Chapter 4 - STRATEGY
Challenges of implementing strategy:
– Fast pace of change
– High level of uncertainty
– Greater degree of complexity
– Each type of strategy (business-level, corporate-level, merger and
acquisition, international and cooperative) a firm chooses to
implement helps it deal with these challenges
– Strategy helps companies in their efforts to change quickly and
effectively and reduce the levels of uncertainty and complexity in their
external and internal environment
– A firm needs to have a digital strategy since innovation is key part of a
firm’s success (innovation related projects like information and
technologies)
Digital strategy = the application of information and technology to raise human
performance
-> this is important as human capital is one of the most significant competitive
advantages a firm can develop
– Digital principle (principles that redefine company imperatives around
customers, growth, efficiency and innovation) are the basis of an
effective digital strategy
– E.g. digital analytics = gathering and interpreting data to identify
behavioural patterns among customers for the purpose of serving
customer’s needs better during future transactions
Strategic management process:
– Step 1: Studying conditions of the external environment and the
resources, capabilities and core competencies that are part of the
internal environment
– Step 2: Implementing strategy
Strategies are purposeful, develop before firms engage rivals in
marketplace competitions and demonstrate a share understanding of the firm’s
mission and vision
Business-level strategy = an integrated and coordinates set of actions the firms
uses to gain competitive advantage by exploiting core competencies in a
specific product market
– The purpose is to create differences between a firms’s position
and its competitors
– The firm must decide if it intents to do activities differently (cost
leadership) or do different activities (differentiation)
– Five strategies: cost leadership (broad market), differentiation
, –
(broad market), focus cost leadership, focused differentiation,
integrated cost leadership / differentiation
– Firms serving a broad market seek to use their capabilities to
create value for customers on an industry-wide basis
– A narrow market segment means that the firms intents to serve the
needs of a narrow group
In terms of customers, when selecting a business-level strategy , the firm
determines:
. Who will be served
– Firms divide customers into groups based on differences in
customer needs
– Market segmentation = the process of doing customers into
groups based on their needs
. What needs the target customers have, that need to be satisfied
– Needs are related to a product’s benefits and features
– Value for products: low cost with acceptable features or highly
differentiated features with acceptable cost
– However customer needs change and firms need to recognise and
respond to be successful
. How those needs will be satisfied
– Firms use core competencies to implement value-creating
strategies, therefore satisfying customer needs
– If firms continuously upgrade their competencies, they will be able
to maintain competitive advantage to meet and exceed customer
expectations over time
– Important to invest in R&D
Delivering superior value -> satisfied customers -> higher profitability (return
customers)
But loyalty is hard due to increased access to info about a firm’s products and a
variety of choices leading to knowledgable customers
Three dimensions that characterise a firm’s relationship with its customers:
. The reach dimension: revolves around the firm’s access and
connection to customers. Firms seek to extend their reach, adding
customers in the process of doing so.
– Important for social networking sites, like Facebook, because in
hope of doing so, users can cognac them to others
. Richness: the depth and detail of the two-way flow of information
between the firm and customers
– Many firms offer online services as means of superior management
of information exchanges with customers to gain a competitive
advantage. This also allows customers to improve their
understanding of how a firm can satisfy them
Challenges of implementing strategy:
– Fast pace of change
– High level of uncertainty
– Greater degree of complexity
– Each type of strategy (business-level, corporate-level, merger and
acquisition, international and cooperative) a firm chooses to
implement helps it deal with these challenges
– Strategy helps companies in their efforts to change quickly and
effectively and reduce the levels of uncertainty and complexity in their
external and internal environment
– A firm needs to have a digital strategy since innovation is key part of a
firm’s success (innovation related projects like information and
technologies)
Digital strategy = the application of information and technology to raise human
performance
-> this is important as human capital is one of the most significant competitive
advantages a firm can develop
– Digital principle (principles that redefine company imperatives around
customers, growth, efficiency and innovation) are the basis of an
effective digital strategy
– E.g. digital analytics = gathering and interpreting data to identify
behavioural patterns among customers for the purpose of serving
customer’s needs better during future transactions
Strategic management process:
– Step 1: Studying conditions of the external environment and the
resources, capabilities and core competencies that are part of the
internal environment
– Step 2: Implementing strategy
Strategies are purposeful, develop before firms engage rivals in
marketplace competitions and demonstrate a share understanding of the firm’s
mission and vision
Business-level strategy = an integrated and coordinates set of actions the firms
uses to gain competitive advantage by exploiting core competencies in a
specific product market
– The purpose is to create differences between a firms’s position
and its competitors
– The firm must decide if it intents to do activities differently (cost
leadership) or do different activities (differentiation)
– Five strategies: cost leadership (broad market), differentiation
, –
(broad market), focus cost leadership, focused differentiation,
integrated cost leadership / differentiation
– Firms serving a broad market seek to use their capabilities to
create value for customers on an industry-wide basis
– A narrow market segment means that the firms intents to serve the
needs of a narrow group
In terms of customers, when selecting a business-level strategy , the firm
determines:
. Who will be served
– Firms divide customers into groups based on differences in
customer needs
– Market segmentation = the process of doing customers into
groups based on their needs
. What needs the target customers have, that need to be satisfied
– Needs are related to a product’s benefits and features
– Value for products: low cost with acceptable features or highly
differentiated features with acceptable cost
– However customer needs change and firms need to recognise and
respond to be successful
. How those needs will be satisfied
– Firms use core competencies to implement value-creating
strategies, therefore satisfying customer needs
– If firms continuously upgrade their competencies, they will be able
to maintain competitive advantage to meet and exceed customer
expectations over time
– Important to invest in R&D
Delivering superior value -> satisfied customers -> higher profitability (return
customers)
But loyalty is hard due to increased access to info about a firm’s products and a
variety of choices leading to knowledgable customers
Three dimensions that characterise a firm’s relationship with its customers:
. The reach dimension: revolves around the firm’s access and
connection to customers. Firms seek to extend their reach, adding
customers in the process of doing so.
– Important for social networking sites, like Facebook, because in
hope of doing so, users can cognac them to others
. Richness: the depth and detail of the two-way flow of information
between the firm and customers
– Many firms offer online services as means of superior management
of information exchanges with customers to gain a competitive
advantage. This also allows customers to improve their
understanding of how a firm can satisfy them
