Discussion Questions/Points for Class- What Is Strategy

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What is strategy?!
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Strategy is the creation of a unique and valuable position,

involving a different set of activities.!
Strategy requires you to make trade-offs in competing-- to
choose what not to do.!
Strategy involves creating fit among a companys activities.!

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Operational effectiveness + Strategy= Superior Performance!
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III.
IV.
V.

Operational Efficiency is not strategy!

Strategy Rests on Unique Activities!
Sustainable Strategic Position Requires Trade-offs!
Fit Drives Both Competitive Advantage and Sustainability!
Rediscovering strategy!

1) Operational effectiveness versus strategy-- define and explain the

differences?!

Operational effectiveness means performing similar activities better

than rivals!

Strategic positioning means performing different activities OR

performing similar activities in different ways.!

All differences between companies on cost or price derive from the

hundreds of actions required to create, produce, sell and deliver
products/service.!

2) What are the risks of only competing on operational effectiveness?!

a. Because competitors can easily copy!
b. OE raises the bar for everyone (not a relative technique)!

Competition based on OE alone is mutually destructiveit's a war of

attrition!

Discussion Questions/Points for Class- January 30th

Bottom lineStrategy is about the differences, OE drives companies
to do the same.!

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3) What are activity systems? What is fit and what are the 3 types of
fit?!

Inter-connected activities. 3 fits are: 1st order fit: Simple consistency

(Vanguard), 2nd order fit: reinforcing (Neutrogena), 3) 3rd order fit:
optimization of effort (GAP)rapid restocking!

Southwest!
Short-haul, low-cost, point to point services (no hubs)!
Frequent departures/low-fares!
Fast turnaround (planes are in the air more to maximize #
passengers)!
No premium services!
Standard fleet (easier/less complicated to services)!
Does not work with travel agents or main travel sites (go direct)!

Ikea (targeting younger buyers @ low-cost)!

Self-service model!
Designs its own furniture!
Huge stores with displays!
Product is on site!
Provides services targeting their buyers (onsite child care)!

4) Discuss the origins of strategic positioning: 1) Variety-based

positioning, 2) Needs-based positioning, and 3) Access-based
positioning.!

Variety baseda subset of an industry's products delivered to a

broader audience (Jiffy Lube & Vanguard)!
Needs-based -- Ikeawant to meet all of a certain audiences needs.
Bessemer vs Citi for high-net worth/private banking.!
Access-base(geography rural vs. urban)!

Discussion Questions/Points for Class- What Is Strategy

Focused competitors thrive on groups of customers who are overserved (over-priced) by more broadly targeted customer or underserved (under-priced) competitors. !

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5) What are the risks of straddling positions (not making tradeoffs)? !

Activities pursued don't support the model. Continental Lite was a disaster
because their core business model and strategies didn't support a low-cost/
reduced service model.!
Inconsistencies in image or reputation!
Activities lead to different outcomes!
Limits on internal coordination (mixed messages)!

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Review the trade-offs for Vanguard in their position vs. MFS!
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Vanguard vs MFS!
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Vanguard= passive manager (low-cost index oriented funds),!

Distribution: Vanguard- direct/no load purchase, no advice!
Service (direct vs. intermediaries)!
Vanguard has a very specific activity map based on the type of
company they are and the clients they support.!
Vanguard appeals to "do it yourself"/cost conscious investors and
builds activities to support those buyers.!

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Bottom line!
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1) Strategy includes choosing what NOT to-do. It's about combining

activities (activity system) together that becomes the differentiation.!

2) Senior management plays a critical role in setting and communicating

the strategic positioning, being willing to make trade-offs, and
ensuring the activities fit the strategic positioning. Poorly executed
strategy often come from management not making trade-offs or
pursuing strategies and related activities that don't fit.!