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StrategyStrategyaccording toaccording to
Michael PorterMichael Porter
Business StrategyBusiness & Administration
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
Consistently outperforming the competition over time
Sustained Competitive Advantage
Porter’s Route toCompetitive 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 Advantagerequires Sustainable Difference
“A company can outperform rivals only if it can establish a difference that it can preserve.”
• Michael Porter, What is Strategy?
Competitive Advantagerequires 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 aStrategic Position
Strategic positions can be based on:– Customers’ needs
• Wal*Mart, Superstore– Company’s products or services
• Toys--Us– Way of Accessing Customers
• Amazon.com, Mary Kay Cosmetics
A defensible Strategic Positioninvolves Trade-offs
A Strategic Position is sustainable only to the extent to which occupying it involves tradeoffs in the supporting 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 Advantagerequires “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 Henry Mintzberg
Harvard Business School McGill University
Two Schools of Strategy
“Deliberate” strategy (Porter / Harvard)
Strategy is the conscious, analytical development of a distinct position in the environment
“Emergent” strategy (Mintzberg / McGill)
Strategy is an intuitive process through which the organization evolves by adapting to its environment
Position School Process School
Organizational Goals
Competitive Advantage– “(strategy is)…
essential to superior performance, which, after all, is the primary goal of any enterprise”
• Michael Porter– What is Strategy?
Continued Existence– “(strategy is)…all
things necessary for the successful functioning of an organization as an adaptive mechanism.”
• Richard T. Pascale– The Honda Effect
Position School Process School
Relationship to Environment
Determine, develop and defend an advantageous position in the environment
Be disciplined about this choice
Learn and evolve through ongoing experience within the environment
Don’t be afraid to experiment
Position School Process School
Organizational Capabilities
Build mutually-reinforcing “fit” among organizational activities in tightly focused support of chosen strategic position
Encourage experimentation and variety in activities, from which potential new strategies may emerge
Position School Process School
Implications forStrategic Management
Leadership conceptualizes strategy based on analysis and mobilizes the organization in well-coordinated support of it.
Leadership nurtures a learning, flexible organization which is highly responsive and adaptable to the environment.
Position School Process School
Question for you!
Which “school of strategy” do you find more convincing personally?
Why?
Preference forPosition 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