Summary of Micheal Porter Competitive Strategy

In today’s ever competitive world, every company that wants to succeed needs to have a well-defined strategy. We at Nestle believe in this philosophy and in this short presentation, I will help you understand exactly what a competitive strategy is and what it entails. My presentation is based solely on the ideas of strategy guru Michael Porter as represented in his 1996 article “What is strategy? ” In determining what a strategy is, it is important to differentiate between competitive strategy and operational effectiveness.

Whereas operational effectiveness involves performing similar activities better than rivals, strategy focuses on choosing to perform activities that are distinctively different from that of the competitor. Improving operational effectiveness allows a company to utilize its inputs better but in the long run, companies outperform rivals by developing and maintaining competitive advantage through the performance of activities that are distinct from competitors and valuable to clients. Competitive strategy is therefore grounded in performing activities differently.

To achieve a great strategy a company must select activities uniquely different from competitors in order to deliver exclusive value to them. This is known as strategic positioning and can be done in 3 main ways: a. By serving a wide selection of customers but meeting only part of their needs better than competitors. b. Targeting a particular set of customers with peculiar needs and then tailoring your activities to meet those needs best. c. Tailoring your activities to cater to the needs of clients whose preferences change on different occasions.

Furniture retail giant IKEA uses the second approach: it identifies its target clients as young adults who look for affordability and style when it comes to buying furniture. The company has accordingly tailored a set of activities that are totally different from that of rival companies (self-service, in-house daycare etc. ) in order to serve these target customers well. Sustainability is a key component of strategy and this is not possible unless there are tradeoffs with other positions. A company cannot successfully satisfy all types of customers and hence must choose one positioning and do it better than the rest.

Since competitive strategy is about being different, as a firm we must choose a different set of activities to deliver value that is unique to our company alone. An essential tool in carving a strategy is building a system of activities that fit. All business activities performed by the company should be consistent, complement each other and re-enforce the overall positioning of the firm. For instance if the firm’s strategy is to provide low cost airline services as is the case of Southwest airlines all its policies and activities must line up to achieve this e. . no meals and standardized aircrafts to keep costs at a minimum. Finally in creating a competitive strategy, managers must take into account all the factors I have mentioned above and ensure that they have defined a clear strategy as well as the in the search for profitable growth we should not be occupied by trying to beat our competitors on all fronts but we should rather focus on select activities that are valuable to our target clients and excel in them.

Our focus should be on deepening our strategic position rather than broadening it . this should be spearheaded by the leadership: management. We should be the ones to define and communicate the unique position of our firm to subordinates, chose whice tradeoffs to make and forge a fit amongst all business activities