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What is strategy?

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Introduction

What is strategy? "What business strategy is all about is, in a word, competitive advantage... The sole purpose of strategic planning is to enable a company to gain, as efficiently as possible, a sustainable edge over its competitors. Corporate strategy thus implies an attempt to alter a company's strength relative to that of its competitors in the most efficient way." Kenichi Ohmae, The mind of the Strategist This definition of strategy looks more like a definition of an operational effectiveness. In different words it states that the company has to perform better then its competitors in any way it could possibly find. According to Porter, the main problem is failure to distinguish between operational effectiveness and strategy. ...read more.

Middle

Southwest Airlines Company is a great example of the unique service proved by the firm in order to survive in a competitive airline industry. It offers short-haul, low-cost, point-to-point service between midsize cities and secondary airports in large cities. It does not offer meals, assigned seats or other services which full-service airline do, however, they can afford to charge low prices. Southwest has staked out a unique and valuable strategic position based on a tailored set of activities. On the routes served by Southwest, a full-service airline could never be as convenient or as low cost. This example confirms the Porter's theory of the unique services. According to Porter, a sustainable advantage cannot be guaranteed by simply choosing a unique position, as competitors will imitate a valuable position. ...read more.

Conclusion

While operational effectiveness focuses on individual activities, strategy concentrates on combining activities. Porter specifies three types of fit: first, second and third order. In all three types of fit, the whole matters more than any individual part. Competitive advantage stems from the activities of the entire system. The fit among activities substantially reduces cost or increases differentiation. Moreover, according to Porter, companies should think in terms of themes that pervade many activities instead of specifying individual strengths, core competencies or critical resources, as strengths cut across many functions, and one strength blends into others. Fit prevents imitating, Southwest's strategy involves a whole system of activities and it is impossible to copy the whole system. Competitors may only copy some activities and will gain little from this action. ...read more.

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