Chapter 1

• A company's strategy is the coordinated set of actions that its managers take to outperform the company's competitors and achieve superior profitability.
• Strategy involves choosing how to compete.

  • how to create products or services that attract and please customers
  • how to position the company in its industry
  • how to develop and deploy resources to build valuable competitive capabilities
  • How each functional piece of the business will be operated
  • How to achieve the firm's performance targets
• A company's strategy is a distinctive set of creative strategic choices.

  • manager's decisions
  • apart from rivals
  • competitive edge
• A company's strategy best fits its unique business situation for competitive advantage.
• A company's strategy is intended to allow it to compete differently.

  • doing what rival firms do not do
  • doing what rival firms cannot do
• Business Model: Management's blueprint for delivering to customers a valuable product or service that will yield an attractive profit.
• Elements of the business model:

  • customer value proposition
  • profit formula
• The customer value proposition defines how the firm will satisfy buyer wants and needs at a price buyers will consider a good value
• The profit formula describes its approach to determining a cost structure that allows for acceptable profits given the pricing tied to its customer value proposition.
• Strategic approaches to a sustainable competitive advantage:

  • low-cost provider strategy
  • broad differentiation strategy
  • focused low-cost strategy
  • focused differentiation
  • best-cost provider strategy
• A low-cost provider strategy achieves a cost-based advantage over rivals.
• A broad differentiation strategy differentiates its products or services from those of its rivals in ways that appeal to a broad spectrum of buyers.
• A focused low-cost strategy outcompetes rivals in a narrow/niche market by achieving lower costs and offering its products at lower prices.
• A focused differentiation strategy outcompetes rivals in a narrow/niche market by offering buyers customized and exclusive attributes.
• A best-cost provider strategy gives customers more value by satisfying their expectations on key attributes, while beating their price expectations.
• A company achieves sustainable competitive advantage when an attractively large number of buyer develop a durable preference for its products or services over the offerings of competitors, despite the efforts of competitors to overcome or erode its advantage.
• competitively valuable capabilities:

  • cannot be easily bested, matched, or imitated by rivals
  • represent superior know-how and specialized abilities that require time to fully develop and perfect
  • result in a sustainable competitive advantage over rivals
• A strategy changes over time due to:

  • unexpected moves of competitors
  • shifting buyer needs and preferences
  • emerging market opportunities
  • managers' new ideas for improving the strategy
  • mounting evidence strategy is not working well
• A strategy evolves:

  • incremental (minor) adjustments or dramatic (major) shifts
  • proactively and adaptively
• A company's realized strategy is a combination of deliberate planned elements and unplanned emergent elements.

  Some components of a company's deliberate strategy will fail in the marketplace and become abandoned strategy elements.
• The three tests of a winning strategy

  • Strategic fit: how well does the strategy fit the firm's situation?
  • Competitive advantage: is the strategy helping the firm achieve a sustainable competitive advantage?
  • Performance: Is the strategy producing good firm performance?
• Good strategy and good strategy execution are the most telling indicators of good management.
• A better-conceived, competently executed strategy makes it more likely that a firm will be a standout performer in the marketplace.
• How well a firm performs directly reflects the caliber of its strategy and the proficiency with which the strategy is executed.
• Strategy is about asking and answering a most important question: What must managers do, and do well, to make a company a winner in the marketplace?
• Doing a good job of managing inherently requires good strategic thinking and good management of the strategy-making and strategy-executing process.