Understanding Strategy and Operational Effectiveness

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Questions and Answers

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?

Southwest Airlines

Continental Lite

Bessemer Trust (correct)

Carmike Cinemas

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?

They only matched a few of Southwest Airlines’ activities. Signup and view all the answers

What is a potential issue with operational effectiveness according to the concepts presented?

It is easily replicated by competitors who observe successful strategies. Signup and view all the answers

What is the primary factor that influences differences in cost or price among companies?

The hundreds of activities involved in production and delivery Signup and view all the answers

What happens when a company moves towards the productivity frontier?

It can charge higher average unit prices Signup and view all the answers

How does cost advantage arise according to the content?

By performing specific activities more efficiently than competitors Signup and view all the answers

What can contribute to the continuous shift of the productivity frontier?

New technologies and management approaches Signup and view all the answers

Which of the following activities is least likely to be considered a basic unit of competitive advantage?

Conducting market research Signup and view all the answers

What is the primary focus of Southwest Airlines' strategy?

Delivering low-cost, convenient service through unique operations Signup and view all the answers

Which of the following activities is NOT performed by Southwest Airlines?

Offering meals and assigned seating on flights Signup and view all the answers

How does Southwest Airlines maintain efficiency in maintenance?

Through a standardized fleet of 737 aircraft Signup and view all the answers

What advantage does Southwest gain from automated ticketing?

It bypasses travel agents to save on commissions Signup and view all the answers

What distinguishes Southwest Airlines' timeliness compared to its rivals?

Offering a shorter turnaround time at the gate Signup and view all the answers

Why is Southwest Airlines strategically positioned in its market?

It adapts its operations to achieve low-cost travel on select routes Signup and view all the answers

Which characteristic of Southwest Airlines helps it to avoid a marketing slogan approach to strategy?

Choosing to perform activities differently than competitors Signup and view all the answers

What does the strategy of Southwest Airlines emphasize about its flight operations?

Offering quick and frequent departures with fewer aircraft Signup and view all the answers

What is a key approach to customer service emphasized by Japanese companies?

Escorting customers through the store Signup and view all the answers

What was a major factor in the competitiveness of Japanese companies in the 1980s?

Operational productivity frontier Signup and view all the answers

How do Japanese companies differentiate themselves in the market?

Through a deeply ingrained service tradition Signup and view all the answers

What challenge is faced by companies trying to compete with Japanese firms?

Maintaining clear product positioning Signup and view all the answers

What is the typical delivery time after a customer places an order with a Japanese firm?

Six to eight weeks Signup and view all the answers

What type of customer does Ikea typically target in contrast to Japanese firms?

Individuals willing to trade-off service for cost Signup and view all the answers

What outcome is primarily associated with the service model used by Japanese companies?

Blurred distinctions among competitors Signup and view all the answers

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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Description

This quiz explores the distinction between strategy and operational effectiveness, highlighting how unique positioning creates value. It discusses various sources of strategic position and the importance of trade-offs in competitive environments. You'll learn how strategic activities must fit together to strengthen an organization's overall strategy.