Professional Documents
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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 companys strategy tends to evolve over time because of changing circumstances and ongoing management efforts to improve the companys strategy. 4. Learn why it is important for a company to have a viable business model that outlines the companys customer value proposition and its profit formula. 5. Learn the three tests of a winning strategy.
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Chapter 1
WHAT IS STRATEGY AND WHY IS IT IMPORTANT?
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Definition
Strategy
is the direction and scope of an organization over the long term ,which achieves advantage in a changing environment through its configuration of resources and competences with the aim of fulfilling stakeholder expectation
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Strategic Management
The
set of decisions and actions that result in the formulation and implementation of plans designed to achieve a companys objectives. It refers to the process of crafting strategies, their implementation and evaluation of their effectiveness.
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Mid-70s-mid-80s Positioning
MAIN ISSUES
Selecting sectors/markets. Positioning for leadership Industry analysis Segmentation Experience curve Portfolio analysis
Resources & Cooperative capabilities. strategy. Shareholder Complexity. value. Owning E-commerce. standards. Knowledge Management Alliances & networks Self-organiz ation & virtual organization
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MANAGEMENT IMPLICATIONS
Business environment and industry conditions Firms financial and competitive capabilities Creating a vision for the firms future direction
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 firms financial and market performance.
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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. Can yield above-average profits.
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1.1
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Follow-up
Which of McDonalds 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?
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Competitive Advantage
Meeting customer needs more effectively, with products or services that customers value more highly, or more efficiently, at lower cost.
Giving buyers lasting reasons to prefer a firms products or services over those of its competitors.
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Differentiation on featuresApple,Rolex
Best-cost provider-Target
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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.
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Changing market conditions Advancing technology Fresh moves of competitors Shifting buyer needs Emerging market opportunities New ideas for improving the strategy
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The Evolving Nature of a Firms Strategy/Patterns of Strategy Development 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.
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1.2
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Realized Strategy
Competitive Initiatives
$$$?
Business Model
Value Proposition
Business Approaches
Profit Formula
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By providing customers with value. The firms customer value proposition By generating revenues sufficient to cover costs and produce attractive profits. The firms profit formula
It takes a proven business modelone that yields appealing profitabilityto demonstrate viability of a firms strategy.
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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.
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Creating a cost structure that allows for acceptable profits, given that pricing is tied to the customer value proposition.
Vthe value provided to customers Pthe price charged to customers Cthe firms costs The lower the costs (C) for a given customer value proposition (VP), the greater the ability of the business model to be a moneymaker.
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Winning Strategy
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The Fit Test Does it exhibit dynamic fit with the external and internal aspects of the firms 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 firms profitability, financial and competitive strengths, and market standing?
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Follow-up
What internal and external factors will create difficulties for either competitor in changing its strategy or business model?
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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.
THINKING STRATEGICALLY
Googles web browser-based Chrome operating system and its online applications suite are now challenging Microsofts long-term dominance of those marketplace sectors.
What should be Microsofts first response to this competitive challenge? How will Microsofts response to this competitors actions affect its business model? Which competitors strategy will likely be the eventual winner in the marketplace?
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What must managers do, and do well, to make a firm a winner in the marketplace?
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.