A couple items for your attention on this assignment: Per the class discussion, there are multiple topics from which to select for this paper.? Those topics are: Innovat

RUBRIC Individual Reading Assignments

Individual Reading Assignments CONTENTS The individual reading assignments will be formatted and submitted with the following formatting requirements and content:

I. Topic a. A topic will be assigned to the class b. Each student must find a relevant article that incorporates the topic for the

Memo II. Memo Format

a. Every paper submitted will employ a ‘Memo format’ [see attached]. This is for illustrative purposes as to what each individual reading should include as to content and format.

b. Content also will include the paragraph headings in the Memo format III. Each student shall select an article/ paper for the assignment based on the

overall subject matter/ topic given for that individual assignment IV. The memo will contain:

a. To whom the Memo will be addressed/ sent to: i. The recipient shall be a relevant company/ industry/ individual and

be addressed to one of the following: 1. The CEO of the business, or 2. The Chairman, or 3. The Board of Directors

b. The current date c. The ‘subject matter’ of the memo d. Paragraph Headings per the Memo format

i. A relevant ‘Summary’ or ‘Background’ of the article ii. A ’Discussion’ of the topic/ subject matter for each heading iii. ‘Recommendations’ for the recipient (individual or company) iv. ‘Other Observations’ beyond the ‘recommendations’ provided

e. The recipient of the Memo must have some relation or linkage to the subject matter and the topic/ article referenced

V. Citations/ References a. The article/ paper that was the basis for the memo must be cited as to

author and source Your final product will be evaluated and graded in terms of its ability to effectively address the overall topic and applicability to the class lecture topics and germane to consulting, strategy, and finance. In grading the Memo, I will pay attention to the following issues:

RUBRIC Individual Reading Assignments

• Was the paper formatted as a memo? • Is the topic in keeping with the assignment? • Is the recipient (a person or company) a logical recipient for the subject

matter? • Is the Memo concise, coherent, persuasive, and logical? • Citations and/ or References, were they provided? • Attributions provided? • Quality of the paper’s content and information provided to the recipient

RUBRIC Individual Reading Assignments

MEMO DATE:

TO:

FROM:

COPY:

SUBJECT:

BACKGROUND In this portion of the memo, the writer briefly but completely reviews the facts of the case or paper. This paragraph will contain historical data, information that is a matter of public record, and facts that are relevant to the recommended communication strategy.

DISCUSSION In this portion of the memo, the writer expands on the implications of the facts cited above. This is where the writer explains to the reader what those facts mean and why they matter. The discussion paragraph often becomes the basis for the recommendations that follow. This is often the largest section of the memo. RECOMMENDATIONS In this paragraph, the writer lays out each recommendation in specific terms.

OTHER ISSUES On occasion, the paragraph above will be labeled “Actions Recommended,” and would be preceded by a paragraph labeled “Actions Taken.” The difference is a matter of authority in the organization. The memo writer clearly has authority to take certain actions on his or her own and to back brief the supervisor or manager by means of this memo. That same writer might propose actions that the reader is asked to agree to. It is always useful for the reader to know what tasks have already been done, and what tasks he or she is being asked to approve.

Most memoranda do not include a signature block, nor do they feature salutation lines (“Dear . . ..”) or complimentary closing lines (“Sincerely yours,”).

RUBRIC Individual Reading Assignments

To conclude, most memos will feature some distinctive typographical mark just beneath the last line of type. Some authors will use their initials, other will simply use the pound sign or other mark of their choice.

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What Is Strategy?

by Michael E. Porter

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Included with this full-text Harvard Business Review article:

The Idea in Brief—the core idea

The Idea in Practice—putting the idea to work

Article Summary

What Is Strategy?

A list of related materials, with annotations to guide further

exploration of the article’s ideas and applications

21 Further Reading

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What Is Strategy?

The Idea in Brief The Idea in Practice

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The myriad activities that go into creating, producing, selling, and delivering a product

service are the basic units of competitive vantage. Operational effectiveness eans performing these activities better— at is, faster, or with fewer inputs and fects—than rivals. Companies can reap ormous advantages from operational ef- tiveness, as Japanese firms demon- ated in the 1970s and 1980s with such actices as total quality management and ntinuous improvement. But from a com- titive standpoint, the problem with oper- onal effectiveness is that best practices easily emulated. As all competitors in an ustry adopt them, the productivity ntier—the maximum value a company

n deliver at a given cost, given the best ailable technology, skills, and manage- ent techniques—shifts outward, lowering sts and improving value at the same e. Such competition produces absolute

provement in operational effectiveness, t relative improvement for no one. And

e more benchmarking that companies , the more competitive convergence u have—that is, the more indistinguish- le companies are from one another.

rategic positioning attempts to achieve stainable competitive advantage by eserving what is distinctive about a com- ny. It means performing different activi- s from rivals, or performing similar activi- s in different ways.

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Three key principles underlie strategic positioning.

1. Strategy is the creation of a unique and valuable position, involving a different set of activities. Strategic position emerges from three distinct sources:

• serving few needs of many customers (Jiffy Lube provides only auto lubricants)

• serving broad needs of few customers (Bessemer Trust targets only very high- wealth clients)

• serving broad needs of many customers in a narrow market (Carmike Cinemas op- erates only in cities with a population under 200,000)

2. Strategy requires you to make trade-offs in competing—to choose what not to do. Some competitive activities are incompatible; thus, gains in one area can be achieved only at the expense of another area. For example, Neutrogena soap is positioned more as a me- dicinal product than as a cleansing agent. The company says “no” to sales based on deodor- izing, gives up large volume, and sacrifices manufacturing efficiencies. By contrast, Maytag’s decision to extend its product line and ac- quire other brands represented a failure to make difficult trade-offs: the boost in reve- nues came at the expense of return on sales.

3. Strategy involves creating “fit” among a company’s activities. Fit has to do with the ways a company’s activities interact and rein- force one another. For example, Vanguard Group aligns all of its activities with a low-cost strategy; it distributes funds directly to con- sumers and minimizes portfolio turnover. Fit drives both competitive advantage and sus- tainability: when activities mutually reinforce each other, competitors can’t easily imitate them. When Continental Lite tried to match a few of Southwest Airlines’ activities, but not the whole interlocking system, the results were disastrous.

Employees need guidance about how to deepen a strategic position rather than broaden or compromise it. About how to ex- tend the company’s uniqueness while strengthening the fit among its activities. This work of deciding which target group of cus- tomers and needs to serve requires discipline, the ability to set limits, and forthright commu- nication. Clearly, strategy and leadership are inextricably linked. C

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What Is Strategy?

by Michael E. Porter

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I. Operational Effectiveness Is Not Strategy For almost two decades, managers have been learning to play by a new set of rules. Compa- nies must be flexible to respond rapidly to competitive and market changes. They must benchmark continuously to achieve best prac- tice. They must outsource aggressively to gain efficiencies. And they must nurture a few core competencies in race to stay ahead of rivals.

Positioning—once the heart of strategy—is rejected as too static for today’s dynamic mar- kets and changing technologies. According to the new dogma, rivals can quickly copy any market position, and competitive advantage is, at best, temporary.

But those beliefs are dangerous half-truths, and they are leading more and more companies down the path of mutually destructive compe- tition. True, some barriers to competition are falling as regulation eases and markets become global. True, companies have properly invested energy in becoming leaner and more nimble. In many industries, however, what some call

hypercompetition is a self-inflicted wound, not the inevitable outcome of a changing paradigm of competition.

The root of the problem is the failure to dis- tinguish between operational effectiveness and strategy. The quest for productivity, quality, and speed has spawned a remarkable number of management tools and techniques: total quality management, benchmarking, time-based com- petition, outsourcing, partnering, reengineering, change management. Although the resulting operational improvements have often been dramatic, many companies have been frustrated by their inability to translate those gains into sustainable profitability. And bit by bit, almost imperceptibly, management tools have taken the place of strategy. As managers push to im- prove on all fronts, they move farther away from viable competitive positions.

Operational Effectiveness: Necessary but Not Sufficient. Operational effectiveness and strategy are both essential to superior performance, which, after all, is the primary goal of any en- terprise. But they work in very different ways.

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december 1996 page 2 se only by Lawrence J Mahon, Florida State University until December 2017. Copying or posting is an infringement of copyright.

[email protected] or 617.783.7860

What Is Strategy?

harvard business review • november–

Michael E. Porter

is the C. Roland Christensen Professor of Business Administration at the Harvard Business School in Boston, Massachusetts.

This article has benefited greatly from the assistance of many individuals and companies. The author gives spe- cial thanks to Jan Rivkin, the coauthor of a related paper. Substantial research contributions have been made by Nicolaj Siggelkow, Dawn Sylvester, and Lucia Marshall. Tarun Khanna, Roger Martin, and Anita McGahan have pro- vided especially extensive comments.

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A company can outperform rivals only if it can establish a difference that it can preserve. It must deliver greater value to customers or create comparable value at a lower cost, or do both. The arithmetic of superior profitability then fol- lows: delivering greater value allows a company to charge higher average unit prices; greater efficiency results in lower average unit costs.

Ultimately, all differences between companies in cost or price derive from the hundreds of ac- tivities required to create, produce, sell, and de- liver their products or services, such as calling on customers, assembling final products, and training employees. Cost is generated by per- forming activities, and cost advantage arises from performing particular activities more effi- ciently than competitors. Similarly, differentia- tion arises from both the choice of activities and how they are performed. Activities, then are the basic units of competitive advantage. Overall ad- vantage or disadvantage results from all a com- pany’s activities, not only a few.1

Operational effectiveness (OE) means per- forming similar activities better than rivals per- form them. Operational effectiveness includes but is not limited to efficiency. It refers to any number of practices that allow a company to bet- ter utilize its inputs by, for example, reducing de- fects in products or developing better products faster. In contrast, strategic positioning means performing different activities from rivals’ or per- forming similar activities in different ways.

Differences in operational effectiveness among companies are pervasive. Some companies are able to get more out of their inputs than others because they eliminate wasted effort, employ more advanced technology, motivate employees better, or have greater insight into managing particular activities or sets of activ- ities. Such differences in operational effective- ness are an important source of differences in profitability among competitors because they directly affect relative cost positions and levels of differentiation.

Differences in operational effectiveness were at the heart of the Japanese challenge to Western companies in the 1980s. The Japa- nese were so far ahead of rivals in operational effectiveness that they could offer lower cost and superior quality at the same time. It is worth dwelling on this point, because so much recent thinking about competition depends on it. Imagine for a moment a productivity frontier that constitutes the sum of all existing

best practices at any given time. Think of it as the maximum value that a company deliver- ing a particular product or service can create at a given cost, using the best available tech- nologies, skills, management techniques, and purchased inputs. The productivity frontier can apply to individual activities, to groups of linked activities such as order processing and manufacturing, and to an entire com- pany’s activities. When a company improves its operational effectiveness, it moves toward the frontier. Doing so may require capital in- vestment, different personnel, or simply new ways of managing.

The productivity frontier is constantly shift- ing outward as new technologies and man- agement approaches are developed and as new inputs become available. Laptop com- puters, mobile communications, the Internet, and software such as Lotus Notes, for exam- ple, have redefined the productivity frontier for sales-force operations and created rich possibilities for linking sales with such activi- ties as order processing and after-sales sup- port. Similarly, lean production, which involves a family of activities, has allowed substantial improvements in manufacturing productivity and asset utilization.

For at least the past decade, managers have been preoccupied with improving operational effectiveness. Through programs such as TQM, time-based competition, and benchmarking, they have changed how they perform activities in order to eliminate inefficiencies, improve customer satisfaction, and achieve best practice. Hoping to keep up with shifts in the produc- tivity frontier, managers have embraced con- tinuous improvement, empowerment, change management, and the so-called learning orga- nization. The popularity of outsourcing and the virtual corporation reflect the growing recognition that it is difficult to perform all activities as productively as specialists.

As companies move to the frontier, they can often improve on multiple dimensions of per- formance at the same time. For example, manu- facturers that adopted the Japanese practice of rapid changeovers in the 1980s were able to lower cost and improve differentiation simul- taneously. What were once believed to be real trade-offs—between defects and costs, for example—turned out to be illusions created by poor operational effectiveness. Managers have learned to reject such false trade-offs.

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What Is Strategy?

harvard business review • november–

Operatio Versus S

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Constant improvement in operational ef- fectiveness is necessary to achieve superior profitability. However, it is not usually suffi- cient. Few companies have competed success- fully on the basis of operational effectiveness over an extended period, and staying ahead of rivals gets harder every day. The most obvious reason for that is the rapid diffusion of best practices. Competitors can quickly imitate management techniques, new technologies, input improvements, and superior ways of meeting customers’ needs. The most generic solutions—those that can be used in multiple settings—diffuse the fastest. Witness the pro- liferation of OE techniques accelerated by support from consultants.

OE competition shifts the productivity fron- tier outward, effectively raising the bar for everyone. But although such competition pro- duces absolute improvement in operational ef- fectiveness, it leads to relative improvement for no one. Consider the $5 billion-plus U.S. commercial-printing industry. The major players— R.R. Donnelley & Sons Company, Quebecor, World Color Press, and Big Flower Press—are competing head to head, serving all types of customers, offering the same array of printing technologies (gravure and web offset), in- vesting heavily in the same new equipment, running their presses faster, and reducing crew sizes. But the resulting major productivity

gains are being captured by customers and equipment suppliers, not retained in superior profitability. Even industry-leader Donnelley’s profit margin, consistently higher than 7% in the 1980s, fell to less than 4.6% in 1995. This pattern is playing itself out in industry after industry. Even the Japanese, pioneers of the new competition, suffer from persistently low profits. (See the insert “Japanese Companies Rarely Have Strategies.”)

The second reason that improved opera- tional effectiveness is insufficient—competitive convergence—is more subtle and insidious. The more benchmarking companies do, the more they look alike. The more that rivals out- source activities to efficient third parties, often the same ones, the more generic those activities become. As rivals imitate one an- other’s improvements in quality, cycle times, or supplier partnerships, strategies converge and competition becomes a series of races down identical paths that no one can win. Competition based on operational effective- ness alone is mutually destructive, leading to wars of attrition that can be arrested only by limiting competition.

The recent wave of industry consolidation through mergers makes sense in the context of OE competition. Driven by performance pres- sures but lacking strategic vision, company after company has had no better idea than to buy up its rivals. The competitors left standing are often those that outlasted others, not com- panies with real advantage.

After a decade of impressive gains in opera- tional effectiveness, many companies are facing diminishing returns. Continuous improvement has been etched on managers’ brains. But its tools unwittingly draw companies toward imi- tation and homogeneity. Gradually, managers have let operational effectiveness supplant strat- egy. The result is zero-sum competition, static or declining prices, and pressures on costs that compromise companies’ ability to invest in the business for the long term.

II. Strategy Rests on Unique Activities Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value.

Southwest Airlines Company, for example, offers short-haul, low-cost, point-to-point service between midsize cities and secondary airports

nal Effectiveness trategic Positioning

Relative cost position

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What Is Strategy?

harvard business review • november–

Japanese Companies

The Japanese triggered a global revol tion in operational effectiveness in th 1970s and 1980s, pioneering practices such as total quality management an continuous improvement. As a result, Japanese manufacturers enjoyed sub- stantial cost and quality advantages fo many years.

But Japanese companies rarely de veloped distinct strategic positions the kind discussed in this article. Those that did—Sony, Canon, and Sega, for example—were the exception rathe than the rule. Most Japanese compa nies imitate and emulate one anothe All rivals offer most if not all produc varieties, features, and services; the employ all channels and match one anothers’ plant configurations.

The dangers of Japanese-style comp tition are now becoming easier to rec ognize. In the 1980s, with rivals opera ing far from the productivity frontier, seemed possible to win on both cost and quality indefinitely. Japanese com panies were all able to grow in an ex- panding domestic economy and by penetrating global markets. They ap-

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in large cities. Southwest avoids large airports and does not fly great distances. Its customers include business travelers, families, and stu- dents. Southwest’s frequent departures and low fares attract price-sensitive customers who otherwise would travel by bus or car, and convenience-oriented travelers who would choose a full-service airline on other routes.

Most managers describe strategic position- ing in terms of their customers: “Southwest Airlines serves price- and convenience-sensitive travelers,” for example. But the essence of strat- egy is in the activities—choosing to perform activities differently or to perform different ac- tivities than rivals. Otherwise, a strategy is nothing more than a marketing slogan that will not withstand competition.

A full-service airline is configured to get passengers from almost any point A to any point B. To reach a large number of destinations and serve passengers with connecting flights, full-

service airlines employ a hub-and-spoke system centered on major airports. To attract passengers who desire more comfort, they offer first-class or business-class service. To accommodate passengers who must change planes, they co- ordinate schedules and check and transfer baggage. Because some passengers will be traveling for many hours, full-service airlines serve meals.

Southwest, in contrast, tailors all its activities to deliver low-cost, convenient service on its par- ticular type of route. Through fast turnarounds at the gate of only 15 minutes, Southwest is able to keep planes flying longer hours than rivals and provide frequent departures with fewer aircraft. Southwest does not offer meals, assigned seats, interline baggage checking, or premium classes of service. Automated ticketing at the gate encourages customers to bypass travel agents, al- lowing Southwest to avoid their commissions. A standardized fleet of 737 aircraft boosts the efficiency of maintenance.

Southwest has staked out a unique and valu- able strategic position based on a tailored set of activities. On the routes served by South- west, a full-service airline could never be as convenient or as low cost.

Ikea, the global furniture retailer based in Sweden, also has a clear strategic positioning. Ikea

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