Chapter 1 - What is Strategy

Strategy

Set of coordinated actions that managers take to outperform competitors and achieve superior profitability

What Does A Company’s Strategy Entail

• How to compete differently from rivals

• Pressuring rivals by doing what they do or don’t do, or even better

How To Achieve Competitive Advantage

• Meeting customer needs more effectively with products or services that customers value more than competitors offerings

• Meeting customer needs more efficiently

How To Achieve a Sustainable Competitive Advantage 

• Giving buyers a lasting reason to prefer firms product over competitors

• Developing inimitable capabilities

• Putting developing a sustainable competitive advantage at forefront of company’s strategy

Five Generic Strategies For Building Competitive Advantage

• Low Cost Provider

• Focused Differentiation

• Focused Low Cost

• Broad Differentiation

• Best Cost Provider

Low Cost Provider

Achieving a cost based advantage over rivals by driving costs out of the business (doesn’t mean has to be lowest cost) (Ex. Walmart)

Focused Low Cost

Concentrating on narrow buyer segment by having lower costs (Ex. Dollarama)

Focused Differentiation

Concentrating on a narrow buyer segment by offering customers a customized product serving their individual needs (Ex. Lululemon) 

Broad Differentiation

Pursuing a wide market while offering customers a specialized product tailored to their wants and needs (Ex. Apple)

Best Cost Provider

Giving customers more perceived value for their money (Ex. Amazon)

Conditions That Lead to Change in Company Strategy (6)

• Changing Market Conditions

• Advancing Technology

• Fresh Moves of Competitors

• Shifting Buyer Needs

• Emerging Market Opportunities

• New Ideas For Improving The Strategy

Deliberate Strategy

Include planned initiatives to improve a company’s financial performance and secure competitive edge

Emergent Strategy

Elements developed in response to unanticipated developments and fresh market conditions

Abandoned Strategy

Elements that no longer fit company’s strategy

How Does A Firm Make Money

• Customer Value Proposition

• Profit Formula

Customer Value Proposition

Satisfying buyer wants and needs at a price customers will consider good value

The Profit Formula

Creates a cost structure that allows for acceptable profits, given that pricing is tied to CVP

Three Tests Of A Winning Strategy

• Exhibits Good Fit

• Results in Competitive Advantage

• Promotes Superior Performance 

The Fit Test

Is it a good fit with the internal and external aspects of a firms dynamic situation

Competitive Advantage Test

Does Strategy help achieve sustainable competitive advantage

Superior Performance Test

Does strategy produce superior results in financial performance, competitive strengths and market standing