Music Case

The article by Michael E. Porter on Strategy essentially focuses on current management practises in the highly competitive corporate America vis a vis, the world, by large businesses not only to penetrate and grow into new markets, but also to sustain their current and future market positions. He discusses quite a few cases, from financial services industry to domestic airline industry in the US along with unique positioning of a furniture company. All these cases tried to illustrate two key concepts hammered throughout the article (a) Strategy, and (b) Operational effectiveness (OE) and how they both contradicts and complements each other to increase productivity. This concept of OE competition is illustrated in a the productivity frontier which is basically a sum of all existing best practices at any given time or the maximum value that a company can create at a given cost, using the best available technologies, skills, management techniques, and purchased inputs. Thus, when a company improves its operational effectiveness, it moves toward the frontier. The frontier is constantly shifting outward as new technologies and management approaches are developed and as new inputs become available. Although companies improve on multiple dimensions of performance at the same time as they move toward the frontier, most of them fail to compete successfully on the basis of operational effectiveness over an extended period. The reason for this being that competitors are quickly able to imitate best practices like management techniques, new technologies, input improvements, etc. Thus, OE competition shifts the frontier outward and effectively raises the bar for everyone. But such competition only produces absolute improvement in operational effectiveness and no relative improvement for anyone. This replication, over time, results in a "mutually destructive" activity as eventually all of them lose their competitive edge by following this same pattern since OE means performing similar activities better than rivals performing them.

On the other hand, the author illustrates the concept of competitive strategy by stating that it is about "being different and deliberately choosing a different set of activities to deliver a unique mix of value". By dissecting the strategy taken up by Southwest Airlines to offer short-haul, low-cost, point to point service between mid-sized cities and secondary airports in United States, the author further emphasized this point. In contrast, when Continental, which had a completely different set of strategies of value additions to offer to its customers by specialising on long-haul, premium seating, etc services, tried to replicate Southwest's strategy by launching a line similar of a low cost version brand, it incurred huge losses as its management failed to address the confusion created in the company's overall strategy within its own employees, losing its competitive edge in both. Here the