Chapter 1: Strategy, Business Models, and Competitive Advantage

Strategy

The coordinated set of actions that its managers take to outperform the company’s competitors and achieve superior profitability.

Business model

Management’s blueprint for delivering a valuable product or service to customers in a manner that will yield an attractive profit.

The two elements of a company’s business model

Customer value proposition and profit formula

Customer value proposition

A company’s overall strategy; lays out the company’s approach to satisfying buyer wants and needs at a price customers will consider a good value.

Profit formula

Describes the company’s approach to determining a cost structure that will allow for acceptable profits given the pricing tied to its customer value proposition.

Top 5 strategies:

1. Low-cost provider

2. Broad differentiation

3. Focused low-cost

4. Focused differentiation

5. Best-cost provider

Sustainable competitive advantage

a long-lasting edge a company holds over its competitors, allowing it to consistently outperform them

Strategy is a blend of

1. Proactive moves to improves the company’s financial performance and secure a competitive edge

2. Adaptive reactions to unanticipated developments and fresh market conditions

Deliberate strategy

Ongoing actions that perform well in the marketplace, as well as newly launched initiatives aimed at building a larger lead over rivals to boost financial performance.

Abandoned strategy elements

aspects of a company's strategy that were previously utilized but are no longer in use, often due to changing market conditions or performance evaluations.

Emergent strategy

a pattern of actions and decisions that develop over time in response to unexpected changes in the marketplace and organizational dynamics.

Realized strategy

Deliberate strategy + emergent strategy

3 Questions for a winning strategy:

1. How well does the strategy fit the company’s situation

2. Is the strategy helping the company achieve a sustainable competitive advantage?

3. Is the strategy producing good company performance?

Good company performance is determined by

1. Gains in profitability

2. Advances in a company’s competitive strength and market standing