In thinking strategically about a company, managers of all types of businesses must develop a clear understanding of what moves and approaches will be employed to gain advantage in the marketplace.
A organization's strategy explains why the company matters by specifying an approach to creating superior value and determining how capabilities and resources will be utilized to deliver the desired value. In effect, the crafting of a strategy represents a managerial commitment to pursuing an array of choices about how to compete.
In most industries, companies have considerable freedom in choosing the how's of strategy. A company’s business model sets forth how its strategy and operating approaches will create value for customers, while at the same time generating ample revenues to cover costs and realizing a profit.
The nitty-gritty issue surrounding a company’s business model is whether it can execute its customer value proposition profitably. Just because company managers have crafted a strategy for competing and running the business does not automatically mean the strategy will lead to profitability - it may or it may not.
Competitive advantage is a condition or circumstance that puts a company in a favorable or superior business position. Strategy leaders need to understand these five strategic approaches to setting an organization apart and winning competitive advantage.
A company achieves sustainable competitive advantage when an attractively large number of buyers develop a durable preference for its products or services over the offerings of competitors, despite the efforts of competitors to overcome or erode its advantage.
Regardless of whether a company’s strategy changes gradually or swiftly, the important point is that the task of crafting strategy is not a onetime event but is always a work in progress. Winning companies create value by defining, developing and deploying a set of strategic capabilities that provide a unique competitive advantage.
A winning strategy must fit the company’s external and internal situation, build sustainable competitive advantage, and improve company performance. Companies don’t get to the top of the industry rankings or stay there with illogical strategies, copycat strategies, or timid attempts to try to do better.
How well a company performs is directly attributable to the caliber of its strategy and the proficiency with which the strategy is executed.