Chap001.pdf mba sm

8/13/2019 Chap001.pdf mba sm

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Chapter 1WHAT IS STRATEGY AND WHY IS IT IMPORTANT?


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1. Understand why every company needs a sound strategy tocompete successfully, manage the conduct of its business, andstrengthen its prospects for long-term success.

2. Develop an awareness of the four most dependable strategicapproaches for setting a company apart from rivals and

winning a sustainable competitive advantage.

3. Understand that a companys strategy tends to evolve overtime because of changing circumstances and ongoingmanagement efforts to improve the companys strategy.

4. Learn why it is important for a company to have a viablebusiness model that outlines the companys customer valueproposition and its profit formula.

5. Learn the three tests of a winning strategy.


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WHAT DO WE MEAN BY STRATEGY?

What is our present situation?

Business environment and industry conditions

Firms financial and competitive capabilities

Where do we want to go from here?

Creating a vision for the firms future direction

How are we going to get there?

Crafting an action plan that will get us there


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WHAT IS STRATEGYABOUT?

Strategy is all about How:

How to outcompete rivals.

How to respond to economic and marketconditions and growth opportunities.

How to manage functional pieces of the

business.

How to improve the firms financial and

market performance.


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WHY DO STRATEGY ?

A firm does strategy:

To improve its financial performance.

To strengthen its competitive position. To gain a sustainable competitive.

advantage over its market rivals.

A creative, distinctive strategy: Can yield above-average profits.

Makes competition difficult for rivals.


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STRATEGYAND COMPETITORS

Strategy is about competing differently

from rivals

Doing what they dont do or doing it better!

Doing what they cant do!

Doing that which sets the firm apart and

attracts customers.

Doing what we should or should not do to

produce a competitive edge.


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1.1 Identifying a Companys StrategyWhat to Look For


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Which of McDonalds Plan-to-Win strategy

initiatives are associated with meeting

customer needs more effectively?

Which initiatives are focused on moreefficientlydelivering products and services?

Which initiatives will likely result in the most

enduring competitive advantage?

Which of the initiatives will competitors likelyattempt to overcome first?

Fol low-up


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The Quest for Competitive Advantage

Competitive Advantage

Meeting customer needs more effectively,

with products or services that customers

value more highly, or more efficiently, atlower cost.

Sustainable Competitive Advantage

Giving buyers lasting reasons to prefer afirms products or services over those of its

competitors.


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STRATEGIC APPROACH CHOICES

Low-costprovider

Differentiationon features

Focus onmarket niche

Best-costprovider

Building Competitive Advantage


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STRATEGIC APPROACHES

Building a competitive advantage by:

1. Striving to become the industrys low-cost

provider (efficiency).

2. Outcompeting rivals on differentiating

features (effectiveness).

3. Focusing on better serving a niche markets

needs (efficiency and\or effectiveness).

4. Offering the lowest (best) prices for

differentiated goods (best-cost provider).


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GAINING SUSTAINABLE COMPETITIVEADVANTAGE

How to create a sustainable competitive

advantage:

Develop valuable expertise and competitive

capabilities over the long-term that rivals

cannot readily copy, match or best.

Put the constant quest for sustainable

competitive advantage at center stage incrafting your strategy.


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Why a Firms Strategy Evolves over Time

Managers modify strategy in response to:

Changing market conditions

Advancing technology

Fresh moves of competitors

Shifting buyer needs

Emerging market opportunities

New ideas for improving the strategy


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The Evolving Nature of a Firms Strategy

Realized (current) strategy is a blend of:

Proactive (deliberate) strategy elements that

include both continued and new initiatives.

Reactive (emergent) strategy elements that

are required due to unanticipated competitive

developments and fresh market conditions.


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1.2 A Companys Strategy Is a Blend of Proactive Initiativesand Reactive Adjustments


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THE RELATIONSHIP BETWEEN AFIRMS STRATEGY AND ITS

BUSINESS MODEL

Realized

StrategyCompetitiveInitiatives

BusinessApproaches

Business

ModelValue

Proposition

Profit Formula

$$$?


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A Companys Business Model

How the business will make money :

By providing customers with value.

The firms customer value proposition

By generating revenues sufficient to cover

costs and produce attractive profits.

The firms profit formula

It takes a proven business modelone thatyields appealing profitabilityto demonstrate

viability of a firms strategy.


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Business Model Elements

The Customer Value Proposition

Satisfying buyer wants and needs at a price

customers will consider a good value.

The greater the value provided (V) and

the lower the price (P), the more

attractive the value proposition is to

customers.


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Business Model Elements (contd)

The Profit Formula

Creating a cost structure that allows for

acceptable profits, given that pricing is

tied to the customer value proposition. Vthe value provided to customers

Pthe price charged to customers

Cthe firms costs

The lower the costs (C) for a given customer

value proposition (VP), the greater the ability

of the business model to be a moneymaker.


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IS OUR STRATEGY A WINNER?

WinningStrategy

The StrategicFit Test

The CompetitiveAdvantage Test

The PerformanceTest


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WHAT MAKES A STRATEGYA WINNER?

A winning strategy must pass three tests:

The Fit Test

Does it exhibit dynamic fit with the external and

internal aspects of the firms overall situation? The Competitive Advantage Test

Can it help the firm achieve a significant and

sustainable competitive advantage?

The Performance Test Can it produce good performance as measured

by the firms profitability, financial and

competitive strengths, and market standing?


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Who listens to the radio anymore?

Given the shifts in how people listen to music, are

the business models of Sirius XM and over-the-air

broadcasters viable over the long term?

Does Sirus XMs strategy pass the three tests of a

winning strategy? Does the strategy of over-the-air

broadcasters pass the same tests?

What internal and external factors will create

difficulties for either competitor in changing its

strategy or business model?

Fol low-up


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WHY CRAFTING AND EXECUTINGSTRATEGY ARE IMPORTANT TASKS

Strategy provides:

A prescription for doing business.

A road map to competitive advantage.A game plan for pleasing customers.

A formula for attaining long-term standout

marketplace performance.

Good Strategy + Good Strategy Execution =

Good Management


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THINKING STRATEGICALLY

Googles web browser-based Chrome operating

system and its online applications suite are now

challenging Microsofts long-term dominance of

those marketplace sectors. What should be Microsofts first response to this

competitive challenge?

How will Microsofts response to this competitors

actions affect its business model?

Which competitors strategy will likely be the eventual

winner in the marketplace?


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THE ROAD AHEAD

Strategy is about asking the right questions:

What must managers do, and do well, to make a

firm a winner in the marketplace?

Strategy requires getting the right answers: Good strategic thinking and good management of

the strategy-making, strategy-executing process.

First-rate capabilities and skills in crafting and

executing strategy are essential to managing

successfully.

Welcome and best wishes for your success!

Documents

Chap001.pdf mba sm