Creating Value

• firms use the resources in their internal organization to create value for customers
• measured by a product’s performance characteristics and by its attributes for which customers are willing to pay

  value
• The stronger a firm's core competencies, the greater the amount of value it is able to create for their customers.
• creating value for customers is the source of above-average returns for a firm
• What the firm intends regarding value creation affects its choice of business-level strategy and its organizational structure.
• Business-level strategies denote that value is created by a product’s low cost, by its highly differentiated features, or by a combination of low cost and high differentiation compared to competitors’ offerings.
• A business - level strategy is effective only when it is grounded in exploiting the firm’s capabilities and core competencies.
• At one time, firms’ efforts to create value were oriented toward understanding their industry's characteristics then determining how they should be positioned relative to competitors.

  But this underestimated the role of firm’s resources and capabilities in developing core competencies as the source of competitive advantages
• core competencies, in combination with product - market positions, are the firm’s most important sources of competitive advantage
• A firm’s core competencies, integrated with an understanding of the results of studying the conditions in the external environment, should drive the selection of strategies.
• As Clayton Christensen noted, “successful strategists need to cultivate a deep understanding of the processes of competition and progress and of the factors that undergird each advantage. Only thus will they be able to see when old advantages are poised to disappear and how new advantages can be built in their stead.”
• By emphasizing core competencies when selecting and implementing strategies, companies learn to compete primarily on the basis of firm-specific differences.


  But they must also be aware of changes in the firm's external environment