The tough strategic choices

Posted by Mereo
at Wednesday November 5th, 2014.

“If you want to take the strategy seriously, the work of Porter contains the fundamentals,” says Joan Magretta, Harvard professor and former student of Porter in his book, Understanding Michael Porter: The Essential Guide Competition and Strategy (ed. HSM). She also warns the reader: “Porter is not fast food” -but a good strategy is not even conceived hastily.

In “The most common strategy mistakes”, published by HBS Working Knowledge, Magretta Porter asks what are the major obstacles to good strategies and why only a few companies have them. The professor admits that early in his research, he believed that the problem resided in bad data or faulty analysis of the sector. Today he can to list several other factors that divert managers to make strategic goal right choices.

“Some of the most significant barriers to good strategy come from many hidden biases in internal systems, organizational structures and decision processes,” said Porter, who mentioned how complicated it is to get information on costs or how incentive systems focusing on the wrong variables.

He also emphasizes the human nature, which is hard to do and keep choices. In this sense, resistance to make strategic trade-offs is a major barrier to sound strategy. “Most managers hate doing trade-offs; they hate to accept limits. They prefer almost always try to serve more customers and offer more features or characteristics of products. They can not resist the belief that this will bring more growth and profits. “

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The trade-offs are necessary choices when there is incompatibility between alternative decisions as between groups of clients for which your product offer. The trade-offs are central to the strategy for two reasons, according Magretta: “First, because they are important differences in prices and costs between competing source. Second, they make it difficult for them to copy what you do no harm to their own strategy. “When, for example, improvements in products do not require trade-offs, they can become part of best practices in the industry, something that others will reproduce easily.

According to Porter, the trade-offs are required for the creation and maintenance of competitive advantage of a company that theme in his keynote address at HSM Management 2013 event which will be held in São Paulo between the 4th and 6th of November.

Where not to go

Having to choose from, so what do strategists choose what not to do. “A company has to abandon some product features, services, or activities in order to be unique at others. Such trade-offs in product and value chain are what make it a truly distinguished company, “said Porter in” Strategy and the internet “, article published by HBS Working Knowledge.

Magretta uses the image of the fork in the road to explain what trade-offs: when one chooses a route, you can not take another simultaneously. In this sense, the options with which the strategist encounters are not only different but mutually exclusive. Thus, customers of Ikea network can not rely on furniture assembly services, but have ensured relatively low prices. In this case, provide services and work with low costs would be incompatible.

The teacher criticizes the consultants recommend that every company looks like the market leader or to encourage the company to do the benchmark with respect to any competitor in the industry, or even that lead managers to believe that it is right and meet retain everyone. “If you listen to every customer and do what you want you do not have a strategy,” simplifies.

Source: http://www.hsm.com.br/

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References:

Magretta, J. “The most common strategy mistakes,” Harvard Working Knowledge 21 December 2011. Available online at: <http://hbswk.hbs.edu/item/6737.html>. Access: 12 August 2013.

Magretta, J. Understanding Michael Porter: the essential guide to competition and strategy. Boston: Harvard Business Review Press, 2011.

Porter, M. “Strategy and the Internet”. HBS Working Knowledge 16 April 2001. Available online at: <http://hbswk.hbs.edu/item/2165.html>. Access on 11 August 2013.

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