Business Strategy: Competitive Advantage

Strategy Essence

• Strategy is fundamentally about achieving long-term success that fosters growth and secures a company's future.

Strategy Requirements

• A good strategy needs a unique aspect to attract customers and create a competitive advantage.

Strategy Success

• A company's strategy is more likely to succeed if it is based on competitive actions that appeal to buyers in ways that set the company apart from rivals.

Strategy Crafting

• When creating a company's strategy, managers must create a sustainable competitive advantage that brings in clients and outperforms rivals.

Competitive Advantage

• A business gains a competitive edge when its products or services are superior in value to those of its competitors, or when they offer comparable value at a lower cost.

Winning Strategy

• A winning strategy aligns with the company's internal and external environment, leads to a sustainable competitive edge, and boosts business performance.

Managerial Task

• Creating and implementing a strategy is a key management responsibility because it guides business operations, establishes a route to competitive advantage, and outlines a plan for pleasing customers and improving performance.

Value Propositions Trap

• Establishing a comparison feature tab that lets customers compare offers from other online retailers would not help Troopline Inc., an online laptop retailer.

Business Model

• Dell laptops do NOT pursue the same business model as the following consumer goods companies: Nintendo Wii, Keurig coffee, Epson printers, and Gillette razors.

Company Strategies

• Company A, an established database management company that acquires a well-reputed but small publishing house to enter the booming publishing industry.
• Company B, a sports management house, declared bankruptcy during a recent recession but now has created a television network that airs regional sports events.
• Company C, a package delivery business, is a startup based on delivery efficiency models created by a few students and delivers almost all kinds of packages.
• All three companies employ deliberate strategies.

Shaping the Strategy-Making

• The strategy-making, strategy-executing process is shaped by external factors such as the industry's economic and competitive conditions and internal factors such as the company's collection of resources and capabilities.

Management's Strategic Vision

• Management's strategic vision charts a strategic course for the organization ("where we are going") and provides a rationale for why this directional path makes good sense.

Strategic Vision Statement

• An effectively worded strategic vision statement is focused, graphic, directional, and easy to communicate.

Mission Statement

• A mission statement typically concerns a company's present business scope and purpose, whereas a strategic vision sets forth "where we are going and why."

Financial Objective

• The best example of a well-stated financial objective is to increase earnings per share by 15 percent annually.

Strategic Objective

• Boosting internal cash flows by seven percent to fund new research and development activities is NOT a strategic objective.

Business Strategy

• Business strategy concerns strengthening the market position and building competitive advantage for a single line of business.

Corporate Governance

• Effective corporate governance requires a company's board of directors to oversee the company's strategic direction, evaluate the caliber of senior executives' skills, handle executive compensation, and oversee financial reporting practices.

Strategy-Making Hierarchy

• In a single-business company, the strategy-making hierarchy consists of business strategy, functional strategies, and operating strategies.

Board of Directors

• The key duties of a company's board of directors in the strategy-making, strategy-executing process include overseeing the company's financial accounting and financial reporting practices and evaluating the caliber of senior executives' strategy-making/strategy-executing skills.

Macro-Environment

• The strategically relevant factors outside a company's industry boundaries—economic conditions, political factors, sociocultural forces, technological factors, environmental factors, and legal/regulatory conditions—are known as a company's "macro-environment."

Strategy-Shaping Impact

• Apple launching a global network of driverless cars, buses, and trucks on demand via mobile app is likely to have the biggest strategy-shaping impact on on-demand transportation providers such as Uber and Lyft.

Rivalry Among Sellers

• Rivalry among competing sellers decreases when buyer demand is growing rapidly.

Potential Entrants

• Potential entrants are more likely to be deterred from actually entering an industry when incumbent firms are willing and able to be aggressive in defending their market positions against entry.

Bargaining Leverage

• The bargaining leverage of suppliers is greater when the suppliers' products/services account for a small percentage of industry members' costs.

Competitive Environment

• A competitive environment where there is strong rivalry among sellers, low entry barriers, strong competition from substitute products, and considerable bargaining leverage on the part of both suppliers and customers is competitively unattractive from the standpoint of earning good profits.

Driving-Forces analysis

• The task of driving-forces analysis is to identify the driving forces, assess whether their impact will make the industry more or less attractive, and determine what strategy changes are needed to prepare for the impacts of the driving forces.

Driving Forces

• Shifts in who buys the product and how the product is used would have the LEAST impact on the attractiveness of the automobile industry.

Competitive Intelligence

• Competitive intelligence can be gleaned from company press releases, company websites, management presentations, and annual reports and 10-K filings.

Key Success Factors

• The key success factors in an industry are those competitive factors that most affect industry members' abilities to prosper in the marketplace—the particular strategy elements, product attributes, operational approaches, resources, and competitive capabilities that spell the difference between being a strong competitor and a weak one, and between profit and loss.

Analytical Tool

• Best practice concept is NOT an analytical tool for revealing a company's competitiveness and for helping to match the strategy to the company's own particular circumstances.

Functional Strategies

• Alliance and partnerships, as well as merger and acquisition growth strategies, are NOT key "functional" strategies of a company.

Intangible Resource

• Technological assets are NOT an intangible resource.

Competitive Power

• For a particular company resource/capability to have real competitive power and perhaps qualify as a basis for competitive advantage, it should be hard to copy, be rare and something rivals lack, be competitively valuable, and not be easily trumped by substitute resource strengths possessed by rivals.

Dynamic Capability

• When a company has become proficient in modifying, upgrading, or deepening the company's resources and capabilities in response to its changing environment and market opportunities, it is called a dynamic capability.

Distinctive Competence

• A distinctive competence is typically less restrictive for rivals to copy than a core competence.

SWOT Analysis

• SWOT can't turn a core competence into a distinctive competence.

Benchmarking

• Benchmarking involves comparing how different companies perform various value chain activities and then making cross-company comparisons of the costs and effectiveness of these activities.

Value Chain

• The means to enhance differentiation through activities at the forward end of the value chain system do NOT include enhancing cost-reducing activities with defensive functionality designed to create incentives.

Competitive Advantage

• A company's value-creating activities can offer a competitive advantage in one of two ways: contribute to greater efficiency and lower costs and provide a basis for differentiation.