What is Strategy

Strategy sentence

"Strategy is an attempt to create a sustainable competitive advantage by creating unique and valuable positions which requires making trade-offs and creating strategic fit"

How to Craft a Good Strategy

1. Diagnosis - identify certain aspects of a situation that are critical 2. Guiding Policy - an approach to cope with obstacles identified in the diagnosis 3. Coherent Actions - steps coordinated with one another to support accomplishment of guiding policy

What are the 4 Limitations of Operational Effectiveness

1. Easily emulated 2. Relative improvement to no one: zero-sum competition 3. Competitive convergence: all businesses become look-a-like 4. Operational effectiveness is necessary but not sufficient

What are the three levers to make a profit? How do you make a profit?

1. Increase customer Willingness To Pay (WTP) 2. Charge higher prices 3. Lower cost structure

Strategic management is motivated by which two observations?

1. Some industries have higher profits (External Analysis) 2. Some firms have higher profits within industries (Internal Analysis)

What are the 3 Types of Strategic Positioning

1. Variety-Based Positioning (product/service specialization) 2. Need-Based Positioning (customer specialization) 3. Access-Based Positioning (geographic/channel specialization)

1980s view of strategy

All about Operational Effectiveness -Be flexible and respond rapidly -Benchmark continuously to achieve best practice -Outsource aggressively to gain efficiencies

Why are trade-offs central to strategy

Choosing a unique position attracts imitation, incumbents can reposition and/or straddle. Trade-offs create the need for choice to protect against repositioners and straddlers... this lets you gain and sustain a competitive advantage.

What is "Strategic Fit" and why do we combine strategy and activity fit?

Combining activities delivers a unique value proposition. When activities/capabilities "fit" with each other, they reinforce the overall value proposition. A single trade-off is easy to copy, but a who system of trade-offs is much harder to copy.

Consumer Surplus formula and Producer Surplus formula and Value Created by Seller formula from Value Creation and Capture chart

Consumer surplus = Consumer's WTP - Price the consumer pays Producer surplus = Price the consumer pays - production cost Value Created by Seller = Customer's WTP - production cost

Elasticity of Demand formula

Measures demand curve tradeoff between P and Q

What is reverse causality?

Usually, A leads to B, but reverse causality states B actually leads to A.

What are the variables in the Value Creation and Capture Framework?

V - Consumer's Willingness To Pay (WTP) (Maximize this) P - Price consumer ultimately pays for product/service C - Production cost spent by the firm on the product Q - Quantity/Number of products sold

Access-Based Positioning: what, when/why and who

What: Channel or Geography-Based Specialization (serving a group of customers who are accessed in a particular way When/When: makes economic sense when accessing different groups requires different capabilities (urban v. rural) Who: Carmike Cinemas (now AMC) - focuses on small towns, keeps costs low

Need-Based Positioning: what, when/why and who

What: Customer-Based Specialization (service all the needs of a particular group of customers) When/Why: makes economic sense when different groups of customers have sharply different needs that require tailoring Who: IKEA - serves young furniture buyers who want style at a low cost; serves all the needs to those customers

What, when/why, and who of Variety Based Positioning

What: Product/Service specialization - provide a subset of an industry's product or service When/Why: Makes sense when producing a subset of industry products/services uses a distinct set of activities Who: Staples Office Supply (provides all office equipment for whoever you are)

Define Emergent Strategy

When conditions change, managers respond and adapt which can create emergent strategies.

Define Intended Strategy

When strategic management processes and managers work to create a strategy and it works out.

Define elastic demand

change in price has a greater change in quantity (E<-1)

Define inelastic demand

change in price has smaller change in quantity (-1 < E < 0)

Cross-Price Elasticity of Demand formula

measures the change in one good/services selling quantity based on another good/services change in price

Define strategic positioning

performing different activities from rivals; performing similar activities in different ways