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| Words: 1804 | Submitted: 18-Apr-2013
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DescriptionMichael porter 1980- pressent
According to porter, the ability the make an informed decision about how, when and where to target a customer group, facilitate resources and set objectives(limits) makes the difference between a manager who thinks from a strategic perspective in light of what might emerge in future. Anticipating, those movements into current decision-making helps to set a stage to create sustainable advantages. Porter argues that positioning is still a notable way to shape advantages within a company and sees hypercompetition as rather odd concept to explain shifting patterns in competition and points out that a misunderstanding exists to distinguish between operational effectiveness and strategy. The replacement of strategy by so-called management tools has been responsible why many firms have increased operational effectiveness but have been unable to translate those improvements into values for customer where profit can be earned and profitability be increased.
Differences in profitability compared with competitors, arises because of activities chosen in order to deliver customer value. Those can be either similar activities combined on a much lower cost base (unit cost) or the average unit price is higher due to superior perceived value.
Operational effectiveness is not strategy
Porter refers to operational effectiveness (OE) as the means of performing similar activities better than rivals and strategic positioning as the means to perform activities in a different way. He uses the Japanese manufacturing during the 1980?s as example to show that operational effectiveness can be responsible for lower cost and superior quality among those Japanese companies but question a unique strategic position of those companies. He shows that an industry (Japanese electronic industry) has worked as cluster of competitors within this industry. The Japanese companies could not win market share within their own industry because most companies employed similar processes and methodology and had a similar cost-base therefore the strategic decision of those firms was to go abroad and compete outside of Japan where operational effectiveness seemed to be a strategic advantage.
He borrowed a concept from economics (possible production frontier) to introduce what he called productivity frontier to show a frontier curve for a maximum possible productivity (value) on a selected process. The combination of used methods (activities) with inputs allows to assign cost factors to demonstrate a companies relative productivity position. Based on a company’s input and its used methods the cost factor can be compared with other best practices and indicate their operational effectiveness.
The pure reliance on operational effectiveness as strategy replacement works only as long competitors not employing to same process and improvements but as soon those best practices are made common within the industry, operational effectiveness becomes mutual destructive and counter-productive with imitations and homogeneity as end result.
Strategy rest on unique activities
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