Introduction
Today we will introduce three key themes that will recur throughout the course. 1. Strategy requires making trade-offs 2. Which trade-offs are the right ones depends on the firm’s context 3. A well-defined strategy tells you both what to say yes to and what to say no to
An introduction to strategy * M. Porter, “What is Strategy?” Harvard Business Review, Vol. 74, Nov/Dec 1996, pp. 39-73. (Study.net case packet only)
Operational effectiveness is not sustainable – it can be imitated (pushing industry wide productivity frontier outward) and results in competitive convergence (no relative improvement).
Strategic positioning, on the other hand, achieves sustainable competitive advantage by performing different activities or similar activities in different ways. Three key principles:

Deliver greater/comparable value at lower cost – establish the different from rival and preserve. If compete purely on operational effectiveness, consumers and suppliers might end up capturing the value (lower cost, lower price).
It’s all about the DIFFERENT IN ACTIVITIES performed to align with the needs of the target customer; difference in targeted customer itself doesn’t cut the difference. E.g. Southwest airline serves no meals, have automated ticketing, and have more frequent departures when compared with full-service big airlines. IKEA has no serviceman (self-service), no large customization choices, no third party manufacturer.
First strategic position – few needs of most customers: variety-based positioning – based on the choice of product or service instead of customer segmentation (best produce particular products using a set of activities, i.e. superior value chain). Caveat is limited needs served.
Second strategic position – most/all needs of few customers: needs-based positioning – based on customer segmentation – serve only one segments.