Sffgf 6d2v2k

Strategy according to Michael Porter Business Strategy Business & istration The University of Winnipeg

What is Strategy? Harvard Business Review November – December, 1996

 Michael E. Porter – Harvard Business School

The Purpose of Strategy  “(strategy is)…essential to superior performance, which, after all, is the primary goal of any enterprise.” – Michael E. Porter, What is Strategy?

 Strategy is about achieving competitive advantage – winning!

Competitive Advantage  Outperforming the competition – usually measured by Return on Equity

Sustained Competitive Advantage  Consistently outperforming the competition over time

Porter’s Route to Competitive Advantage  Strategic discipline to strengthen strategic position  Continual improvement in operational effectiveness

Operational Effectiveness  Operational effectiveness (doing individual activities well) can and will likely be readily copied and therefore is not a sustainable source of advantage.  However, it is still a necessary, (although not sufficient) condition for competitive advantage.

Competitive Advantage requires Sustainable Difference  “A company can outperform rivals only if it can establish a difference that it can preserve.” • Michael Porter, What is Strategy?

Competitive Advantage requires a Defensible Position  “Competitive Strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value.” • Michael Porter, What is Strategy?

The dimensions of a Strategic Position  Strategic positions can be based on: – Customers’ needs • Wal*Mart, Superstore

– Company’s products or services • Toys-a-Us

– Way of Accessing Customers • Amazon.com, Mary Kay Cosmetics

A defensible Strategic Position involves Trade-offs  A Strategic Position is sustainable only to the extent to which occupying it involves tradeoffs in the ing activities. – The necessity for tradeoffs is not only a function of resource constraints

– Some activities are inherently incompatible

Strategy is about Choice  Strategy is also about what not to do!  “Strategy … requires hard choices.”  One of the leader’s jobs …(is) to say no. • Michael Porter, What is Strategy?

“Strategy renders choices about what not to do as important as choices about what to do.” - Michael Porter, What is Strategy?

Competitive Advantage requires “fit” among activities  “Strategy is about combining activities” • Michael Porter, What is Strategy?

– For consistency with strategy – For mutual reinforcement – To optimize effort and mix of activities

Strategy according to Michael Porter  The goal is to win!  Deliberate, disciplined choices based on analysis  Leadership is key

Comparisons and Contrasts  Michael Porter

Harvard Business School

 Henry Mintzberg

McGill University

Two Schools of Strategy Position School

Process School

 “Deliberate” strategy  (Porter / Harvard)

 “Emergent” strategy  (Mintzberg / McGill)

 Strategy is the conscious, analytical development of a distinct position in the environment

 Strategy is an intuitive process through which the organization evolves by adapting to its environment

Organizational Goals Position School

 Competitive Advantage – “(strategy

is)…essential to superior performance, which, after all, is the primary goal of any enterprise” • Michael Porter – What is Strategy?

Process School

 Continued Existence – “(strategy is)…all

things necessary for the successful functioning of an organization as an adaptive mechanism.” • Richard T. Pascale – The Honda Effect

Relationship to Environment Position School

Process School

 Learn and evolve  Determine, develop through ongoing and defend an experience within advantageous position the environment in the environment  Don’t be afraid to  Be disciplined about experiment this choice

Organizational Capabilities Position School

 Build mutuallyreinforcing “fit” among organizational activities in tightly focused of chosen strategic position

Process School

 Encourage experimentation and variety in activities, from which potential new strategies may emerge

Implications for Strategic Management Position School

Process School

 Leadership  Leadership nurtures conceptualizes a learning, flexible strategy based on organization which analysis and mobilizes is highly responsive the organization in and adaptable to the well-coordinated environment. of it.

Question for you!  Which “school of strategy” do you find more convincing personally?  Why?

Preference for Position versus Process strategy seems to depend on….  Degree of Volatility in the environment  Size of the Company  Internal / External locus of control  Risk / Return preference  Management style / ego

Let’s Compromise  “Strategy formation walks on two feet… one deliberate, the other emergent.” – Henry Mintzberg – Of Strategies Deliberate and Emergent