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.

Do you think of:

• Launching a new product. You have the power.

• Take operational advantage. Use 6 or JIT or Lean Manufacturing etc. Provide feature modifications.

• Increased volume sales. Lower the price and (or) increase warranty. Intensified promotional activities.

• 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 .

• 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:

• Ask forFLEXIBILITY.

• Do theBENCHMARKING.

• Opt forOUTSOURCING.

• Nurture a fewCORE COMPETENCIES.

• Go forPOSITIONING.

Operational Effectiveness Is Not Strategy: 8.

Above beliefs are half-truths. Whats the consequence?

• • Self competition & hyper competition.

• • Nothings stable in this dynamic world of competition. Understand and realize the importance of flat world.

• • 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.

Your example isNOKIA.

• Very flexible organization.

• Leveraging its employee for extra and extensive sales activities.

• Benchmark its smart phone with Samsung.

• Outsourced developers for handset design and applications.

• Apart from durability, it has also chosen launch of a new handset very frequently.

• Extensive media ad & promotions.

Example..?? 10.

What else can be done?

• They can make use of their strategic positioning, i.e. Environment, Expectation & Purpose and Resources & Competitors.

• May be launching a fewer but high quality and defect free usage smart phones and reap profits on them.

• 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.

E.g. Maruti.

• 800

• Zen

• Esteem

• Baleno

• .

• .

• .

• Vitara

• Swift

• Dzire

• SX4

• Kizashi

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?

• Environment, Expectation & purpose and Resources & competencies.

• Perform different activities from rivals and/or perform similar activities in a different way.

• It helps in preserving Distinctiveness of the company.

Strategic Positioning & Its 3 Principles: The Idea In Practice. 17.

The 3 Principles:

• Strategy is the creation of a unique and valuable position involving a different set of activities.

• Strategy requires you to trade-offs in competing- to choose what not to do. E.g.

• Strategy involves creating fit among a companys activities.

Continued 18.

• Strategy is the creation of a unique and valuable position involving a different set of activities.

• • The 3 distinct sources:

• • • Few needs, many customers a.k.a. variety based positioning. E.g. Internet service providers like Tata Photon.

• • • Broad needs, few customers a.k.a. need based positioning. E.g. Wealth management services like Bessemer.

• • • Broad needs, many customers a.k.a. access based positioning. E.g. Telecom services like Tata Docomo.

Continued 19.

Tata Photon (+): ISP

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

• Testing and shaping the market.

• Capturing the market.

• Extending the market.

Strategic Positioning Game Played By Tata Photon: Logical Increment. New Service Launch. 20.

• Strategy requires you to trade-offs in competing- to choose what not to do.

• • Incompatibility of competitive activities. E.g. Maruti vs. Toyota.

• • Trade-offs are necessary. E.g. Blackberry mobiles.

Continued 21.

• Strategy involves creating fit among a companys activities.

• • To examine whether the practice applied fits into the organization. E.g. Design excellence fits Apple but may not fit with Samsung or Nokia.

• • 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?

• Its your uniqueness and that turns out to be your competitive strategy.

• It may be your knowledge, skill set, leadership, hard work & smart work etc.

• 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?

Understanding the need:

• Environment

• Customers requirement

• 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.

• 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.

• 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.

• Mark the trade-off: Service industry to OEM.

• A confusion to customers and danger of brand reputation.

• 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.

Types of fit:

• First order fit simple consistency.

• • MakeMYTrip No brick models till now to book tickets.

• Second order fit activities are reinforcing.

• • MakeMytrip Extensive promotions and internet ads.

• Third order fit optimization of effort.

• • MakeMytrip With tie up among various airlines and real time data.

The 3 fits collectively help in strategy formulation.

Continued 32.

Fit & sustainability.

• It is harder to imitate greater set of activities performed strategically and uniquely.

• The more you account for 2 ndand 3 rdfit, better sustainability of advantages is achieved. A simple game of probability multiplication.

• Fit creates pressure which ultimately induces operational effectiveness. Hence imitation is harder.

Continued 33.

The role of top management in an organization is:

• Leadership.

• Defining an organizations position, activities and strategy.

• Making trade-offs between activities and positioning.

• Innovation.

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.

• Leader

• • • Defines and communicates companys position.

• • • Makes trade-offs.

• • • Forges fit among activities.

• • • Maintains companys distinctiveness.

• • • 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.

Need of alignment with:

• New practice

• Set appropriate activity & trade-offs

• Understand the requirement - Customers & stakeholders perspective

• Best usage of its available resources

• 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.