1-what is strategy Flashcards
operational effectiveness is not a strategy
competitive landscape of different companies operational effectiveness means performing simulator activities better than rivals and this refers to best practices/strategic positioning means perform different activities from rivals or performing similar activities in a different ways
goal of strategic positioning
to achieve sustainable competitive advantage by preserving what is distinctive about a company
productivity Frontier
constitutes the sum of all existing best practices at any given time maximum value that a company can create at a given cause using the best available Technologies
three principles underlying strategic positioning
1- strategy is a creation of unique and valuable position including a different set of activities 2- strategy requires you to make trade-offs in competing to choose what not to do 3- strategy involves creating fit among the companies activities
distinct sources of strategic position
1-serving few needs of many customers like Jiffy Lube
2-serving broad needs of few customers like trusts Bank serving High individuals
3-serving broad needs of many customers in a narrow Market like Carmike Cinemas operates in cities under 200,000
fit drives both competitive advantage and sustainability
when activities mutually reinforce each other competitors can’t easily imitate them it’s like interlocking system
OE competition shifts the productivity Frontier outward
this depresses margins like Japanese car manufacturers suffered from persistently profits / competitive convergence is more prominent in the rivals towards the productivity Frontier
strategy rests on unique activities example
Southwest Airline offers short haul low cost point-to-point service between midsize cities and secondary airport in large cities and avoids large airports and doesn’t fly great distances
CarMax is based on new way of Performing activities extensive refurbishing of cars product guarantees no haggle pricing sophisticated use of In-House customer financing that has been long open to incumbents
three distinct sources of strategic position
variety based positioning
need base positioning
access-based positioning
variety based positioning examp ppo
variety based positioning example Jiffy Lube is International specializes in automotive lubricants and doesn’t offer other car repairs or maintenance services
need-based positioning example
Ikea seems to meet all the Home Furnishing needs of its Target customers not just a subset of them differences in needs will not translate into meaningful positions unless the best set of activities to satisfy them also diffe
access based positioning example
Carmike Cinemas operates movie theater exclusively in cities and towns with populations under 200,000 rural customers are one example of access-driven differences and activities
positioning is not only about carving out a niche
a position emerged from any of the sources can be brought or narrow
focused versus broadly targeted competitors
Ikea is a focus competitor serving over served or underserved people Delta Airlines is broad competitor with variety of customers and having a different set of activities designed to meet their common needs
the basis could be variety needs or access or any combination of these
in particular variety or access differences often a company needs differences
sustainable strategic position requires trade-offs such as
first competitors can reposition themselves
second is called straddling they match the benefits of a successful position while maintaining their existing position
especially in airline industry invitation can be achieved readily however comparing Continental Airlines and Southwest the end results wasn’t good enough for Continental because they didn’t do any trade off
trade-offs create the need for choice and protect against repositions and straddlers
Neutrogena soap marketing strategy for them looks more like a drug company than a soap marketers the advertising medical journals answer doctors skin care Institute
three sources of trade-offs
first inconsistency and image or reputation and customer confusion
second inflexibility in tailoring activities Ikea has configures activities to lower costs the less customers were able to satisfy higher level or service
third limits on internal coordination and control and set priorities in organization with clear framework
strategy is making trade-offs
in competing the essence of a strategy is choosing what not to do without trade-offs there would be no need for choice and thus no need for strategy
Fit drives both competitive advantage and sustainability
Good operational effectiveness is about achieving Excellence individual activities or functions strategy is about combining activities such as Southwest Rapid turnarounds low cost routes great productivity in Crews
how does fit lock out imitators
by creating a chain that is as strong as its strongest link all the activities compliments one another that create real economic value
three types of fit
first order fit is simple consistency between each activity and overall strategy
second order fit occurs when activities or reinforcing such as neutrogena’s strategy to use hotels
third order fit goes beyond reinforcement and called optimization of effort which comes from coordination and information exchange across activities to eliminate redundancy and minimize basic effort such as Gap restocking daily out of its Warehouse and no need to carry large in store inventories
the growth trap
the desire to grow as perhaps the most perverse effect on strategy
trade-offs and limits appear to constrain growth
such as broadly targeted strategies emphasizing on low price result in Lost sales with customer sensitive to features or services
