Summary of Micheal Porter Competitive Strategy
In today’s ever competitive world, every company that wants to succeed needs to have a well-defined strategy. We at Nestle believe in this philosophy and in this short presentation, I will help you understand exactly what a competitive strategy is and what it entails. My presentation is based solely on the ideas of strategy guru Michael Porter as represented in his 1996 article “What is strategy?”
In determining what a strategy is, it is important to differentiate between competitive strategy and operational effectiveness. Whereas operational effectiveness involves performing similar activities better than rivals, strategy focuses on choosing to perform activities that are distinctively different from that of the competitor. Improving operational effectiveness allows a company to utilize its inputs better but in the long run, companies outperform rivals by developing and maintaining competitive advantage through the performance of activities that are distinct from competitors and valuable to clients.
Competitive strategy is therefore grounded in performing activities differently. To achieve a great strategy a company must select activities uniquely different from competitors in order to deliver exclusive value to them. This is known as strategic positioning and can be done in 3 main ways: a. By serving a wide selection of customers but meeting only part of their needs better than competitors. b. Targeting a particular set of customers with peculiar needs and then tailoring your activities to meet those needs best. c. Tailoring your activities to cater to the needs of clients whose preferences change on different occasions.
Furniture retail giant IKEA uses the second approach: it identifies its target clients as young adults who look for affordability and style when it comes to buying furniture. The company has accordingly tailored a set of activities that are totally different from that of rival companies (self-service, in-house daycare etc.)
In determining what a strategy is, it is important to differentiate between competitive strategy and operational effectiveness. Whereas operational effectiveness involves performing similar activities better than rivals, strategy focuses on choosing to perform activities that are distinctively different from that of the competitor. Improving operational effectiveness allows a company to utilize its inputs better but in the long run, companies outperform rivals by developing and maintaining competitive advantage through the performance of activities that are distinct from competitors and valuable to clients.
Competitive strategy is therefore grounded in performing activities differently. To achieve a great strategy a company must select activities uniquely different from competitors in order to deliver exclusive value to them. This is known as strategic positioning and can be done in 3 main ways: a. By serving a wide selection of customers but meeting only part of their needs better than competitors. b. Targeting a particular set of customers with peculiar needs and then tailoring your activities to meet those needs best. c. Tailoring your activities to cater to the needs of clients whose preferences change on different occasions.
Furniture retail giant IKEA uses the second approach: it identifies its target clients as young adults who look for affordability and style when it comes to buying furniture. The company has accordingly tailored a set of activities that are totally different from that of rival companies (self-service, in-house daycare etc.)