Chapter 2 Notes Essay

Chapter 2: Strategy
Strategy is the definitive tool for building, communicating, and maintaining the direction of a business. The intention of strategy is to take the basic ideas of a business, such as those reflected in the vision, mission and values, and to express them in operational terms (terms useful for analysis and action). Strategy can be thought of in terms of four related components: goals, product market focus, value proposition, and core activities.
l. Goals: What does the business propose to achieve? What are its aims, for example, with respect to growth, profitability and risk?
2. Product Market Focus: What are the products and/or services that the business plans to sell, and to what specific markets?
3. Value Proposition: How does the business intend to attract customers? What benefits constitute its "offer" or "value proposition" in the marketplace?
4. Core Activities: What are the primary value-adding activities that the business intends to perform and how does it intend to perform them?

Strategy plays a central role in the efforts of GMs to establish, sustain and monitor the direction of their businesses. The concept of strategy provides a base point for organizing and discussing your understanding of what a business is all about. Most businesses are more complex and subtle than they seem on first view. The concept of strategy will help you to sort out what a business is doing and what it is doing differently than its competitors, and to communicate and discuss your views on these points.

Strategy provides a vehicle for you to translate general ideas about direction and performance. Goals set up the targets while the product market focus provides critical direction to people throughout the business so that they can focus their effort on targeted markets/products. The value proposition provides a beacon for employees everywhere while illuminating what the business is trying to do for its customers. The choice of core activities highlights the key jobs that will have to be done and the capabilities that need more to be developed/reinforced.

Strategy also provides a touchstone for continuous improvement. Strategy can and will be changed, usually incrementally, to adapt to changing circumstances.

1) Goals
Strategic goals are a measurable expression of what the business intends to achieve. Businesses may use their goal structures to distinguish themselves from competitors and achieve a competitive advantage.

2) Product Market Focus
This component of strategy spells out the nature of the products/services that a business intends to offer and the characteristics of the markets that it intends to compete in.

A product market matrix may be used to compare their products to that of competitors in the market.

3) Value Proposition
A business’s value proposition is a statement of the fundamental benefit or benefits that is has chosen to “offer” in the marketplace. There are two generic value propositions: low cost and differentiation. Value propositions should be expressed in terms of fundamental customer benefits such as price, features, service and execution.

It is also important to stick to simple, fundamental themes, which may be quite a task since there are a variety of ways in which a basic value proposition may be presented in a market:

The choice of a value proposition is perhaps the most obvious way in which a business attempts to differentiate itself from competition. To the extent that a proposed value proposition is important to customers, different from competitors, and hard for competitors to match, it will constitute a competitive advantage. In many industries, it is relatively easy for competitors to quickly copy new product or service innovations.

4) Core Activities
In the "value chain" of activities that constitutes an industry, a business needs to make choices about which particular activities it intends

Show More