The overarching theme of Chapter 1 is business strategy. It discusses who is responsible for business
strategies, how they’re formulated, what guides them, and what they mean.
A business strategy is a “company’s plan to gain, and
sustain, a competitive advantage in the marketplace.” Successful strategies are
created with four things in mind: how
attractive a market is, how to offer a unique proposition relative to
competitors, what resources need to be deployed to deliver the unique value,
and how to sustain the competitive advantage. The book defines competitive
advantage as something that requires a firm to consistently out-perform its
rivals. The source of the competitive
advantage can come from almost anywhere in the organization.
The strategic management process is how the organization creates
a plan to achieve a competitive advantage. It involves both an internal
analysis of the company and an external analysis of the competitive environment.
There are four strategic choices involved in the strategic management process,
and they mirror the aforementioned items in the previous paragraph.
The company’s mission, or its primary purpose, informs the
strategy formulation. Internal and external analyses guide the strategy
formulation process. An external analysis provides a snapshot of the industry
and the customers so the business can decide what opportunities or threats
exist. Internal analysis highlights strengths and weaknesses. These are things
the company does well, or does poorly, relative to the competition.
Formulating the strategy “involves selecting which actions
the company will take to gain a sustainable competitive advantage.” There are
different “levels” of strategy. There’s corporate strategy (decisions made by
corporate as to where the firm competes), business strategy (decisions made by
strategic business units about how to sustain the competitive advantage) and
functional strategy (decisions about how to effectively implement the business
strategy in various departments). Strategy vehicles are the means through which
companies achieve their objectives and take the form of diversification,
acquisitions, alliances, etc.
The actual implementation of the strategy “occurs when a
company adopts organizational processes that enable it to carry out the
strategy.” Strategic leaders are responsible for the strategy and generally
include the CEO and other presidents of various business functions. Decisions
made regarding the strategy affect a myriad of people, including capital
market, product market, organizational, and community stakeholders.
The sustainable competitive advantage lies at the heart of
business strategy. Companies should continuously update their strategies to
ensure the safety of their competitive advantages.