STRATEGY, BUSINESS MODELS, AND COMPETITIVE
ADVANTAGE
Chapter 1
➢ STRATEGY
○ Choosing how to compete.
○ A distinctive set of creative strategic choices.
■ Manager’s Decision.
■ Apart from rivals.
■ Competitive edge.
○ Best fits its unique business situation for competitive advantage.
■ Doing what rival firms do not do or, better yet, what rival firms
cannot do.
○ Coordinated set of actions that its managers take to outperform the
company’s competitors and achieve superior profitability.
○ How to:
■ Create products or services that attract & please customers
■ To position the company in its industry.
■ To develop & deploy resources to build valuable competitive
capabilities.
■ Each functional piece of the business (research & development,
supply chain activities, production, sales and marketing,
distribution, finance, and human resources) will be operated.
■ To achieve the firm’s performance targets.
➢ CORE CONCEPT: BUSINESS MODEL
○ Management’s blueprint for delivering to customers a valuable product or
service that will yield an attractive profit.
○ How a company’ strategy & operating approaches will create value for
customers + generate revenue to cover costs & earn a profit.
○ 2 Elements of the Business Model:
■ Customer Value Proposition (CVP): defines how the firm will
satisfy buyer wants & needs at a price buyers will consider a good
value.
■ Profit Formula: describes its approach to determining a cost
structure that allows for acceptable profits given the pricing ties to
its customer value proposition.
➢ STRATEGY & QUEST FOR SUSTAINABLE COMPETITIVE ADVANTAGE
○ 1. LOW-COST PROVIDER STRATEGY
■ Achieves a cost-based advantage over rivals.
○ 2. BROAD DIFFERENTIATION STRATEGY
■ Differentiates products/services from rivals to appeal to a broad
spectrum of buyers.
○ 3. FOCUSED LOW-COST STRATEGY
■ Outcompetes rivals in a narrow/niche market by achieving lower
costs & offering its products at lower prices.
○ 4. FOCUSED DIFFERENTIATION
■ Strategy outcompetes rivals in a narrow/niche market by offering
buyers customized & exclusive attributes.
○ 5. BEST-COST PROVIDER STRATEGY
■ Gives customers more value by satisfying their expectations on key
attributes, while beating their price expectations.
➢ CORE CONCEPT: SUSTAINABLE COMPETITIVE ADVANTAGE
○ This is achieved when a large number of buyers develop a durable
preference for its products/services over the offering of competitors,
despite the efforts of competitors to overcome or erode its advantage.
➢ IMPORTANCE OF CAPABILITIES IN BUILDING & SUSTAINING
COMPETITIVE ADVANTAGE
○ Competitively Valuable Capabilities:
■ Cannot be easily bested, matched, or imitated by rivals.
■ Represent superior know-how & specialized abilities that require
time to fully develop & perfect.
■ Result in a sustainable competitive advantage over rivals.
➢ WHY A COMPANY’S STRATEGY EVOLVES OVER TIME
○ Unexpected moves of competitors.
○ Shifting buyer needs & preferences.
○ Emerging market opportunities.
○ Amagner’s new ideas for improving the strategy.
○ Mounting evidence strategy is not working well.
■ A Strategy Evolves:
● Incremental (minor) adjustments or dramatic (major) shifts.
● Proactively & adaptively.
➢ CORE CONCEPT: REALIZED STRATEGY
○ Combination of deliberate panned elements & unplanned emergent
elements.
○ some components of a company’s deliberate strategy will fail in the
marketplace & become abandoned strategy elements.
➢ 3 TESTS OF A WINNING STRATEGY
○ Strategic Fit:
■ How well does the strategy fit the firm’s situation?
○ Competitive Advantage:
■ Is the strategy helping the firm achieve a sustainable competitive
advantage.
○ Performance:
■ Is the strategy producing good firm performance?
➢ WHY CRAFTING & EXECUTING STRATEGY ARE IMPORTANT TASKS
○ Good strategy and good execution are the most telling indicators of good
management.
○ A better-conceived, competently executed strategy makes it more
likely that a firm will be a standout performer in the marketplace.
○ How well a firm performs directly reflects the caliber of its strategy
and the proficiency with which the strategy is executed.
➢ THE ROAD AHEAD
○ What must managers do, and do well, to make a company a winner in
the marketplace?
○ Doing a good job of managing inherently requires good strategic thinking
& good management of the strategy-making & strategy-executing
process.
