The following are notes that I made out of the book. Please keep in mind that my notes are not own content by a summarization of my understanding of the authors content. So I claim no rights to content, also my notes are not a replacement to the book in any which way.
What is strategy? Strategy is how a company achieves its goals by deploying its scarce resources to gain a sustainable competitive advantage.
Important steps in building a strategy plan:
Lay the foundation: Know your business. Set strategy in a micro-economic context or a context of demand and supply. View strategy as the output of competitive analysis both as is and to be. Strategy has two components: business and corporate. Strategy development is wrapped in uncertainty.
First you need to know your business. Where exactly do the sources of profit lie in the business? In other words, which are the product/market segments you serve and which make the greatest contribution towards operating profit?
The single most important factor in strategy development is to root it firmly within the context of the micro-economy in which your firm operates. Key assumption areas could be: product development, pricing, service enhancement or cost reduction.
Your strategy must reflect the reality of market demand and industry supply, today and tomorrow in your micro-economy.
Competitive analysis is best undertaken in two steps . The first is the current reality of how your firm stacks up to its peers in today's marketplace. And the second is how you envisage your firm rating against its competitors in the future - your target competitiveness.
Ask questions like - What are your goals and objectives? To make a reasonable existence, to maximize profit, growth, to keep employees in the jobs, to satisfy a range of stakeholders?
Business strategy is concerned with maximizing the competitiveness of a single strategic business unit. Corporate strategy is how you optimize your portfolio of business, whether through investment, acquisition or disposal, and how you add value to each through exploitation of your firm's overall resources and capabilities.
Finally the analysis of market demand, industry supply and your firms competitiveness will encounter risk at every turn, likewise opportunity. Uncertainty is unavoidable and will be ever-present. It must be addressed systematically in the strategy development process.
So when you put the building blocks of strategy together the look as follows:
This blog entry is part 1 of 10 entries that I will write. Next 9 will summarize tools to build each building block of the strategy pyramid.
I am already impressed with the way the author has put a structured way for learning this process. Kudos to Vaughan for that!
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