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The Three big strategic questions are
- 1. What's the compay's present situation
- 2. Where does the company need to go from here?
- 3. How should it get there?
The Hows that define a Firm's Strategy
- How to grow the business
- How to please customers
- how to outcompete rivals
- How to manage each functional piece of business (R&D, production, marketing, HR, finance and so)
- How to respond to changing market condition
- How to achieve targeted levels of performance
Strategic choices about "how" are based on
- Trial and error organizational learning about what has worked and what has not worked
- Management's appetite for taking risks
- managerial analysis and strategic thinking about how best to proceed given market conditions and a company's circumstances
In choosing a strategy, managment is in effect saying
"amoung all the many different ways of competing we could have chosen, we have decided to employ this combination of competitive and operating approaches to move the company in the intended direction, strengthen its market position and competitveness, and boost performance"
Developing a successful strategy hines on making competitive moves aimed at
- Appealing to buyers in ways to set the company apart from rivals and
- Carving out it's own market position
Involves developing a distinctive "aha" element to
- Attract customers and
- produce competitive edge
The heart and soul of any strategy are actions a company makes to
- Improve its finacial perforamnce
- stregthen its competitive position, and
- gain competitive advantages over rivals
A creative, distinctive strategy that sets a company apart from rivals and yields a competitive advantage is a company's most reliable ticket to above average profitability
Operating with a competitive advantage is more profitable than operating without one
Operating with a competitive disadvantage nearly always results in below-average profitability
A company achieves sustainable competitive advantage when
- an attractive number of buyers prefer tis product/services over those of rivals and
- The basis for this preference is durable
What separates a powerful strategy from and ordinary strategy is management's ability to forge a series of moves, both in the marketplace and internally, that
produces sustainable competitive advantage
Strategic approches to building sustainable competitive advantages are
Be the industry low cost provider by achieving a cost-based competitive advantage
Incorporate differentiating features such as superior products/service keyed to higher quality, better performance, wider selection, value-added services, or some other attribute
Focus on a narrow market niche by winning a competitive edge by doing a better job than rivals of serving the need and preferences of buyers in the niche
Develop expertise and resource strengths not easily imitated or matched by rivals Achieve a capablities-based competitive advantage
Identifying a company's strategy 1
Actions to gain sales and market share via lower prices, more performance features, more appealing design, better quality or cust serv, wider product selection, or other such actions
Identifying a company's strategy 2
Actions to respond to changing market conditions or other external factors
Identifying a company's strategy 3
Actions to enter new geographic or product markets or exit existing ones
Identifying a company's strategy 4.
Actions to capture emerging market opportunties and defend against external threats to the company's business prospects
Identifying a company's strategy 5
Actions to strenthen market standing and competitiveness by acquiring or mearging wit other companies
Identifying a company's strategy 6
Actions to stregthen competitiveness via strategic alliances and collaborative partnerships
Identifying a company's strategy 7
Actions and approaches used in managing R&D, production, sales and marketing, finance, and other key activities
Identifying a company's strategy 8
Actions to strengthen competitive capabilities and correct competitive weaknesses
Identifying a company's strategy 9
Actions to diversify the company's revenues and earnings by entering new businesses
Why do Strategies Evolve?
- A company's strategy is a work in progress
- Changes may be necessary to react to
- Financial Crisis
- Fresh moves of competitors
- evolving customer prefernces
- Technological breakthroughs
- Emerging market opportunities
- changing political or enconomic climate
- New Ideals to improve strategy
A company's stratgey is a blend of proactive initiatieves and reactive adjustments
- Proacative strategy elements included
- New intiatives plus ongoing strategy elements continued from prior periods
- Reactive Strategy elements
- Adaptive reactions to changing circumstances
These become the latest version of the company's strategy and the prior version of the companies strategy is abandoned
Ethical and moral standards go beyond
prohibitions of law and language of "though shalt not"
to issues of Duty and right vs "wrong"
Ethical and moral standards address
What is the right thing to do?
Two critieria of an ethical strategy
Does not entail actions and behaviors that cross the line from "should do" to "should not do" (because such actions are unsavory, shandy, unconscionable, injurious to others, or harmful to the environment)
Allow managment to fufill its ethical duties to all stakeholders
A firm's ethical Responsibilities too its Stakeholders
Owners/shareholders - Rightfully expect some form of return on their invesment
Employees - Rightfully expect to be treated with dignity and respect for devoting their energies to the enterprise
Customers - Rightfully expect a seller to provide them with a reliable, safe product or service
Supplies Rightfully expect to have an equitable relationship with firms they supply and be treated faily
Community Rightfully expect pbusinesses to be good citizens in their community
Roes of senior executives; linking strategy with ethics
Forbid pursuit of ethically questionable business opportunities
insist all aspects of company strategy reflect high ethical standards
make it clear that all employees are expected to act with integrity
install organizational checks and balances to monitor behavior, enforce ethcal codes of conduct and provide gudiance to employees in gray areas
Display genuine commitment to conduct business activities ethically
What is a business model?
A business model addresses "how do we make money in this business?"
Is a the company's strategy capable of delivering good bottom-line results?
Do the revenue-cost-profit economics of the strategy make good business sense?
Look at revenue streams the strategy is expected to produce
Look at associated cost structure and potential profit margins
Do resulting earnings streams and ROI indicate the strategy has good potential to deliver acceptable profitability?
Relationship between strategy and business Model
Stragey: deals with a company's competitive initiatives and business approaches
Business model concerns whether revenues and cost flowing from the strategy demonstrate a business can be profitable and viable
Tests of a winning strategy
Goodness of fit test How well does the strategy fit the company's external and internal situation?
Competitive advantage test is the strategy helping the company acieve a sustainable competitive advantage?
Performance Test is the strategy resulting in better company performance?
Why shold crafting and executing strategy be top priority management tasks?
A compelling need exists for managers to proactively shape how a firm's business will be conducted
A strategy -focused firm is more likelyt to be a strong bottom-line performer than one that views strategy as secondary
Good Strategy + Good Strategy Execution = Good Management
- Crafting and executing strategy are core management functions
- Among all things managers do, nothing affects a company's ultimate success or failure more fundamentally than how well its management team
- Charts a company's direction
- develops competitively effective strategic moves and guiness approaches, and
- Pursuses what needs to be done internally to produce good day=in/day=out strategy execution
Excellent execution of an excellent strategy is the best test of managerial excellence and the most reliable recipe for winning in the marketplace!