Strategy is about making choices, trade-offs; it's about deliberately choosing to be different. The essence of strategy, according to Porter, is choosing to perform activities differently than rivals do. Strategy is the creation of a unique and valuable position, involving a different set of activities. 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. The competitor might easily reposition itself and math the first performer or he could match the benefits of a successful position while maintaining its existing position. Strategic position is not sustainable unless there are trade-offs with other positions. Porter gives an example of trade-ff in an airline business. “Continental Airlines saw how well Southwest was doing and decided to straddle. While maintaining its position as a full-service airline, Continental also set out to match Southwest on a number of point-to-point routes.” It didn’t work as you cannot be at the same time in different places; you should trade-off one position for another. According to Porter, trade-offs create the need for choice and protect against repositioners and straddlers. Therefore the essence of strategy is what not to do.
Positioning choices determine not only which activities a company will perform and how it will configure individual activities but also how activities relate to one another. 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.
