Differences in the best configuration of activities in the value chain to deliver the chosen value proposition – Inconsistencies in image or reputation across positions – Limits on internal coordination, measurement, motivation, and control • Tradeoffs make a strategy sustainable against imitation by established rivals • An essential part of strategy is choosing what not to do
20 Copyright 2005 © Professor Michael E. Porter 20060606 HSM Chicago – 06052006 Final NV.ppt Strategic Tradeoffs Neutrogena Soap (1990) • Forgo cleaning, skin softening, and deodorizing features • Choose higher costs through the configuration of: – packaging – manufacturing – detailing – medical advertising – skin research • Give up the ability to reach customers via: – promotions – television – some distribution channels
21 Copyright 2005 © Professor Michael E. Porter 20060606 HSM Chicago – 06052006 Final NV.ppt Recent Thinking on the Sources of Competitive Advantage • “Key” Success Factors • “Core” Competencies • “Critical” Resources • “Key” Success Factors • “Core” Competencies • “Critical” Resources • Competitive advantage is seen as concentrated in a few parts of the value chain
22 Copyright 2005 © Professor Michael E. Porter 20060606 HSM Chicago – 06052006 Final NV.ppt Mutually Reinforcing Activities Zara Apparel Source: Draws on research by Jorge Lopez Ramon (IESE) at the Institute for Strategy and Competitiveness, HBS Very Very flexible flexible production production system system Tight coordination with 20 wholly-owned factories Extensive use of store sales data JIT delivery Very Very frequent frequent product product changes changes Cutting- edge fashion edge fashion at moderate at moderate price and price and quality quality Word-of- Word-of- mouth marketing marketing and repeat and repeat buying buying Little media advertising Widely popular styles Prime store Prime store locations in locations in high traffic high traffic areas areas Customers chic but cost- conscious Advanced productio n machiner y Global team of trend- spotters Productio n in Europe • Fit is leveraging what is different to be more different
23 Copyright 2005 © Professor Michael E. Porter 20060606 HSM Chicago – 06052006 Final NV.ppt Continuity of Strategy • Continuity of strategy is fundamental to sustainable competitive advantage – e.g., allows the organization to understand the strategy – builds truly unique skills and assets related to the strategy – establishes a clear identity with customers, channels, and other outside entities – strengthens the fit across the value chain • Reinvention and frequent shifts in direction are costly and confuse the customer, the industry, and the organization • Continuity is required in the value proposition • Successful companies continuously improve in how they realize their strategy – Strategic continuity and continuous change should occur simultaneously . They are not inconsistent • Continuity of strategy allows learning and change to be faster and more effective
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- Professor Michael E. Porter