Crafting & Executing Strategy: The Quest for Competitive Advantage: Concepts and Cases 23th edition

83)   1. To be sufficiently innovative to thwart the efforts of clever rivals to copy or closely imitate the product offering. Examples cited in Chapter 1 include Apple Inc. (innovative products), Johnson & Johnson (reliability of baby products), BMW (engineering for performance), Rolex (luxury and prestige), and Hyundai (advanced manufacturing processes and unparalleled quality control systems).
   2. To make it extremely difficult for rivals to match the low-cost leader's approach to driving costs out of the business. Examples cited in Chapter 1 include Walmart (superior distribution and inventory management capabilities) and Southwest Airlines (superior revenue management and efficient maintenance and turnaround of aircraft).

 

84)    The three questions to distinguish a winning strategy from a so-so or flawed strategy are: (1) How well does the strategy fit the company's situation? (2) Is the strategy helping the company to achieve a sustainable competitive advantage? (3) Is the strategy producing good company performance? Regarding its fit with a company's internal and external situation, a strategy has to be well matched and must fit competitive conditions in the industry and other aspects of the enterprise's external environment. At the same time, it should be tailored to the company's collection of competitively important resources and capabilities. Regarding strategy and the achievement of sustainable competitive advantage, strategies that fail to achieve a durable competitive advantage over rivals are unlikely to produce superior performance for more than a brief period of time; the bigger and more durable the competitive edge that the strategy helps build, the more powerful it is. Regarding strategy and performance, the mark of a winning strategy is a strong company performance; the caliber of a company's strategy can be measured by (1) gains in profitability and financial strength and (2) advances in the company's competitive strength and market standing.

 

85)    Yes, a company's strategy should be tightly connected to its quest for competitive advantage because a strategy is deemed successful when it achieves a durable competitive edge over rivals to gain profits for a long period of time along with building a strong customer base and steady market position. Delivering superior value or delivering value more efficiently—whatever form it takes—nearly always requires performing value chain activities differently than rivals do and building competencies and resource capabilities that are not readily matched.

 

86)    Strategy, at its essence, is about competing differently—doing what rival firms do not do or what rival firms cannot do. This does not mean that the key elements of a company's strategy have to be 100 percent different, but rather that they must differ in at least some important respects. Refreshing its products completely during recession might improve the company's position in the market; however, as consumers tend to have lower disposable income during a recession, there is no guarantee that these customers would purchase an all-new product line.

 

87)    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. Gillette's business model in razor blades involves (1) selling a master product—the razor—at an attractively low price and then (2) making money on repeat purchases of razor blades that can be produced cheaply and sold at high profit margins. Printer manufacturers like Epson (as well as Hewlett-Packard and Canon) pursue much the same business model as Gillette, that is, (1) selling printers at a low (virtually break-even) price and (2) making large profit margins on the repeat purchases of ink cartridges and other printer supplies.

 

88)    A strategy should be tailored to the company's collection of competitively important resources and capabilities. It is unwise to build a strategy upon the company's weaknesses or pursue a strategic approach that requires resources that are deficient in the company. Examples of winning business strategies cited in the chapter include (1) Pandora's superior capabilities in developing and using algorithms to generate playlists based on listeners' predicted preferences and (2) Apple Inc.'s distinctive innovation and pricing strategies and proliferation across the globe. The capabilities of both of these companies have proven difficult for competitors to imitate or best and have allowed each to build and sustain competitive advantage.