What is Strategy?

Michael Porter – Harvard Business School

Positioning + Tradeoffs + Fit

Strategy is the creation of unique and valuable position in the marketplace by performing a
different set of valuable activities efficiently (your core competitive advantage), staying focused
on your core by constantly making right tradeoff decisions and improving ‘the fit’ among
existing core competitive advantages.
 Strategic Position – performing a different set of valuable activities efficiently (your core
competitive advantage
 Staying focused on your core by constantly making right tradeoff decisions
 Improving the “fit” among existing core competitive advantages

Operational Effectiveness alone is not a strategy. Benchmarking, quality management, reducing

defects, improving productivity, outsourcing partnering, reacting according to change, re-
engineering >> in order to achieve efficiency

Operational effective alone if pursued by all competitors is a zero sum game in the long run. It
leads to convergence of best practices over time and eventually leads to price wars and value
destruction.

Positioning: A company can outperform its rivals and maintain its competitive advantage only if
it can establish difference in activities that it can uniquely do and improve overtime. There are
three ways to position for customers:
 Variety Based
 Need Based
 Access Based

Tradeoffs: Choosing what to do and what not to do. Making right strategic decisions, availing
some opportunities and doing some compromises as well because quality always comes with a
cost.
 Inconsistency brings reputation at risk
 Productivity can be improved by limiting some of the activities
 Making clear priorities in selecting

What not to do?

 Failure to choose
 Straddling
 Growth Trap