“What is Strategy?” Summary and Integration

SUMMARY: “What is Strategy?” – Michael E. Porter

Michael E. Porter utilizes many engineered terms and principles to formulate his view of strategy in “What is Strategy?”.  He illustrates how the last quarter-century saw managers believing corporate strategy is the nature of a firm’s operational effectiveness – or business activity efficiencies.  However, he immediately offers that effectiveness and activities can easily be emulated and are thus, not sound strategy. The actual product of effectiveness with strategy is that activities are emulated causing the industry’s productivity frontier to expand – lowering costs and increasing value – causing competitive convergence where competitors become indistinguishable.

Porter demonstrates that true strategy has a few chief merits. Summing up strategy in Porter’s terms: Strategy is the creation of a unique position characterized by a distinct set of unique activities that fit driving competitive advantage and sustainability.  A terrific example of complete strategy Porter offers is that of Southwest Airlines.  The airline industry, systematic and bland, is characterized by big carriers relenting to get any and all passengers (no uniqueness) from any airport to any other airport (serving broad market) with long flights, short flights, and connections.  SA decided to focus their efforts through many activities: only offering “short-haul, low-cost, point-to-point service between midsize cities”, one-size of airplane throughout entire fleet, no food service, and no assigned seats. These truly unique activities fit its strategy of low-cost carrier.  Like many strategic firms, SA decided to trade-off long-trips, first-class, and the other activities undertaken by the entire industry to position itself in a profitable, sustainable position.

Tools like Activity System Maps and definitions of Types of Fit from Porter allow leaders to better define the activities that will lead their firm to building a sustainable strategy.  Porter emphasizes the need to develop a true strategy and impede external and internal forces from altering it into a blur.

INTEGRATE:  New Entrants, Existing Competitors and Strategy

It is obvious that Porter’s business publications would align, however, “The Five Competitive Forces that Shape Strategy” resonates very well with several themes of “What is Strategy?” especially well.  One of the Five Forces, New Entrants to the Industry, often join an industry while barriers are low. It is rare, but promising for new entrants when they can create a fresh, unique position that is sustainable.  However, more often than not, new entrants copy existing players by positioning the firm to match the superior performer or multiple performers – much like Porter’s “repositioning” or “straddling” theories of position copying.

If a new entrant successfully matches those activities of the superior player, Porter might argue that the superior player did not have a unique strategy at all, but more so, only retained operational effectiveness unmatched by other competitors.  For an existing competitor – one of the other Five Forces – to do this successfully, it would require the trading off of an old reputation as well as old activities.  However, a threatening characteristic of new entrants to all industry players is that, by nature, they are not comprised of existing activities that would prohibit or interfere with their newly-developed position – unlike their counterparts (existing competitors) who have established activities. 

Straddling, on the other hand, requires both new entrants and existing competitors to successfully marry both sets of activities that derive the desired outcome and strategy of, for instance, the two superior performers in the industry.  Again, this strategy may be more promising for new entrants than existing competitors as there are no previous activities to deal with.  Starting from scratch, new entrants have the opportunity to grow a formidable position, though risky, by either method. Concluding, for Porter, his outlook on straddling appears much less promising than repositioning.