Question: Please read the Paper "What is Strategy?"

Proceed to then apply the classifications that

Porter offers to a selection of companies of your

choice. Why do you think so? How does each compare

to their nearest competitor?

THE IDEA IN BRIEF THE myriad activities that go into creating, producing, selling, and delivering a product or service are the basic units of competitive advan- tage. Operational effectiveness means perform- ing these activities betterthat is, faster, or with fewer inputs and defectsthan rivals. Companies can reap enormous advantages from operational effectiveness, as Japanese rms demonstrated in the 19705 and 1980s with such practices as total quality management and con- tinuous improvement. But from a competitive standpoint, the problem with operational effectiveness is that best practices are easily emulated. As all competitors in an industry adopt them, the productivity frontierthe maximum value a company can deliver at a THE IDEA AT WORK 1-H REE key principles underlie strategic positioning. 1.5trategy is the creation of a unique and valuable position, involving a different set of activities. Strategic position emerges from three distinct sources: - serving few needs of many customers (Jiffy Lube provides only auto lubricants) - serving broad needs of few customers (Bessemer Trust targets only very highwealth clients) - serving broad needs of many customers in a narrow market (Carmike Cinemas operates only in cities with a population under 200,000) 2. Strategy requires you to make trade-offs in competingto choose what not to do. Some competitive activities are incompati- ble; thus. gains in one area can be achieved only at the expense of another area. For example, Neutrogena soap is Positioned more as a medicinal product than as a cleansing agent. The company says "no\" to sales based on deodorizing, gives up large volume, and sacrices manufacturing efciencies. By contrast, Maytag's decision to extend its product line and acquire other What Is Strategy? given cost, given the best available technology, skills, and management techniquesshifts out- ward. lowering costs and improving value at the same time. Such competition produces absolute improvement in operational effectiveness, but relative improvement for no one. And the more benchmarking that companies do, the more competitive convergence you havethat is, the more indistinguishable companies are from one another. Strategic Positioning attempts to achieve sus- tainable competitive advantage by preserving what is distinctive about a company. It means performing dzerent activities from rivals, or performing similar activities in di'erent ways. brands represented a failure to make difcult trade-offs: the boost in revenues came at the expense of return on sales. 3. Strategy involves creating "fit" among a company's activities. Fit has to do with the ways a company's activities interact and reinforce one another. For example, Van guard Group aligns all of its activities with a lowcost strategy; it distributes funds directly to consumers and minimizes port folio turnover. Fit drives both competitive advantage and sustainability: when activi ties mutually reinforce each other, competi- tors can't easily imitate them. When Conti- nental Lite tried to match a few of South- west Airlines' activities, but not the whole interlocking system, the results were disastrous. Employees need guidance about how to deepen a strategic position rather than broaden or compromise it. About how to extend the com pany's uniqueness while strengthening the t among its activities. This work of deciding which target group of customers and needs to serve requires discipline, the ability to set lim its, and forthright communication. Clearly, strategy and leadership are inextricably linked HBR OnPoint 2000 President and Fellows of Harvard College. All rights reserved