Corporate and Business Strategy

The means by which individuals or organizations achieve their objectives. It defines the determination of long-run goals and the allocation of resources to achieve them, implying consistency and cohesiveness in decisions.

Corporate Strategy asks "Where should we compete?" (industry attractiveness, diversification). Business Strategy asks "How should we compete?" (creating competitive advantage in a specific market).

The consistency of a firm's strategy with its external environment (customers, competitors, market trends) and its internal environment (goals, values, resources, capabilities, structure).

1. Simple, consistent, long-term goals.

2. Profound understanding of the competitive environment.

3. Objective appraisal of resources.

4. Effective implementation.

Intended Strategy is the original plan conceived by management (Design). Emergent Strategy is the pattern of decisions that arise from adapting to changing circumstances. Realized Strategy is what is actually implemented (a mix of intended and emergent).

Strategy is the overall plan for deploying resources to establish a favorable position (winning the war). Tactics are schemes for specific actions or maneuvers (winning a battle).

A perspective emerging in the 1990s that identifies the firm's internal resources and capabilities as the primary source of competitive advantage, rather than just external market positioning.

A concept describing an obsession with achieving a leadership position that creates a misfit between current resources and ambitions, forcing the organization to stretch and innovate (e.g., Kennedy's Moon Shot).

Strategy simplifies decision-making by constraining the range of alternatives and acting as a guide, helping overcome bounded rationality.

Strategy acts as a communication device to align the actions of different organizational members, ensuring everyone moves in the same direction.

1. Introduction (Product Innovation)

2. Growth (Dominant Design emerges)

3. Maturity (Process Innovation/Cost Efficiency)

4. Decline (Price Wars/Exit)

A product architecture that defines the look, functionality, and production method for the industry and becomes the accepted standard (e.g., the smartphone rectangle, the QWERTY keyboard).

Product Innovation is changing the physical attributes of the product (dominant in Intro stage). Process Innovation is improving how the product is made/delivered to lower costs (dominant in Growth/Maturity).

The resistance to change within an organization caused by entrenched routines, political power structures, conformity to industry norms, and limited search for new ideas.

The ability of a firm to simultaneously EXPLOIT existing competencies (for current profit) and EXPLORE new opportunities (for future growth). Balancing the present and the future.

A phenomenon where a product becomes more valuable as more people use it (e.g., Telephones, Social Media), often leading to 'Winner-Takes-All' markets.

he concept that a company's capabilities today are determined by its history and early experiences (e.g., Wal-Mart's logistics capability came from starting in rural areas).

Invention is the creation of a new product/process (knowledge). Innovation is the initial commercialization of that idea (making money).

The conditions that determine how much value an innovator captures. Strong regime = Innovator keeps profits (e.g., Drugs). Weak regime = Customers/Imitators get benefit (e.g., PCs).

The diverse resources needed to finance, produce, and market an innovation (e.g., manufacturing, distribution channels, brand) which often determine who wins.

Codifiable knowledge can be written down (easy to copy/imitate). Tacit knowledge is based on skill/practice (hard to copy/imitate).

A strategy where a firm seeks to become the dominant player in a declining industry by acquiring competitors or encouraging them to exit, allowing it to capture the remaining demand.

A strategy aimed at maximizing short-term cash flow by halting investment, reducing costs, and raising prices, effectively 'milking' the asset as it declines.

Selling the business early in the decline phase before asset values crash. Best for firms with weak competitive positions.

A key success factor in mature industries involving rigorous control of administrative and fixed costs (e.g., Walmart, Ryanair).

Creating competitive advantage in mature industries by breaking industry rules, redefining markets (e.g., Nintendo Wii), or reconfiguring the value chain (e.g., Zara).

1. Reduced opportunities for competitive advantage (diffusion of technology).

2. Shift from differentiation-based to cost-based competition.

When a firm earns (or has the potential to earn) a persistently superior rate of profit compared to its direct competitors.

Barriers that protect a firm's profits from being eroded by competitor imitation. They include: Obscuring performance, Deterrence, Causal Ambiguity, and Resource Immobility.

A situation where it is difficult for a competitor to understand exactly why a firm is successful (e.g., is it the culture, the process, or the leadership?), making imitation difficult.

Scale: Unit costs drop because of increased VOLUME at a point in time (spreading fixed costs). Learning: Unit costs drop because of ACCUMULATED EXPERIENCE over time (getting better at the task).

Also known as 'organizational slack.' It occurs when costs are higher than necessary due to lack of motivation, poor management, or lack of competitive pressure (e.g., state-owned monopolies).

Differentiation is HOW you compete (providing unique value). Segmentation is WHERE you compete (which customer groups you target).

A strategy to deter imitation by occupying all available strategic niches or buying up capacity/resources so competitors have no room to enter.

Creating a price premium by providing something unique that is valuable to buyers, where the premium exceeds the cost of providing the uniqueness.

Tangible relates to observable characteristics (size, speed, color). Intangible relates to unobservable values (status, identity, security).

A strategy used for 'experience goods' where high-quality firms use expensive signals (warranties, branding) to prove their quality to customers who cannot assess it beforehand.

Search Goods: Quality can be inspected before purchase (e.g., clothes). Experience Goods: Quality is only known after consumption (e.g., wine, medical services).

The consistency of a product's differentiation. Internal integrity means parts fit well; External integrity means the product fits the customer's lifestyle and values.

A tool to map customer perceptions of competing products on a graph to identify key attributes (e.g., mapping painkillers by 'gentleness' and 'effectiveness').

Combining complementary products and services into a single offering to create uniqueness (e.g., a bookstore adding a coffee shop).

1. Financial (Shareholders)

2. Customer (Satisfaction)

3. Internal Business Process (Efficiency/Quality)

4. Learning & Growth (Innovation/Culture)

A measure of profit that deducts the Cost of Capital from Operating Profit. It represents the true surplus value created beyond what investors require.

The concept that firms should focus on the intersection between corporate interests and social interests, creating economic value in a way that also creates value for society.

The difference between the maximum price a consumer is willing to pay and the price they actually pay. (Total Value = Consumer Surplus + Producer Profit).

Breaking down Return on Assets (ROA) into 'Sales Margin' (Profitability) and 'Asset Turnover' (Efficiency) to diagnose the source of poor performance.

1. Threat of Entry

2. Threat of Substitutes

3. Supplier Power

4. Buyer Power

5. Industry Rivalry

Products or services that increase the value of the focal industry's product (e.g., Apps for Smartphones, Ink for Printers).

Economies of scale, Capital requirements, Switching costs, Access to distribution channels, Government policy (patents/licenses).

A cluster of firms within an industry that follow similar strategies (e.g., Luxury cars vs. Economy cars). Competition is most intense WITHIN the group.

The selective communication of information to competitors to influence their perception and behavior (e.g., bluffing or warning of retaliation).

The product attributes customers value most and the capabilities a firm must possess to survive competition (The answer to: 'What do customers want?' + 'How do we survive?').

Resources are productive assets owned by the firm (nouns). Capabilities are what the firm DOES with those resources (verbs).

A capability that makes a disproportionate contribution to customer value and provides a basis for entering new markets (e.g., Honda's engines).

The firm's ability to integrate, build, and reconfigure internal and external competencies to address rapidly changing environments.

Tangible: Financial (cash) and Physical (plant/equipment). Intangible: Technology (patents), Reputation (brand), and Culture. Intangibles are usually harder to copy.