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What Is Startegy Essay

9276 words - 37 pages

What Is Strategy?by Michael E. PorterMichael E. Porter is the C. Roland Christensen Professor of Business Administration at the Harvard Business School in Boston, Massachusetts.http://hbr.org/1996/11/what-is-strategy/ar/1This article has benefited greatly from the assistance of many individuals and companies. The author gives special thanks to Jan Rivkin, the coauthor of a related paper. Substantial research contributions have been made by Nicolaj Siggelkow, Dawn Sylvester, and Lucia Marshall. Tarun Khanna, Roger Martin, and Anita McGahan have provided especially extensive comments.I. Operational Effectiveness Is Not StrategyFor almost two decades, managers have been learning to play by a new set of rules. Companies must be flexible to respond rapidly to competitive and market changes. They must benchmark continuously to achieve best practice. They must outsource aggressively to gain efficiencies. And they must nurture a few core competencies in race to stay ahead of rivals.Positioning-once the heart of strategy-is rejected as too static for today's dynamic markets and changing technologies. According to the new dogma, rivals can quickly copy any market position, and competitive advantage is, at best, temporary.But those beliefs are dangerous half-truths, and they are leading more and more companies down the path of mutually destructive competition. True, some barriers to competition are falling as regulation eases and markets become global. True, companies have properly invested energy in becoming leaner and more nimble. In many industries, however, what some call hypercompetition is a self-inflicted wound, not the inevitable outcome of a changing paradigm of competition.The root of the problem is the failure to distinguish between operational effectiveness and strategy. The quest for productivity, quality, and speed has spawned a remarkable number of management tools and techniques: total quality management, benchmarking, time-based competition, outsourcing, partnering, reengineering, change management. Although the resulting operational improvements have often been dramatic, many companies have been frustrated by their inability to translate those gains into sustainable profitability. And bit by bit, almost imperceptibly, management tools have taken the place of strategy. As managers push to improve on all fronts, they move farther away from viable competitive positions.Operational Effectiveness: Necessary but Not SufficientOperational effectiveness and strategy are both essential to superior performance, which, after all, is the primary goal of any enterprise. But they work in very different ways.A company can outperform rivals only if it can establish a difference that it can preserve. It must deliver greater value to customers or create comparable value at a lower cost, or do both. The arithmetic of superior profitability then follows: delivering greater value allows a company to charge higher average unit prices; greater efficiency...

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