Foundations of Corporate Success: How Business Strategies Add Value

By John A. Kay | Go to book overview

CHAPTER 19
The Firm

In this chapter, the strategic audit focuses on the firm itself. What are its own distinctive capabilities and its strategic assets? Which are the markets in which these might yield competitive advantage? Are there other markets in which, although the firm may not have a competitive advantage as such, it should nevertheless compete because there are economies of scale or scope associated with its primary market?

What competitive advantages result, and relative to which competitors? What are these competitive advantages worth? To what extent are they realized in added value, and if they are not fully realized, what are the factors which prevent full realization? When and to what degree have these competitive advantages been reflected in the company's share price? What steps is the company taking in order to secure the sustainability and appropriability of its distinctive capabilities and strategic assets?

The answers to these questions define the firm's corporate strategy. They describe the business, or businesses, the company should be in. The strategic audit must also tackle questions of business strategy. The analysis of markets leads naturally to questions of market positioning and market segmentation. Positioning will partly be dictated by the nature of the firm's distinctive capabilities, and partly by an assessment of the positions of competitors. In identifying its markets the company must distinguish as many distinct economic markets as there are. What steps can it take to keep these distinct economic markets apart? What pricing policies should it adopt relative to its competitors? This latter is partly an issue of positioning, partly one of competitive dynamics. What is the role of advertising and branding for the firm and in its industry? What is the nature of vertical relationships with the firm's suppliers and towards its distributors--what is their style, what is their effect on incentives and on actual and potential competition? Can added value be effectively defended against them?

These are some of the principal issues for a strategic audit. This chapter poses some of these questions for two companies--British Airways and Benetton.

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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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