STRATEGY BY MICHAEL PORTER Strategy is kind of the big picture of how theorganization is going to win in its environment. What is the fundamental strategic challenge of any organization. I think most organizations when they understand what am they trying to do in their industry in their marketplace they think that their job is really to be the best organization in their industry. To be the best we have to come up with a best product, best service, best supply chain and best customer support model. However, I think is that that a very dangerous way of thinking about competition and strategy . There is no best company in any industry, that whole idea is kind of flawed from the very start. It all depends on who the customer is and what the customers needs. There are there's lots of different customers in virtually every business ,so it is impossible to be the best at serving every need of every customer . Starting Point -How to be unique not how to be the best. -How an organization actually can you create unique value for the customers it's seeking to serve. *To be able to succeed in the rong run Strategy is how you're going to position yourself in the organization ultimately to hopefully achieve your goal . Economic Foundations of Competition Industry Structure Businesses are different (inherent attractiveness and profitability). Every company competes in an industry that structure, and structure can make it harder or easier for every company to be profitable. Strategic positioning within the industry how that company kind of differs from its rivals Strategic thinking must encompass both areas Company must focus on the health of industry, not just their position. Superior performance in terms of excellent profitability and growth is affected by both of these things it's affected by the inherent attractiveness of the industry and by the the quality and of the position that the company is able to occupy. Good strategic analysis includes industry analysis and it also includes positioning on positioning analysis and positioning. What drives profitability? -Five Forces- Threat of new entrants, bargaining power of buyers, bargaining power of suppliers, threat of substitutes, rivarly among competing firms Achieving Superior Performance within industry Differentiation -highh price -offer something that the customer willing to pay more for Competitive advantage Lower cost -producing similar products at low cost -discounted price Competitive advantage and the Value Chain In any business, in order to compete, we have to perform a whole set of activities. Activities are things that a company does to actually create the product, product design, provide support and marke the product. Value chain is seeing a firm in a set of activities. Value chain allows us to know where the competitive advantage comes from *support activities Operational effectives is not a strategy Operational effectiveness- assimilating attaining and extending best practices -doing things better -although a necessity is not sufficient to achieve superior performance or not fro long VALIDATE AND EXECUTE *If you offer best practices, rivals want best to, therefore you offer same products which results to price going down Strategic positioning- creating unique value proposition -doing things differently to deliver superior value -CHOICES (how you’re going to be different) What creates a successful strategy? Unique value proposition compared to other organizations VALUE PROPOSITION -What customer (end users, channels) -Which needs(services, features,products) -What relative prices(premium,party, discount) Example :IKEA Value proposition- customers whos seek quality and sophisticated design in low price -stylish furnitures and succesories Distinctive activities- modular, ready to assemble, easily ship design furnitures, self selection by customers, self delivery, in house design of all products A distinctive value chain embodying choices about how the organization will operate efficiently to deliver its uniqueness Making clear tradeoffs and choose what not to do -tradeoffs is to do one thingreally well and not to other things (customers you’ll not try to know or please, others you don’t serve)(don’t make everyone happy) -tradeoffs create the need of choice, it makes a strategy sustainable against imitation by established rivals and -essential part of strategy is choosing what not to do Connecting activities in value chain(fit) Continuity -continue to find best strategy, operational effectiveness, delivering value proposition better and make tradeoff clearer - we should not change strategy(customers will not know what you really want to offer) -stick with your strategy and understand it better to make your customers know you Create a positive some competition where we where we where companies meet different groups of needs hopefully uniquely well and that actually allows multiple organizations to be successful it also tends to expand the market because we can serve more needs and we can serve more needs better and that means that more people get to be served. Instead of offering same products and one company loses and other wins. Role of leadership Strategy is the ultimate job of leadership strategy is. The ultimate thing that only the leader can ultimately oversee and and make those critical choices because the leader is the one who has this perspective of the whole, the person in charge of marketing, is worrying about marketing, the person talking about service, is worried about services ,they look at the world from their discipline. Leader has to be the architect of strategy and make the choice at the end of the day, with a lot of participation by the team. Leaders have to communicate the strategy you know having a strategy written down and put in a safe and kept secret. The purpose of strategy is alignment it's to get everybody the organization to figure out what they're supposed to do in their role to advance the company. Leadership is about choosing strategy but it's also about communicating, about enforcing and avoiding distraction, avoiding imitation, avoiding trying to please people that we shouldn't try to please. They really keep the organization on point on focus on direction and and help the organization move ahead.
