WHAT IS STRATEGY?

-- MICHAEL E. PORTER

SUMMARY, APPLICATION, AND LIMITATIONS

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Indian Institute of Management Raipur 2

SUMMARY

• Managers fail to distinguish Operational Effectiveness (OE) and Strategy.

• Strategy being replaced by OE and is not sustainably profitable.

• Managers to Identify and reject reject false trade-offs.

• Perform unique activities differently from rivals.

• Strategic Positions (Variety/Needs/Access based).

• A Sustainable Strategic Position Requires Trade-offs.

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SUMMARY CONTINUED

• Trade off incompatible activities for sustainable advantage

• Essence of strategy: choosing what not to do.

• Fit Drives Both Competitive Advantage and Sustainability

• Types of Fit/Sustainability• Rediscovering Strategy

• The Failure to Choose• The Growth Trap• Profitable Growth• The Role of Leadership

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INDIAN DOMESTIC AVIATION SECTOR

AIRLINES INDIGO KINGFISHER JET AIRWAYS

FACTORS

Airport Charges Same Same Same

Fuel Cost Same Same Same

Regulatory Environment Same Same Same

Profit/Loss (In Rupees) 650 Crores -2328 Crores -1236 Crores

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STRATEGY IMPLEMENTATION

INDIGO

Need based positioning: Low Cost and “On time is a wonderful thing.”

Trade-off - Premium Segment vs Growing Middle Class.

Simple consistency; low cost

KINGFISHER & JET AIRWAYS

Diffused positioning.

Trade-off - Not very clear.

No fit between activities.

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DIFFERENTIAL ACTIVITIES

INDIGO

Similar aircraft in fleet (A320 Air bus); younger fleet(2.3 years old)

Connecting metros with 2-tier cities (33 destinations/day), better synchronization and fit.

Multi-source revenue (Ads, Food, and Onboard Merchandising)

Best in market OTP (93%), Load Factor (83.9%), and Cancel Rate.

KINGFISHER & JET AIRWAYS

Diverse aircrafts in fleets; No fit between strategies and activities.

Connecting metros to metros and metros with 2-tier cities, less synchronized and low fit.

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LIMITATION(S) Time is a big constraint: Long-term strategies may span to over 10-15 years.

During this time, the business environment may not turn out to be different from what was predicted. This will create hazards for the company.

Successful strategies are imitated by other companies. Hence, no business will survive on just one business and need to strive towards better strategies.

Dynamic business environment may call for urgent managerial decisions. Adopted strategy may constrain the management to take conflicting decisions.

High degree of government regulation can render long term strategies useless. (like insurance, financial, telecom, and aviation sectors)

Operational Effectiveness itself can be a strategy where the technology is slow moving.

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Indian Institute of Management Raipur 8

THANK YOU.