Once a strategy is revealed, why cant competitors take advantage of its success and engage in imitations??? ... The answer lies in trade-off and fit.
Inconsistencies which arise when the reputation or image of a business leading to conflict are the trade-offs between the different positions of the firm.
Trade-offs can arise when:
1. There is a mismatch between the images of different products. The image in the minds of the consumer must not clash with the products it is offering. Consider the case of Ponds. Pond’s, the popular brand of face cream, didn’t prove to be quite so popular when it applied its name to toothpaste. In a blind test environment, people were not able to differentiate Pond’s toothpaste from that of Colgate.
However, when the Pond’s name and imagery were attached to the toothpaste, no-one was interested. Although Pond’s had successfully extended its brand before (into soap products, for instance), these extensions had all been linked by a similar fragrance. The main attribute of a toothpaste is taste, this mismatch between taste and fragrance created a dissonance in the minds of consumers. To most people Ponds was something to do with fragrance and freshness and used for external application only.
2. The product or service features are incompatible. A company producing high quality luxury goods would find it difficult to produce cheaper goods for mass markets all of a sudden. The source of problems would be numerous, with logistics, customer support and finding new sources of raw material, among the many associated with reducing costs as the company would have sophisticated levels of production and support processes meant to deliver quality rather than quantity. The reason that a Louis Vuitton cannot create stores like Pantaloons overnight is because its products must remain unique and exclusive.
3. There is a limit on international co-ordination, measurement, motivations and control. Trying to achieve different objectives from the same set of resources can lead to a clash. The Air Deccan - Kingfisher merger brought the ownership of the two airlines under one control but they still operate as separate entities since their service lines are very distinct.
Now, that we have seen what a company cannot do, lets look at the other aspect of strategy called Fit.
Fit is seen as the system of activities, processes and changes in a business which should be compatible and mutually reinforcing. Let us look at what Michael Porter had to say about fit.
Fit Drives Both Competitive Advantage and Sustainability. Although fit among activities is generic and applies to many companies, the most valuable fit is strategy-specific because it enhances a position’s uniqueness and amplifies trade-offs. There are three types of fit, which are not mutually exclusive:
So, basically it is this uniqueness of strategy that enables a firm to create value, capture value and sustain value.
Cheers!!!
Signing off,
Shauvik.
Inconsistencies which arise when the reputation or image of a business leading to conflict are the trade-offs between the different positions of the firm.
Trade-offs can arise when:
1. There is a mismatch between the images of different products. The image in the minds of the consumer must not clash with the products it is offering. Consider the case of Ponds. Pond’s, the popular brand of face cream, didn’t prove to be quite so popular when it applied its name to toothpaste. In a blind test environment, people were not able to differentiate Pond’s toothpaste from that of Colgate.
However, when the Pond’s name and imagery were attached to the toothpaste, no-one was interested. Although Pond’s had successfully extended its brand before (into soap products, for instance), these extensions had all been linked by a similar fragrance. The main attribute of a toothpaste is taste, this mismatch between taste and fragrance created a dissonance in the minds of consumers. To most people Ponds was something to do with fragrance and freshness and used for external application only.
2. The product or service features are incompatible. A company producing high quality luxury goods would find it difficult to produce cheaper goods for mass markets all of a sudden. The source of problems would be numerous, with logistics, customer support and finding new sources of raw material, among the many associated with reducing costs as the company would have sophisticated levels of production and support processes meant to deliver quality rather than quantity. The reason that a Louis Vuitton cannot create stores like Pantaloons overnight is because its products must remain unique and exclusive.
3. There is a limit on international co-ordination, measurement, motivations and control. Trying to achieve different objectives from the same set of resources can lead to a clash. The Air Deccan - Kingfisher merger brought the ownership of the two airlines under one control but they still operate as separate entities since their service lines are very distinct.
Now, that we have seen what a company cannot do, lets look at the other aspect of strategy called Fit.
Fit is seen as the system of activities, processes and changes in a business which should be compatible and mutually reinforcing. Let us look at what Michael Porter had to say about fit.
Fit Drives Both Competitive Advantage and Sustainability. Although fit among activities is generic and applies to many companies, the most valuable fit is strategy-specific because it enhances a position’s uniqueness and amplifies trade-offs. There are three types of fit, which are not mutually exclusive:
Strategic fit is fundamental not only to competitive advantage but also to the sustainability of that advantage because it is harder for a competitor to match an array of interlocked activities than it is merely to replicate an individual activity. Additionally, fit among activities creates pressures and incentives to improve operational effectiveness, which makes imitation even harder.1. First-order fit: Simple consistency between each activity (function) and the overall
strategy. Consistency ensures that the competitive advantages of activities cumulate
and do not erode or cancel themselves out. Further, consistency makes it easier to
communicate the strategy to customers, employees, and shareholders, and
improves implementation through single-mindedness in the corporation.2. Second-order fit: Occurs when activities are reinforcing.3. Third-order fit: Goes beyond activity reinforcement to what Porter refers to as
optimization of effort. Coordination and information exchange across activities to
eliminate redundancy and minimize wasted effort are the most basic types of effort
optimization.
So, basically it is this uniqueness of strategy that enables a firm to create value, capture value and sustain value.
Cheers!!!
Signing off,
Shauvik.
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