Operational Effectiveness Is Not Strategy According to Porter, various management tools like total quality management, benchmarking, time-based competition, outsourcing, partnering, reengineering, that are used today, do enhance and dramatically improve the operational effectiveness of a company but fail to provide the company with sustainable profitability. Thus, the root cause of the problem seems to be failure of management to distinguish between operational effectiveness and strategy:
Choosing Your Route to Success Which do you prefer when you fly: And would you ever consider a small company with just a few routes?
The choice is up to you, of course. Why is this so? The answer is that each of these airlines has chosen a different way of achieving competitive advantage in a crowded marketplace. Outpace and outsmart your rivals by picking the right strategy for your organization.
The no-frills operators have opted to cut Competitive positioning to a minimum and pass their savings on to customers in lower prices.
This helps them grab market share and ensure their planes are as Competitive positioning as possible, further driving down cost. The luxury airlines, on the other hand, focus their efforts on making their service as wonderful as possible, and the higher prices they can command as a result make up for their higher costs.
Meanwhile, smaller airlines try to make the most of their detailed knowledge of just a few routes to provide better or cheaper services than their larger, international rivals. Generic Strategies These three approaches are examples of "generic strategies," because they can be applied to products or services in all industries, and to organizations of all sizes.
They were first set out by Michael Porter in in his book, " Competitive Advantage: Creating and Sustaining Superior Performance. He then subdivided the Focus strategy into two parts: The terms "Cost Focus" and "Differentiation Focus" can be a little confusing, as they could be interpreted as meaning "a focus on cost" or "a focus on differentiation.
There are two main ways of achieving this within a Cost Leadership strategy: Increasing profits by reducing costs, while charging industry-average prices. Remember that Cost Leadership is about minimizing the cost to the organization of delivering products and services.
The cost or price paid by the customer is a separate issue! The Cost Leadership strategy is exactly that — it involves being the leader in terms of cost in your industry or market. Simply being amongst the lowest-cost producers is not good enough, as you leave yourself wide open to attack by other low-cost producers who may undercut your prices and therefore block your attempts to increase market share.
You therefore need to be confident that you can achieve and maintain the number one position before choosing the Cost Leadership route.
Companies that are successful in achieving Cost Leadership usually have: Access to the capital needed to invest in technology that will bring costs down. A low-cost base labor, materials, facilitiesand a way of sustainably cutting costs below those of other competitors.
The greatest risk in pursuing a Cost Leadership strategy is that these sources of cost reduction are not unique to you, and that other competitors copy your cost reduction strategies.
One successful way of doing this is by adopting the Japanese Kaizen philosophy of "continuous improvement. How you do this depends on the exact nature of your industry and of the products and services themselves, but will typically involve features, functionality, durability, support, and also brand image that your customers value.Drawn by using simple statistical analysis, a price-benefit positioning map provides insights into the relationship between prices and benefits, and tracks how competitive positions change over time.
When a firm sustains profits that exceed the average for its industry, the firm is said to possess a competitive advantage over its rivals. The goal of much of business strategy is to achieve a sustainable competitive. Fleet Management Solutions ® for All-Satellite, GPS Fleet Tracking.
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Marketing Plan (Blue Cover + MS Word file) 2 x 40 page template: Marketing Plan (Color Pencils, Berlin, Hip Themes) 3 x 40 page template: Competitive Analysis.