CHAPTER 1 Strategy and the Quest for Competitive Advantage
Thinking  Strategically: The  Three  Big  Strategic  Questions <ul><li>Where are we now? </li></ul><ul><ul><li>Current   s...
What  Do  We  Mean  By  “Strategy?” <ul><li>Consists of  competitive moves  and  business approaches  used by managers to ...
Answering the Question, “How Are We Going to Get There?” <ul><ul><li>How  to please customers </li></ul></ul><ul><li>How  ...
Elements of a Company’s Business Strategy
McDonald’s Strategy <ul><li>Key initiatives of McDonald’s  “Plan to Win” Strategy </li></ul><ul><ul><li>Improved restauran...
Strategy  and Sustainable  Competitive  Advantage <ul><li>A company achieves   sustainable competitive advantage   when a ...
Four  Proven Strategic  Approaches  to Winning a Sustainable  Competitive  Advantage <ul><li>Developing a  cost-based adva...
Competitive Strategy Examples <ul><li>Strive to be the industry’s low-cost provider </li></ul><ul><ul><li>Wal-Mart  - dist...
Competitive Strategy Examples <ul><li>Focus on a narrow market niche </li></ul><ul><ul><li>Best Buy – Home electronics </l...
Why  Do  Strategies  Evolve? <ul><li>A company’s  strategy  is a  work in progress </li></ul><ul><li>Changes may be necess...
A Company’s Strategy Is a Blend of Planned Initiatives and Unplanned Reactive Adjustments
The Importance of a Company’s Business Model <ul><li>A business model is management’s  blueprint for delivering value  to ...
Elements of a Business  Model <ul><li>Specifies a customer value proposition  (its approach to satisfying buyer wants and ...
Tests  of  a  Winning  Strategy <ul><li>GOODNESS OF FIT TEST </li></ul><ul><ul><li>How well does strategy fit the firm’s s...
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Chap001 what is strategy

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Chap001 what is strategy

  1. 1. CHAPTER 1 Strategy and the Quest for Competitive Advantage
  2. 2. Thinking Strategically: The Three Big Strategic Questions <ul><li>Where are we now? </li></ul><ul><ul><li>Current situational analysis </li></ul></ul><ul><li>2. Where do we want to go? </li></ul><ul><ul><li>Business(es) to be in and market positions to stake out </li></ul></ul><ul><ul><li>Buyer needs and groups to serve </li></ul></ul><ul><ul><li>Direction to head </li></ul></ul><ul><li>3. How are we going to get there? </li></ul><ul><ul><li>A company’s answer to “how will we get there?” is its strategy </li></ul></ul>
  3. 3. What Do We Mean By “Strategy?” <ul><li>Consists of competitive moves and business approaches used by managers to run the company </li></ul><ul><li>Management’s “action plan” to </li></ul><ul><ul><li>Attract and please customers </li></ul></ul><ul><ul><li>Compete successfully </li></ul></ul><ul><ul><li>Conduct operations </li></ul></ul><ul><ul><li>Achieve target levels of organizational performance </li></ul></ul>
  4. 4. Answering the Question, “How Are We Going to Get There?” <ul><ul><li>How to please customers </li></ul></ul><ul><li>How to outcompete rivals </li></ul><ul><li>How to manage each functional piece of the business (R&D, production, marketing, HR, finance, and so on) </li></ul><ul><li>How to respond to changing market conditions </li></ul><ul><li>How to achieve targeted levels of performance </li></ul>
  5. 5. Elements of a Company’s Business Strategy
  6. 6. McDonald’s Strategy <ul><li>Key initiatives of McDonald’s “Plan to Win” Strategy </li></ul><ul><ul><li>Improved restaurant operations </li></ul></ul><ul><ul><li>Affordable pricing </li></ul></ul><ul><ul><li>Wide menu variety and beverage choices </li></ul></ul><ul><ul><li>Convenience and expansion of dining opportunities </li></ul></ul><ul><ul><li>Ongoing restaurant reinvestment </li></ul></ul>
  7. 7. Strategy and Sustainable Competitive Advantage <ul><li>A company achieves sustainable competitive advantage when a sufficiently large number of buyers develop a lasting preference for its products/services over those offered by rivals </li></ul>
  8. 8. Four Proven Strategic Approaches to Winning a Sustainable Competitive Advantage <ul><li>Developing a cost-based advantage </li></ul><ul><li>Creating a differentiation-based advantage </li></ul><ul><li>Focusing on a narrow market niche </li></ul><ul><li>Developing competitively valuable resources and capabilities rivals can’t easily match, copy, or trump with substitute resources </li></ul>
  9. 9. Competitive Strategy Examples <ul><li>Strive to be the industry’s low-cost provider </li></ul><ul><ul><li>Wal-Mart - distribution capabilities </li></ul></ul><ul><ul><li>Southwest Airlines – no frills service </li></ul></ul><ul><li>Outcompete with a key differentiating feature </li></ul><ul><ul><li>Harley-Davidson – Outlaw image and distinctive engine sound </li></ul></ul><ul><ul><li>Rolex – Top-of-the-line prestige </li></ul></ul><ul><ul><li>Amazon.com – Wide selection and convenience </li></ul></ul>
  10. 10. Competitive Strategy Examples <ul><li>Focus on a narrow market niche </li></ul><ul><ul><li>Best Buy – Home electronics </li></ul></ul><ul><ul><li>eBay – Online auctions </li></ul></ul><ul><ul><li>The Weather Channel – Cable TV </li></ul></ul><ul><li>Develop competitively important resources or capabilities not easily imitated by rivals </li></ul><ul><ul><li>Fed Ex – Superior distribution capabilities </li></ul></ul><ul><ul><li>Ritz-Carlton – Personalized customer service </li></ul></ul>
  11. 11. Why Do Strategies Evolve? <ul><li>A company’s strategy is a work in progress </li></ul><ul><li>Changes may be necessary to react to </li></ul><ul><ul><li>Shifting market conditions </li></ul></ul><ul><ul><li>Changing competitor moves </li></ul></ul><ul><ul><li>Evolving customer preferences </li></ul></ul><ul><ul><li>Emerging market opportunities </li></ul></ul><ul><ul><li>New ideas to improve strategy </li></ul></ul><ul><ul><li>Crisis situations </li></ul></ul>
  12. 12. A Company’s Strategy Is a Blend of Planned Initiatives and Unplanned Reactive Adjustments
  13. 13. The Importance of a Company’s Business Model <ul><li>A business model is management’s blueprint for delivering value to customers and earning an attractive profit </li></ul><ul><ul><ul><ul><ul><li>Is the strategy capable of delivering profits? </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>How will business provide customers with value and generate revenues sufficient to cover costs and produce profits? </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>What resources are needed to deliver value to customers? </li></ul></ul></ul></ul></ul>
  14. 14. Elements of a Business Model <ul><li>Specifies a customer value proposition (its approach to satisfying buyer wants and needs at a price customers will consider a good value) </li></ul><ul><li>Develops a profit formula (determining a cost structure that will allow for acceptable profits given the pricing tied to its customer value proposition) </li></ul><ul><li>Identifies key resources and processes necessary to create value and deliver value to customers </li></ul>
  15. 15. Tests of a Winning Strategy <ul><li>GOODNESS OF FIT TEST </li></ul><ul><ul><li>How well does strategy fit the firm’s situation? </li></ul></ul><ul><li>COMPETITIVE ADVANTAGE TEST </li></ul><ul><ul><li>Does strategy lead to sustainable competitive advantage? </li></ul></ul><ul><li>PERFORMANCE TEST </li></ul><ul><ul><li>Does strategy boost firm performance? </li></ul></ul>

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