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Ces18e ch01 ge(2)

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    Ces18e ch01 ge(2) Ces18e ch01 ge(2) Presentation Transcript

    • CHAPTER 1 WHAT IS STRATEGY AND WHY IS IT IMPORTANT?
    • 1. Understand why every company needs a sound strategy to compete successfully, manage the conduct of its business, and strengthen its prospects for long-term success. 2. Develop an awareness of the four most dependable strategic approaches for setting a company apart from rivals and winning a sustainable competitive advantage. 3. Understand that a company’s strategy tends to evolve over time because of changing circumstances and ongoing management efforts to improve the company’s strategy. 4. Learn 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. 5. Learn the three tests of a winning strategy. Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. 1–2
    • WHAT DO WE MEAN BY STRATEGY ? ♦ What is our present situation? ● Business environment and industry conditions ● Firm’s financial and competitive capabilities ♦ Where do we want to go from here? ● Creating a vision for the firm’s future direction ♦ How are we going to get there? ● Crafting an action plan that will get us there Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. 1–3
    • WHAT IS STRATEGY ABOUT? ♦ Strategy is all about How: ● How to outcompete rivals. ● How to respond to economic and market conditions and growth opportunities. ● How to manage functional pieces of the business. ● How to improve the firm’s financial and market performance. Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. 1–4
    • 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. Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. 1–5
    • STRATEGY AND COMPETITORS ♦ Strategy is about competing differently from rivals— ● Doing what they don’t do or doing it better! ● Doing what they can’t do! ● Doing that which sets the firm apart and attracts customers. ● Doing what we should or should not do to produce a competitive edge. Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. 1–6
    • 1.1 Identifying a Company’s Strategy—What to Look For Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. 1–7
    • Key initiatives of the Plan-to-Win strategy: • Improved restaurant operations • Affordable pricing • Wide menu variety and beverage choices • Convenience and expansion of dining opportunities • Ongoing restaurant reinvestment and international expansion Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. 1–8
    • Follow-up • Which of McDonald’s Plan-to-Win strategy initiatives are associated with meeting customer needs more effectively? • Which initiatives are focused on more efficiently delivering products and services? • Which initiatives will likely result in the most enduring competitive advantage? • Which of the initiatives will competitors likely attempt to overcome first? Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. 1–9
    • The Quest for Competitive Advantage ♦ Competitive Advantage ● Meeting customer needs more effectively, with products or services that customers value more highly, or more efficiently, at lower cost. ♦ Sustainable Competitive Advantage ● Giving buyers lasting reasons to prefer a firm’s products or services over those of its competitors. Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. 1–10
    • STRATEGIC APPROACH CHOICES Building Competitive Advantage Low-cost provider Differentiation on features Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. Focus on market niche Best-cost provider 1–11
    • STRATEGIC APPROACHES ♦ Building a competitive advantage by: 1. Striving to become the industry’s low-cost provider (efficiency). 2. Outcompeting rivals on differentiating features (effectiveness). 3. Focusing on better serving a niche market’s needs (efficiency andor effectiveness). 4. Offering the lowest (best) prices for differentiated goods (best-cost provider). Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. 1–12
    • GAINING SUSTAINABLE COMPETITIVE ADVANTAGE ♦ 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 in crafting your strategy. Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. 1–13
    • Why a Firm’s 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 Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. 1–14
    • The Evolving Nature of a Firm’s 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. Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. 1–15
    • 1.2 A Company’s Strategy Is a Blend of Proactive Initiatives and Reactive Adjustments Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. 1–16
    • THE RELATIONSHIP BETWEEN A FIRM’S STRATEGY AND ITS BUSINESS MODEL Realized Strategy $$$? Business Model Competitive Initiatives Value Proposition Business Approaches Profit Formula Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. 1–17
    • A Company’s Business Model ♦ How the business will make money : ● By providing customers with value.  The firm’s customer value proposition ● By generating revenues sufficient to cover costs and produce attractive profits.  The firm’s profit formula It takes a proven business model—one that yields appealing profitability—to demonstrate viability of a firm’s strategy. Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. 1–18
    • 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. Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. 1–19
    • Business Model Elements (cont’d) ♦ The Profit Formula ● Creating a cost structure that allows for acceptable profits, given that pricing is tied to the customer value proposition.  V—the value provided to customers P—the price charged to customers  C—the firm’s costs The lower the costs (C) for a given customer value proposition (V–P), the greater the ability of the business model to be a moneymaker.  ● Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. 1–20
    • IS OUR STRATEGY A WINNER? The Strategic Fit Test The Competitive Advantage Test Winning Strategy Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. The Performance Test 1–21
    • WHAT MAKES A STRATEGY A WINNER? ♦ A winning strategy must pass three tests: ● The Fit Test  Does it exhibit dynamic fit with the external and internal aspects of the firm’s 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 firm’s profitability, financial and competitive strengths, and market standing? Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. 1–22
    • WHY CRAFTING AND EXECUTING STRATEGY 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 Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. 1–23
    • THINKING STRATEGICALLY ♦ Google’s web browser-based Chrome operating system and its online applications suite are now challenging Microsoft’s long-term dominance of those marketplace sectors. ● What should be Microsoft’s first response to this competitive challenge? ● How will Microsoft’s response to this competitor’s actions affect its business model? ● Which competitor’s strategy will likely be the eventual winner in the marketplace? Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. 1–24
    • 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! Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. 1–25