Asking the right questions, assessing the competitive environment, and continuously revisiting the assumptions and decisions behind your strategic direction to determine if a change or corrective actions are needed. This is at the core of defining and executing on a competitive strategy.
In this 4-part series, I’ll cover the fundamentals of strategy and competition.
- Strategy 101
- External Analysis
- Internal Analysis
What is strategy?
Strategy: “consists of the competitive moves and business approaches management has developed to attract and please customers, conduct operations, growth the business, and achieve performance objectives.”
Strategy is a set of assumptions, decisions, and intentions.
Strategy formulation is the process of answering 3 critical questions:
- Where are we now?
- Analyze your company’s macro-environments.
- Analyze your company’s internal environments.
- What are the forces shaping the industry.
- Where do we want to go?
- Describe your vision of the future.
- Determine what new or different customer groups and customer needs your company should endeavour to satisfy and how should it change its business makeup.
- How are we going to get there?
- Devise a Game Plan.
- Describe how you are going to develop a competitive advantage, outcompete rivals, and capitalize market opportunities to achieve your strategic and financial objectives.
What is a competitive advantage?
- Competitive Advantage: “If the gap between the price buyers are willing to pay and the cost for your product is larger than your competitors.” It’s about being able to outcompete your rivals.
- Sustainable Competitive Advantage: “If a large number of buyers hold a long-lasting preference for your products and services over the offerings of your competitors.” It’s about being able to outcompete your rivals over an extended and continuous period of time.
- Wal-Mart leverages economies of scale to provide an extremely affordable low-cost offering for its consumers.
- Ritz Carlton leverages is highly personalized customer service to offer its customers with a differentiated and unique experience.
What is a business model?
- Business Model: “Specifies customer value proposition, develops a profit formula, and identifies key resources and processes required to create and deliver customer value”
- A business model is a ‘blueprint’ for profit generation.
An incredibly useful tool you can use is Alexander Osterwalder’s Business Model Canvas. The Business Model Canvas is an iterate approach to mapping and testing the assumptions and decisions driving your business model.
Defining a winning strategy comes down to asking the right questions, seeking the right information, and formulating effective competitive hypotheses. It’s not a 1-time activity. Strategic management requires a continuous effort to revisit assumptions, integrate and adapt to new information and changing market conditions.
That’s it for now! In the next post, I’ll dig into analyzing your company’s macro-environment.
Cheers ‘till next time!