Crafting & Executing Strategy: The Quest for Competitive Advantage: Concepts and Cases 23th edition
78) A company's strategy is the set of actions that its managers take to outperform the company's competitors and achieve superior profitability. A well-crafted strategy is the sort of lasting success that can support growth and secure the company's future over the long term. A company's strategy provides direction and guidance, in terms of not only what the company should do but also what it should not do.
79) ● A company achieves a competitive advantage when it provides buyers with superior value compared to rival sellers or offers the same value at a lower cost to the firm. The advantage is sustainable if it persists despite the best efforts of competitors to match or surpass this advantage.
● Deliberate strategy consists of proactive strategy elements that are both planned and realized as planned and ongoing strategy elements continued from prior periods.
● Emergent strategy consists of reactive strategy elements that emerge as changing conditions warrant. A portion of a company's strategy is always developed on the fly, coming as a response to fresh strategic maneuvers on the part of rival firms, unexpected shifts in customer requirements, fast-changing technological developments, newly appearing market opportunities, a changing political or economic climate, or other unanticipated happenings in the surrounding environment. These adaptive strategy adjustments make up the firm's emergent strategy.
● A company's realized strategy tends to be a combination of proactive and reactive elements, with certain strategy elements being abandoned because they have become obsolete or ineffective.
● Abandoned strategies are planned strategy elements that may not work out and are abandoned in consequence.
● Deliberate strategy consists of proactive strategy elements that are both planned and realized as planned and ongoing strategy elements continued from prior periods.
● Emergent strategy consists of reactive strategy elements that emerge as changing conditions warrant. A portion of a company's strategy is always developed on the fly, coming as a response to fresh strategic maneuvers on the part of rival firms, unexpected shifts in customer requirements, fast-changing technological developments, newly appearing market opportunities, a changing political or economic climate, or other unanticipated happenings in the surrounding environment. These adaptive strategy adjustments make up the firm's emergent strategy.
● A company's realized strategy tends to be a combination of proactive and reactive elements, with certain strategy elements being abandoned because they have become obsolete or ineffective.
● Abandoned strategies are planned strategy elements that may not work out and are abandoned in consequence.
80) A winning strategy must pass three tests:
● The fit test: No strategy can work well unless it exhibits good external fit and is in sync with prevailing market conditions.
● The competitive advantage test: Winning strategies enable a company to achieve a competitive advantage over key rivals that is long-lasting. The bigger and more durable the competitive advantage, the more powerful it is.
● The performance test: The mark of a winning strategy is strong company performance. Two kinds of performance indicators tell the most about the caliber of a company's strategy: (1) competitive strength and market standing and (2) profitability and financial strength.
● The fit test: No strategy can work well unless it exhibits good external fit and is in sync with prevailing market conditions.
● The competitive advantage test: Winning strategies enable a company to achieve a competitive advantage over key rivals that is long-lasting. The bigger and more durable the competitive advantage, the more powerful it is.
● The performance test: The mark of a winning strategy is strong company performance. Two kinds of performance indicators tell the most about the caliber of a company's strategy: (1) competitive strength and market standing and (2) profitability and financial strength.
81) The five most frequently used strategic approaches are:
● A low-cost provider strategy: It aims at achieving a cost-based advantage over rivals. Walmart and Southwest Airlines have earned strong market positions because of the low-cost advantages they have achieved over their rivals. Such strategies produce a durable competitive edge.
● A broad differentiation strategy: It aims to differentiate the company's product or service from that of rivals in ways that will appeal to a broad spectrum of buyers. Successful adopters of differentiation strategies include Apple (innovative products) and Johnson & Johnson in baby products.
● A focused differentiation strategy: It concentrates on a narrow buyer segment and outcompetes rivals by offering buyers customized attributes that meet their specialized needs and tastes better than rivals' products. Lululemon, for example, specializes in high-quality yoga clothing and the like, attracting a devoted set of buyers in the process.
● A focused low-cost strategy: It concentrates on a narrow buyer segment (or market niche) and outcompetes rivals by having lower costs and thus being able to serve niche members at a lower price. Private-label manufacturers of food, health and beauty products, and nutritional supplements use their low-cost advantage to offer supermarket buyers lower prices than those demanded by producers of branded products.
● A best-cost provider strategy: It gives customers more value for the money by satisfying their expectations on key quality features, performance, and/or service attributes while beating their price expectations. This approach is a hybrid strategy that blends elements of low-cost provider and differentiation strategies, and Target is cited in Chapter 1 as one example of a company pursuing a best-cost strategy.
● A low-cost provider strategy: It aims at achieving a cost-based advantage over rivals. Walmart and Southwest Airlines have earned strong market positions because of the low-cost advantages they have achieved over their rivals. Such strategies produce a durable competitive edge.
● A broad differentiation strategy: It aims to differentiate the company's product or service from that of rivals in ways that will appeal to a broad spectrum of buyers. Successful adopters of differentiation strategies include Apple (innovative products) and Johnson & Johnson in baby products.
● A focused differentiation strategy: It concentrates on a narrow buyer segment and outcompetes rivals by offering buyers customized attributes that meet their specialized needs and tastes better than rivals' products. Lululemon, for example, specializes in high-quality yoga clothing and the like, attracting a devoted set of buyers in the process.
● A focused low-cost strategy: It concentrates on a narrow buyer segment (or market niche) and outcompetes rivals by having lower costs and thus being able to serve niche members at a lower price. Private-label manufacturers of food, health and beauty products, and nutritional supplements use their low-cost advantage to offer supermarket buyers lower prices than those demanded by producers of branded products.
● A best-cost provider strategy: It gives customers more value for the money by satisfying their expectations on key quality features, performance, and/or service attributes while beating their price expectations. This approach is a hybrid strategy that blends elements of low-cost provider and differentiation strategies, and Target is cited in Chapter 1 as one example of a company pursuing a best-cost strategy.
82) The central features of a strategy are the actions and moves in the marketplace that managers are taking to gain a competitive advantage over rivals. There are many routes to competitive advantage, but they all involve either giving buyers what they perceive as superior value compared to the offerings of rival sellers or giving buyers the same value as others at a lower cost to the firm. Superior value can mean a good product at a lower price, a superior product that is worth paying more for, or a best-value offering that represents an attractive combination of price, features, quality, service, and other attributes.