Podcast
Questions and Answers
What concept is primarily highlighted as contributing to a competitive advantage and sustainability for firms?
What concept is primarily highlighted as contributing to a competitive advantage and sustainability for firms?
- Operational effectiveness through best practices
- Continuous improvement with minimal variation
- Activities that mutually reinforce each other (correct)
- Focus on a narrow customer segment
Which firm exemplified the strategy of focusing on serving broad needs of very high-wealth clients?
Which firm exemplified the strategy of focusing on serving broad needs of very high-wealth clients?
- Southwest Airlines
- Continental Lite
- Bessemer Trust (correct)
- Carmike Cinemas
Which of the following practices was illustrated by Japanese firms in the 1970s and 1980s?
Which of the following practices was illustrated by Japanese firms in the 1970s and 1980s?
- Market segmentation by operational effectiveness
- Targeting diverse customer needs in a broad market
- Maximizing individual customer profit
- Total quality management and continuous improvement (correct)
What was a key tactical mistake made by Continental Lite in trying to compete?
What was a key tactical mistake made by Continental Lite in trying to compete?
What is a potential issue with operational effectiveness according to the concepts presented?
What is a potential issue with operational effectiveness according to the concepts presented?
What is the primary factor that influences differences in cost or price among companies?
What is the primary factor that influences differences in cost or price among companies?
What happens when a company moves towards the productivity frontier?
What happens when a company moves towards the productivity frontier?
How does cost advantage arise according to the content?
How does cost advantage arise according to the content?
What can contribute to the continuous shift of the productivity frontier?
What can contribute to the continuous shift of the productivity frontier?
Which of the following activities is least likely to be considered a basic unit of competitive advantage?
Which of the following activities is least likely to be considered a basic unit of competitive advantage?
What is the primary focus of Southwest Airlines' strategy?
What is the primary focus of Southwest Airlines' strategy?
Which of the following activities is NOT performed by Southwest Airlines?
Which of the following activities is NOT performed by Southwest Airlines?
How does Southwest Airlines maintain efficiency in maintenance?
How does Southwest Airlines maintain efficiency in maintenance?
What advantage does Southwest gain from automated ticketing?
What advantage does Southwest gain from automated ticketing?
What distinguishes Southwest Airlines' timeliness compared to its rivals?
What distinguishes Southwest Airlines' timeliness compared to its rivals?
Why is Southwest Airlines strategically positioned in its market?
Why is Southwest Airlines strategically positioned in its market?
Which characteristic of Southwest Airlines helps it to avoid a marketing slogan approach to strategy?
Which characteristic of Southwest Airlines helps it to avoid a marketing slogan approach to strategy?
What does the strategy of Southwest Airlines emphasize about its flight operations?
What does the strategy of Southwest Airlines emphasize about its flight operations?
What is a key approach to customer service emphasized by Japanese companies?
What is a key approach to customer service emphasized by Japanese companies?
What was a major factor in the competitiveness of Japanese companies in the 1980s?
What was a major factor in the competitiveness of Japanese companies in the 1980s?
How do Japanese companies differentiate themselves in the market?
How do Japanese companies differentiate themselves in the market?
What challenge is faced by companies trying to compete with Japanese firms?
What challenge is faced by companies trying to compete with Japanese firms?
What is the typical delivery time after a customer places an order with a Japanese firm?
What is the typical delivery time after a customer places an order with a Japanese firm?
What type of customer does Ikea typically target in contrast to Japanese firms?
What type of customer does Ikea typically target in contrast to Japanese firms?
What outcome is primarily associated with the service model used by Japanese companies?
What outcome is primarily associated with the service model used by Japanese companies?
Flashcards
Operational Effectiveness
Operational Effectiveness
Best practices in running a business.
Competitive Advantage
Competitive Advantage
An advantage over competitors, difficult to imitate.
Interlocking Activities
Interlocking Activities
Activities reinforcing each other, creating an advantage.
Best Practices
Best Practices
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Total Quality Management
Total Quality Management
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Productivity Frontier
Productivity Frontier
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Activities
Activities
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Cost Advantage
Cost Advantage
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Southwest Airlines strategy
Southwest Airlines strategy
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Key to strategy
Key to strategy
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Full-service airline
Full-service airline
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Southwest's fast turnaround
Southwest's fast turnaround
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Southwest's services
Southwest's services
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Automated ticketing
Automated ticketing
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Standardized fleet
Standardized fleet
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Unique strategic position
Unique strategic position
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Japanese Business Model
Japanese Business Model
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Blurred Positioning
Blurred Positioning
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Third-Party Manufacturer
Third-Party Manufacturer
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Value Chain Customization
Value Chain Customization
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Trade-Off Strategy
Trade-Off Strategy
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Ikea's Strategy
Ikea's Strategy
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Cost vs. Customization
Cost vs. Customization
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Study Notes
Article Summary
- The article examines the concept of strategy, distinguishing it from operational effectiveness
- Operational effectiveness involves performing activities better than rivals (faster, fewer inputs, fewer defects)
- Strategic positioning aims to create a unique and valuable position by performing different activities, or performing similar activities differently
What is Strategy?
- Strategy involves creating a unique and valuable position through different activities
- Sources of strategic position:
- Serving few needs of many customers
- Serving broad needs of few customers
- Serving broad needs of many customers in a narrow market
- Strategy requires trade-offs in competing; choosing what not to do
- Activities should create fit among the company's activities
- Strategy and leadership are inextricably linked. Employees need guidance on deepening strategic positions rather than broadening and compromising.
Operational Effectiveness is Not Strategy
- Operational effectiveness is necessary but not sufficient for superior performance
- Managers focusing solely on operational effectiveness often fail to translate improvements into sustainable profitability.
- The failure to distinguish operational effectiveness from strategy leads to mutually destructive competition.
- Continual improvement, while necessary, does not create a sustainable competitive edge.
- Operational effectiveness improves productivity, but relative gains are limited as best practices are easily emulated.
- Strategy is about creating a unique, sustainable position in a competitive market.
Strategic Positioning vs Operational Effectiveness
- Operational effectiveness means implementing activities better than others.
- Strategic positioning means choosing different activities than other companies, or doing the same things in a different way.
- Productivity frontier - the maximum value a company can deliver at a given cost, considering the best available resources.
- Companies that converge on the productivity frontier move toward indistinguishability.
- Companies must choose to perform Activities differently (strategic positioning) from competitors to remain distinct.
Finding New Positions
- Strategic competition implies perceiving new positions that take customers from established positions or draw new customers into the market.
- This may involve new varieties, needs, or access segmentation, for example a high-end or low-end variety or customers located in different areas.
- New entrants often discover unique positions that established competitors might have overlooked.
The Connection with Generic Strategies
- Generic strategies, such as cost leadership, differentiation, and focus, are frameworks for strategic positioning.
- Activity systems, variety-based positioning, needs-based positioning, and access-based positioning provide further detail.
- Strategic positions arise from considering varieties, customer needs, or accessibility.
Trade-offs in Strategy
- Trade-offs are essential for a sustainable competitive advantage that defines strategy.
- Trade-offs arise from:
- Inconsistencies in image or reputation
- Inherent incompatibilities between activities
- Limits on internal coordination and control
Sustainable Strategic Position Requirements
- Trade-offs among various activities
- Positioning choices determine activities and how those activities are related to one another
- Creating fit among activities—a coordinated system of activities that reinforce and support each other — is crucial. Three types of fit include:
- First-order - consistency between activities and the overall strategy
- Second-order - reinforcing activities that support the strategy
- Third-order - optimizing effort by coordinating activities to minimize waste and duplication.
- Creating a unique position in the market is essential for creating a sustainable competitive advantage.
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