Michael Porter mentioned that a strategy is word that describes a lot of things which can be looking at big bigger picture such as on how the organization is going to win in its environment. However, many are struggling to find the right strategy and moreover, the good strategy when poorly executed is not going to success. As such, Michael Porter stressed that we need to have a great strategy sense on how the organization going to commit. The fundamental strategic challenge of organization is most of the organization wanted to be best company in their industry. However, Michael Porter stressed that thinking of competing is not the good idea for a company to succeed and there is no best company in any industries. As such, the starting point to think about strategy is not being the best, instead to think about how an organization can create unique value for the customer. Strategy is the creation of a unique and valuable position, involving a different set of activities. If there were only one ideal position, there would be no need for strategy. A strategy is different than goal because strategy is how we position ourselves in the organization. Therefore, strategy must be separated to any particular action that they want to take. Strategy is the position that we need to occupy in the market place and in the advantage which will compete. Strategy is different than vision and mission and is very concrete, specific, and it’s really about the choices that we make on how we going to deliver the unique value to customer. Strategy defines the company’s distinctive approach to competing and the competitive advantages on which it will based.
Company economic performance results from two distinct causes known as strategic thinking. The strategic thinking encompasses Industry Structure and Strategic Positioning within the industry.
Although the industry structure of each company is different, Michael Porter mentioned that every industry has a same set of fundamental characteristic that can be analyze by looking at the determinants of industry profitability. For this Michael Porter relates that the 5 forces analysis model that can be used to analyze the industries profitability. The model consists of rivalry among existing competitors, threat of substitute products or services, bargaining power of buyers, treat of new entrants and bargaining power of supplier.
The essence of strategic positioning is to choose activities that are different from rivals. If the same set of activities were best to produce all varieties, meet all needs, and access all customers, companies could easily shift among them and operational effectiveness would determine performance. However, Michael Porter stressed on the positioning where the company not only achieving the profit, but profit that is above average. This according to him can be done by achieving superior performance within an industry by creating a differentiation in the product which carries higher selling and lower cost of production. In return the company will achieve competitive advantage by achieving superior performance within an industry. Michael Porter said in order to under better about strategic positioning we need to understand the concept of value chain. Value chain defines set of activities (Primary and Supporting activities) that a company is doing comprise from purchase of raw material, production, and shipping the finished product to customer.
Michael Porter also compares the Operational Effectiveness (OE) with Strategic Positioning. OE is doing the same thing better by applying the best practices. Operational effectiveness (OE) means performing similar activities better than rivals perform them. Operational effectiveness includes but is not limited to efficiency. It refers to any number of practices that allow a company to better utilize its inputs by, for example, reducing...