Contents
1. Porter (1996); What is strategy? p.2
2. Rumelt (2011); The perils of bad strategy p.6
3. Hambrick & Frederickson (2001); Are you sure you have a strategy? p.8
4. Porter (2008); The five competitive forces that shape strategy p.11
5. Ofek & Wathieu (2010); Are you ignoring trends that could shake up your business? p.14
6. Barney (1991); Firm resources and sustained competitive advantage p.17
7. Grant (1991); The Resource-Based Theory of Competitive Advantage p.19
8. Heracleous and Wirtz (2009); Strategy and organization at Singapore Airlines p.23
9. Heracleous and Wirtz (2010); The Globe: Singapore Airlines’ Balancing Act p.25
10. Ireland et al. (2001); Integrating entrepreneurship and strategic management actions p.26
11. Kraus and Kauranen (2009); Strategic management and entrepreneurship p.29
12. Hitt et al. (2011); Strategic entrepreneurship p.32
13. Hansen and Birkenshaw (2007); The innovation value chain p.35
14. Williamson and Meyer (2012); Ecosystem Advantage p.37
15. Bartlett and Ghoshal (2003); What is a global manager? p.40
16. Ghemawat (2007); Managing differences: The central challenge of global strategy p.42
1
, What is strategy?
Porter (1996)
1. Operational effectiveness is not strategy
The root of the problem in acquiring a competitive advantage is the failure to distinguish between
operational effectiveness and strategy. Although there have been many drastic operational
improvements, many companies have been frustrated by their inability to translate those gains into
sustainable profitability; management tools have taken the place of strategy.
Operational effectiveness: Necessary but not sufficient
Operational effectiveness and strategy are both essential to superior performance, but they work in
very different ways. A company can outperform rivals only if it can establish a difference that it can
preserve. It must deliver greater value to customers, create comparable value at a lower cost, or do
both. The competitive advantage thus comes from the company’s activities.
- Operational effectiveness (OE); performing activities better than rivals do
- Strategic positioning; performing different activities or performing similar activities in
different ways
Differences in OE among companies are an important source of differences in profitability as they
directly affect relative cost positions and levels of differentiation. (advanced technologies, employee
motivation, greater insights into managing activities)
Productivity frontier; the sum of all existing best practices at any given
time. It is the maximum value a company can create at a given cost, using
the best available technologies, skills, management techniques, and
purchased inputs.
An improvement in OE moves the company towards the frontier.
As technologies and management practices are developed, the frontier
constantly shifts outward. Think for example how mobile
communications and the internet redefined the productivity frontier for
sales-force operations.
Constant improvement in OE is necessary to achieve superior
profitability, but is usually not sufficient to maintain it. The most obvious
reason for this is the rapid diffusion of best practices; rivals can quickly imitate these practices. So
while improvements in OE shift the productivity frontier outward and raise the bar for everyone, there
are no relative improvements for anyone. All improvements are captured by customers and suppliers
instead of being retained in superior profitability.
Another reason that OE is insufficient is more subtle;
- Competitive convergence; the more benchmarking companies do, the more they look alike
As companies increasingly outsource to often the same companies, the activities become more
generic. As rivals imitate each other’s practices, strategies converge and competition becomes a series
of races down identical paths that no one can win. The result is zero-sum competition, static or
declining prices, and pressures on costs that compromise companies’ ability to invest in the long term.
2. Strategy rests on unique activities
Competitive strategy is about choosing a different set of activities to deliver a unique mix of value.
The origins of strategic positions
Strategic positions emerge from three distinct sources, which are not mutually exclusive and often
overlap;
1. Variety-based positioning; positioning based on producing a subset of an industry’s products
or services, so a company focusses on a particular product type within an industry, instead of
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, the customer segments (for example a company that only produces car oil and doesn’t offer
other car repair or maintenance services)
A variety-based positioning can serve a wide array of customers, but for most it will meet only
a subset of their needs
2. Needs-based positioning; serving most or all the needs of a particular group of customers.
Ikea is a good example; it seeks to meet all the home furnishing needs of its target customers
It is important to note that differences in needs will not translate into meaningful positions
unless the best set of activities to satisfy them also differs, otherwise every competitor could
meet the same needs
3. Access-based positioning; segmenting customers who are accessible in different ways
These customers have similar needs, but the best configuration of activities to reach them is
different
The article gives the example of a movie theatre chain which only operates movie theatres in
cities and towns with populations under 200,000
Whatever the basis – variety, needs, access, or a combination – positioning requires a tailored set of
activities because it’s always a function of differences on the supply side instead of the demand side.
3. A sustainable strategic position requires trade-offs
Choosing a unique position is not enough to guarantee a sustainable advantage as it will attract
imitation by incumbents who are likely to copy it in one of two ways;
1. A competitor can reposition itself to match the superior performer
2. Straddling; seeking to match the benefits of a successful position while maintaining its
existing position
However, especially in straddling, there are always trade-offs; an airline can choose to either serve
meals, adding cost and slowing turnaround time at the gate, or choose not to, but it cannot do both
without bearing major inefficiencies. It is these trade-offs that protect against repositioners and
straddlers, as they undermine their strategies and degrade the value of their existing activities.
Trade-offs arise for three reasons;
1. Inconsistencies in image or reputation
A company known for delivering one kind of value may lack credibility and confuse
customers if it attempts to deliver two inconsistent things at the same time
2. Activities themselves
Different positions require different factors. Many trade-offs reflect inflexibilities in
machinery, people, or systems
3. Limits on internal coordination and control
Companies that try to be all things to all customers risk confusion amongst employees as they
attempt to make day-to-day operating decisions without a clear framework
As managers have improved OE greatly, they have internalized the idea that eliminating trade-offs is a
good thing. But if there are no trade-offs companies will never achieve a sustainable advantage.
Fit drives both competitive advantage and sustainability
Positioning choices determine not only which activities a company will perform and how it will
configure individual activities but also how activities relate to one another. While OE is about
achieving excellence in individual activities, strategy is about combining activities.
Fit locks out imitators by creating a chain that is as strong as its strongest link. One activity’s cost may
be lowered because of the way other activities are performed. Similarly, one activity’s value to
customers can be enhanced by a company’s other activities.
Types of fit
Fit is important because activities often affect one another. Although some fit among activities is
generic and applies to many companies, the most valuable fit is strategy-specific because it enhances a
position’s uniqueness and amplifies trade-offs.
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