Chapter 1: Strategy, Business Models, and Competitive Advantage Flashcards
Strategy (Textbook Definition)
- Coordinated set of actions managers take,
- To outperform the company’s competitors,
- And achieve superior profitability
Strategy (Michael Porter Definition)
Unique and specific position that gives you a competitive advantage, NOT steps/set of actions, but an overarching goal
Business Model
Sets forth how its strategy and operating approaches will create value for customers, while generating ample revenues to cover costs and realize a profit composed of:
1. Value Proposition
2. Profit Formula
(Customer) Value Proposition
Lays out the firm’s approach to satisfying buyer wants and needs at a price customers will consider a good value
Profit Formula
Company’s approach to determining a cost structure that will allow for acceptable profits given the pricing tied to its customer value proposition
What are the 5 types of strategy?
- Low-cost provider
- Broad differentiation
- Focused low-cost
- Focused differentiation
- Best-cost provider
Low-cost provider strategy
Achieve cost-based advantage over rivals
Broad differentiation strategy
Seeking to differentiate the firm’s product or service in a way that appeals to a broad spectrum of buyers
Focused low-cost strategy
Concentrating on a narrow buyer segment (or market niche) and cost-based advantage
Focused differentiation strategy
Concentrating on a narrow buyer segment by offering niche-members customized attributes
Best-cost provider strategy
Giving customers more value for their money by satisfying expectations on key attributes, while also beating price expectations (Costco)
Sustainable Competitive Advantage
Attractively large # of buyers develop a durable preference for a firm over competitors, despite competitor efforts
Deliberate Strategy Elements (Planned)
Planned new initiatives plus ongoing strategies continued from prior periods
Emergent Strategy Elements (Adaptive)
Unplanned reactive responses to changing circumstances by mgmt
Abandoned Strategy Elements
Components of a firm’s deliberate strategy that fail in the marketplace
Realized Business Strategy
Combination of planned deliberate elements and unplanned emergent elements
What are the three tests of a winning strategy? (Hint: matches each component of the strategy definition)
- How well does it fit the firm’s situation? (internal & external)
- Is it helping the firm achieve a sustainable competitive advantage?
- Is it producing good firm performance?
