Name: Saira Mukeet

SAP ID: 28476

Submitted to: Dr. Hassan Zahid

What is Strategy
Review points

I . Operational effectiveness is Not Strategy

The main theme of this article describes that operational effectiveness is not a strategy. Though
operational effectiveness is very essential for the effective performance of any organization.

To achieve best performance, companies have to closely observe the competitive market to stay ahead
of their rivals. Differentiating the product from competitors or keeping it similar to rivals but with
lowest rates and getting cost advantage by using all techniques efficiently is very important. Dynamic
market and changing technology is forcing managers to bring continuous changes and aggressive
activities to achieve sustainable profits.

Operational effectiveness is in fact, an efficiency to execute all activities smoothly. Strategy is different
from operational effectiveness. Strategy is defined to plan activities which should be different and
unique from rivals or similar activities should be used in a different way.

During 1980s, Japanese were far ahead of their rivals in operational effectiveness. They offered lowest
cost and best quality and they earned higher market share at that time. They focused more on total
quality management. They reduce cost and give best quality with operational effectiveness. They were
reluctant to follow strategic positions. This operational efficiency was easy to recognize by rivals and
they start configuring other’s production channels. But this competition has created hurdles for them
and now they had to take decisions to select some strategy. Though it is very hard choice to select
strategy but otherwise they couldn’t survive.
Productivity frontier play a very essential role with the emergence of new technology, new managerial
tools and skills enrichment. Competitive forces further influence the sales techniques by adding value
of other activities like order processing and after sales services. Now with the time, managers has to
improve their strategies by focusing on continuous improvement procedures to reduce inefficiencies
and customer care rather than only looking for benchmarking and total quality management.

Considering the $5 plus US Commercial printing industry, all major players were following the same
operational effectiveness (OE) competition and in return they couldn’t get profit superiority. Donnelly
was the industry leader and achieved more than 7% profit margin in 1980s using Japanese techniques
of OE but in 1995 this profit margin was lower than 4.5%. even Japanese pioneers also suffer lower
profit margin.

II. Strategy Rests on Unique Activities

Competitive strategy means choosing a different set of activities to deliver a unique mix of value.
Southwest Airline company offer a unique set of activities which are totally different from their rivals.
They offer services with lowest cost and short traveling routes. They also save time of their customers
by reducing wait time to check luggage and broker system. Automated ticketing system was introduced
and attract convenience-sensitive customers. They introduced unique set of strategic position based on
tailored set of activities.

Ikea, global furniture retailer based in Sweden also follow strategic positioning based on tailored set of
activities. He offered stylish furniture at lowest cost for young people. Ikea uses a self service model
based on clear, in store displays . In a big store all furniture was well decorated, arrangement to give
an image of room to settle all pieces. Ikea also offer other added services that were not being offered by
traditional rivals. Ikea also gave delivery box for the cars on refund basis to their customers to carry
luggage. They also offer kids care center to accommodate their customers.

With this competitive positioning, new entrant has more edge to get market share by bringing new
ideas. Creativity and insight is required to achieve this position. Ikea introduced new customer group
with new idea of displaying products.

Origin of Strategic positions

Three distinctive source which are not mutually exclusive but overlaped are emerged as strategic
positioning. Variety based positioning is created when variety of line is introduced within a product
or service.

Jiffy Lube international offer only once subset service of automotive lubricants and customers are
getting other services from rivals.

Vanguard group is a mutual fund company is also offering wide array of value services but meets
only one subset of their needs.
Need based positioning considers all need of particular customers and traditionally it refers to
customer segmentation. Different group of customers require different type of product or services.
Some want unique features and others may be price sensitive. Ikea is offering a large variety of
furniture with targeted customers. Targeted customers group has different demands at different time.
Companies has to bring unique set of activities to fulfill wide range of customer needs

Bessemer Trust company and City Bank private bank, both are offering same set of tailored activities
to their customers but there is difference between their profit margins because Bessemer is dealing
their clients at the risk of high operating expense of their personnel to deal their clients away from the
office at their Yacht.

Access Based positioning , a function of customer geography or customer scale. It means accessing or
reaching to the customer in a different way. Rural versus urban based customers are the best example
of access based positioning. Carmike Cinema promoted theater services in small town area at lowest
operating expense and best marketing tactics.

Generic Strategies which are cost leadership, differentiation and focus to represent alternative
strategic position in an industry.

Strategic positioning may be used separately or in combination. Positioning required tailored set of
activities in a unique way.

If there is only one position then no need to use strategy. But strategy needs to create different set of
activities using different position against rivals.

III. A Sustainable Strategic Positions Require Trade-offs

A concept of trade offs eliminates the danger of imitation. With a competitive environment, rivals also
tried to reposition their product or services to meet the challenges. Some marketers think that straddling
is not so difficult as described in Airline case study. Continental Airline bear the cost and suffer
inefficiencies due to straddling. Trade offs means more of one thing necessitates less of another.

Trade offs arise for three reasons.

One is inconsistency that occur because of change in image. This will demolish the credibility and
reputation and effort to create new image will cost ten or even hundreds of millions dollars.

Secondly, trade off is very basic in general. Repositioning require product configuration, all operational
activities need to re-frame that will also be a big cost for any organization.

Management coordination and control also defines the clear picture of any organization. Trade offs is
all about selection of choice. Fulfilling all needs of all type of customers is not wise worthy. This way
employees will be reluctant and they couldn’t understand clear framework. Trade off deter straddling
because it will badly affect existing activities.
Concluding that, if there is no trade offs, companies could not achieve competitive advantage. Choice
is very important to define strategy. If there is no choice selection then no strategy is required and again
performance will be based on operational effectiveness.

IV. Fit Drives both competitive advantage and

sustainability
Strategic fit creates competitive advantage and superior profitability. All activities are interlinked and
creates real economic value. For example south west airlines reduces cost, this activity depends on all
other activities which are being executed within a firm.

Types of fit
There are three types of fit;

First order fit is a simple consistency between each activity and the overall strategy. For example
Vanguard align all activities with lowest cost. It eliminates cost and avoid hiring highly paid manager,
limit advertisement and after sales services. This consistency ensure competitive advantage and
strategy of making an easier channel to communicate with customers, employees and shareholders.

Second order fit occurs when activities are reinforcing. For example Neutrogena offer medicated soap
and it was recommended by dermatologists. Upscale hotels eager to offer this soap to their guests and
they grant Neutrogena the privilege of using its customary package while requiring other soaps to
feature the hotel name. This way medical and hotel marketing activities reinforce each other and it
eliminates the advertising cost.

Third factor of fit goes beyond activity reinforcement to what I call optimization of effort. The Gap, a
retailer of casual clothes consider product availability in store a critical element of its strategy. Gap
could keep product either by holding store inventory or stocking from warehouse. Gap minimizes the
need to carry large in store inventory. Gap turns its inventory seven and half times per year. This rapid
restocking minimizes the cost of implementation of Gap short model cycle from six to eight weeks
long.

Coordination and information exchange among activities is very important type of effort optimization.
If one activity of choice is clear there is be no need for after sales services activities. Fit among
activities reduces cost or increase differentiation. Organizations always interconnected with a chain of
activities. Strengths lists are not only associated with one area but it covers the whole streamline.

Fit and Sustainability

Strategic fit is fundamental among all activities not only to achieve competitive advantage but to
sustain that advantage. Sales force approach can be observed but an array of interlocked activities are
very difficult to imitate. For existing companies it would be very important to configure the whole
system and a set of all activities which are closely interlinked. Even new entrant would face barrier to
imitate their competitors activity chains.

Finally fit among companies create pressure and incentives to improve operational effectiveness.
Imitation is harder because activities are complement to each other. If one area is showing poor
performance this will affect the whole system and it would be more easier to identify weak area. Toys
R U follow the same activity fit and create complex chain of activities that was harder to imitate and
rivals such as Child World and Leisure left behind.

Strategic position should have a horizon or a decade to sustain but not for a single planning cycle.
Continuity will only bring sustainability fit and superior profitability because of trade offs and unique
skills and competency. Otherwise frequent shifts in positioning is very costly and it is very difficult to
configure the whole system and imitating the whole processing and it leads to failure.

Finally the answer to this question… What is Strategy?

Strategy is creating fit among companies activities and doing all activities in a chain well not a few
one. This fit will only create distinctive strategy and sustainable advantage.

V. Rediscovering Strategy
the failure to choose...
Managers feel it difficult to make a choice. They are confused and reluctant to select some strategy. In race of
competition, they only focus on operational effectiveness and don’t consider strategy. Many factors like change
in technology, competitors behavior and other external forces threat them not to choose strategy. Managers are
under pressure to deliver tangible and performance measures improvement and they do not understand the need
of strategy. Trade offs are frightening and companies tried to imitate them in the form of herd behavior, each
assume that rivals know something that they do not.

The Growth Trap

The desire to grow has more perverse effect on strategy. Serving one group of customers and leaving other
group may limit the revenue growth. Managers always tried to take tempted steps to increase profit margin but
blur company strategic position. Pressure to achieve targeted market managers mostly add more features to the
product or adding more product lines, imitating competitors activities to handle all these issues. Maytang
corporation success was more on focus with durable washer and dryers. Later they introduce dishwasher that
was extension to full line product and it was forced by dealers and customer demands. By the time it increase
product line in refrigerators and other kitchen households. This wide variety of products diluted the image and
began turning to price promotions. Attempts to achieve in several ways decrease focus and sustainability.

Profitable growth
Many companies after restructuring and cost cutting are turning to growth. Broadly deepening the strategic
position rather than extending product line. Managers has to focus on strategic position and penetrate the market
with their customer line rather than focusing on that customer group where they could not offer much. They
should be consistent with strategy adding new features and services and value their customers. Opening up
globally, expanding the marketing strategy is more better than expanding product line domestically.

The role of leadership

Leadership role is very essential in formulating strategy. Although many factors within organization are not
supportive to make choices but strategy choice is very important to achieve competitive advantage. Leadership
role is very essential to define and communicate company strategic position, making trade offs and fit to
complement unique activities rather than only focusing on operational improvements. Deciding which target
group, features, and needs company to serve is very fundamental role of a leader. They must address their
employees to understand about selection of choices. It is very mandatory for managers to distinguish between
operational effectiveness and strategy.

Operational agenda is a proper place for constant change, flexibility and relentless effort to achieve best
practice.

Strategic agenda is right place to define a unique position , making clear trade off and tightening fit. It
demands discipline and continuity.

While there are structural changes in organization then they may have to change strategy. Choice of
new position much be driven up by new ability to find new trade offs and leverage a new systems of
complementary activities into a sustainable advantage.