Literature Essay

1451 WordsJan 15, 20126 Pages
The logic behind this statement is that efficiency can lower costs, while delivering greater value than competitors through distinction allows for higher pricing*. Only the latter sustains profitability in the long run, which is a defining characteristic of strategy. One may wonder how a strategic position can become durable. Theoretically, one should think that anyone could copy a competitor’s position and thereby attain results similar to the competitor’s. Porter is explaining this apparent contradiction with the concept of trade-offs. Choosing a distinct strategy carries with it a trade-off. As an example, being a low-cost airline operator requires all unnecessary activities to be phased out. This makes it harder for a competitor with a different strategy to copy the concept (Porter 1996:68). Porter uses the concept of fit to explain this phenomenon. It is a defining characteristic of strategy that it is about combining activities: “The competitive value of individual activities cannot be separated from the whole”(Porter 1996:72). In other words, strategy is distinction achieved through the sum of individual activities, not each individual activity by itself. This is why operational effectiveness is not strategy: Operational effectiveness is about achieving excellence in individual activities or functions. We will therefore add two notes to our definition of strategy: Strategy should create profitability and sustainability through pro-activity• • sustainability is possible through distinctiveness only• distinctiveness can only be achieved if all individual activities are treated as a whole Strategy takes place in a dynamic industry Porter would say that misjudging operational effectiveness as strategy will ultimately lead to a poor competitive position. Since IT is one of today’s major sources of operational effectiveness, it is very relevant to

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