ch 1 what is strategy 14th

7/27/2019 CH 1 What is Strategy 14th

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What Is Strategy and

Why Is It Important?

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Chapter

Screen graphics created by:

Jana F. Kuzmicki, Ph.D.Troy State University-Florida and Western Region


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Chapter Roadmap

What Is Strategy?

Identifying a Companys Strategy

Strategy and the Quest for Competitive Advantage

Strategy Is Partly Proactive and Partly Reactive

Strategy and Ethics: Passing the Test of Moral Scrutiny

The Relationship Between a Companys Strategy and Its

Business ModelWhat Makes a Strategy a Winner?

Why Are Crafting and Executing Strategy Important?


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Thinking Strategically:The Three Big Strategic Questions

1. Where are we now?

2. Where do we want to go?

Business(es) to be in and market positions to stake out

Buyer needs and groups to serve

Outcomes to achieve

3. How will we get there?

A companys answer to how

will we get there? is its strategy


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Core Concept

A companys strategy consists of the

competitive moves and business approaches

that managers employ to attract and pleasecustomers, compete successfully, grow the

business, conduct operations, and achieve

targeted objectives.


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What Is Strategy?

Consists of the combinationofcompeti tive movesandbusiness approachesused by managers to run the

company

Managements game planto

Attract and please customers

Stake out a market position

Compete successfullyGrow the business

Achieve targeted objectives


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Howto please customers

Howto respond to changing

market conditions

Howto outcompete rivals

Howto grow the business

Howto manage each functional piece of the business anddevelop needed organizational capabilities

Howto achieve strategic and financial objectives

Strategyis HOW

to . . .

The Hows ThatDefine a Firm's Strategy


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Fig. 1.1: Identifying a Companys Strategy


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Striving forCompetitive Advantage

To achieve sustainable competitive advantage, acompanys strategy usually must be aimed at either

Providing a distinctive product or service or

Developing competitive capabilities rivals can not match

Achieving a sustainable competitive advantage greatlyenhances a companys prospects for

Winning in the marketplace and

Realizing above-average profits

What separates a powerful strategyfrom an ordinary strategyis managements ability to forge a series of moves,

both in the marketplace and internally, thatproduces sustainable competi tive advantage!


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Strategic Approaches toBuilding Competitive Advantage

Strive to be the industrys low-cost provider

Outcompete rivals on a key differentiating feature

Focus on a narrow market niche, doing a better job

than rivals of serving the unique needs of niche

buyers

Develop expertise, resource strengths, and

capabilities not easily imitated by rivals


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Fig. 1.2: A Companys Strategy IsPartly Proactive and Partly Reactive


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A companys strategy is a work in progress

Changesmay be necessary to reactto

Fresh moves of competitors

Evolving customer preferences

Technological breakthroughs

Shifting market conditions

Crisis situations

Why Do Strategies Evolve?


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Ethical and moral standards go beyond

Prohibitions of law andthelanguage ofthou shalt not

to issues of

Dutyand right vs. wrong

Ethical and moral standards address

What is the right thing to do?

Two criteria of an ethical strategy:

Does not entail actions and behaviors that cross the line from

can doto should not doand unsavoryorshadyand

Allows management to fulfill its ethical duties to all stakeholders

Linking Strategy With Ethics


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A Firms Ethical Responsibilitiesto Its Stakeholders

Owners/shareholdersRightfully expect some form ofreturn on their investment

Employees- Rightfully expect to be treated with dignityand respect for devoting their energies to the enterprise

Customers- Rightfully expect a seller to provide themwith a reliable, safe product or service

Suppliers- Rightfully expect to have an equitablerelationship with firms they supply and be treated fairly

Community- Rightfully expect businesses to be goodcitizens in their community


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What Is a Business Model?

A business model addresses How do we make money inthis business?

Is the strategy capable of delivering

good bottom-line results?

Do the revenue-cost-profit economics

of the strategy make good business sense?

Look at revenue streamsthe strategy is expected to produce

Look at associated cost structureand potential profi t margins

Do resulting earnings streams and ROI indicate the strategy

makes sense and the company has a viable business model for

making money?


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Strategy- Deals with acompanys competitive

initiatives and business

approaches

Business Model-Concerns whether

revenues and costs

flowing from the strategydemonstrate the business

can be amply profitable

and viable

Relationship BetweenStrategy and Business Model


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Tests of a Winning Strategy

GOODNESS OF F IT TEST

How well does strategy fit

the firms situation?

COMPETITIVE ADVANTAGE TEST

Does strategy lead to sustainable

competitive advantage?

PERFORMANCE TEST

Does strategy boost firm performance?

Oth C it i f J d i


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Other Criteria for Judgingthe Merits of a Strategy

Internal consistency and unity among all pieces of thestrategy

Degree of risk the strategy poses as compared to

alternative strategies

Degree to which the strategy is flexible and adaptable to

changing circumstances

While these criteria are relevant, they seldom override

the importance of the three testsof a winning strategy!


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ch 1 what is strategy 14th

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