Nowadays, we are in a very high level of competition that we name“hyper-competition” that kills the positioning and heart of strategy. In fact, with the globalization, firms cannot “just be good” as the market has a global size. Also, with the globalization, we note a new trend in the consumer behaviour. Consumers always compare and challenge firms, analyze what is the best product, service for the best given price and the added value. So, if there is an issue in the strategy, positioning the consumer will not find him or herself in the product and do not purchase it.
What is strategy? Basically, it is the ability to perform different activities from rivals’ or perform similar activities in different ways. Also, strategy is the ability of a company to answer to the needs or create a desire. However, to be considered as strategic a company has to add a value and create a difference. We have two cases possible. The first one, we are in a high competition, in this case the strategy to respond to the competition is to create a standard. The second one, we have a monopoly and in this case the strategy is to be unique.
What is competition? We tend to define competition as the environment, the demand and supply for a given product or service. In fact, companies have to cope with rivals in a global market.
What is Competitiveness? Competitiveness is defined by the company positioning in regard of the market, value creation, P.O.V of single individual. However, the responding to competition is a key point as a strong, precise positioning. We have firms that prefer be the first mover (innovate) to target new market to get, keep the advantage and diversify the portfolio of goods. But, we have to keep in mind that firms tend to copy what the competitors do.
Operational effectiveness (OE) is defined by the efficiency and producing capacity of a given firm. Basically, we are focused on how a firm produce and use their resource. We talk about productivity frontier that is the maximum value a company can deliver at a given cost, given the best available technology, skills, and management techniques-shifts, lowering cost and improving value at the same time. A firm has to always improve its OE cause of the competitive convergence. So, in regard of the competition and trend to
As we mentioned before, we have to cope with a hyper-competition that causes issues on the firms. In fact, this hyper-competition kills the positioning and the heart of strategy. We call this phenomenon the “failure”. It is a failure between operational effectiveness and strategy. We can note that operational effectiveness is not enough to answer to the competition and stay competitiveness but it is essential. Firms are too much interesting about the OE competition, driven by the performance pressures and forgot the link with the strategy.
Each firm has to make a choice in regard of the positioning, opportunity cost etc. In fact, a sustainable strategy requires trade-offs. Besides, companies have to cope with imitation; there is two kind of imitation. The first one is that a competitor can reposition itself to match the superior performance. The second one is straddling. The straddler seeks to match the benefits of a successful position while maintaining its existing position. How to eradicate it? Trade-offs, positioning trade-offs give an answer and eradicate this imitation as we can see in the example of Continental Airlines. In fact, through trade-offs a firm get inconsistencies in image or reputation. So it is powerful barrier to imitation cause it costs in major industries tens or hundreds of millions dollars to create a new image through the same trade-offs of an existing firm. Also, trade-offs arise from activities themselves, different positions require different product, configuration etc.
In fact, positioning trade-offs determine not only which activities a company will perform and how it will configure individual activities but also how activities relate to one other. Strategy is about combining activities, fits. The first order fit is simple consistency. The second order fit occurs when activities are reinforcing. The third one fit beyond activity reinforcement what is called optimization efforts. We talk about rediscovering strategy. In this process firms have to reconnect with strategy, refocused on what a firm provide or make, the added value, what is the most profitable, positioning more precise, how we are different and develop it take trade‐offs.
To conclude, nowadays firms have to cope with hyper-competition in a global market. Also, firms have to be different to be wealthy and have a strong positioning. Firms have to balance between operational competitiveness and strategy to perform well and keep them advantage. It is for that we have more consultants in term of business strategy.