|MBA – 2025 Batch|

|Thiagarajar School of Management – Madura i|

S. Gnanaharan
What Is Strategy?
 Arithmetic of Profitability
Greater
Value

Higher Average Unit Prices

Profitability Lower Average
Unit Cost

Greater
Efficiency
 Cost Advantage

Cost
Generation

Performing
Cost
Activities More
Advantage
Efficiently
 Differentiation

Differentiation

Choice Performing
Greater
Of Activities
Value
Activities Differently
 Operations Vs. Strategy
Operational Effectiveness (OE) means performing similar activities
better than rivals perform them. It includes but not limited
to efficiency.

Strategic Positioning (SP) on the other hand means performing

similar activities in different ways. It is about being different.
It means deliberately choosing a different set of activities
to deliver a unique mix of value.
Strategy – First Layer

Differentiation
 Kollywood Cases

 Tamil Film Directors: K Balachander and Barathiraja

 Tamil Comedy Actors

 Vijay Super Singer Priyadharshini

Business Cases

Apple Bajaj FabIndia

 Different Bases

Varie Need Acce

ty s ss
 Variety Based Positioning

Based on the choice of product or service varieties rather than

customer segments.

It makes economic sense when a company can best produce

particular products or services using distinctive
set of activities. Suzuki vs. Volkswagen
 Needs Based Positioning

Based on serving most or all the needs of a particular group of

customers. This comes close to traditional thinking about
targeting a segment of customers.

It arises when there are groups of customers with different

needs, and when a tailored set of activities can serve
those needs best. Economy Class vs. Executive Class
Access Based Positioning

In some cases, customers’ needs could be similar to others,

but the best configuration of activities to reach them
would be different.

Access can be a function of customer geography or customer scale –

or of anything that requires a different set of activities to reach
customers in the best way.
Example: Amway, Amazon.com, Dell
 Choosing a Position
A position emerging from any of the sources can be broad or narrow.

A focused competitor, like IKEA targets the special needs of a subset

of customers and designs its activities accordingly.

A broadly targeted competitor like Delta Airlines serves a wide array

of customers, performing a set of activities designed to meet
their common needs.
Strategy – Second Layer

Positioning

Differentiation
B S Chandrasekhar
 Blancpain

“Since 1735 there has never been a quartz Blancpain watch.

And there will never be.”
 Threats To Sustainability

A valuable position will attract imitation by incumbents,

posing the threat of sustainability in either of the two ways:

• Repositioning to match the superior performance

• Matching the benefits by straddling across

 Ensuring Sustainability

Strategic position is not sustainable unless there are trade-offs

with other positions.

Simply put, a trade-off means that more of one thing necessitates

less of other.
 Why Trade-Offs Arise?

 Inconsistencies in image or reputation

 Requirement of different product configurations

 Limits on internal coordination and control

Strategy – Third Layer

Trade-Offs

Positioning

Differentiation
 Putting It All Together

Positioning choices determine not only which activities a company

will perform and how it will configure individual activities
but also how activities relate to one another.
 Types of Fit

Third-Order

Second-Order

First-Order
 First-order Fit

First-order fit is simple consistency between each activity

and the overall strategy. (Across functions & strategy)

Example: Tata Nano and Promotion Policy

 Second-order Fit

Second-order fit occurs when activities are reinforcing.

Example: Tata Nano’s effort/decision to locate ancillary units closer

to the assembly unit.
 Third-order Fit

Third-order fit goes beyond activity reinforcement to

what is called optimisation of effort.

Example: Tata Nano’s proposed Distributed Manufacturing Model

wherein part of the assembly work would happen at the
distributors end.
Strategy – Final Layer

Fit

Trade-Offs

Positioning

Differentiation
 Role of Leadership

1. Management and Strategic Management

2. Balancing Present and Future

3. Learning & Teaching to say ‘No”

4. Constant Discipline and Clear Communication

5. Having a Right Perspective

 Summing Up

 Operational Effectiveness: Necessary but Not Sufficient.

 Strategy Rests on Unique Activities.

 A Sustainable Strategic Position Requires Trade-offs.

 Fit Drives Both Competitive Advantage & Sustainability

 The Reading Material

What Is Strategy?

By

Michael E. Porter

Harvard Business Review, November-December 2010