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Read: What is strategy?

Read: What is strategy? Michael E. Porter HBR (1996) and prepare a 3 page written report of key points. Also cite implications for management practice.

What is a Strategy?
1.0 Introduction

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Michael Porter is linked with the positioning school. The School analytic methodology
views the process of making a strategy mainly from a process of identifying forces (drivers) of
intra – industry competition and responding to challenges. Porters' reasoning bases on the
assumption that a business entity can deliberately choose its position within an industry and be
able to combine various activities in different ways, as a result, creating sustainable competitive
advantages over its key rivals leading to sustainable competition and profitability. In his 1996
article titled “What is Strategy” Porter discusses operational efficiency linking it with strategy
making and he argues that these two elements cannot be used interchangeably (Porter 156).
Porter asserts that positioning is a vital measure that an organization can employ in order
to shape advantages (156). He further views hyper competition as obsolete concept that explains
the changing patterns in market competition and asserts that a misunderstanding exists to
different between strategy and operational effectiveness (Porter 156). Many organizations
replace management tools – which have helped these organizations increase operational
effectiveness – with strategy does not translate such improved operational effectiveness into
values for consumers where profitability can be increased and profits can be earned Read: What is strategy?. Variations
in profitability in comparison with rivals emerge due to activities that an organization employs in


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order to deliver consumer value. These can either be combining similar factors on a much lower
unit cost or a higher average unit cost arising from perceived superior value.
2.0 Strategy is not Operational Effectiveness
Porter notes that various management tools such as benchmarking, quality management,
outsourcing, time – based competition, reengineering, partnering, that business organizations use
today, do improve and dramatically enhance the organization’s operational effectiveness but fail
to ensure that the company realizes sustainable profitability (156). Consequently, the main cause
of management failure in an organization seems to be differentiating between strategy and
operational effectiveness, that is, management tools have replaced strategy. Strategy and
operational effectiveness are both essential for improved performance of a company, they
operate in varied ways. Strategy entails conducting different activities from competitors or using
different ways to perform similar activities. Operational effectiveness, on the other hand,
involves performing similar activities in a better way as compared to competitors. Operational
effectiveness encompasses efficiency. Efficiency means activities that allow an organization to
utilize its inputs in a better way. Porter postulates that an organization can outdo competitors
only if it creates a difference it can sustain (156). The organization should ensure enhanced value
delivery to its consumers or establish comparable value at a reduced cost, or employ both
strategies. However, porter notes that most organizations use operational effectiveness to
compete today. Competition anchored only on operational effectiveness is destructive and leads
to rivalries of attrition, a situation that can be cooled only by reducing competition. Japanese
companies, which started global transformation in operational effectiveness, witnessed such
competitions during the 1970s and 1980s. Arguably, companies that compete only on
operational effectiveness – including the Japanese – are facing zero – sum competition, declining

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or static prices, diminishing returns and cost pressures that compromise organizations’ ability to
sustain the business venture in the end VRead: What is strategy?.

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