Definition Of Operational Effectiveness And Strategy Essay

1621 Words Nov 2nd, 2015 null Page
Compared to twenty years ago, the market environment has shifted from static to dynamic. This has led to more rapid changes in technology and has increased the intensity of competition. Many managers then believe strategic positioning may not be as effective as it used to be, due to the fact that companies imitate each other’s competencies so fast. Porter considers this view is not completely correct because the real problem is that people failed to distinguish operational effectiveness and strategy. By definition, operational effectiveness (OE) means performing similar activities better than rivals perform them (Porter, 1996). The ultimate goal of achieving OE is to enhance profitability. And two major ways are mentioned in the article, delivering greater value (higher price) and gaining greater efficiency (lower cost). Over the past decades, firms concentrated on elaborating their business activities to charge higher price and lower cost. Many management techniques were created, for example, benchmarking, total quality management, and just-in-time inventory etc. These may led them to a short-term victory, but if they fail to preserve the advantages, they cannot really outperform their rivals. Porter pointed out that constant improvement in OE is necessary to achieve superior profitability but is not sufficient. When firms competing with each other, they usually employ best practices they can use which results in no relative improvements for everyone. In addition to that,…

Related Documents