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Chapter One

The ‘Big 3’ Strategic Questions
1. What’s the company’s present situation?

2. What should the company’s future direction be and what are our performance targets?

3. What is our plan for running the company and achieving the targeted results?

What is strategy
is a coherent combination of actions and approached about how to run a company.
The ‘Hows’ that define a firm’s strategy
o How to attract, please and retain costumers
o How to compete against rivals
o How to capitalize on growth opportunities and grow the business
o How best to respond to changing economic and market conditions
o How to manage the functional pieces of the business
o How to achieve the firm’s performance targets
Why one should create strategy
In order to have a clear, specific and deliberate action plan to:
o Avoid conflicting, inconsistent or uncoordinated strategic actions or decisions
o Strengthen the company’s competitive position
o Win a competitive edge over rivals
o Improve the company’s financial performance
Essence of good strategy making
is making choices to compete differently from rivals by:
o Appealing to buyers in ways that set a company apart from rivals-particularly when it comes to doing what rivals don’t do or can’t do
o Staking out a market position that is not crowded with other strong competitors
o Developing a distinctive ‘Aha!’ element to attract customers
o Copy-cat strategies seldom work
Sustainable competitive advantage
is when a profitable number of buyers are drawn to purchase its products or services rather than those of competitors. Especially, one that is lasting or durable or sustainable
4 strategic approaches to building sustainable competitive advantage
o Becoming the industry’s lowest-cost provider
o Offering unique differentiating features to customers
o Focusing on a specific market niche of customers
o Developing specialized expertise and resources
Proactive & reactive elements of strategy
The typical firm’s strategy is a blend of:

o Current strategy elements that seem to be working well enough to be continued

o New proactive actions that managers believe have good potential for improving the strategy and boosting the firm’s performance

o As-needed strategic reactions developed in response to unanticipated developments and fresh market conditions

Strategies most evolve over time due to:
o Changing market conditions
o Advancing technology
o Fresh moves of competitors
o Shifting buyer needs and preferences
o Emerging market opportunities
Business Model
A business model focuses on whether the revenues and costs flowing from the strategy demonstrate the business can be profitable and viable
Two crucial elements of a company’s business model are:
Customer Value Proposition (how the firm will satisfy its customer needs and requirements at a price they will consider to be a good value)

Profit Proposition (how the firm will create and deliver customer value in a cost-efficient manner at a price that produces enough revenues to cover costs and earn a profit)

How it differs from strategy
In contrast strategy deal with a company’s competitive initiatives and business approaches
3 tests of a winning strategy
1. The Competitive Advantage Test
o Is this strategy resulting in better strategic performance?

2. The Goodness of Fit Test
o How well does the strategy fit the firm’s situation?

3. The Performance Test
o Is the strategy producing better financial performance?

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