Summary of Michael Porter's "What is Strategy?"

Operational effectiveness is not strategy. Porter suggests, management tools such as benchmarking, time-based competition, outsourcing, partnering, reengineering do drastically enhance operational effectiveness of a company, but fail to provide the company with sustainable profitability. The failure of distinguishment between operational effectiveness and strategy, is the root problem. Strategy must be distinguished from management. Operational effectiveness is performing similar activities better than rivals perform them. However, strategy is performing different activities from rivals’ or performing similar activities in different ways. Porter states that companies must deliver greater value in terms of strategy as oppose to operational effectiveness as most companies do these days.
Strategy rests on unique activities. Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value. The essence of strategy is choosing to perform activities differently than rivals. There are three strategic positions. First, variety based positioning is producing subset of an industry’s products or services. Second, needs-based positioning is about serving most or all the needs of a particular group of customers. It is based on targeting the customers in process of STP marketing strategy. Third, access-based positioning is about segmenting customers who are accessible in different ways.
A sustainable strategic position requires trade-offs. Porter states a sustainable advantage cannot be guaranteed by simply choosing a unique position because competitors will imitate a valuable position in two ways. First, a competitor can choose to reposition itself to match the superior performer. Secondly, a competitor can seek to match the benefits of a successful position while maintaining its existing position. Therefore, in order to successfully seek a strategic position, there must be trade-offs with other positions. According to Porter, even though external factors may cause a company to change its strategy, a greater threat to strategy often comes from an internal factor of a company. The fundamental problem of a corporate may lie in the mentality of the managers who believe in making no trade-offs and keep pursuing operational effectiveness and imitating competitors. Porter also emphasizes growth trap. efforts to grow uniqueness ultimately undermines competitive advantage. Strategy is about choosing what to do as well as not to do. The leadership also is a huge portion of strategy. Strategy requires continuous discipline and clear communication. Strategy should guide employees in making choices that arise because of trade-offs in their individual activities and in day-to-day decisions.