Posted at 12.30.2018
In 1996, Porter had written an academic newspaper What is Strategy in Harvard Business Review, and has been examined and debated from the academics. There are some purposes and motivations of this article.
First of most, after Porter has printed Competitive Strategy in 1980, Competitive Advantage in 1985, there are numerous new ideas from the management area plus some argued that Porter's generic strategies have been declined as too static and challenged, including the resource-competence-based method of strategic management gained increasing approval (Barney and Give, 1991) and the core competence of the organization is better importance (Baden-Fuller and Stopford, 1992). And D'Avani (1994) also submit a new theory of hypercompetition and disagreed with the ongoing competitive edge theory (Porter, 1985). Besides, Mintzberg criticized Porter's view that Japanese companies would have to "learn strategy" if they were to be able to sustain competitive benefit. He also argued that the strategy will somehow emerge from the learning process (Mintzberg and Waters, 1985). However, Porter thought that they have some misunderstanding. Then, Porter made a decision to make response with their criticisms in this specific article of "What is Strategy". Thus, the primary purpose of the article written by Porter is to refuses, response and difficulties their theories, thinking and criticisms in order to tell them they are incorrect, but also describe and define the meaning about what strategy is.
Secondly, the other inspiration is Porter wishes to propose some answers to the contemporary business issue and environment. Under the pressure by internal and exterior environment factors, many companies and professionals fail to identify between operational efficiency and strategy, only reaching the maximization functional effectiveness and lower cost in the past 10 years, these were still confusing, operating into trouble and just want to copy the operational performance of other company or buy other company and merger to increase their competitiveness. Because of this, there has progressively more enterprises burning off their competitive edge and the center of strategy easier by the progress capture. Porter (1996) presumed that this would lead them real downing the path of mutually destructive competition, a long way away of their competitive positions and no-one can win by the end. Hence, he desires to make use of his article to help them clarifying operational effectiveness is not really a strategy, what they should do themselves and what they should not to do if indeed they want to become more competitive in the future, such as deepening a position, profitable growth, setting up mixture activities and trade-off. Also, they are the important contents of strategy.
Furthermore, Porter writes this article and provides more examples about the value of tactical position, take-offs and incorporating activities like the cost-based focus strategy for Ikea, to help some companies, managers and readers easier understanding and expanding the dynamic thinking about common strategies theory including cost command, differentiation and emphasis in its early on publication of 'Competitive Strategy' in 1985 obviously and specifically.
The article of 'What is strategy' makes a great contribution and gets much attention of professionals about the substance of competitive strategy once again. The main element to ecological competitive benefit is right position included cost-leadership, differentiation and target, and the source of information foot of the organisation follows the market position in his common strategies (Porter, 1985). Nevertheless, there a wide range of misunderstandings for position and strategy from different ideas. Matching to Barney and Give (1991), "The ownership of valuable, rare, non-imitable and properly organised resources as source of competitive benefit at the company level". The strategy of organization is to comprehend how do improve and improve these unique resources. This might keep their competitive advantages sustaining in the foreseeable future. Along with other strategists (Baden-Fuller and Stopford, 1992) argued that the aim of strategy is determining and producing the key competence and other key success factors. A key competence and key success factors are difficult for the rivals imitating plus they can acquire and have sustainable competitive edge. The center competence is the way to. Whittington (1993) also launched including the classical, evolutionary, processual and system point of view on strategy.
In particular, D'Avani, R. (1994) thinks that the concept of hypercompetition is intense and vibrant competition. The competitors can imitate and enter any market position easily. All competitive advantages are relatively short-term and temporal and would be exceeding by rivals or other activities. There's no lasting competitive advantage. They should find and build new and non permanent advantages through market disruption and break the status quo on a regular basis. Long-term success desire a active strategy by come up with, destroy, and create other new non permanent advantages again and again. Besides, Mintzberg (1987) advised that strategy as an idea and a style represented by some activities of company for getting the better of competition, by plotting to disrupt, dissuade, discourage, or otherwise effect them. Mintzberg (1988) also thinks that focus strategy of Porter is mainly limited by the inner factors however, not reflected by the competition of market, thus it is not a strategy. Plus the competitive strategy by Porter has less details and guiding (Miller, 1992)
The contributions of this article are building position university and assisting other strategists eliminating the misunderstanding of strategy and makes more clearly convincing about the importance of strategy and what is strategy. Porter corrects their misunderstanding and emphasises that strategy reveal the idea of enterprise which is the main for operating business. The strengths and unique of competitive advantages are all mirrored by strategy and whole system alternatively than some specific strengths, central competencies, or critical resources. Without strategy, company will eventually lose business route. Besides, Porter also corrects and explains to the strategists that utilizing a plan or structure to specify the strategy, their activities could be isolated, irrelevant no unifying goal. Strategy is position, and so that it is unique and more competitive and deicide what to do and how to do, only this way can make the organization end up being the market leader and achieving their aims and long-term competitive benefit. Most important, do not only obtaining operational effectiveness and market show but ignore the value of strategic position. "Hypercmpettion is a do it yourself inflicted wound" and leading increasingly more companies down the path of mutually damaging competition. Besides, this article also underpins the thought of Strategy by defining five important elements of tactical decisions (Lynch, 2006). And Johnson, Scholes and Whittingtom (2005) also agreed and described strategy to be worried about position, choice and action. Most significant, it creates a great contribution on company operating business and help them increasing competitive advantage.
According to the article, Porter primary argues that operational effectiveness is necessary for attaining the superior performance, but it is not a technique. A company's strategy must rest on doing and preserving some unique and different activities in order to outperform competitors in a long time. And a ecological tactical position also requires trade-offs and creating fit among the activities of company, they both can drive both competitive gain and locks out imitators because of their sustainability. Then, Porter also shows that some businesses and managers should pay more attention to their profitable expansion, but not show up into the development capture and lose their own competitive advantage and the key strategy. Thus, Porter made a finish that some ideas such as hypercompetition have some mistakes and they are dangerous half-truths, the enthusiasts actually do the wrong thing. Hypercompetition is a self-inflicted wound and zero-sum competition is the ultimate final result by using functional effectiveness to replace the strategy. Competitive Strategy is about being different and without take-offs, corporations will never achieve a sustainable advantage. It really is misleading about explaining that only involve some key success factors, core competencies or critical resources can perform the success. The success of a technique will depend on doing many things well, not just a few. Furthermore, the existing situation of company, the expansion trap and the exterior environment are stresses for the professionals only finding up in the contest of operational effectiveness, staying away from or bluring strategic choices. They need to clearly distinguish operational efficiency from strategy. Only the company and supervisor do all above things right, they could create and keep their own competitive edge lasting in a long-term.
In additional information, Porter recognized that operational performance is executing similar activities much better than rivals, not in various ways of tactical position. He not only used a good example with the operational effectiveness benefit of Japanese making in 1980s, but also unveiled the idea of output frontier to clarify that operational success can not sustain without a unique tactical position and would be copied and increased easily by some management techniques. Third, , he illustrated that some similar activities weren't in a position to produce all kinds, meet all needs and access all customers, thus company should learn how to position regarding to three different, overlap roots of strategic positions, variety-based, needs-based and access-based positioning. And present two success position examples of Southwest and Ikea in order to support "real" competitive strategy can only be about being deliver a variety of ideals and activities in several ways. Furthermore, Porter also suggested that placement trade-offs and fits are pervasive in competition, some trade-offs not only can strengthen the position, but also make the rivals quitting to imitate as the inconsistent among reputation, activities and limitations of organisation, including the failing of Continental Lite. Likewise, when activities supplement one another, it could drive the increase of operational effectiveness and rivals will get little benefit from imitation. They will be the underpinning of trade-offs and fit both can drive both competitive benefits and locks out imitators because of their sustainability (Porter, 1996). At last, some growths are dangerous and do not have any revenue, such as Maytag and Neutrogena in 1990s, because they far away from and lose their position.
Definitely, the theory of Porter may seem affordable. Operational effectives can't be equal to strategy. Only relying on the operational success cannot achieve the wonderful performance in long term and probably cause the zero-sum competition. Because operational effectiveness is actually increasing and most companies would imitate the market leaders easily by the new management techniques. In the same way, if all company only do the same activity, they could end up being the same finally, no income can gain. "Competitive benefits means achieving a larger space than your competitors between the value your customers see in your product and the expenses you incur in providing that product". (Pietersen, 2010). And Markides (2004) also argues that "a company will achieve success if choose a distinctive (that is, different from competitors) tactical position. " Thus, position in several and unique activities may help enterprise finding a new way to compete, such as Southwest Airlines Company. Besides, it would outperform than the competitors and avoid the purchase price war for additional income, like the success of Apple. At the same time, position and take-offs make businesses specifying the prospective markets and making an investment more resources to do it well. It is because any company cannot do any things perfect at the same time. Favaro, Rangan and Hirsh (2012) claim that "strategy is the consequence of choices executives make, on where you can play as well as how to win, to increase long-term value". "Where you can play" refers to any roots of position in order to find the mark market. "How to win" actually is exactly like trade-offs with choosing what not to do and not too much from the capabilities a small business already has. Furthermore, compare with the theory of RBV and key competence and learning, fit and an entire system absolutely making the competitors more challenging to imitate than individual activities by minimizing the cost and raise the differentiation. "Creating links that can't be easily duplicated by competition" (Lynch, 2006). Now Toyota is a success company by its functional effectiveness and continuous improvement, other learners and imitators still cannot get a great success, this is because they have something of blend activities to fit among interior and external rather than have a "core" competencies and "critical" resources.
However, it is still very difficult to check out and practices in current specific business environment. Some (Give, 2005) assumed that the idea of Porter is too ideal. Nowadays, with the uncertain and unpredictable development of the industry, fewer companies are operating without competition. "Up to now, no single institution within the field of proper management provides a complete or definitive reason of strategy and strategizing by company" (Stonehouse and Snowdon, 2007). Even though some professionals know their activities could not generate a long-term competitive gain, they still follow it, because operational efficiency continues to be important and essential to the company. In many business such as creation in China, the competitive distance between enterprises is principally the comparability of operational effectiveness. It will result in several profitability. Without operational effectiveness, company probably lost and cannot survive though they have a strategy. "That is a trap to answer which is a more important about providing unique profit for customers or attaining superior operational performance" (Pietersen, 2010). Besides, trade-offs and the progress trap are also very hard for managers to make business decisions. Today's business mainly focuses on product diversification so you can get more go back and market talk about. Most shareholders choose their return and growth in the short term and be anxious about the merger and acquisition from exterior environment. Under these pressures, many managers far away from the benefit and strategy and achieving the utmost of operational efficiency rather than take-offs. And in truth, both viewpoints are necessary in the forming of strategy by organizations.