''Summary of What is strategy''

Submitted toProf.Bijaya K.CCourse Instructor

International Strategic Management

Submitted byPradipta Kafle

Januarry 3rd, 2016South Asian Institute of Management

Kathmandu

W h a t i s S t r a t e g y ? ( S u m m a r y )

The definition of strategy nowadays is different to what it used to be. Positioning is too static –

nowadays, any competitive advantage is temporary as competitors can copy it quite easily. The

article aims at redefining strategy by separating the term from operational effectiveness.

Operational effectiveness (OE) means performing similar activities better than rivals. Better

means more efficient, faster, and cheaper. It is necessary to achieve superior profitability.

However, while OE is necessary, it is not sufficient. It is not a strategy. A company needs to

establish a difference that it can preserve.

Strategy is about being different. Different in a way of choosing a different mix of activities to

provide a product or service. Strategic positions can emerge from three distinct sources which

serve as a basis for positioning:

1. Variety-based positioning: A company can specialize in a subset of an industry’s

product (e.g. sell chairs only)

2. Needs-based positioning: A company can try to serve more needs of a target group than

rivals (e.g. not only sell chairs but furniture for the whole apartment)

3. Access-based positioning: A company can segment customers who are accessible in

different ways (e.g. only sell chairs in big cities, or via the internet).

A sustainable strategic position requires trade-offs. Trade-offs become necessary when two

activities are incompatible (e.g. you sell low-cost chairs while offering individual customer

service). Companies have to make sure that their activities are coherent. This implies refraining

from certain activities. Strategy is about choosing what not to do.

Another important aspect is how a company combines activities. By creating a fit among

activities, imitators cannot copy the business model as easy anymore. The three types of fit are

simple consistency (e.g. everything is low-cost); reinforcement (e.g. specific marketing

strategies); and optimization effect.

As we can see, strength of a company can result from a combination of activities. We can think

of themes (e.g. low-cost), which span across activities. Strategic fit is fundamental not only to the

competitive advantage, but also to the sustainability of that advantage.

The biggest threat to strategy is the desire to grow. Trade-offs set by the strategy seem to limit

growth. Trying to compete at numerous levels at once create confusion and undermine

organizational motivation and focus. The solution is to grow by deepening the strategic position.

This means making the activities even more distinctive, strengthening fit, and communicating the

strategy to new customers.