Summary of “What is Strategy?” by Porter, M

In the beginning there was Operational Effectiveness, but this has just led to an optimisation of companies with very little direction and strategic vision.
“Competitive strategy is about being different”: This is the way that you choice to service your customers, or present what you are offering, are distinctly different from those of your competitors. If this is just a statement and not an action then the competition will win if they have a strategy that they actually implement.
Strategic Positions
· Variety Based Positioning – companies that within an industry offering a wide variety of choices choose to specialise in just one, so they can offer superior value for a particular service.
· Needs Based Positioning – Company strategy is to focus on a specific need of a customer base and meet all their needs in this one area, the example sited is Ikea targets young, not wealthy, likely to have children family’s and meets all their furniture needs in one store. Then the company must have a unique value proposition to meet these needs.
· Access Based Positioning – If there is a specific way that deal with your customer base, only dealing with rural customers that might mean no transport so have to take your product to them.
Therefore, an answer to the question posed becomes “Strategy is the creation of a unique and valuable position, involving a different set of activities”.
Trade-offs needed
To maintain a strategic advantage requires some trade-offs, to be able to maintain a position you have to give up something which then prevents you from changing your position without incurring costs. This also means competitors who try to straddle across their existing market and then copy your model have to give up, or accept new, practices required for their existing position which then either makes it cost ineffective to compete in same sphere or cause irregularities in their brand or reputation.
Again this refines our answer, “Strategy is making trade-offs in competing. The essence of strategy is choosing what not to do.”
Fit
· Simple Consistency – Each activity and the overall strategy work together
· Reinforcing – Activities build on the strategy
· Optimisation of effort – Processes optimised towards the strategy.
The activities that company doing as it strategy make it harder for competition to copy without having to copy the whole system.
Thus, the final answer to “What is strategy? Strategy is creating fit among a company’s activities. The success of a strategy depends on doing many things well – not just a few – and integrating among them. If there is no fit among activities, there is no distinctive strategy and little sustainability.”
With the answer to what is a strategy, the problem then moves to not ‘sticking to your guns’ and in the chasing of profit losing track of your goal as defined by the strategy. As with Neutrogena moving into the mass merchandisers away from the drug store, they are no longer unique and their image becomes diluted.
However, to obtain profitable growth companies must reinforce their activities that fit with the strategy, focus on meeting those needs, and unless rework and refocus the complete company strategy then do not change what doing if it is in line with the current strategy. The leadership of the company must keep a tight rein on direction the company is taking to ensure inline with the strategy.
In closing, managers must differentiate between operational effectiveness and strategy, as both are essential and both are different.