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Vision
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Picture of what the firm wants to be and, in broad terms, what it ultimately wants to achieve
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Mission
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Who we are now, why do we exist, what is the unique value we bring to the market?
More concrete than the vision
Recently more companies call this "purpose"
More concrete than the vision
Recently more companies call this "purpose"
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Strategy
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Integrated and coordinated set of commitments and actions (choices) designed to gain a competitive advantage
must choose: objective, scope, economic logic
must choose: objective, scope, economic logic
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Competitive Advantage
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when its strategy leads to better performance than competitors (i.e.'above average returns')
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Above Average Returns
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Returns in excess of what investors expect in comparison to other investments with similar risk; returns in excess of the industry average
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Sustainable Competitive Advantage
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when a firm outperforms the industry average or competitors for a prolonged period of time.
The firm has implemented a value-creating strategy that competitors are unable to duplicate or find too costly to imitate
The firm has implemented a value-creating strategy that competitors are unable to duplicate or find too costly to imitate
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Objective
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given challenges: . a specific, measurable, attainable, time-bound, superordinate goal that informs trade-offs in ongoing decisions
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Scope
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given priorities: Relevant domain for all organizational activities
Prioritizes employee focus on "What?" and "Where?" and "For whom?"
Prioritizes employee focus on "What?" and "Where?" and "For whom?"
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Logic of advantage
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given competition: How will the organization create and capture more per-unit value than rivals
create more value: Increase consumer's WTP without increasing cost, Decrease cost per unit without decreasing WTP.
Capture more value: Increase sales price...holding cost and WTP constant
create more value: Increase consumer's WTP without increasing cost, Decrease cost per unit without decreasing WTP.
Capture more value: Increase sales price...holding cost and WTP constant
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Operational effectiveness
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Perform same activities better than rivals
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Uniqueness
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Perform different activities or perform same differently
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Porter's 5 Forces
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Rivalry, buyer power, supplier power, threat of entry, substitutes, complements
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buyer power
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buyers can force down prices or bargain for higher quality or more services by playing competitors against each other
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supplier power
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Suppliers can threaten to raise prices or reduce quality of input goods and services
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rivalry
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reduces profits as resources are devoted towards price competition, advertising battles, increased customer WTP
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threat of entry
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Profits of established firms in the industry may be eroded by new competitors
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substitutes
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limit the potential returns of an industry by placing a ceiling on the prices that firms in that industry can profitably charge
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Complementors
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A product or service that increases the value of the industry's product when the two are used together -the value is higher in combination.
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resource
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is tangible and intangible assets the firm controls
tangible: financial assets and physical assets
intangible: IP, Culture and "Capabilities", like product development at Apple
tangible: financial assets and physical assets
intangible: IP, Culture and "Capabilities", like product development at Apple
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capability
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is the ability of a firm to perform an activity repeatedly
generally developed over time
generally developed over time
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Superior customer value
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Capabilities can lead to above-average profits by imparting products/services with characteristics that customers value and will pay a premium for
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Superior Efficiency/costs
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Capabilities can lead to above-average profits by reducing the firm's costs
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INTERNAL ANALYSIS
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Evaluate key assets & competencies.
Apply to value creation activities.
Consider sustainability of advantage.
Apply to value creation activities.
Consider sustainability of advantage.
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"VRIN" Test
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valuable, rare, inimitable, non-substitutability
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value chain
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is a template firms use to determine which activities or capabilities are truly fundamental for adding value and which are not
primary activities (marketing and selling)
support activities (infrastructure and everything else)
primary activities (marketing and selling)
support activities (infrastructure and everything else)
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DIFFERENTIATION
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Generating profits from higher consumer willingness-to-pay. Command price premium from unique features, technology, high quality, service, "prestige."
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COST LEADERSHIP
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Keeping costs lower than those of competitors to generate profits. Tend to offer standardized products with broadly acceptable features at lowest price
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FOCUS STRATEGY
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Tailoring products to meet the needs of a targeted segment especially well
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Generalists
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cater to mass market tastes
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Specialists
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cater to niches with tastes inconsistent with mass market
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Valuable
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is the resource/capability valuable in the industry?
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Rare
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do rivals have the resource/capability?
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Inimitable
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can rivals acquire/develop the same resources?
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Non-subsitutable
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can the resource/capability be substituted for? Highly valued by customers?
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