Strategy is an integrated and coordinated set of commitment and actions designed to utilize core competencies and achieve a competitive advantage. When a company has a strategy, it will perform different activities from its competitors, or perform similar activities in different ways. The strategy of a company is to develop products or deliver services which are valuable, rare, costly to imitate, and difficult to substitute.
What to do and what not to do
The essence of strategy is to choose what to do and what not to do. Strategy means making choices among two or more alternatives. Its means choosing among the competing alternatives. Strategy must creates fit among a company’s activities. It aligns each activity with the company’s overall objectives. It makes activities reinforce one another. It optimizes efforts across all activities. Strategy makes the whole more than any individual part.
Operative effectiveness is not enough
A company must acquire information to make choices as it studies external opportunities and threats as well as it evaluates its internal resources and core competencies. Information regarding market demands, customers, finance, technology, and economy must be collected and analyzed to form a strategy. The strategy must address what business a company should be in. It must specify what the product or service is and how to create or deliver it. It must address where and how the company has a competitive advantage over its competitors. If there is a competitive advantage, you start your business. What if there is not? You should not. Why? Because your new product or service probably imitates the existing competitors’.
When you enter the market, you join the crowd and imitate one another in a type of herd behavior. Operative effectiveness – that is, performing similar activities better than competitors – cannot set your company apart from your competitors. Your competitors can quickly imitate management techniques, new technologies, process improvement, and ways of meeting customers’ needs. In other words, they can quickly perform similar activities better than you. It is most likely you will not beat the existing competitors in the market. Thus, the profitability of your company will not be sustained.
Strategy is essential
Strategy requires a company to perform different activities from its competitors – for example, Apple’s operation system differs from its competitor’s. A company may perform similar activities in different ways – for example, Jiffy Lube provides oil-service to its customers in a different way than its competitors do. Its competitors require its customers to make appointments whereas Jiffy Lube does not.
Competitors often imitate one another’s improvement in quality, cycle times, or delivery. Competition requires companies to make choices as to what to do and what not to do to survive and succeed. A company must have a strategy – the creation of a tailor set of best-fit activities to develop products or deliver services which are valuable, rare , costly to imitate, and difficult to substitute. With a right strategy, a company can achieve a sustainable, competitive advantage and profitability.
References:
- M. E. Porter, 1996, What Is Strategy? Harvard Business Review, 74(6): 61-78.
- M. A. Hitt, R.H. Ireland, & R.E. Hoskisson, 2005, Strategic Management, 5th ed., Mason, Ohio: South-Western College Publishing.