What is Strategy?

Which one is a strategy
Improve product quality Increase production efficiency Do Total Quality Management Focus on niche customers Benchmark with customers Cut expensive service to reduce cost Concentrate on customers in rural area

Operation Effectiveness (OE) VS Strategy
¾ Improve product quality

¾ Focus on niche customers

¾ Improve production


¾ Cut expensive services to

reduce cost

¾ Do TQM

¾ Concentrate on customers

in rural area
¾ Benchmark with customer

OE is necessary, but not sufficient
¾ OE means performing similar activities better

than rivals perform them
¾ Have better quality and lower cost ¾ However, only few companies have competed

successfully on a basis of OE over an extended period

¾ Why?

OE is a zero-sum game
¾ Technology and best practice diffuse across the

board very fast
¾ Everybody implement the same practice, and

have the same result
¾ You have a higher quality than before, but not

higher than your competitors anymore
¾ You have a lower cost than before, but not

lower than your competitors anymore

What is strategy?
¾ Competitive strategy is about being different

¾ Choosing different set of activities to deliver a

unique mix of value

¾ Tesco Lotus VS 7-Eleven

Origin of strategic position
¾ Variety-based positioning

¾ Needs-based positioning

¾ Access-based positioning

Variety-based positioning
¾ Focus on particular subset of an industry·s

product or services


¾ Coach

Needs-based positioning
¾ Service to most or all needs of a particular group

of customers

¾ Home Depot

¾ Tesco Lotus

Access-based positioning
¾ Anything that requires a different set of activities

to reach customers in the best way

¾ 7-Eleven

¾ Fruit cart

Strategy needs trade-off
¾ A strategic position is not sustainable unless there

are trade-offs with other positions

¾ Trade-offs create the need for choice and

protect against repositioners and straddlers

¾ Make it costly for others to follow

Which strategy that requires trade-off?
¾ Inconsistency with company·s image or


¾ Reflect inflexibilities in machinery, people, or


¾ Limitation on internal coordination and control

Generic strategy
¾ Cost leadership

¾ Differentiation

¾ Focus

Fit is the core part in strategy
¾ Strategy is about combining activities

¾ Fit locks out imitators by creating a chain that is

as strong as its strongest link

¾ Competitors can copy one activity, but it is hard

to copy all activities

3 levels of fit
¾ Simple consistency

¾ Activities are reinforcing

¾ Optimization of effort

Simple consistency
¾ Every activity align with the strategy

¾ Consistency ensures that the competitive

advantages of activities cumulate and do not erode or cancel themselves out

Activities are reinforcing
¾ Not only each activity align with the strategy, it

also support each other

¾ E.g. using point-of-sale activity, heavy TV

advertising, and packaging changes to create extra buying impulse

Optimization of effort
¾ Optimize every activity to support the strategy

¾ E.g. restocking the warehouse daily to reduce

the stock volume when the company focuses on basic items with limited variety

What is strategy?
Strategy is the creation of a unique and valuable position, involving a different set of activities.

Strategy is making trade-offs in competing

Strategy is creating fit among a company·s activities.

Strategy is not a one-time process
¾ Strategy needs readjustment when the

environment changes

¾ Strategy can form as well as be formulated

¾ Strategy may be developed from the


Strategic planning cycle

Business environment

Strategy planning

Strategy execution

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