needs-based positioning

Strategic positioning based on serving most or all of the needs of a specific customer group (answering 'WHO is the company serving?'). Example: IKEA.

Access-based positioning

Strategic positioning based on serving customers who are best reached through a different set of activities (answering 'HOW are customers reached?'). Example: Carmike Cinemas.

Porter's 3 generic strategies

Cost leadership, differentiation, and focus.

Trade-off

A strategic decision where choosing more of one thing requires giving up something else; choosing what not to do.

Reasons trade-offs arise

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

Straddling

Trying to keep an existing strategy while also copying another company’s strategy. Example: Continental Lite trying to copy Southwest Airlines.

Strategic fit

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

First-order fit

Consistency between each activity and the overall strategy (1st = Consistency). Example: Vanguard.

Second-order fit

A type of fit where activities reinforce one another (2nd = Reinforcement). Example: Neutrogena.

Third-order fit

Optimization of effort across activities (3rd = Optimization). Example: The Gap.

Growth trap

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

Formula for Sustainable Competitive Advantage

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