Competitive Strategy 101
Strategy is about choices and making trade-offs in those choices. It is more than market positioning. What turns a marketing slogan into a strategy is the tailored set of activities that facilitate the meaning of that slogan. Market positioning and all marketing efforts are an extension of strategy. But strategy is much more than positioning yourself, strategy is what you do and who you are.
Porter’s definition of strategy centers around doing things differently than your rivals. He uses the classic example of Southwest Airlines to note how all their activities are tailored to deliver low cost air travel. With no meals offered, no seat assignments, and automated ticketing, Southwest was able to reduce the cost of commercial air travel.
But it didn’t stop there. All Southwest’s activities were tailored to fit this strategy. For example, Southwest leased only one type of plane. With the maintenance crews only needing to work on one type of aircraft, they became very efficient at maintaining the planes and doing routine services quickly. With the planes ready to go and no meal deliveries to wait for, Southwest was able to dramatically reduce the turnaround time at the gate and hence get more flights per plane per year. This demonstrates how Southwest not only said it was going to be a low-cost provider of air travel but tailored all its activities around this goal and had to face difficult trade-offs in the process.
Southwest did things differently than their rivals and through those differentiating activities, developed natural defenses for their business model. In order to compete with Southwest on price, a rival would be forced to eliminate meals. But most of the major airline companies already owned their own concession divisions. Next, they would have to speed up the down time for maintenance, but they already operated many different types of aircraft while Southwest used just one.
The ill-fated Continental Lite tried to imitate Southwest only to find it couldn’t “straddle” what Southwest was doing, without negatively impacting the parent airline, Continental. For example, in order to lower cost, Continental Lite chose not to offer frequent flier miles. When customers became angry they reintroduced a miles program, watering down the parent airline’s miles program and letting the Continental Lite customers in on it. The result was angry customers of the parent airline, Continental.
