Strategy according to Michael Porter

Business Strategy Business & Administration The University of Winnipeg

What is Strategy?
Harvard Business Review November – December, 1996

 Michael E. Porter
– Harvard Business School

The Purpose of Strategy  “(strategy is)…essential to superior performance. is the primary goal of any enterprise. What is Strategy?  Strategy is about achieving competitive advantage – winning! . Porter.” – Michael E. after all. which.

Competitive Advantage  Outperforming the competition – usually measured by Return on Equity Sustained Competitive Advantage  Consistently outperforming the competition over time .

Porter’s Route to Competitive Advantage  Strategic discipline to strengthen strategic position  Continual improvement in operational effectiveness .

 However.Operational Effectiveness  Operational effectiveness (doing individual activities well) can and will likely be readily copied and therefore is not a sustainable source of advantage. . it is still a necessary. (although not sufficient) condition for competitive advantage.

Competitive Advantage requires Sustainable Difference  “A company can outperform rivals only if it can establish a difference that it can preserve.” • Michael Porter. What is Strategy? .

” • Michael Porter.Competitive Advantage requires a Defensible Position  “Competitive Strategy is about being different. What is Strategy? . It means deliberately choosing a different set of activities to deliver a unique mix of value.

The dimensions of a Strategic Position  Strategic positions can be based on: – Customers’ needs • Wal*Mart. Superstore – Company’s products or services • Toys-a-Us – Way of Accessing Customers • Amazon.com. Mary Kay Cosmetics .

A defensible Strategic Position involves Trade-offs  A Strategic Position is sustainable only to the extent to which occupying it involves tradeoffs in the supporting activities. – The necessity for tradeoffs is not only a function of resource constraints – Some activities are inherently incompatible .

What is Strategy? .Strategy is about Choice  Strategy is also about what not to do!  “Strategy … requires hard choices. • Michael Porter.”  One of the leader’s jobs …(is) to say no.

“Strategy renders choices about what not to do as important as choices about what to do.” . What is Strategy? .Michael Porter.

What is Strategy? – For consistency with strategy – For mutual reinforcement – To optimize effort and mix of activities .Competitive Advantage requires “fit” among activities  “Strategy is about combining activities” • Michael Porter.

disciplined choices based on analysis  Leadership is key .Strategy according to Michael Porter  The goal is to win!  Deliberate.

Comparisons and Contrasts  Michael Porter  Henry Mintzberg Harvard Business School McGill University .

Two Schools of Strategy Position School Process School  “Deliberate” strategy  (Porter / Harvard)  Strategy is the conscious. analytical development of a distinct position in the environment  “Emergent” strategy  (Mintzberg / McGill)  Strategy is an intuitive process through which the organization evolves by adapting to its environment .

Organizational Goals Position School Process School  Competitive Advantage – “(strategy  Continued Existence – “(strategy is)…all is)…essential to superior performance. Pascale – The Honda Effect . after all. is the primary goal of any enterprise” • Michael Porter – What is Strategy? things necessary for the successful functioning of an organization as an adaptive mechanism.” • Richard T. which.

develop through ongoing and defend an experience within advantageous position the environment in the environment  Don’t be afraid to  Be disciplined about experiment this choice .Relationship to Environment Position School Process School  Learn and evolve  Determine.

Organizational Capabilities Position School Process School  Build mutuallyreinforcing “fit” among organizational activities in tightly focused support of chosen strategic position  Encourage experimentation and variety in activities. from which potential new strategies may emerge .

Implications for Strategic Management Position School Process School  Leadership  Leadership nurtures conceptualizes a learning. support of it. . flexible strategy based on organization which analysis and mobilizes is highly responsive the organization in and adaptable to the well-coordinated environment.

Question for you!  Which “school of strategy” do you find more convincing personally?  Why? .

Preference for Position versus Process strategy seems to depend on….  Degree of Volatility in the environment  Size of the Company  Internal / External locus of control  Risk / Return preference  Management style / ego .

Let’s Compromise  “Strategy formation walks on two feet… one deliberate.” – Henry Mintzberg – Of Strategies Deliberate and Emergent . the other emergent.

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