mgmt
hyy362
Thompsonch1whatisstrategywhyimptr20.pptxCrafting and Executing Strategy
Arthur A. Thompson, Margaret A. Peteraf
John E. Gamble, Dr. A.J. Strickland
The Quest for Competitive Advantage
What is Strategy and Why is It Important?
Chapter 1
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Chapter 1
Strategy is about making choices, trade-offs; it’s about deliberately choosing to be different … Michael Porter – Professor and Consultant
If your firm’s strategy can be applied to any other firm, you don’t have a very good one … David J. Collis and Michael G. Rukstad -- Consultants and professors
If you don’t have a competitive advantage, don’t compete … Jack Welch – former CEO of General Electric
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LEARNING OBJECTIVES
What is meant by a company’s strategy
Concept of a sustainable competitive advantage
The 5 most basic strategic approaches for setting a company apart from rivals and winning a sustainable competitive advantage
A company’s strategy tends to evolve because of changing circumstances and ongoing efforts by management to improve the strategy
Why it is important for a company to have a viable business model that outlines the company’s customer value proposition and its profit formula
The 3 tests of a winning strategy
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Chapter 1
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How to please customers
How to respond to changing market conditions
How to outcompete rivals
How to grow the business
How to manage each functional piece of the business and develop needed organizational capabilities
How to achieve strategic and financial objectives
Management commitment to a coherent array of well consider choices about how to compete
Chapter 1
A company strategy is the set of actions that the managers take to outperform the company’s competitors and achieve superior profitability
Strategy is about competing differently from rivals – doing what competitors don’t do or even better doing what they can’t do
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The pattern of actions and business approaches that define a company’s strategy
Actions to gain sales and market share via more performance features, more appealing-design, better quality or customer service, wider product selection, or other such actions
Actions to gain sales and market share with lower prices based on lower costs
Actions enter new product or geographic markets or to exit existing ones
Actions to capture emerging market opportunities and defend against external threats to the company’s business prospects
Actions to strengthen market standing and competitiveness by acquiring or merging with other companies
Actions to strengthen competitiveness via strategic alliances and collaborative partnerships
Actions and approaches used in managing R&D, production, sales and marketing, finance, and other key activities
Actions to upgrade, build, or acquire competitively important resources and capabilities
Actions to strengthen the firm’s bargaining position with suppliers, distributors, and others
Identifying a Company’s Strategy – WHAT to LOOK FOR
Sustainable Competitive Advantage
5 Basic
Strategic Approaches
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Chapter 1
The 5
The first 2 are standard approaches
1. Low cost provider strategy
Achieving cost-based advantage over rivals – when rivals find it hard to match the low-cost leader’s approach to driving costs off the business
e.g. Southwest Airlines and Walmart
2. A broad differentiation strategy
Seeking to differentiate the company’s products or services of rivals in ways that will appeal to a broad spectrum of buyers (one way is through innovation)
e.g. BMW (engineering design and performance), LVMH (luxury and prestige), Johnson & Johnson baby products (reliability)
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Chapter 1
The 5
The next 2 begin to narrow the standard approaches
3. A Focused Low cost strategy
Focus on a market niche buyer and outcompeting rivals by having lower costs
e.g. private label manufacturers of food, health and beauty products, and nutritional supplements use their low-cost advantage to compete against brand names
4. A broad differentiation strategy
concentrate on a narrow buyer segment by offering buyers customized attributes that meet their specialized need and tastes better than rivals’ products
e.g. Jiffy Lube International in quick oil change, The Weather Channel
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Chapter 1
The 5
The last strategy is a HYBRID
5. A best-cost provider strategy
A hybrid strategy blends elements of low-cost provider and differentiation strategies --- the aim is to have lower cost than rivals while simultaneously offering better differentiation attributes
Giving customers more value for the money by satisfying their EXPECTATIONS ON KEY QUALITY FEATURES, PERFORMANCE, AND/OR SERVICE ATTRIUTES WHILE BEATING THEIR PRICE EXPECTATIONS
e.g. Target is know for its hip product design ( a reputation built by cheap-chic designers as Isaac Mizrahi) and more appealing shopping ambience for discount store shoppers
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Chapter 1
ProActive AND ReActive Strategy
External Factors
Industry and competitive conditions
Buyers Preferences
Societal, political, economic, regulatory, technological, and environmental considerations
Internal Factors
Resource strengths and weaknesses
Competitive capabilities
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Chapter 1
Abandoned
strategy elements
New planned initiatives plus ongoing strategy elements continued from prior periods
New strategy elements that emerge as managers react adaptively to changing circumstances
A company’s Current (or Realized) Strategy
Emergent Strategy
(reactive, Adaptive Elements)
Deliberate Strategy
(Proactive Strategy Elements)
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What Makes a Strategy a WINNER?
A winning strategy must pass three tests:
The FIT TEST
How well does strategy fit the firm’s situation?
The COMPETITIVE ADVANTAGE TEST
Is the strategy helping the company achieve a sustainable competitive advantage?
The PERFORMANCE TEST
Is the strategy producing good company performance?
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Chapter 1
The Fit Test … no strategy can work well unless it exhibits good external fit and is in sync with prevailing market conditions … a wining strategy must be tailored to the company’s resources and competitive capabilities and be supported by a complementary set of functional activities.
It must also exhibit internal fit and the capability with company’s ability to execute the strategy in a competent manner
Unless a strategy exhibits a good fit both external and internal aspects it is likely to under perform
Winning strategies also exhibit a dynamic fit in the sense it is evolving over time
The Competitive Advantage test … the bigger and more durable the competitive advantage the more powerful it is
The Performance test … 2 kinds of performance indicator (1) competitive strength and market standing and (2) profitability and financial strength
Above-average financial performance or gains in the market share, competitive position or profitability are signs of a winning strategy
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Good Strategy + Good Strategy Execution = Good Management
Strategy Link to Ethics
Ethical strategies must entail actions and behaviour that can pass the test of moral scrutiny in the sense of NOT BEING deceitful, unfair or harm to others, disrespectable, or unreasonably damaging to the environment
Core Management Functions
Good strategy and good strategy execution are the most telling and trustworthy signs of good management
Management team charts the company’s direction
Develops competitive effective strategic moves
And pursues what needs to be done internally to produce day-in and day-out strategy execution and operation excellence
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Chapter 1
LEARNING OBJECTIVES
What is meant by a company’s strategy
Concept of a sustainable competitive advantage
The 5 most basic strategic approaches for setting a company apart from rivals and winning a sustainable competitive advantage
A company’s strategy tends to evolve because of changing circumstances and ongoing efforts by management to improve the strategy
Why it is important for a company to have a viable business model that outlines the company’s customer value proposition and its profit formula
The 3 tests of a winning strategy
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Chapter 1
Assignment
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Read Chapters 1 & 2
The chapters begin with Learning Objectives (L.O.) by the authors
Select two L.O.s from each chapter and discuss how the author succeeded with you – i.e. explain the learnings from your perspective (minimum 100 words per L.O.).
Apply the concepts toward your final paper.
Submit all responses in the appropriate Blackboard Discussions module
Chapter 1
