In the paper, Porter attempts to redefine the concept of strategy in the corporate space, building his illustration on the prevailing understanding, which is allegedly misinterpreted. Porter dwells on the distinction between operational effectiveness and strategy, citing the essence as the misconception of creating high competition as an indication of success. The article distinguishes operational effectiveness (OE) from strategic positioning, noting that the former refers to unique market performance for the same range of products as competitors while the latter as engaging in different activities all in all.
The paper draws plenty of illustrations of strategy from the late 20th-century duel between Japanese and American corporations. As a great contributor to strategic success, Porter presents operational effectiveness as the judicial diffusion of best practices in technology management, management techniques, improvements in input, and supply chain management. A particular emphasis is laid on the obsession with operational effectiveness – which mostly leads to needless competition management and little product differentiation. On the contrary, Porter aligns the ideal strategy as understanding the client base and suitably differentiating the product(s) to gain an edge over competitors. As a result, there becomes no need to excessively reduce prices to win market leadership as many firms do, which often leads to stagnation.
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Entrepreneurial thinking and strategic positioning are presented as noble pillars of business strategy. To this effect, Porter emphasizes “need-based positioning,” the philosophy of laying strategic positions based on the customer’s needs and accessibility. From the example of Citibank and Bessemer Trust Company in the banking industry, the paper asserts that strategy is all about setting strategic tariffs around the niche and unexploited market segments. Ultimately, Porter defines strategy as “the creation of a unique and valuable position, involving a set of activities.” Most importantly, the paper regards trade-offs as the grand aid to strategy, given that they create the need for choice and limit the company’s products and services on purpose. Lastly, Porter designates strategic fit, delineating an “an array of interlocked activities,” as a unique piece of the jigsaw, with which the company can deny competitors the chance to replicate their market footprint. Altogether, the paper’s definition of strategy is a conscious and dynamic view of competition in creating a unique value proposition.
