WHAT IS

MOC studied by NIDA BUSINESS SCHOOL (FLEX’27)

MOC 2nd CHAPTER

STRATEGY?

CH

AP

TER

2

Operational Effectiveness

Is not STRATEGY

For almost 2 decade• Learn to play by a new set of rule• Flexible to respond rapidly to competitive and market change

Hyper-competition• Self-inflicted wound

Root of problem• Speed, Quality,

productivity and management tools

Positioning (The heart of strategy) is rejected• Because it’s too static for dynamic market

changing and changing technology

Operational Effectiveness(OE) means performing similar activities better than rival perform them

Strategic positioning means performing different activities from rivals or performing similar activities in different ways.

Non

-pric

e bu

yer

valu

e de

liver

ed

Relative cost position

high

highlow

low

STRATEGY rests on UNIQUE activities

Competitive strategy is about being different set of activities to deliver a unique mix of value

The origin of strategic position

Variety-based positioning• Choice of product or service varieties

Needs-based positioning• Serving most or all the needs of a particular group of

customers

Access-based positioning• Segmenting customers who are accessible in different way.However, positioning is not always a function of differences

on the demand or customer side. Variety and access positioning in particular, do not rely on any customer difference

Strategy is the creation of a unique and valuable position, involving a different set of activities.

A Sustainable Strategic Position Requires Trade-offs

Why do Trade-offs arise? • Inconsistencies in image or

reputation• Trade offs within activities

themselves• Product features may be

incompatible

“You cannot be everything for everyone by having strategy, it means you have made a decision to trade off one thing with another”

Michael E. Porter

Continental AirwaysTried to compete in two ways : to be low cost on some routes and full service on others

Southwest AirwaysLow-cost strategy • No meal• No seat assignment• No interline baggage

transfers

Strategy is making trade-offs in competing

The essence of strategy is choosing what not to do

Fit drives both Competitive Advantage and Sustainability

1. Simple Consistency First-order fit is Simple consistency between each activity (function) and the overall strategyEx. Vanguard

2. Activities are reinforcingSecond-order fit occurs when activities are reinforcingEx. Neutrogena

3. Optimization of effortThird-order fit goes beyond activity reinforcementEx. The Gap

Types of fit… How Fit work

“ ”“ ”

FIT and SUSTAINABILITY

Strategy is creating fit among a company’s activities. The success of a strategy depends on doing many things and

integrating among them. If there is no fit among activities, there is no distinctive strategy and little sustainability.

Strategic fit among many activities is fundamental not only to competitive advantage but

also to the sustainability of that advantage

FAILURE TO CHOOSE• Many companies and managers do not understand need of strategy

• Imitating their competitor by flooded business information

• Operating far from productivity frontier

• Pressured to deliver tangible and measurable performance

• Pursuit of operational effectiveness

GROWTH TRAP• Many managers tempted to incremental

growth but blur strategy

• Compromise in pursuit of growth is erode competitive advantage

• Answer seen as revenue growth, but profit decline

PROFITABLE GROWTH

• Concentrate in deepening a strategic position

- Deepening make distinctiveness, strengthen fit and good communicate to valued customer

- Extension the existing activity system, that are feasible and rivals would find impossible to match

ROLE OF LEADERSHIP• Cleared strategy depend on strong leadership

- Leadership…

Making choice/ trade-off/ defining and communicating company’s unique position/ provide the discipline/ teach lower level manager

• Manager must clearly distinguish operational effectiveness from strategy

• Strategy renders choices about- What not to do- What to do

• However, a company’s choice of a new position must be driven by the ability into a sustainable advantage

MEMBER…

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