Strategy

an Introduction

What is Strategy:
Porter, M. E. (1996).
Harvard Business Review, 74: 61-78.

Are You Sure You Have a Strategy?

Hambrick, D. C., & Frederickson, J. W. (2001)
Academy of Management Executive, 15 (4)

Strategy
Strategy

The creation of a unique and valuable

position by combining sets of activities, where
fit among a companys activities, the ability to
do the activities well, and extent to which all
activities are integrated determines the
success of the strategy.
Our central concept of how we will achieve
our objectives by recognizing an opportunity
and plan to seize it
Demands

discipline and continuity; its

enemies are distraction and compromise.

Strategy
The

essence of strategy

To perform activities differently than rivals

do.
Determining what not to do and deciding
what to do.
What

should it do for us?

Guide our resource allocation and daily actions

Guide our design of organizational arrangements
Provide a catalyzing shorthand of what we are
all trying to do

Operational Effectiveness
(OE)
Operational

Effectiveness (OE)

To perform similar activities better than rivals do.

OE

is necessary, but not sufficient, for

sustainable superior profitability because of
rapid diffusion of best practices.

The

Productivity Frontier

The sum of all existing best practices at any

given time characterized by both relative cost
position and non-price buyer value delivered.

Putting Strategy
In Its Place
Strategic Analysis:
C3E
Customer analysis
Competitor
analysis
Company capability
analysis
Environmental
analysis

Mission
fundamental
purpose
values
Objectives
specific targets

Strateg
y
Our central
concept of
how we will
achieve our
objectives

Supporting
Organizational
Arrangements
structure rewards
processes
people
symbols activities

The Five Major Elements

of Strategy
What will be our
speed and sequence
of moves?
Speed of expansion?
Sequence of
initiatives?
Staging

Arenas

Econ
omic
Logi
c

Where will we be
active?
(and with how much
emphasis?)
Which product
categories?
Which market
segments?
Which geographic
areas?
Which
core
How
will we get
technologies?
there?
Vehicles
Which
value-creation
Internal
stages?

development?
Joint ventures?
Differentiato

rs
Licensing/franchisin
How will we
win in the
How will we obtain our returns?
g?
marketplace?
Lowest costs through scale
Image? Acquisitions?
advantages?
Customization?
Lowest costs through scope and
Price?
replication advantages?
Styling?
Premium prices due to
Product Reliability?
unmatchable service?
Etc.?
Premium prices due to proprietary

IKEAs Strategy
Arenas

Staging
Rapid international
expansion, by region
Early footholds in each
country; fill-in later

Arena
s
Eco
nom
Stagin
ic
g
Logi
c
Differentiat

Inexpensive contemporary
furniture
Young, white-collar
customers
Worldwide

Vehicle
Vehicles
s Organic

expansion
Wholly-owned stores

ors

nomic Logic
onomies of scale (global, regional,
d individual store scale)
fficiencies from replication

Differentiators
Very reliable quality
Low price
Fun, non-threatening
shopping experience

Strategic Positioning
Strategic

Positioning

perform different activities than ones rivals or

performing similar activities in different ways.
Sources

of Strategic Positions (not mutually

exclusive)
Variety-based
based on the choice of product or service variety in the
offering

Needs-based
serving most or all the needs of a particular customer
segment

Access-based
serving customers in terms of ways to reach them

Trade-Offs
Trade-offs

create the need for choice

and purposefully limit what a company
offers.

Reasons

Trade-offs are needed

To maintain consistencies in image or

reputation
Different positions require a different mix
of activities
Limits on internal coordination and control
(clear priorities must be set)

Fit
Types

of Fit (in order of increasing magnitude)

Simple consistency advantages of activities cumulate (not erode

or cancel out)
Reinforcing activities reinforce one another (i.e. complementary
marketing)
Optimization of effort individual activities cannot be separated
from the whole
Positions

built upon systems of activities are harder for

rivals to duplicate.

The

greatest threats to strategy come from within. The

pursuit of OE is seductive because it is concrete and
actionable.

The

role of leadership is strategy: defining a companys

position, making trade-offs and forging fit among activities.