Ch. 1 - What is Strategy & Why it's Important

A company's strategy stands a better chance of succeeding when...... a. it is developed through a collaborative process involving all managers and staff from all levels of the organization. b. managers employ conservative strategic moves based on past experience and form an underlying basis of control. c. it is predicated on competitive moves aimed at appealing to buyers in ways that set the company apart from rivals. d. managers copy the strategic moves of successful companies in its industry.

C

The most significant signs of a well-managed company are..... a. The eagerness with which executives set stretch financial and strategic objectives and develop an ambitious strategic vision. b. Aggressive pursuit of new opportunities and a willingness to change the company's business model whenever circumstances warrant. c. Good strategy-making combined with good strategy execution. d. A visionary mission statement and a willingness to pursue offensive strategies rather than defensive strategies.

C

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.

Reasons for a Co. to modify strategy

-Change in market conditions -Advancing tech. -Fresh moves of competititors -Shifting Buyer needs -Emerging market opportunities -New ideas for improving strategy

Elements of Successful Strategies

-Designing its own operating systemns, hardware, application software & servies -Continuously invest in R&D -Strategically locating stores -Maintaining quality brand image, supported by premium price -Committing to corp. social responsibility & sustainability through supplier relations -cultivating a diverse workforce rooted in transparency

"Hows" of strategy

-How to position the firm in the marketplace -How to attract customers -How to compete against rivals -How to achieve the firm's performance targets -How to capitalize on opportunities to grow the business -How to respond to changing economic & market conditions

Strategy.....

-Is deciding to compete differently by hopefully doing what they can not do -Guide the co. in what it must do & also in knowing what it must NOT do -Is successful when its actions, biz approaches & competitive moves appeal to buyers

Realized Strategy

-competitive initiatives -business approaches

Requirements of Sustainable Competitve advantage

-develop expertise & long-term competitive capabilities that can not be readily overcome -giving buyers reason(s) to prefer a firm's products over those of its competitors

business model

-value proposition: lays out the co.'s approach to satisfying buyer wants & needs at a price customers will consider a good value -profit formula : describes the co.'s approach to determining cost structure that will allow for acceptable profits, given the pricing tied to its customer value proposition

3 tests of a winning strategy

1. The Fit Test - "Does it exhibit a good fit with the external & internal aspects of the firm's dynamic situation?" 2. The Competitive Advantage Test - "Is it likely to result in a sustainable competitive advantage?" 3. The Performance Test - "Is it producing superior performance? Which measures are reliable?

3 central questions businesses face

1. What is our present situation? ----> EX: Industry conditions, Competitive pressure, future prospects in light of changes taking place 2. What should the company's future direction be and what performance targets should we set? ---->Which growth opportunities/customers to emphasize 3. What's our plan for running the company and achieving good results? ---->crafting of series of competitve moves & biz approaches

Giving customers more value for the money by satisfying their expectations on key quality features, performance, and/or service attributes while beating their price expectations is a __________ strategy. a. best-cost provider b. focused low-cost c. focused differentiation d. broad differentiation

A

Managers in all types of businesses must develop a clear answer for which of the following questions? a. What is the set of actions that we need to take to outperform competitors & achieve superior profitability? b. What approaches do we need to take in order to gain competitive advantage in the marketplace? c. Where are we now? d. Where do we go from here?

A

A company's realized strategy evolves from one version to the next due to..... a. Changing management direction because of understanding several appealing strategy alternatives. b. The proactive efforts of company managers to improve the current strategy, a need to respond to changing customer requirements and expectations, and a need to react to fresh strategic maneuvers on the part of rival firms. c. Ongoing turnover in the managerial and executive ranks (new managers often decide to shift to a different strategy). d. Pressures from shareholders to boost profit margins and pay higher dividends.

B

A company's strategy is not concerned with management's choices about how to.... a. attract and please customers. b. stake out the same market position as successful rival companies. c. grow the business. d. compete successfully.

B

A winning strategy must pass which three tests? a. The dominant market test, the sustainable advantage test, and the profit test b. The fit test, the competitive advantage test, and the performance test c. The sustainable performance test, the fit test, and the profit test d. The performance test, the dominant market test, and the fit test

B

Managers of all types of business organizations must develop a clear answer for which of the following questions? a. What approaches do we need to take in order to gain a competitive advantage in the marketplace? b. What is the set of actions that we need to take to outperform competitors and achieve superior profitability? c. Where are we now? d. Where do we go from here?

B

Sanofi, a pharmaceutical company selling prescription drugs in France for the past 10 years, has had moderate sales in a crowded market while its rivals manufacture and market drugs having similar efficacy and safety precautions, but with superior market share. This particular pharmaceutical company's greatest challenge is to increase prescriptions of their drugs by French doctors. What would be the most effective strategy for Sanofi to improve sales performance in its existing market? a. Relocating all the existing drug manufacturing facilities to developing countries to reduce operational costs b. Modifying marketinf communication to increase brand familiarity within key physician segments c. Employing hiting plans that aim at acquiring drug designers from rival companies d. Exiting the market and entering a new unexplored geographical location

B

focused low-cost strategy ((Strategy for Building Competitive Advantage))

Concentrating on a narrow buyer segment (or market niche) and outcompeting rivals by having lower costs than rivals and thus being able to serve niche members at a lower price

Customers value proposition (Customer's share)

Customer value - Product Price

In the course of crafting a strategy, managers typically do not...... a. abandon certain strategy elements that have grown stale or become obsolete. b. revamp the current strategy in response to the fresh strategic maneuvers of rival firms. c. take proactive actions to improve this or that piece of the strategy. d. share the strategy publicly to obtain additional customer and shareholder support.

D

best-cost provider strategy ((Strategy for Building Competitive Advantage))

Giving customers more value for the money by satisfying buyers' expectations on key quality/features/performance/service attributes while beating their price expectations

Low-cost provider strategy ((Strategy for Building Competitive Advantage))

achieving a cost-based advantage over rivals

Strategy

coordinated set of actions that its managers take in order to outperform the co.'s competitors & achieve superior profitability

Reactive (emergent) strategy

developed on the fly in response to unanticipated developments and fresh market conditions

Proactive (deliberate) strategy

elements that include planned initiatives to improve the company's financial performance and secure a competitive edge

Requirements of Competitive Advantage

requires meeting customer needs either more effectively (product) or effienctly (Low price)

broad differentiation strategy ((Strategy for Building Competitive Advantage))

seeking to differentiate the company's product or service from rivals' in ways that will appeal to a broad spectrum of buyers

focused differentiation strategy ((Strategy for Building Competitive Advantage))

serving only one segment of the overall market and trying to be the most differentiated organization serving that segment