2. Operational Effectiveness is Not Strategy
 The main problem is the failure to distinguish between
operational effectiveness and strategy.
 Operational effectiveness- performing similar activities better
than rivals. E.g: reducing defects in products
 Strategic positioning- performing different activities from
rivals or performing similar activities in different ways.
 A company can outperform rivals only if it can establish a
difference that it can preserve.
 Eg: Japanese companies rarely have strategy

3. Strategy Rests on Unique Activities
 Competitive strategy is about being different
 Essence of strategy is- choosing to perform activities
differently or to perform different activities than rivals.
 Eg: Southwest Airlines-
Short haul point to point
Low cost
No food
Turnaround time
Small Airports
No agent commission

4.  Strategic position emerge from 3 sources
Variety-based positioning- producing a subset of an
industry’s products or services. Eg: Jiffy Lube
International specializes in automotive lubricants only
Need- based positioning- serving most or all the needs of a
particular group of customers.
Eg: Ikea furniture meets all the home furnishing needs of its
target customers
Access- based positioning- Segmenting customers who are
accessible in different ways. Access can be customer
geography or customer scale.
Eg: Amazon.com, accessing customers exclusively through
internet

5. A sustainable strategic position requires trade-offs
 A strategic position is not sustainable unless there are trade-offs
with other positions.
 Trade-offs occur when activities are incompatible.
 Trade-offs create the need for choice and protect against
repositioners and straddlers.

6.  Trade-offs arise for three reasons:
1. Inconsistencies in image or reputation
2. Trade-offs arise from activities themselves
3. Trade-offs arise from limits on internal coordination and
control
 Tradeoffs are essential to strategy. They create the need for
choice and purposefully limit what a company offers.

7.  Trade-offs add a new dimension to the definition of strategy
 Strategy is making trade-offs in competing.
 The essence of strategy is choosing what not to do.
 Without trade-offs, there would be no need for choice and thus
no need for strategy

8. Fit drives both competitive advantage and
sustainability
 The importance of fit among functional policies is one of the
oldest ideas in strategy.
 Fit is important because discrete activities often affect one
another.
 Three types of fit
1. First-order fit is simple consistency between each activity
(function)
2. Second-order fit occurs when activities are reinforcing
3. Third- order fit occurs when optimization of effort (reducing
redundancy & waste)

9.  Competitive advantage grows out of the entire system of
activities.
 The fit among activities substantially reduces cost or
increases differentiation
 Strategy is creating fit among a company’s activities.
 The success of strategy depends on doing many things well-
not just a few and integrating among them.

10. Rediscovering to a successful strategy, not Profit is the key to
 Profit is the key strategy
a successful strategy, not growth.
 Compromises and inconsistencies in the pursuit of growth will
erode the competitive advantage a company.
 Keep an eye on profitable growth.
 The role of top management in an organization is:
 Defining an organization’s position and strategy
 Making trade-offs
 Forging fit among activities
 Building an innovation machine
 And strategy may have to change along with major structural
changes in an industry -- flexibility is vitally important.

12. Profitability Frontier