A company's realized strategy is made up of

CHAPTER 1 Strategy, Business Models, and Competitive Advantage

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LEARNING OBJECTIVES

Understand what is meant by a company's strategy.

Explain why a company needs a creative, distinctive strategy that sets it apart from rivals.

Explain why it is important for a company to have a viable business model that outlines the company’s customer value proposition and its profit formula.

Identify the five most dependable strategic approaches for setting a company apart from rivals and winning a sustainable competitive advantage.

Understand that a company’s strategy tends to evolve over time because of changing circumstances and ongoing management efforts to improve the company’s strategy.

Identify the three tests of a winning strategy.

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What Is Strategy?

Strategy involves choosing how to compete.

How to create products or services that attract and please customers.

How to position the company in its industry.

How to develop and deploy resources to build valuable competitive capabilities.

How each functional piece of the business (R&D, supply chain activities, production, sales and marketing, distribution, finance, and human resources) will be operated.

How to achieve the firm’s performance targets

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CORE CONCEPT: Strategy

A company’s strategy is the set of actions that its managers take to outperform the company's competitors and achieve superior profitability.

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The Importance of a Distinctive Strategy and Competitive Approach

A Company’s Strategy

Distinctive set of creative strategic choices

Manager’s decision

Apart from rivals

Competitive edge

Fit its own particular situation for competitive advantage

Compete differently

Doing what rival firms do not do or, better yet, what rival firms cannot do

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The Relationship Between a Company's Strategy and Business Model

Business Model

Management’s produces a blueprint for delivering a valuable product or service to customers that will yield an attractive profit.

Elements of the Business Model

The customer value proposition defines how the firm will satisfy buyer wants and needs at a price buyers will consider a good value.

The profit formula describes its approach to determining a cost structure that allows for acceptable profits given the pricing tied to its customer value proposition.

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CORE CONCEPT: Business Model

A company’s business model sets forth how its strategy and operating approaches will create value for customers, while at the same time generate ample revenues to cover costs and realize a profit.

The two elements of a company’s business model are its (1) customer value proposition and (2) its profit formula.

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CONCEPTS and CONNECTIONS 1.1