Professional Documents
Culture Documents
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THIS CHAPTER WILL HELP YOU UNDERSTAND:
LO 1 What we mean by a companys strategy.
LO 2 The concept of a sustainable competitive advantage.
LO 3 The five most basic strategic approaches for setting a
company apart from rivals and winning a sustainable
competitive advantage.
LO 4 That a companys strategy tends to evolve because of
changing circumstances and ongoing efforts by
management to improve the strategy.
LO 5 Why it is important for a company to have a viable business
model that outlines the companys customer value
proposition and its profit formula.
LO 6 The three tests of a winning strategy.
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CORE CONCEPT
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WHAT DO WE MEAN BY STRATEGY ?
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WHAT IS STRATEGY ABOUT?
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STRATEGIC MANAGEMENT PRINCIPLE
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WHY BOTHER WITH STRATEGY?
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STRATEGY AND COMPETITORS
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FIGURE 1.1 Identifying a Companys StrategyWhat to Look For
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ILLUSTRATION Starbuckss Strategy in
CAPSULE 1.1
the Coffeehouse Market
Competitive Advantage
Requires meeting customer needs either more
effectively (with products or services that customers
value more highly) or more efficiently (by providing
products or services at lower cost).
Sustainable Competitive Advantage
Requires giving buyers lasting reasons to prefer a
firms products or services over those of its
competitors.
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111
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BASIC STRATEGIC APPROACHES
Strategies
Strategies for
for Building
Building
Competitive
Competitive Advantage
Advantage
Low-cost
Low-cost Broad
Broad
provider
provider differentiation
differentiation
Focused
Focused Focused
Focused
low-cost
low-cost Best-cost
Best-cost differentiation
differentiation
provider
provider
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STRATEGIC APPROACHES
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CORE CONCEPT
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GAINING SUSTAINABLE COMPETITIVE
ADVANTAGE
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WHY A COMPANYS STRATEGY
EVOLVES OVER TIME
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STRATEGIC MANAGEMENT PRINCIPLE
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THE EVOLVING NATURE OF A FIRMS STRATEGY
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CORE CONCEPT
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FIGURE 1.2 A Companys Strategy Is a Blend of Proactive Initiatives
and Reactive Adjustments
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THINKING STRATEGICALLY
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THE RELATIONSHIP BETWEEN A FIRMS
STRATEGY AND ITS BUSINESS MODEL
Realized Business
Strategy Model
Competitive
Initiatives
$$ Value
Proposition
$?
Business
Profit Formula
Approaches
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A COMPANYS STRATEGY
AND ITS BUSINESS MODEL
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BUSINESS MODEL ELEMENTS
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BUSINESS MODEL ELEMENTS (CONTD)
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FIGURE 1.3 The Business Model and the Value-Price-Cost Framework
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THINKING STRATEGICALLY
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ILLUSTRATION Pandora, Sirius XM, and Over-the-Air
CAPSULE 1.2 Broadcast Radio: Three Contrasting
Business Models
Who listens to the radio anymore?
Given the changes in how people listen to music,
are the business models of Pandora, Sirius XM
and over-the-air broadcasters viable over the
long term?
Which competitors present strategy best passes
the three tests of a winning strategy?
What internal and external factors will create
particular difficulties for each competitor in
changing its strategy or business model?
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IS OUR STRATEGY A WINNER?
The Strategic
Fit Test
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WHAT MAKES A STRATEGY A WINNER?
Strategy provides:
A prescription for doing business.
A road map to competitive advantage.
A game plan for pleasing customers.
A formula for attaining long-term standout
marketplace performance.
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STRATEGIC MANAGEMENT PRINCIPLE
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THINKING STRATEGICALLY
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