What is strategy

Question 1

What is Strategy?

Answer 1

Goals:
- achieve and sustain competitive advantages (apply VRCN framework)
- earn above-average returns (AARs)

Question 2

How to earn AARs?

Answer 2

Two models:
- I/O model: external perspective
- RBV model: internal perspective

Question 3

I/O model

Answer 3

1. Study external environment (mainly industry 5 forces)
2. Locate industry with high potential for AARs
3. Identify the best strategy (cost leadership/differentiation)
4. Obtain the needed assets and skills
5. Use the firm’s strengths to implement the strategy

Question 4

Resource-Based Model (RBV model)

Answer 4

1. Identify firm’s resources, study strenghts and weaknesses
2. Determine the firm’s capabilities
3. Determine potential of the resources and capabilities in terms of competitive advantage (VRCN)
4. Locate attractive industry (use I/O model)
5. Select best strategy to use the resources and capabilities relative to opportunities from external environment