Chapter 1 – What Is Strategy and why is it important?

AFI Framework
Analyzing
Formulating
Or Implementing

Identify key resources and learn to deploy them, hold them, or shift them a little. – Strategy

Strategy is the quest to gain and sustain competitive advantage over rivals. It’s about being different from your rivals, creating values while containing cost, deciding what to do and what not to do, set of activities to stake out a unique position and it requires long term commitments that are often not easily reversible.

Speed kills…develop habits and learn to use them fluently.
Analyst = being a good historian

Companies are an array of activities.
Managers allocate scarce resources

Razor-blade model -> Microsoft makes you pay for windows 8 but gives the patches to fix it for free;
Google gives you the search engine or chrome for free but make u pay for advertising and click throughs.

“you can’t predict the future, but you can predict trends”

Strategic management is an integrative management field that combines analysis, formulation, and implementation in the quest for competitive advantage.

The AFI strategy framework embodies this view of strategic management.

Competitive advantage – generating above average returns and superior performance relative to other competitors in the same industry or the industry average.

Sustainable competitive advantage - outperforming competitors or the industry average over a prolonged period of time.

Competitive parity - performance of two or more firms at the same level.

Many strategic successes are accomplished when firms or individuals cooperate with one another.

co-opetition - cooperation by competitors to achieve a strategic objective. Strategy as a theory of how to compete provides managers with a roadmap to navigate the competitive territory.

Firm effects – the results of managers’ actions to influence fir performance.

Industry effects - the results attributed to the choice of industry in which to compete.

Managers leverage a company’s strengths while mitigating its weaknesses….turn external threats into opportunities. Strategy requires important trade-offs.

The key to successful strategy is to combine a set of activities to stake out a unique position in an industry.

Strategy formulation concerns the choice of where and how to compete.
Corporate strategy where to compete? Which industries, markets and geographies their company should compete in
Business strategy how to compete? Responsible for formulating a strategic position for their business unit.
Functional strategy how to implement? Responsible for decisions and actions within a single functional area that aid in the implementation of the business level strategy.

Strategic business unit – a standalone division of a larger conglomerate, with its own profit-and-loss