The overarching theme of Chapter 1 is business strategy. It discusses who is responsible for businessstrategies, how they’re formulated, what guides them, and what they mean. A business strategy is a “company’s plan to gain, andsustain, a competitive advantage in the marketplace.
” Successful strategies arecreated with four things in mind: howattractive a market is, how to offer a unique proposition relative tocompetitors, what resources need to be deployed to deliver the unique value,and how to sustain the competitive advantage. The book defines competitiveadvantage as something that requires a firm to consistently out-perform itsrivals. The source of the competitiveadvantage can come from almost anywhere in the organization. The strategic management process is how the organization createsa plan to achieve a competitive advantage. It involves both an internalanalysis 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 thestrategy formulation. Internal and external analyses guide the strategyformulation process.
An external analysis provides a snapshot of the industryand the customers so the business can decide what opportunities or threatsexist. Internal analysis highlights strengths and weaknesses. These are thingsthe company does well, or does poorly, relative to the competition. Formulating the strategy “involves selecting which actionsthe company will take to gain a sustainable competitive advantage.
” There aredifferent “levels” of strategy. There’s corporate strategy (decisions made bycorporate as to where the firm competes), business strategy (decisions made bystrategic business units about how to sustain the competitive advantage) andfunctional strategy (decisions about how to effectively implement the businessstrategy in various departments). Strategy vehicles are the means through whichcompanies achieve their objectives and take the form of diversification,acquisitions, alliances, etc. The actual implementation of the strategy “occurs when acompany adopts organizational processes that enable it to carry out thestrategy.” Strategic leaders are responsible for the strategy and generallyinclude the CEO and other presidents of various business functions.
Decisionsmade regarding the strategy affect a myriad of people, including capitalmarket, product market, organizational, and community stakeholders. The sustainable competitive advantage lies at the heart ofbusiness strategy. Companies should continuously update their strategies toensure the safety of their competitive advantages.