“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
31 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 flexible production system Tight coordination with 20 wholly-owned factories Extensive use of store sales data JIT delivery Very frequent product changes Cutting- edge fashion at moderate price and quality Word-of- mouth marketing and repeat buying Little media advertising Widely popular styles Prime store locations in high traffic areas Customers chic but cost- conscious Advanced production machinery Global team of trend- spotters Productio n in Europe • Fit is leveraging what is different to be more different
32 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
33 Copyright 2005 © Professor Michael E. Porter 20060606 HSM Chicago – 06052006 Final NV.ppt Barriers to Strategy Flawed Concepts • Misunderstanding of strategy itself • Poor industry definition Industry Pressures • Industry conventional wisdom leads all companies to follow common practices • Labor agreements limit ways of configuring activities • Regulation constrains price, product, service or process alternatives • Customers ask for incompatible features or request new products or services that do not fit the strategy
34 Copyright 2005 © Professor Michael E. Porter 20060606 HSM Chicago – 06052006 Final NV.ppt Barriers to Strategy Capital Market Biases • Strong pressures to emulate the currently “successful” peers • Pressure to grow faster than the industry • A strong bias for “ doing deals ” (M&A) Internal Practices • Inappropriate goals and performance metrics bias strategy choices – Short time horizon • Over-weighting of equity-based compensation amplifies unhealthy stock market pressures • Rapid turnover of leadership undermines the strategic direction to achieve short-term performance benefits • A desire for consensus
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- Summer '19
- Professor Michael E. Porter