Chapter 1
Chapter Roadmap
What Do We Mean by Strategy? Strategy and the Quest for Competitive Advantage Identifying a Companys Strategy Why a Companys Strategy Evolves Over Time A Companys Strategy Is Partly Proactive and Partly Reactive The Relationship Between a Companys Strategy and Its Business Model What Makes a Strategy a Winner? Why Are Crafting and Executing Strategy Important?
Conduct operations
Achieve the targeted levels of organizational performance
How to manage each functional piece of the business (R&D, production, marketing, HR, finance, and so on) How to respond to changing market conditions
How to achieve targeted levels of performance
A creative, distinctive strategy that sets a company apart from rivals and yields a competitive advantage is a companys most reliable ticket to above average profitability
Operating with a competitive advantage is more profitable than operating without one Operating with a competitive disadvantage nearly always results in belowaverage profitability
Develop expertise and resource strengths not easily imitated or matched by rivals
Achieve a capabilities-based competitive
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Figure 1.2: A Companys Strategy Is a Blend of Proactive Initiatives and Reactive Adjustments
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Business Model
The definition includes four key terms: 1. Core logic: A properly crafted business model helps articulate and make explicit cause and effect relationship and internal consistency of strategic choices 2. The strategic choices that have been made
Business Model
3. Creating and capturing value Represent two fundamental functions that all organizations must perform to remain viable over an extended period of time Successful firms create substantial value by doing things in ways that differentiate them from the competitors They might use the core competencies and capabilities that differentiate them from competitors May even have a unique approach in securing capital that is needed to fund the creation of core competencies, capabilities and positional advantages
Business Model
4. Value network Include suppliers, partners, distribution channels, and coalitions that extend the companys own resources The firm may be able to create unique relationships with any of these parties or even with its end customers The role a firm chooses to play with its value network is an important element of its business model
Value Network
Suppliers Customer information Information flow Product/ service flows
Capture Value
Cost Financial Aspects Profits
Create Value
Resources / assets Processes / activities
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