Strategy is a set of goal-directed actions a firm takes to gain and sustain superior performance
relative to competitors.3 To achieve superior performance, companies compete for
resources: New ventures compete for financial and human capital. Existing companies
compete for profitable growth. Charities compete for donations, and social networks compete
for members. In any competitive situation, a good strategy enables a firm to achieve
superior performance.
A good strategy consists of three elements:4
1. A diagnosis of the competitive challenge. This element is accomplished through
strategy analysis of the firm’s external and internal environments (Part 1 of the AFI
framework).
2. A guiding policy to address the competitive challenge. This element is accomplished
through strategy formulation, resulting in the firm’s corporate, business, and functional
strategies (Part 2 of the AFI framework).
3. A set of coherent actions to implement the firm’s guiding policy. This element is
accomplished through strategy implementation (Part 3 of the AFI framework).
Let’s revisit ChapterCase 1 and see how these three elements
manifest themselves in a good strategy.
THE COMPETITIVE CHALLENGE. First, consider the diagnosis
of the competitive challenge. ChapterCase 1 briefly traces
Apple’s renewal from the year 2001, when it hit upon the product
and business-model innovations of the iPod/iTunes combination.
Prior to that, Apple was merely a niche player in the desktopcomputing
industry, and struggling financially. Steve Jobs turned
the sinking company around by focusing on only two computer
models (one laptop and one desktop) in each of two market segments
(the professional market and the consumer market) as