Strategy and entrepreneurship
Chapter 1: The definition and importance of strategy
Core concept:
Strategy is about competing differently from rivals. It’s about doing what competitors are not
currently doing or doing what they can’t do at all.
A company’s strategy is the set of actions that its managers take to outperform the
company’s competitors and achieve superior profitability.
How well a company performs is directly attributable to its strategy and the proficiency with
which the strategy is executed.
What do we mean by strategy?
1. Context: What is our present situation?
Business environment and industry conditions
Firm’s financial and competitive capabilities
1. Content: Where do we want to go from here?
Creating a vision for the firm’s future direction
1. Process: How are we going to get there?
Crafting an action plan for heading the firm in the intended direction, staking out a market
position, attracting customers, achieving the targeted financial and market performance, and
getting the firm where it wants to go. This is the strategy.
What is strategy about?
Strategy is all about How:
How to attract and please customers.
How to compete against rivals.
How to position the firm in the marketplace to capitalize on opportunities for growth.
How to respond to changing economic and market conditions.
How to manage each functional piece of the business.
How to achieve the firm’s performance targets.
What is strategy not about?
Strategy is NOT about being the best, the biggest or the first This is volatile, can be copied
and is unclear
1
, Growth strategy: Being bigger is not always better. It’s about being different. Don’t try for the
sake of just growing or other non-relevant goals like prestige, ego, money. Growing should
create value for your customers, employees, product and everybody/everything involved in
your business.
Identifying a firm’s strategy – pattern
2
, The quest for competi ti ve advantage
Competitive Advantage
A firm 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.
Requires meeting customer needs either more effectively (with products or services that
customers value more highly) or more efficiently (by providing products or services at lower
cost).
Sustainable Competitive Advantage
The firm achieves a sustainable competitive advantage if its advantage persists despite the
best efforts of competitors to match or surpass its advantage.
Requires giving buyers lasting reasons to prefer a firm’s products or services over those of its
competitors.
Effi ciency versus eff ecti veness
Difference between operational excellence and strategy:
Both are essential, but the agendas are different.
The operational agenda means continuous improvement and efforts; flexibility; there are no
tradeoffs.
The strategic agenda is the right place to define a unique position, where tradeoffs need to
be made.
The difference: Efficiency means doing things right and effectiveness means doing the right
things.
Strategy is more about effectiveness. Efficient is something that is expected from any company
regardless of what your strategy might be. It’s not a choice. Effectiveness however is all about making
the right decisions and choices.
3
, Why does an organizati on’s strategy evolve over ti me?
Managers modify strategy in response to:
Changing market conditions
Advancing technology
Fresh moves of competitors
Shifting buyer needs
Emerging market opportunities
New ideas for improving the strategy
Strategic management principle:
Changing circumstances and ongoing management efforts to improve the strategy causse a
company’s strategy to evolve over time—a condition that makes the task of crafting strategy
a work in progress, not a one-time event.
A company’s strategy is shaped partly by management analysis and choice and partly by the
necessity of adapting and learning by doing.
Realized (current) strategy is a blend of:
Proactive (deliberate) strategy: Elements that include both continued and new initiatives.
Reactive (emergent) strategy: Elements that are required due to unanticipated competitive
developments and fresh market conditions.
The relationship between an organization’s strategy and its business model
4
Chapter 1: The definition and importance of strategy
Core concept:
Strategy is about competing differently from rivals. It’s about doing what competitors are not
currently doing or doing what they can’t do at all.
A company’s strategy is the set of actions that its managers take to outperform the
company’s competitors and achieve superior profitability.
How well a company performs is directly attributable to its strategy and the proficiency with
which the strategy is executed.
What do we mean by strategy?
1. Context: What is our present situation?
Business environment and industry conditions
Firm’s financial and competitive capabilities
1. Content: Where do we want to go from here?
Creating a vision for the firm’s future direction
1. Process: How are we going to get there?
Crafting an action plan for heading the firm in the intended direction, staking out a market
position, attracting customers, achieving the targeted financial and market performance, and
getting the firm where it wants to go. This is the strategy.
What is strategy about?
Strategy is all about How:
How to attract and please customers.
How to compete against rivals.
How to position the firm in the marketplace to capitalize on opportunities for growth.
How to respond to changing economic and market conditions.
How to manage each functional piece of the business.
How to achieve the firm’s performance targets.
What is strategy not about?
Strategy is NOT about being the best, the biggest or the first This is volatile, can be copied
and is unclear
1
, Growth strategy: Being bigger is not always better. It’s about being different. Don’t try for the
sake of just growing or other non-relevant goals like prestige, ego, money. Growing should
create value for your customers, employees, product and everybody/everything involved in
your business.
Identifying a firm’s strategy – pattern
2
, The quest for competi ti ve advantage
Competitive Advantage
A firm 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.
Requires meeting customer needs either more effectively (with products or services that
customers value more highly) or more efficiently (by providing products or services at lower
cost).
Sustainable Competitive Advantage
The firm achieves a sustainable competitive advantage if its advantage persists despite the
best efforts of competitors to match or surpass its advantage.
Requires giving buyers lasting reasons to prefer a firm’s products or services over those of its
competitors.
Effi ciency versus eff ecti veness
Difference between operational excellence and strategy:
Both are essential, but the agendas are different.
The operational agenda means continuous improvement and efforts; flexibility; there are no
tradeoffs.
The strategic agenda is the right place to define a unique position, where tradeoffs need to
be made.
The difference: Efficiency means doing things right and effectiveness means doing the right
things.
Strategy is more about effectiveness. Efficient is something that is expected from any company
regardless of what your strategy might be. It’s not a choice. Effectiveness however is all about making
the right decisions and choices.
3
, Why does an organizati on’s strategy evolve over ti me?
Managers modify strategy in response to:
Changing market conditions
Advancing technology
Fresh moves of competitors
Shifting buyer needs
Emerging market opportunities
New ideas for improving the strategy
Strategic management principle:
Changing circumstances and ongoing management efforts to improve the strategy causse a
company’s strategy to evolve over time—a condition that makes the task of crafting strategy
a work in progress, not a one-time event.
A company’s strategy is shaped partly by management analysis and choice and partly by the
necessity of adapting and learning by doing.
Realized (current) strategy is a blend of:
Proactive (deliberate) strategy: Elements that include both continued and new initiatives.
Reactive (emergent) strategy: Elements that are required due to unanticipated competitive
developments and fresh market conditions.
The relationship between an organization’s strategy and its business model
4
