Different approaches to strategy in business

Strategy has always been the object of a lot of analysis, as the essence of a company. It defines the path that a firm should run through to achieve financial and economic objectives. Organizations are actually striving for the competitive advantage, they are trying to go beyond the crowd by achieving the best value with the lowest cost, and preserve this situation for the longest term possible. So, the true meaning of strategy cannot be limited at those few words, the effective meaning is more complex than that. This short essay will try to establish the differences and the similarities of two approaches argued by two well-known business thinker Gary Hamel and the economist Michael E Porter.

Starting with Porter who focused his article in his business review What is strategy? on the difference between operational effectiveness (OE) and Strategy. Firms need both of them in order to achieve their goals, operational effectiveness is being more effective in term of performance than your rivals but Strategy is being able to outperform your competitors by being different or performing differently.

According to Michael Porter, firms should first of all get a position in the industry which means to know the limits of its competences and resources so that she can define a competitive advantage (something only the firm got). This competitive advantage should fulfill the 4 conditions of the VRIN Model (Barney,1991) : to be Valuable, rare, inimitable and non-substitutable. It is evident that to create a competitive advantage, the organization should imperatively respond to the consumers expectations. The creation of this value can sometimes be neglected by lots of firms trying to reduce costs or raise the profitability for the shareholders. In a general way, an offers value is the price that a consumer is ready to pay in order to get it. Thats why every organization should understand that having a different competence that is not valuable in the eyes of its costumers cannot be described as a competitive advantage.

Going back to the VRIN Model (Barney,1991), this advantage should be rare. Because having a competence similar to the one of rivals, everybody can propose the same offers. This is what can be seen in the automotive industry where all the new equipment offered by some (parking assistance, multimedia system, traction control, etc..) is quickly offered be others. However, when only few companies who got this competence at this time, we can say that the competitive advantage is rare. The organization should next to develop the inimitability of its competences in order to create a sustainable competitive advantage. Having a competence which is hard to copy, this is what inimitable is about, but doing this cannot be that easy to all organizations. This inimitability is based on two conditions: the first is that the competence should lead the firm to the highest levels of performance effectively superior than rivals.

The second one is that if the competence includes multiple activities, knowledge and skills, then the relationship between those three which should define the inimitability of this competence. In general, the inimitability of a competence can be inspired from 4 sources: the complexity (between internal and external links) the ambiguity of the cause of success, the culture and the history of an organization and the change (innovation and dynamism). So, having a complex system of competences (human, financial and technical) can without no doubts be hard to imitate by competitors. In others words a complex system can be defined as a complex interconnexion between all the components of the system including the client, so this interconnexion is when the organization is able to develop a sense of dependence in their consumers by offering them the exact offer that responds to their needs.

Then the ambiguity of the source of success is one of the tactics that organizations try to play in order to hide and preserve their cause of success. It is logical that if your rivals dont know how you did to outperform them, then they wont be able to do the same as you did.  In addition to the culture and the history of the company those two are very important for a sustainable relationship between not only an organization and its employees but also between a firm and its customer, because a client doesnt by only a product or a service but he buys a story that makes it unique. Lastly, change is one the source to inimitability, a company that have a great strategic dynamism and an ability to outperform its competitors by innovating, is then a company inimitable or hard to imitate.

All this was cited to show that every company should not rely on the operational effectiveness and forget about establishing strategies. As Michael Porter said that to avoid a position of vulnerability, the company should determine its positioning next to its competitive advantage then elaborate a strategy without forgetting about its operational effectiveness.

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