Organisational Business Strategy

Chapter 1: Business Model: is a framework for making money. It is the set of activities which a firm performs, how it performs them, and when it performs them so as to offer its customers benefits they want and to earn a profit. Components: Positions, Resources, Costs, Industry Factors = Profitability. Determinants of profitability: Industry factors: Competitive Forces: exerted by suppliers (is high – bargaining power over industry firm; extract high prices raising costs; lower quality supply), customers, rivals (if high – there are many identical products; forcing higher quality products), potential entrants (high if barriers to entry are low), complementors, and substitute products. Cooperative Forces: working together with suppliers and firms, Macro Environment: P.E.S.T.E.L. Critical Industry Value Drivers: impact on value; low cost/differentiation, R&D. Firm Specific Factors: Positions of a Firm: Customer Value: Making customers prefer one product over another: differentiation, low cost, market segments (source of revenue), relative positioning, price reservation price: maximum a customer is willing to pay for perceived benefits. Activities of a Firm: Which, How, When (deliver value to segment). Resources of a Firm: using tangible/intangible assets to create value. Revenue Model: set of activities performed to create, offer and appropriate value to and from customers. How a firm generates income. Business Model: How a firm earns profit; revenue + costs. Three levels of strategy: Corporate (portfolio performance) Business/ Competitive (creation of value), Functional (functions: R&D etc.)

Chapter 2: Customers choose one firm’s products over its competitor’s products if the firm’s product offers benefits that customers need and that either are superior/identical (or both) to benefits of competitors’ products as well as low price. Differentiation Strategy: product features, brand-name reputation, network size, timing, location, service, product mix.