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KATHMANDU UNIVERSITY SCHOOL OF MANAGEMENT

BALKUMARI, LALITPUR

Article Review on

What is Strategy?
By Michael E. Porter

Submitted by:

Ginish Jung Dahal

Roll No: 17307

8th March, 2018


Article Review: What is Strategy? By Michael E. Porter

Michael E. Porter starts off the article by discussing the main issue surrounding the
failure to have a strategy is the inability to distinguish between operational effectiveness and
strategy. Whereas operational effectiveness is necessary, it is not enough to result in sustainable
outcomes. The difference between operational effectiveness and strategy is that operational
effectiveness is performing similar activities better than rivals while strategic positioning is
performing different activities or performing similar activities differently. Companies should be
flexible to respond rapidly to competitive and market changes to stay ahead of rivals.
Operational effectiveness and strategy are both essential to superior performance, which, after
all, is the primary goal of any enterprise. The article has cited Operational effectiveness as a
means performing similar activities better than rivals whereas it has mentioned strategic
positioning as performing different activities from rivals’ or performing similar activities in
different ways other than competitors. So, in all, companies only have a real advantage if they
can establish a difference they can preserve. More so, without strategic vision, companies are left
to buy each other out and the competitors that are left were simply able to outlast the others and
did not necessarily have real advantage.

Talking about strategy resting on unique activities, Michael E. Porter discusses that
competitive strategy is about performing activities differently than rivals, and without it, strategy
is merely a marketing campaign that cannot survive the competition. A company can make
competitive strategy meaning choosing a different set of activities which delivers a unique mix
of value to the customers.

According to article, Strategic positions stems from three distinct sources, the first called
variety-based positioning. Variety-based positioning is based on service or product varieties
rather than customer segments. The second source is called needs-based positioning which
focuses on serving most or all the needs of any one customer group. The final source is called
access-based positioning that understands that the needs of customers are similar, but the best
activities to reach them are different. No matter which source of positioning is used,
implementing these sources always requires a difference in activities to gain advantage. These all
should be used as use of only one ideal position may reflect the vibes that need of strategy is not
there.

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Article Review: What is Strategy? By Michael E. Porter

Thirdly, talking about a sustainable strategic position requiring trade-offs, Porter then
discusses that strategic positioning can only be sustainable if there are trade-offs because trade-
offs create the need for choice and prevent competition from imitating the strategy. According to
Porter, trade-offs occur for three reasons: inconsistencies with image or reputation, the
activities themselves, and from limits on internal coordination and control. Positioning these
trade-offs are unavoidable in competition and necessary for strategy, and the absence of trade-
offs is a risky fallacy. Managers want to eliminate trade-offs, but without them there is no way to
achieve a sustainable advantage. At the trade-offs at productivity frontier, the companies have
achieved current best practice, and the trade-off between cost and differentiation is very real
indeed.

Finally, the article has covered about fit driving both competitive advantage and
sustainability where Porter discusses how fit is one of the oldest ideas of strategy, how fit drives
competitive advantage and sustainability, and the reawakening of strategy. Strategic fit locks out
imitators by creating a chain that is as strong as its strongest link and it further create competitive
advantage and superior profitability as well. Fit is important because activities affect one another
and it’s vital to understand how.

There are three types of fit that are not mutually exclusive. The first-order fit is simple
consistency between each activities and the overall strategy. The second-order fit is when
activities are reinforcing, and the third-order fit is what Porter calls optimization of effort in
that fit goes beyond activity reinforcement. The article has also discussed in detail about the
relation between fit and sustainability where strategic fit among activities is regarded
fundamental activity whereas it also emphasizes on sustainability of that advantage. Article has
emphasized fostering of improvement through continuity and strategic fit across activities is
considered as the company’s identity. It has also highlighted finding a new strategic position
preferable rather than being imitator of an occupied position.

The article has highlighted about rediscovering of strategy through various points. Many
managers has not understood the need for making a strategy and the threats to strategy are to be
seen from outside the company such as changes in technology or behavior of competitors.

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Article Review: What is Strategy? By Michael E. Porter

Moreover, organizational realities also work against strategy. Companies are now realizing the
importance of having a strategy and the dangers of not having one. The desire to grow is one
hindrance to strategy as trade-offs constrain growth. Trade-offs and limits most of the time
appears to slow down the growth pace in organization. Also, giving importance to one customer
and excluding others limits the revenue model of company. In today’s context, many companies
are more into considering growth factors. Generally, growth necessity is risky for strategy and at
general management core strategy is to define a company’s position, making trade-offs and
forging fit among these activities.

Another challenge faced with strategy pointed out by porter is the dependence of
leadership. The article has discussed the most important leader’s job as to teach others in the
organization about strategy and further, it also clarifies that strategy renders choices about what
needs to be done and what is not to be done setting limits on it which could be another function
of leadership. Lastly, Porter reinforces the thought that operational effectiveness must be
improved, but it is not equivalent to having a strategy.