What I Learned In Business School ...

Business Strategy

If you have been following my Tweets, you would already know the following about strategy.

"Strategy is about winning." - Robert M Grant, 2008. (Glad someone cleared that up!)

Successful strategy requires effective implementation of simple and consistent long-term goals, profound understanding of the competitive environment, and objective appraisal of resources.

Successful strategies consist of clear goals, understanding the competitive environment, resource appraisal, and effective implementation.

Strategy is the link between the firm and it's external environment (competitors, customers, & suppliers).

Strategy is about doing things differently. The essence of strategy is making choices: Where to compete and how to compete.

Corporate strategy = Domain selection. ("Where to compete?")
Business strategy = Domain navigation. ("How to compete?")

Economic Profit can be defined as Economic Value Added (EVA), or net operating profit after tax (NOPAT) less cost of capital.

Value of the enterprise = The sum of free cash flows in each year, discounted at the enterprise's cost of capital (WACC of equity & debt).

Maximizing profit = Maximizing enterprise value (see above)

The most consistently successful companies in terms of profits and shareholder value tend to be motivated by factors other than profit.

Profits are essential for the existence of the corporation, but they are not the reason for its existence. (Dennis Bakke, AES)

Long-living companies build strong communities, have strong sense of identity, commit to learning, & are sensitive to the world around them.

… an enterprise needs sustainable societies in order to protect its own sustainability … (BP CEO John Browne)

Riff