Fluent Essays

This exercise requires an understanding of strategy through activity system maps. Please go over the attachment below, after this please create your own version of a University activity system map. theory_behind_activity_system_maps.pdf examples_of_activity_system_maps.pdf Unformatted Attachment Preview What is Strategy: Understanding Strategy through Activity System Maps 1. Strategy & Activities According to Strategy’s foremost guru Porter, strategy is the “creation of a unique & valuable position, involving different set of activities… and creating fit among a company’s activities” (Porter, 1996). So the essence of strategy is about being DIFFERENT. In terms of what? • PERFORMING ACTIVITIES: A business performs hundreds and thousands of activities – Research, Source, Produce, Market, Distribute, Service… ALL the differences arise from these activities, especially the CHOICE of activities & HOW they are performed. So the roots of a company’s strategy are in its “ACTIVITIES”: Choosing to perform the SAME activities DIFFERENTLY or to perform DIFFERENT activities than rivals. 2. Mapping Activity Systems Porter has created a tool he calls an “activity system map” to chart a company’s significant activities, their relationship to the value proposition, and to each other (see examples on IKEA, SOUTWEST AIRLINES, ZARA, WALMART, etc.). You can start by identifying the core elements of the value proposition. For IKEA, I would highlight three: distinctive design, low prices, and immediate use. You then identify the most salient activities performed in the business, those most responsible for creating customer value or those that generate significant cost. Try to list the unique activity choices at each step. This makes contrasts between the company and its competitors more obvious. For instance, even a cursory glance at IKEA’s value chain compared with that of a traditional furniture store would highlight its unique configuration of in-store service and delivery. Next, place activities on the map as shown in the following figure. Draw lines wherever there is fit—where an activity contributes to the value proposition and where two activities affect each other. On the IKEA map, flat packs contribute to low prices and immediate use. They affect selfdelivery by customers. And so on. Were you to fully map IKEA’s activities, you’d end up with an extremely dense and tangled web. For strategy, this is a good thing. Conversely, a map with sparse connections likely signals that the strategy is weak. An activity map can help you see how well each activity supports the overall positioning—the customers served, the needs met, the relative price. For each activity, ask how it could be better linked to the overall strategy, even activities such as order processing or logistics that might seem to be largely generic in character. In most organizations, Porter observes, there are activities whose alignment has been ignored because they were not seen as part of strategy. An activity map can help you identify ways to strengthen fit. Managers responsible for each activity can usually tell you whether their performance is impaired by other activities. They may also have ideas about how to improve the fit across activities. 1 3. Strategy is about Performing Activities and also Ensuring a Fit among These Activities Fit means that the value or cost of one activity is affected by the way other activities are performed. Fit can take three forms: The first kind of fit is basic consistency, where each activity is aligned with the company’s value proposition and each contributes incrementally to its dominant themes. Think about the speed that is critical to Zara’s success. At every step in the value chain, Zara has configured its activities so that nothing takes longer than it needs to: its design teams are configured for rapid response; its plants are located nearby; its own fleet of trucks ensures rapid delivery; its investments in IT speed communications between design and manufacturing. Each activity contributes to Zara’s speed. Zara passes the basic consistency test. When activities are inconsistent, they cancel each other out. Expressed mathematically, consistency means that 1 + 1 + 1 = 3, and not some number less than 3. Inconsistent activities make the whole less than the sum of the parts. A second type of fit occurs when activities complement or reinforce each other. This is real synergy, where the value of each activity is raised by the other. Zara’s high-traffic store locations and the large number of collections reinforce each other. The high-visibility locations help Zara with its goal of turning over all of a store’s merchandise every two weeks. Large display windows are like a beacon drawing customers in. Porter’s third type of fit is substitution. Here performing one activity makes it possible to eliminate another. IKEA’s full-room displays and product hang-tags substitute for sales associates. Zara’s prominent store locations and the rapid turnover of its collections make traditional advertising unnecessary. Increasingly, companies have learned to cooperate with suppliers or customers or both in order to optimize efforts across company boundaries. For its large business customers, for example, Dell will load customized software onto new PCs. Dell can do this faster and cheaper during the assembly process than a customer’s IT department, which would have to load the software machine by machine after the PCs have been delivered. This substitution lowers the total cost, allowing Dell to share some of the savings with its customers. 4. Understand a Company’s Strategy through Activity System Maps Can you map a company’s activity system? Can you find new ways in which activities can reinforce each other or where one activity can substitute for others? Can you find new activities, or enhancements to what you already do, whose cost or effectiveness is improved by your existing activity system? Are there services, features, or product varieties that you can offer (and rivals cannot) because of the other things that you already do? Extensions like these will be the hardest for rivals to imitate, thereby making every company’s strategy unique. 2 5. How to Build Activity System Maps? • • • • • • • • Brainstorm a long list of unique/special aspects of your company. Include many different types of things assets, resources, policies, culture and processes. Starting with the brainstorm will help you avoid missing things Then start with the most important differentiated benefit from the value proposition Then ask yourself “How do we deliver this?”. Draw the cause and effect tree through several layers of cause and effect Do the same for each differentiated benefit from the value proposition. Note common causes Combine the cause and effect trees to one map, linked by the common causes Iterate, shuffle to make links clearer Ask is there anything important missing from your map? Can you explain the business logic behind every cause and effect relationship? 3 ... Purchase answer to see full attachment