What Is Strategy? (Porter, HBR Nov-Dec 1996)

Vocabulary flashcards capturing key terms and definitions from Porter’s What Is Strategy? (HBR, 1996).

Operational effectiveness

Performing similar activities better than rivals; includes productivity, quality, and speed; necessary but not sufficient for sustainable profitability because rivals imitate improvements and relative advantage erodes.

Productivity frontier

The boundary of best-practice performance at a given cost; moves outward as new technologies and methods are developed; used to describe the level toward which OE strives.

Strategy

The creation of a unique and valuable position through a different set of activities; requires clear trade-offs and a coherent fit among activities; aims for a sustainable advantage.

Trade-offs

Choices that limit what a company can do; arise from image inconsistencies, activity configurations, and coordination limits; essential to prevent imitation and sustain advantage.

Fit

The way a system of activities reinforces and aligns with the overall strategy; the whole matters more than any single activity; can be described at multiple orders of interdependence.

First-order fit

Consistency between each individual activity and the overall strategy.

Second-order fit

Reinforcing relationships among activities that lower total costs or enhance value (e.g., cross-promotions or aligned marketing).

Third-order fit

Optimization across activity systems to minimize total effort and avoid unnecessary activities (e.g., Gap’s restocking approach to reduce in-store inventory).

Activity System

A network of tightly linked activities that collectively deliver a strategic position; maps illustrate how activities cluster and reinforce one another.

Variety-based positioning

Position based on producing a subset of product or service varieties; emphasizes distinct activities to excel at specific varieties (e.g., Jiffy Lube; Vanguard).

Needs-based positioning

Position based on serving all the needs of a particular customer group; requires tailoring activities to those needs (e.g., Ikea; Bessemer Trust).

Access-based positioning

Position based on how customers are reached (geography, scale, etc.); sets activities to match access constraints (e.g., Carmike Cinemas).

Strategic position

The set of activities that delivers a unique mix of value and differentiates a company from rivals.

Competitive advantage

Superior profitability or value arising from a unique position and the way activities are configured; enhanced by fit and trade-offs.

Sustainable competitive advantage

A lasting advantage created by an interlocked activity system and meaningful trade-offs that are hard for rivals to imitate.

Straddling

Imitating a rival’s position while maintaining the incumbent’s position; often leads to costly trade-offs and poor performance (e.g., Continental Lite).

Repositioning

A firm shifts its activities to match or imitate another position; can fail when trade-offs and system coherence are not preserved.

Emergent industries

Industries with high uncertainty where imitation and hedging are common; enduring success comes from defining a unique position early and sticking to it.

Growth trap

The lure to broaden a strategy for growth, which can erode uniqueness and profitability by spreading resources across too many offerings.

Leadership in strategy

General management defines the company’s position, makes trade-offs, forges fit, and communicates the strategy; leaders must say no to distractions and sustain strategic continuity.

Strategic horizon

A long-term view (often a decade or more) for strategic positions; continuity supports deeper fit and durable advantage.

Operational vs. strategic agendas

OE focuses on continual improvement of individual activities; strategy focuses on unique position, trade-offs, and the fit among activities; both are essential but distinct.