What is strategy?

Group C-1
20P137 Darshani Singhal 20P158 Pradyumn Mattu
20P138 Deepak Gupta 20P167 Sandeep Kumar Sahu
20P147 Keshav Singhal 20P170 Shubham Bhardwaj
Operations effectiveness is not strategy
● Managers and even companies have failed to draw line between Operation effectiveness and
strategy
● Operation effectiveness (OE) involves quest for productivity, quality and speed
● Tools like TQM, time-based competition, outsourcing , partnering, reengineering and change
management are used to achieve
● OE does help to gain an edge over competition as the activities are performed in better
fashion with less defects, faster production etc
● However, despite focusing so much on these tools, such companies have been unable to
have sustainable profitability
Operations effectiveness is not strategy
● This can be understood from Japanese
companies which had better operation
effectiveness in 1980s
● However as times passed and new technologies
arrived, the edge was lost.
● Japanese companies now struggle because they
lack strategy and there is a culture of inertia
towards taking hard decisions.
● It can also be understood from the graph how
value delivered to customer change with time as
the operations advantage was lost over time
Operations effectiveness is not strategy
● Hence, constant improvement in OE is necessary to gain competitive advantage, but it is not
enough
● The basic reason why firm needs a strategy and OE won’t survive in the long run are:
■ Operation effectiveness are easy to imitate. One such example can be easily seen in
the IT sector, where the mode of operation is almost similar in major services firms
■ Competitive convergence becomes more subtle and insidious. The more benchmarking
companies do, more they look alike.
● Thus competition based on OE is mutually destructive leading to wars of attrition that can only be
solved by limiting the competition
● Otherwise, the only strategy left with companies is that of M&A
Competitive strategy
● Competitive strategy is about being different. It means deliberately choosing a different set of
activities to deliver a unique mix of value.
● The essence of strategy is choosing to perform activities differently or to perform different
activities than rivals
● For ex- Ikea serves customers who are happy to trade off service for cost. Ikea uses a self-service
model based on clear, instore displays. Designs its own low-cost, modular, ready-to-assemble
furniture to fit its positioning.
● Strategic competition can be thought of as the process of perceiving new positions that woo
customers from established positions or draw new customers into the market
● For example, superstores offering depth of merchandise in a single product category take market
share from broad-line department stores offering a more limited selection in many categories
Strategic positions
● Strategic positionings are often not obvious, and finding them requires creativity and
insight. New entrants often discover unique positions that have been available but simply
overlooked by established competitors
● New positions open up because of change when new customer groups or purchase
occasions arise; new needs emerge as societies evolve; ;new distribution channels appear;
new technologies are developed; new machinery or information system become available
● Strategic positions emerge from three distinct sources, which are not mutually exclusive
and often overlap.
○ Variety-based positioning- It is based on the choice of product or service varieties
rather than customer segments. This positioning makes economic sense when a
company can best produce particular products or services using distinctive sets of
activities.
 ○ Needs-based positioning- It involves traditional thinking about targeting a segment of
customers. When there are groups of customers with differing needs, and when a
tailored set of activities can serve those needs best
○ Access-based positioning- It involves segmentation on the basis of customer geography
or customer scale-or of anything that requires a different set of activities to reach
customers in the best way. Segmenting by access is less common and less well
understood than the other two cases
● Position emerging from any of the above mentioned sources can be focused or broadly
targeted
○ Focused competitors thrive on groups of customers who are overserved (and hence
overpriced) hy more broadly targeted competitors, or underserved (and hence
underpriced)
○ Broadly targeted competitor serves a wide array of customers, performing a set of
activities designed to meet their common needs.

After Defining Positioning, we can define what is strategy

 Sustainable strategic position
Choosing a unique position does not guarantee a sustainable advantage due to threat of imitation.
Ways of imitation:
● Competitor repositioning itself to match the superior product
■ For ex: J.C. Penney repositioning itself from a Sears clone to a more upscale, fashion oriented
retailer
● Imitation through straddling
■ Straddler seeks to match the benefits of a successful position while maintaining its existing
position
■ Grafts new features, services or technologies into existing activities
■ For ex: Continental airlines while maintaining its position as a full-service airline set out to match
Southwest airlines in number of point-to-point routes

Sustainable strategic positioning requires trade-offs that occur when activities are incompatible
Trade-offs in sustainable strategic position
● Trade-offs arise for the following three reasons:
■ Inconsistencies in the image or reputation
■ Trade-offs arising from the activities pertaining to inflexibilities in machinery, people or systems
due to variation in activities and its requirements
■ Limits on internal coordination and control

● Trade-offs means that more of one thing necessitates less of another

● Benefits associated:
■ They create the need for choice and protect against repositioners and straddlers
➢ For ex: Neutrogena soaps traded-off manufacturing efficiencies and aggressive distribution
for uniqueness which protected the company from imitators
■ Purposefully limits what the company offers protecting it
■ Deter straddling or repositioning, because competitors that engage in those approaches
undermine
■ their strategies and degrade value of their existing activities
■ Absence of trade-off is detrimental for the firm as they have to run faster and faster just to stay in
place if they remove trade-offs
Fit: driving competitive advantage and
sustainability
● Locks out imitators by creating a chain that is strong as its strongest link
● Creates competitive advantage and superior profitability by enhancing one activity's value to customers with
the help of other activities
○ For ex: Southwest's case
■ Rapid gate turnaround allowing frequent departures and greater usability of aircrafts due to its
high-convenience and low-cost positioning
■ High-convenience and low-cost positioning is attributed to well-paid gate and ground crews with
enhanced productivity due to flexible union rules and removal of other activities such as no meals,
no seat assignment and no interline baggage transfers that reduces speed
■ Selects airports and routes to avoid congestion that introduces delays
■ Standardization of aircraft due to strict limits on the type and length of routes
■ Southwest's competitive advantage is the way its activities fit and reinforce one another
Types of fit
First Order Fit Second Order Fit Third Order Fit

● Simple Consistency ● Occurs when activities ● Includes Optimization of

between each Activity are Reinforcing each Effort
and overall strategy other ● Steps involved are
● It ensures Competitive ● For ex: Neutrogena, coordination and
advantage of each where its medical and information exchange
activity cumulates hotel marketing activities across activities, better
instead of canceling reinforce one another, product design and
each other lowering the total coordination with
marketing costs suppliers and
distributors
Fit and Sustainability
● Strategic Fit plays a crucial role in ensuring sustainability of the organisation
● Positions built based on systems of activities which are in strategic fit are far more
sustainable than those built on individual activities.
● Chances of competitors adopting and replicating all the processes which are in
strategic fit are low since successful adoption of each process has challenges
● Fit among a company’s activities creates pressure and incentives to improve
operational effectiveness, which will ensure replication even harder.

Companies with strong fit among their activities enjoy superiority in strategy and
compound their advantages, thus raising hurdles for imitators.
Mapping activity systems
● Activity-system maps show how a company's strategic position is contained in a set of tailored
activities designed to deliver
● A number of higher-order strategic themes can be identified and implemented through
clusters of tightly linked activity in companies with a clear strategic position
● Useful for examining and strengthening activities
● The following set of basic questions guide the process:
■ Ask the people responsible for each activity to identify how other activities within
the company improve or detract from their performance
■ Are there ways to strengthen how activities or group activities reinforce one
another?
■ Could changes in one activity eliminate the need to perform others?
 Some maps

Dark purple represents higher-order strategic themes while clustered activities are represented in lighter color
The Failure to Choose a Strategy
● Managers are reluctant to make trade-offs with ineffective rivals because of their macho sense
which ends up confusing the managers about the necessity of making choices

● External changes are a threat to strategy but internal changes which includes misguided view
of competition by organisational failure or desire to grow hampers the strategy a lot more.

● Managers have been increasing pressure to deliver tangibles but profitability is still the same.
They want to target all the customer needs and respond to every request from distribution
channels and thus they don't find the need of having a strategy. In imitating their competitors,
they try to chase every technology for their own sake even not knowing the exact use of that
particular technology.

● Sometimes, for avoiding blame for a bad choice, managers do not make any choice which
leads to a lack of vision in the organisation.
The Growth Trap
● The desire to grow has the most severe effect on strategy
● Trades off and limits appear to constrain growth.
■ Serving just a particular set of customers and ignoring rest leads to a limitation
when it comes to revenue. It all ends to Profits falling but an increase in the
revenue
● Managers want to continuously increase and surpass those limits but they forget about
company strategic position.
■ Extending product lines, adding new features, imitating competitors popular
services erodes the competitive advantage that the company had with its original
varieties or target customers
● Rivals continue to match each other until desperation breaks the cycle, resulting in a merger or
downsizing to the original position
Reconnecting with Strategy
● The company should reconnect with the strategy by establishing the core of uniqueness which can be
identified by answering the following questions:
■ Which of our product or service varieties are the most distinctive
■ Which of our product or service varieties are the most profitable
■ Which of our customers the most satisfied
■ Which customers, channels, or purchase locations are the most profitable?
■ Which of the activities in our value chain are the most different and effective?
● In homogenizing products with its rival, the profit starts falling so the company should refocus it
strategy to the unique core and realign the companies activities with it
● One can re-examine the original strategy and see if it is still valid or not in today's modern world
● This sort of thinking may lead to a commitment to renew the strategy and may challenge the
organization to recover its distinctiveness.
Profitable Growth
● Efforts to grow usually blur the uniqueness of a company, create compromises and undermine
competitive advantage
● To ensure profitable growth a company should focus on deepening, rather than broadening,
its strategic position
● They should start offering services that are extension of their current strategy, are
complementary to their offered services, is cheap for them to offer and is near impossible for
competitors to match
● Globalization allows for this to happen, i.e. growth consistent with strategy
● Growth achieved through broadening have its own risks
● Companies divide themselves into standalone units each acting independently with a different
product and a target audience
Role of Leadership
● A clear intellectual framework is necessary to guide strategy in the advent of compromises and trade-
offs. Strong leaders are required for this to happen
● Core of a general manager is defining and communicating strategy to the organization. It is his job to
maintain uniqueness and distinctiveness of the organization
● Managers at lower level lack the experience and the perspective to develop strategies for the
organization. They also do not have the confidence to adhere to the strategy and minimize the trade-
offs and compromises
● Strategy is not just about what to do, but also what not to do and deciding what course of action is to
be taken, what service to offer and to whom is a core part of developing a strategy
● Operational effectiveness is different from strategy. Former is a continual process without any trade-
offs as it would even make a company with good strategy vulnerable while the latter is about defining a
unique position
Emerging Industries & Technology
● In emerging industries or industry that is going through a technological change it is difficult to
develop a strategy
● The uncertainty about what customers want is high so companies try to offer everything
● This might work in the beginning, but this is a disastrous strategy after some time
● If the company does not move away from imitation or homogenization then it will see a
destruction of its profitability
● Imitation reflects uncertainty not the desired state of affairs.
● In high tech industries this uncertainty is longer; everyone offers all features, even redundant
ones and slash prices to the bone
Thank
you!