Last Updated 06 Jan 2022

Porter’s Operational Effectiveness and Strategy

Category Competition, Strategy
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What does Porter mean by operational effectiveness? For Michael Porter, operational effectiveness means performing similar activities better than rivals perform them. Porter says operational effectiveness includes but is not limited to efficiency. Operational effectiveness then refers to any number of practices that allow a company to better utilize its inputs by, for reducing defects in products or by developing better products faster. Why is operational effectiveness not a strategy?

Operational effectiveness is not a strategy because OE is doing similar business better than others, while strategy is simply making a difference. Operational effectiveness is more than just a competitive way of doing business; it means outperforming rivals in terms of the quality of services and products. In this sense, operational effectiveness cannot be a strategy because, “Strategy is nothing more than a marketing slogan that will not withstand with competition” (Porter, p. 43). It is simply deliberately choosing a different set of activities to deliver a unique set of value.

However, Porter emphasized that both operational effectiveness “are essential to superior performance” (p. 49). Does identifying and focusing on core competencies and unique advantages suggest that only focus strategies (in the generic sense) are truly sustainable? I should say yes in the context of competencies. If focus strategies means something like what the Southwest airline has been doing, (the airline initiated activities that are different from others to attract passengers), then, only focus strategy is truly sustainable. Read also about focused low cost strategy

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It means, strategies that provides advantages and enhances the company’s operational effectives are a focus strategy and it must be sustain in view of its positive impact on the business. Does Porter’s example of Southwest Airlines (SWA) contradict the claim that operational effectiveness is not a strategy? Why or why not? No! What Porter was talking regarding the example of Southwest airline was that the airline simply made their services different from their rivals. It was not a similar activity. You may also be interested in reading "Are entrepreneurs born or made essay"

They offered low cost, more convenient, and standardized services which were not done by others. They installed automated ticketing at the gate for passengers to easily purchase tickets. Because of such activity, they were able to provide low cost and convenient services because don’t have to pay commission to travel agencies. That is, they simply have chosen a different set of activity to deliver a unique set of value.

Reference Porter, M. (1998) On Competition (What is Strategy Chapter2) USA: Harvard Business Press

Related Questions

on Porter’s Operational Effectiveness and Strategy

What is operational effectiveness strategy?

Operational effectiveness is about having functions in the organization that work well. These functions are the organization skills used to implement the strategy. All the mentioned points above make a positive difference in the company operations, therefore operational effectiveness is greater.

What is Porter competitive strategy?

Porter's Generic Competitive Strategies (ways of competing) A firm's relative position within its industry determines whether a firm's profitability is above or below the industry average. The fundamental basis of above average profitability in the long run is sustainable competitive advantage.

What is a Porter strategy?

Porter's generic strategies are ways of gaining competitive advantage - in other words, developing the "edge" that gets you the sale and takes it away from your competitors. There are two main ways of achieving this within a Cost Leadership strategy: Increasing profits by reducing costs, while charging industry-average prices.

What is the meaning of operational efficiency?

In a business context, operational efficiency can be defined as the ratio between an output gained from the business and an input to run a business operation. When improving operational efficiency, the output to input ratio improves.

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