W h a t i s S t r a t e g y ?

( Po r t e r )
The definition of strategy nowadays is different to what it used to be. Positioning is
too static nowadays, any competitive advantage is temporary as competitors can
copy it quite easily. The article aims at redefining strategy by separating the
term from operational effectiveness.
Operational effectiveness (OE) means performing similar activities better than
rivals. Better means more efficient, faster, and cheaper. It is necessary to achieve
superior profitability. However, while OE is necessary, it is not sufficient. It is not a
strategy. A company needs to establish a difference that it can preserve.
Strategy is about being different. Different in a way of choosing a different mix of
activities to provide a product or service. Strategic positions can emerge from three
distinct sources which serve as a basis for positioning:
1. Variety-based positioning: A company can specialize in a subset of an
industrys product (e.g. sell chairs only)
2. Needs-based positioning: A company can try to serve more needs of a
target group than rivals (e.g. not only sell chairs but furniture for the whole
apartment)
3. Access-based positioning: A company can segment customers who are
accessible in different ways (e.g. only sell chairs in big cities, or via the
internet).
A sustainable strategic position requires trade-offs. Trade-offs become
necessary when two activities are incompatible (e.g. you sell low-cost chairs while
offering individual customer service). Companies have to make sure that their
activities are coherent. This implies refraining from certain activities. Strategy is
about choosing what not to do.
Another important aspect is how a company combines activities. By creating a fit
among activities, imitators cannot copy the business model as easy anymore. The
three types of fit are simple consistency (e.g. everything is low-cost); reinforcement
(e.g. specific marketing strategies); and optimization effect.

As we can see, strength of a company can result from a combination of

activities. We can think of themes (e.g. low-cost), which span across activities.
Strategic fit is fundamental not only to the competitive advantage, but also to the
sustainability of that advantage.
The biggest threat to strategy is the desire to grow. Trade-offs set by the strategy
seem to limit growth. Trying to compete at numerous levels at once create
confusion and undermine organizational motivation and focus. The solution
is to grow by deepening the strategic position. This means making the activities
even more distinctive, strengthening fit, and communicating the strategy to new
customers.