Strategy: Foundations and Perspectives

Strategy, despite it millennia-long history, still elicits an enigmatic aura and lacks precise definition. In this chapter, we explore the conceptual foundations of strategy and develop a working definition. Key themes in strategy applied to business coalesce around the concept of competitive advantage. Strategy comes into play in situations that prompt a defence of competitive advantage, or the enhancement of a competitive position held. If competitive advantage is the desired outcome of any strategy, then the means to that end are the creation, delivery, and capture of value. Not simply any value—a firm’s competitors also create value. Strategy is about creating differentiated value. This chapter therefore examines the critical relationship between strategy and differentiated value creation, and implications for competitive advantage. It also addresses for whom value is being created. Firms create value in response to needs and expectations of their stakeholders. These concepts form the working definition of strategy for this book. We define strategy as a scheme for purposefully guiding decisions and actions taken by a firm towards fulfilling its obligations to its stakeholders by creating, delivering, and capturing differentiated value. Strategy not only provides firms with a purpose and raison d’être, but it also spells out what a firm will do and what it will not do. The degree of competitive advantage achieved by a firm is contingent on the extent to which it succeeds in differentiating itself from its competitors. The chapter closes with reflections on some of the idiosyncratic attributes of strategy and the current state of strategic management theory.