Chapter 1

• Strategy


  The art of the general, the art of war
• Business strategy


  A company's dynamic plan to gain and sustain competitive advantage in the marketplace
• A company's business strategy is based on the theory its leaders have about how to succeed in a particular market
• This theory involves predictions about which markets are attractive and how a company can offer unique value to customers in those markets in a way that won't be easily imitated by competitors
• Apple's theory of how to gain a competitive advantage in the music download business was to create cool and easy-to-use MP3 players and smartphones that could easily—and legally— download digital songs from a computer through the iTunes store
• Apple sought to sustain its advantage by making it difficult for competitor MP3 players or phones to download songs from the iTunes store
• The Apple Stores contributed to Apple's advantage by providing a direct physical link to customers those competitors couldn't match
• Strategies are more likely to be successful when the plan explicitly takes into account four factors: 1) Where to compete, 2) How to offer unique value, 3) What resources or capabilities are necessary, 4) How to sustain a competitive advantage
• Competitive advantage


  A firm's ability to consistently generate above-average profits through a strategy that competitors are unable to imitate or find too costly to imitate
• Above-average profits are profit returns in excess of what an investor expects from other investments with a similar amount of risk
• Many organizations work to achieve objectives other than profit, such as universities, hospitals, government agencies, not-for-profit organizations, and social entrepreneurs
• The strategic management process involves thorough external analysis and internal analysis to identify the most attractive business opportunities and formulate a strategy for achieving competitive advantage
• The four key strategic choices

  • Which markets will the company pursue
  • What unique value does the company offer customers
  • What resources and capabilities are required
  • How will the company capture value and sustain a competitive advantage
• Markets


  The industries a company competes in and the specific customer segments or needs it will address within those industries
• Unique value


  The value that a company proposes to offer to customers, often achieved through a low-cost or differentiation strategy
• Resources


  Assets that the firm accumulates over time, such as plants, equipment, land, brands, patents, cash, and people
• Capabilities


  Processes (or recipes) the firm develops to coordinate human activity to achieve specific goals
• Mission


  A company's primary purpose and the business or businesses in which the firm intends to compete
• External analysis


  An examination of the competition and the forces that shape industry competition and profitability, and customer analysis to understand what customers really want
• Internal analysis


  An analysis of the company's set of resources and capabilities that can be deployed—or should be developed—to deliver unique value to customers
• Primary stakeholder groups


  • Capital market stakeholders
  • Product market stakeholders
  • Organizational stakeholders
  • Community stakeholders