MGMT 497 Chapter 1: Strategy

crafting a good strategy entails deliberately choosing to:

compete differently from rivals

business model:

concerns whether the revs and costs flowing from the strategy demonstrate the firm can be profitable and viable

the two crucial elements of a firms business model:

customer value proposition and profit proposition (profit formula)

firm strategy:

deals with the firm's competitive initiatives and business approaches

profit proposition (profit formula):

how the firm will create and deliver customer value in a cost-efficient manner and at a price that produces enough revenues to cover costs enable attractive profits (the lower a firms costs are in relation to the revs generated, the more appealing is its profit proposition or profit formula)

customer value proposition:

how the firm will satisfy customer needs and requirements at a price customers will consider to be a good value (the greater the value delivered to customers and the lower the price, the more attractive the value proposition is to customers)

the competitive advantage test:

is the strategy helping the company achieve a sustainable competitive advantage?

the performance test:

is the strategy producing good company performance?

the goodness of fit test:

is the strategy well matched to the firm's internal and external situation?

strategy - distinguishing between what is legal and what is ethical:

just because a strategic action or business approach is legal does not necessarily mean it is ethically or morally acceptable

what makes a strategy a winner?

testing the merits of one strategy versus another to distinguish a winning strategy from a flawed or weak strategy requires asking specific questions

how well a firm performs and the degree of market success it achieves are directly attributable to:

the caliber of its strategy and the proficiency with which the strategy is executed (excellent execution of an excellent strategy is the best test of managerial excellence)

crafting a good strategy entails deliberately choosing to compete differently from rivals by:

- appealing to buyers in ways that set a company's product offering apart from rivals and delivers what buyers view as "superior value" - staking out a market position that is not crowded with other strong competitors - copycat strategies rarely work

ethical standards are about:

- right vs wrong - moral vs immoral - not crossing the line from "should do" to "should not do" - "being within the bounds of acceptability" vs "outside the bounds of acceptability"

the three tests of a winning strategy:

- the goodness of fit test - the competitive advantage test - the performance test (to qualify as a winning strategy, a strategy must pass all three tests)

specific questions to ask for a winning strategy:

1. how well does the strategy fit the internal and external aspects of the company's overall situation? 2. is the strategy helping the company achieve a sustainable competitive advantage? 3. is the strategy producing good company performance?