Foundations of Corporate Success: How Business Strategies Add Value

By John A. Kay | Go to book overview

CHAPTER 1

The Structure of Strategy

In this chapter I describe three legendary stories of business success. In 1959 BMW was on the edge of bankruptcy. The company recovered to become one of the world's most profitable automobile manufacturers. Honda became the leading supplier of motor cycles in the United States within five years of entering the market. That example proved the prototype of Japanese attacks on many established Western industries. Glaxo, a British company best known for its baby foods, discovered what was to prove the best-selling drug in the history of the pharmaceutical industry, and marketed it around the world.

But success is most illuminating when contrasted with failures. So I also tell how Saatchi & Saatchi tried to create the world's first multinational, multidisciplinary consultancy business, how Groupe Bull sought to be a European rival to IBM, and how EMI exploited the most important advance in radiography since the discovery of X-rays; and how each of these endeavours brought the major companies concerned close to financial collapse.

These histories illustrate how corporate success is based on an effective match between the external relationships of the firm and its own distinctive capabilities. BMW, Honda, Glaxo are all firms which identified their distinctive capabilities, selected the markets best suited to these strengths, and built effective competitive strategies to exploit them. They did so sometimes belatedly and not always consciously, but it was that process which formed the basis of their subsequent success.

The other three firms exemplify the most common causes of failure. Bull simply lacked capabilities sufficient for its aspirations. Saatchi misunderstood the nature of its own competitive strengths and entered, expensively, markets in which its capabilities had no value. EMI, with the most distinctive capability of any of these six firms, failed to gain any long-run benefit from it by mishandling its relationships with its competitors and customers. It pursued a mistaken competitive strategy.

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Foundations of Corporate Success: How Business Strategies Add Value
Table of contents

Table of contents

  • Title Page i
  • Foreword iii
  • Preface vi
  • Contents xi
  • List of Figures xiii
  • List of Tables xiv
  • List of Tables xv
  • I - Corporate Success 1
  • Chapter 1 - The Structure of Strategy 3
  • Chapter 2 - Adding Value 19
  • II - Business Relationships 31
  • Chapter 3 - Co-Operation and Co-Ordination 33
  • Chapter 4 - Relationships and Contracts 50
  • III - Distinctive Capabilities 63
  • Chapter 5 - Architecture 66
  • Chapter 6 - Reputation 87
  • Chapter 7 - Innovation 101
  • Chapter 8 - Strategic Assets 113
  • IV - From Distinctive Capabilities to Competitive Advantage 125
  • Chapter 9 - Markets 127
  • Chapter 10 - Mergers 144
  • Chapter 11 - Sustainability 160
  • Chapter 12 - Appropriability 181
  • Chapter 13 - The Value of Competitive Advantage 192
  • Added Value Statements 211
  • V - Competitive Strategies 219
  • Chapter 14 - Pricing and Positioning, 1 221
  • Chapter 15 - Pricing and Positioning, 2 235
  • Chapter 16 - Advertising and Branding 251
  • Chapter 17 - Vertical Relationships 267
  • VI - The Strategic Audit 283
  • Chapter 18 - The Industry 285
  • Chapter 19 - The Firm 302
  • Chapter 20 - The Nation 320
  • VII - The Future of Strategy 335
  • Chapter 21 - A Brief History of Business Strategy 337
  • Chapter 22 - Conclusion 364
  • Value of the Ecu 369
  • Glossary 371
  • Bibliography 377
  • Index of Companies 395
  • General Index 399
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