Strategy Flashcards
what is strategy
• Strategy is the creation of a unique and valuable position,
involving a different set of activities… The essence of strategic positioning is to choose activities that are different from
rivals’. (Porter,1996)
• Strategy requires organizations to make trade-offs when competing – to choose what to do and what not to do.
• Strategy involves creating “fit” among a company’s activities. Fit underlies both competitive advantage and its sustainability.
why is strategy important
Rivals can quickly copy any market position, and competitive advantage is, at best, temporary.
how would you calculate value created from introducing a strategy?
willingness to pay - cost of providing good service
= value created
what is value captured
the difference between price and cost
- it’s different than value created since willingness to pay depends on each consumer, and thus can’t set it to the maximum of one consumer to achieve all value created all the time
porter’s five forces
- Buyer power
- Supplier power
- Industry rivalry
- Threat of new entrants
- threat of substitutes
describe the role of strategic fit
Strategy is about combining activities to achieve “fit“,
which underlies both competitive advantage and its sustainability.
describe competitive advantage and how it forms
• A company does not succeed on a single core
competency or success factor, because each activity matters
– Competitive advantage stems from the way activities fit and reinforce one another,
– i.e. from the entire system of activities, which provide protection because: rivals will gain little if they imitate only some activities; it is harder for a rival to understand then match a system of activities than to copy a single activity.
activity maps
• Activity maps show how a company’s strategic position is contained in a set of tailored activities designed to permit realizing that position.
– Note the similarity, but not equivalence, to systems diagrams
– Identification of virtuous, self-reinforcing cycles is key
• BUT (like all strategies) drawing activity maps is more an art or craft than science
what are the 4 components of bad strategy
- Trying (to be all thing to all people)
- Picking (components of other companies’ strategies–> unlikely to yield fit)
- confusing (strategy with operational effectiveness)
- -> performing all activities efficiently is necessary but not sufficient - Remaining (committed to an outmoded strategy)
What is the goal of strategiy
Strategy aims for the creation of a unique and valuable position; it stems
from a deliberate choice of a different set of activities, as compared to rivals,
to deliver a unique mix of value.
what is the requirement of strategy
Strategy requires organizations to make trade-offs when competing – to choose what to do and what not to do.
