What Strategy Is: Gaining Competitive Advantage at Nvidia

While the text uses Tesla to explore the concepts behind the three elements of a good strategy, here we will build from a brief case about a different firm to help us further understand these ideas. This exercise uses a brief case about Nvidia, a firm specializing in video graphic semiconductors for computer devices. Make sure you are familiar with the material found in the "What Strategy Is$"$ section of your book and the differences between good and bad strategy. The concepts covered in this activity will help enhance your understanding of the role of strategy in a firm's quest for competitive advantage.

The goal of this exercise is to provide a scenario for analyzing how strategy impacts competitive advantage.

Read the following case on Nvidia and then answer the questions that follow.

Good Strategy at Nvidia

Nvidia went from an IPO $($Initial Public Offering$)$ in $1999$ to being named "company of the year" by Forbes magazine in $2007.$ Forbes noted Nvidia had gross margins of $46$ percent in $2006$ and its stock price rose even faster than Twitter over this period. In $2013,$ the firm, with over $$4B$ in sales, provided processors for use in mobile devices, cloud computing, and super computers.

However, had it not been for some early stumbles, the firm may have never reached these successes. Nvidia was founded in $1993$ by Jen$-$Hsun Huang and two colleagues. Their first product$-$delivered in $1995-$was a commercial failure. However, a rival firm, $3$Dfy$.$ Interactive, introduced a very successful $3$D graphics chip for the rapidly$-$growing PC$-$based gaming industry.

Chastened by this initial failure, Mr$.$ Huang and his team regrouped. They analyzed the gaming industry of that era and concluded that the market $($gamers$,$ as well as others interested in rendering graphics$)$ would want to continuously upgrade to the best graphics technology available for the foreseeable future.

Given this situation, Mr$.$ Huang focused the team on a new insight he thought would lead to success. Nvidia would release a new chip every $6$ months rather than the standard $18$ months used by the rest of the semiconductor industry. Nvidia decided that if they could gain and keep the highest$-$performing graphics solutions in the marketplace, they would be able to build a great business.