- 1. What is strategy? By:Michael E. Porter Interpreted By:
Nilesh Kumar 10BSP0148 IBS-B.
2.
- Your company is under severe loss due to competitors habit of
imitating the same product with nearly same quality and extended
warranty coverage but at a comparative lower price.
- What will be your immediate step?
Situation: 3.
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- Launching a new product. You have the power.
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- Take operational advantage. Use 6 or JIT or Lean Manufacturing
etc. Provide feature modifications.
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- Increased volume sales. Lower the price and (or) increase
warranty. Intensified promotional activities.
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- Develop a STRATEGYat the understanding of Strategic
Positioning. You may use operational effectiveness for existing
product or develop a new product all together.
Continued 4.
- To sustain and thrive for excellence andavoidthe need for2
ndchance.
- To define yourVISION&MISSIONand set achievableGOALS.
- Tounderstandyourenvironment , within & out.
- To createuniquenessin your activities and moves.
- Toleadthe way anddemonstrate . Core competencies.
- To obtainbest allocationandusageof yourresources .
Need of strategy. 5.
- Tomeetyourobjectivesandalign , if deviated.
- Tosatisfythose who expectadvancementandprofitsfrom you. Its a2
way process .Need fulfillment .
- Remember,STRATEGYis understood and used by those who
areforesighted .
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- They have good assessment ofRight Time ,Right Place ,Right
Resourcesand hence developRight Strategyw.r.t. requirements.
- Tomeetseen & unseenuncertaintiesandcertainties . What to do
and What not to do.
Continued 6.
- Operational Effectiveness vs. Strategy.
Keep In Mind And We Shall Find Out In The End. Vs. 7.
- In the presence of competition you may:
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- Nurture a fewCORE COMPETENCIES.
Operational Effectiveness Is Not Strategy: 8.
- Above beliefs are half-truths. Whats the consequence?
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- Self competition & hyper competition.
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- Nothings stable in this dynamic world of competition.
Understand and realize the importance of flat world.
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- Strive for productivity, quality & speed.
- Root cause is ability to differentiate between Operational
effectiveness & Business strategy.
- Current Belief: Management Tools = Operational Strategy. Result
isFRUSTRATION & LOSS. Reason?
Continued 9.
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- Very flexible organization.
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- Leveraging its employee for extra and extensive sales
activities.
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- Benchmark its smart phone with Samsung.
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- Outsourced developers for handset design and applications.
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- Apart from durability, it has also chosen launch of a new
handset very frequently.
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- Extensive media ad & promotions.
Example..?? 10.
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- They can make use of their strategic positioning, i.e.
Environment, Expectation & Purpose and Resources &
Competitors.
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- May be launching a fewer but high quality and defect free usage
smart phones and reap profits on them.
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- May be acquisitions. May be collaborations with Google &
Android.
- Industrial talk: Nokia may be acquired.
Continued 11.
- Difference with preservation.
- Greater value at lower cost.
- Cost & price. Slashing one slashes another.
- Develop Operational effectiveness and also Operational strategy
if necessary.
Operational Effectiveness: Necessary But Not Sufficient. 12.
- Whom are you going to benefit when you overtake your benchmark?
Think...
- Remember: operational effectiveness is necessary to compete but
insufficient to win.
- Reason: Imitation & competition end.
- Japan: Toyota: Luxury cars vs. Prius. Use of strategic
positioning.
Continued 13.
- Concept of Productivity Frontier.
Continued HighRelative Cost PositionLow High Low Productivity
Frontier 14.
- Productivity frontier vs. technologyOutwards. E.g. Companies
that produced carburetors.
- New system: Order processing & after sales service. E.g.
Forbes.
- Productivity frontier + continuous improvement + empowerment +
change management + learning organization = Healthy
organization.
Continued 15.
- Race of productivity factor races parallel between companies
and this becomes endless such that no one wins. E.g. P&G and
HUL.
- Recent trend: Merger & acquisition. E.g. Infosys.
- The companies with strategic vision stand still and stand
apart. E.g. Bosch.
Continued 16.
- What is strategic positioning & how does it helps?
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- Environment, Expectation & purpose and Resources &
competencies.
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- Perform different activities from rivals and/or perform similar
activities in a different way.
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- It helps in preserving Distinctiveness of the company.
Strategic Positioning & Its 3 Principles: The Idea In
Practice. 17.
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- Strategy is the creation of a unique and valuable position
involving a different set of activities.
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- Strategy requires you to trade-offs in competing- to choose
what not to do. E.g.
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- Strategy involves creating fit among a companys
activities.
Continued 18.
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- Strategy is the creation of a unique and valuable position
involving a different set of activities.
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- Few needs, many customers a.k.a. variety based positioning.
E.g. Internet service providers like Tata Photon.
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- Broad needs, few customers a.k.a. need based positioning. E.g.
Wealth management services like Bessemer.
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- Broad needs, many customers a.k.a. access based positioning.
E.g. Telecom services like Tata Docomo.
Continued 19.
- Market: New and developing at rapid pace.
- Uniqueness: USB Modem with high speed. Convenient packages
Post/pre paid.
- Strategy: Partially Blue Ocean in ISP and Blue Ocean in USB
modems.
- Observation: 1.Tata Photon 2.Tata Photon+ 3.Tata Photon TV
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- Testing and shaping the market.
Strategic Positioning Game Played By Tata Photon: Logical
Increment. New Service Launch. 20.
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- Strategy requires you to trade-offs in competing- to choose
what not to do.
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- Incompatibility of competitive activities. E.g. Maruti vs.
Toyota.
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- Trade-offs are necessary. E.g. Blackberry mobiles.
Continued 21.
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- Strategy involves creating fit among a companys
activities.
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- To examine whether the practice applied fits into the
organization. E.g. Design excellence fits Apple but may not fit
with Samsung or Nokia.
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- Design uniqueness has given Apple the competitive advantage as
well as core competency with sustainability.
Continued 22.
- How do you feel you are different from the one sitting next to
you?
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- Its your uniqueness and that turns out to be your competitive
strategy.
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- It may be your knowledge, skill set, leadership, hard work
& smart work etc.
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- The placement which you will acquire through college will be
based on this unique competitive strategy, but you may not
acknowledge it with the term strategy now.
Situation: 23.
- How do you tailor your activities?
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- Affordability & accessibility
- May be then you can develop a suitable uniqueness that can be
your competitive advantage and hence strategic positioning.
- Differentiation strategy: Deliberate selection of set of
activities to deliver unique mix of values. May be price or product
features.
- Alleviates strategic positioning.
Strategy Rests On Unique Activities: 24.
- Dell:Customizationalong withonline orderingalong withhigh
responsivenessalong withJIT inventoryandaffordable prices .
- Southwest Airlines: Uniqueness of connectivity service, price,
small airports and frequency of flights. This uniqueness became
their strategy.
Continued 25.
- Continental Lite vs. Southwest Airlines.
- Points of parity: Low cost onsomeroutes &fullservice on
others.
- Tradeoffs are essential to strategy. They create the need for
choice and purposefully limit what a company offers.
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- Remembering that a valuable position will attract copycats
.
A Sustainable Strategic Position Requires Trade-Offs: 26.
- Cant be all things to all people. Be best at doing a few
things.
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- Then expand on those core competencies. E.g. Apple,
Google.
- Competitors follow either repositioning or straddling method to
overtake.
- Positioning not only selects but highlights the
interdependencies between them.
Continued 27.
- 3 reasons support this. Lets see how.
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- Mark the trade-off: Service industry to OEM.
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- A confusion to customers and danger of brand reputation.
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- So they need to trade-off to avoid inconsistencies in image or
reputation. First reason.
Why Does Trade-Offs Arises? + 28.
- Difference in activity. Here R&D will have to be kept aside
then.
- Different positioning requires a different set of management,
control, employee, market etc. Second reason.
Continued Designer and unique + = + = ? 29.
- Limit on internal co-ordination and control, i.e. make
organizational priorities clear, transparent and visible. Third
reason. E.g. Aston Martin for James Bond & car fans. Competency
is robust design & engine efficiency.
- Aston Martin will not go down to produce small segment
vehicles, not at least in near future.
- So with all the 3 reasons in mind, the creation of need for
choices is purposefully limited to what a company offers.
Continued & 30.
- Fit locks out imitators by creating a chain that is as strong
as its strongest link. What if FIT becomes UNFIT ?
- Many strategies fit into an organization. Its how do we combine
them with relevance. E.g. Southwest Airlines.
Fit Drives Both: Competitive Advantage & Sustainability.
31.
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- First order fit simple consistency.
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- MakeMYTrip No brick models till now to book tickets.
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- Second order fit activities are reinforcing.
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- MakeMytrip Extensive promotions and internet ads.
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- Third order fit optimization of effort.
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- MakeMytrip With tie up among various airlines and real time
data.
- The 3 fits collectively help in strategy formulation.
Continued 32.
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- It is harder to imitate greater set of activities performed
strategically and uniquely.
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- The more you account for 2 ndand 3 rdfit, better sustainability
of advantages is achieved. A simple game of probability
multiplication.
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- Fit creates pressure which ultimately induces operational
effectiveness. Hence imitation is harder.
Continued 33.
- The role of top management in an organization is:
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- Defining an organizations position, activities and
strategy.
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- Making trade-offs between activities and positioning.
- This is what we learnt in Chinese Toy industry case but at a
macro level.
Continued 34.
- Inefficient managers fail to distinguish between operational
effectiveness and strategy.
- Strategy is affected by external competition & environment
and within the organization. Deviation from actual strategy.
- Desire to grow (growth trap) leads to rapid change of
strategies without watching or realizing their post implementation
effects.
- Inability to recognize appropriate strategy and hence misguided
activities and irrelevant trade-offs.
Rediscovering Strategy: 35.
- In order to grow rapidly, focus on deepening the strategic
positioning, i.e. Environment, Expectation & purpose and
Resource & competency.
- Deepening position helps in Distinctiveness, Strengthening fit
and Communicating the strategy to customers.
- Globalizing often helps in consistency with strategy but at a
wider level.
Continued 36.
- Strategy is leaded by a leader.
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- Defines and communicates companys position.
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- Forges fit among activities.
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- Maintains companys distinctiveness.
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- Setting limits so as what to do and what not to do.
- A company have to change its strategy if theres major
industrial change.
Continued 37.
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- Set appropriate activity & trade-offs
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- Understand the requirement - Customers & stakeholders
perspective
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- Best usage of its available resources
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- Coordinate among organizing structure.
Continued 38.
- Creation of unique and valuable position.
- Involve a different set of activities.
- Positioning of strategic positioning in a company.
- Essence of trade-offs, in other words What not to do.
- About integrating and coordinating activities and creating a
fit among them.
Now we can answer What is strategy? 39. The Strategy Focused
Organization Mission: Why we exist Core Values: What we believe in
Vision: What we want to beStrategy: Our game plan (how to win)
Goals For Implementing Strategy (Metrics): What we need to do
OUTCOMES Satisfied Shareholders Delighted Customers Effective
Process Motivated and Prepared Workforce 40.