Strategy
Chapter 1
Chapter 1 Concepts What do we mean by strategy? A company's strategy is the coordinated set of actions that its managers take in order to outperform the company's competitors and achieve superior profitability. It's to bring long lasting success to the company with set objectives that support and secure the company. It requires a commitment to the path chosen. How to position the company in the marketplace, how to attract customers, how to compete against rivals, how to achieve the company's performance targets, how to capitalize on opportunities to grow the business, how to respond to changing economic and market conditions. Strategy and the quest for competitive advantage Heart of strategy is the actions in the marketplace that managers take to gain a competitive advantage over rivals. A competitive advantage is found when a company has an edge over rivals in attracting buyers and coping with competitive forces Business model: management's blueprint for delivering a valuable product or service to customers in a manner that will generate revenues sufficient to cover costs and yield an attractive profit. Two elements are its customer value proposition and its profit formula. Identifying a company's strategy • Actions to strengthen the firm's bargaining position with suppliers, distributors, and others • Actions to gain market share through more performance features, better design, quality, customer service, wider product selection, etc • Gain increased market share or profitability via lower costs • Enter into new product or geographic markets or even exit existing ones • Capture emerging market opportunities and defend against external threats to the company's business prospects • Strengthen market standing and reputation through corporate responsibility and sustainability programs • Actions to strengthen corporate culture, motivate employees, create a productive environment • Strengthen competitiveness through strategic alliances, partnerships, mergers, or acquisitions • Actions and approaches used in managing R&D, production, sales and marketing, finance, or other key activities • Upgrade, build, or acquire competitively important resources and capabilities What makes a strategy a winner? Must pass the fit test, the competitive advantage test, and the performance test. The Fit Test: How well does the strategy fit the company's situation? To qualify as a winner, a strategy has to be well matched to industry and competitive conditions, a company's best market opportunities, and other pertinent aspects of the business environment in which the company operates. No strategy can work well unless it exhibits good external fit with respect to prevailing market conditions. At the same time, a winning strategy must be tailored to the company's resources and competitive capabilities and be supported by a complementary set of functional activities (i.e., activities in the realms of supply chain management, operations, sales and marketing, and so on). That is, it must also exhibit internal fit and be compatible with a company's ability to execute the strategy in a competent manner. Unless a strategy exhibits good fit with both the external and internal aspects of a company's overall situation, it is likely to be an underperformer and fall short of producing winning results. Winning strategies also exhibit dynamic fit in the sense that they evolve over time in a manner that maintains close and effective alignment with the company's situation even as external and internal conditions change 2. The Competitive Advantage Test: Is the strategy helping the company achieve a competitive advantage? Is the competitive advantage likely to be sustainable? Strategies that fail to achieve a competitive advantage over rivals are unlikely to produce superior performance. And unless the competitive advantage is sustainable, superior performance is unlikely to last for more than a brief period of time. Winning strategies enable a company to achieve a competitive advantage over key rivals that is long-lasting. The bigger and more durable the competitive advantage, the more powerful it is. The Performance Test: Is the strategy producing superior company performance? The mark of a winning strategy is strong company performance. Two kinds of performance indicators tell the most about the caliber of a company's strategy: (1) competitive strength and market standing and (2) profitability and financial strength. Above-average financial performance or gains in market share, competitive position, or profitability are signs of a winning strategy Good Strategy + Good strategy execution = good management
Chapter 2
Chapter 2 1. Developing a strategic vision that charts the company's long-term direction, a mission statement that describes the company's purpose, and a set of core values to guide the pursuit of the vision and mission. 2. Setting objectives for measuring the company's performance and tracking its progress in moving in the intended long-term direction. 3. Crafting a strategy for advancing the company along the path management has charted and achieving its performance objectives. 4. Executing the chosen strategy efficiently and effectively. 5. Monitoring developments, evaluating performance, and initiating corrective adjustments in the company's vision and mission statement, objectives, strategy, or approach to strategy execution in light of actual experience, changing conditions, new ideas, and new opportunities Strategic Plan: maps out where a company is headed, establishes strategic and financial targets, and outlines the basic business model, competitive moves, and approaches to be used in achieving the desired business results. Concepts Explain the strategy making and executing steps, Figure 2.1 for example Phase 1 - Developing a strategic vision, mission, and core values describes management's aspirations for the company's future and the course and direction charted to achieve them. mission statement describes the enterprise's present business and purpose—"who we are, what we do, and why we are here." It is purely descriptive. Ideally, a company mission statement (1) identifies the company's products and/or services, (2) specifies the buyer needs that the company seeks to satisfy and the customer groups or markets that it serves, and (3) gives the company its own identity. A company's values are the beliefs, traits, and behavioral norms that company personnel are expected to display in conducting the company's business and pursuing its strategic vision and mission. Phase 2 - setting objectives objectives is to convert the vision and mission into specific performance targets. Objectives reflect management's aspirations for company performance in light of the industry's prevailing economic and competitive conditions and the company's internal capabilities. Specific and quantifiable, measurable, time-limited, challenging, achievable Stretch objectives set performance targets high enough to stretch an organization to perform at its full potential and deliver the best possible results. Extreme stretch goals are warranted only under certain conditions. Financial objectives communicate management's goals for financial performance. Strategic objectives are goals concerning a company's marketing standing and competitive position. A company's set of financial and strategic objectives should include both near-term and longer-term performance targets Phase 3 - Crafting a strategy to achieve the objectives and the company vision Business strategy is concerned with strengthening the market position, building competitive advantage, and improving the performance of a single line of business Functional-area strategies concern the approaches employed in managing particular functions within a business—like research and development (R&D), production, procurement of inputs, sales and marketing, distribution, customer service, and finance. Operating strategies concern the relatively narrow approaches for managing key operating units (e.g., plants, distribution centers, purchasing centers) and specific operating activities with strategic significance (e.g., quality control, materials purchasing, brand management, Internet sales). Strategic vision + mission + objectives + strategy = strategic plan Phase 4 - Executing the strategy • Creating a strategy-supporting structure. • Staffing the organization to obtain needed skills and expertise. • Developing and strengthening strategy-supporting resources and capabilities. • Allocating ample resources to the activities critical to strategic success. • Ensuring that policies and procedures facilitate effective strategy execution. • Organizing the work effort along the lines of best practice. • Installing information and operating systems that enable company personnel to perform essential activities. • Motivating people and tying rewards directly to the achievement of performance objectives. • Creating a company culture conducive to successful strategy execution. • Exerting the internal leadership needed to propel implementation forward. Pha se 5 - Monitoring developments, evaluation performance, and initiating corrective adjustments the trigger point for deciding whether to continue or change the company's vision and mission, objectives, strategy, and/or strategy execution methods Handout: "Defining the Mission and Planning Pr
Chapter 3
Concepts Draw and label Figure 3.2 Explain Table 3.1: Six components of the macro-environemnt: political factors, economic conditions, sociocultural forces, technological factors, environmental forces, and legal and regulatory factors Explain Figure 3.3 Porter's Five Forces Model (1) competition from rival sellers, (2) competition from potential new entrants to the industry, (3) competition from producers of substitute products, (4) supplier bargaining power, and (5) customer bargaining power. Competitive pressures created by the rivalry among competing sellers Competitive pressures associated with the threat of new entrants This is because credible threat of entry often prompts industry members to lower their prices and initiate defensive actions in an attempt to deter new entrants. Just how serious the threat of entry is in a particular market depends on (1) whether entry barriers are high or low, and (2) the expected reaction of existing industry members to the entry of newcomers. Competitive pressures stemming from buyer bargaining power Suppliers with strong bargaining power are a source of competitive pressure because of their ability to charge industry members higher prices, pass costs on to them, and limit their opportunities to find better deals. BONUS QUESTION: Review your Leadership Self-Assessment from Day One of the course Identifying the forces driving industry change driving forces because they have the biggest influences in reshaping the industry landscape and altering competitive conditions • changes in an industry's long term growth rate • increasing globalization • emerging new internet capabilities and applications • Shifts in who buys the products and how the products are used • Technological change and manufacturing process innovation • Product innovation • Marketing innovation • Entry or exit of major firms • Diffusion of technical know-how across companies and countries. • Changes in cost and efficiency • Reductions in uncertainty and business risk • Regulatory influences and government policy changes • Changing societal concerns, attitudes, and lifestyle Using strategic group maps to assess marketing conditions of key competitors Strategic group mapping is a technique for displaying the different market or competitive positions that rival firms occupy in the industry. • Identify the competitive characteristics that delineate strategic approaches used in the industry. Typical variables used in creating strategic group maps are price/quality range (high, medium, low), geographic coverage (local, regional, national, global), product-line breadth (wide, narrow), degree of service offered (no frills, limited, full), use of distribution channels (retail, wholesale, Internet, multiple), degree of vertical integration (none, partial, full), and degree of diversification into other industries (none, some, considerable). • Plot the firms on a two-variable map using pairs of these variables. • Assign firms occupying about the same map location to the same strategic group. • Draw circles around each strategic group, making the circles proportional to the size of the group's share of total industry sales revenues. Key success factors Key success factors are the strategy elements, product and service attributes, operational approaches, resources, and competitive capabilities that are essential to surviving and thriving in the industry.
Chapter 4
Know the six questions 1. How well is the company's present strategy working? 2. What are the company's most important resources and capabilities, and will they give the company a lasting competitive advantage over rival companies? 3. What are the company's strengths and weaknesses in relation to the market opportunities and external threats? 4. How do a company's value chain activities impact its cost structure and customer value proposition? 5. Is the company competitively stronger or weaker than key rivals? 6. What strategic issues and problems merit front-burner managerial attention? SWOT and Identifying company resource strengths and competitive capabilities Explain Table 4.2 Strengths and competitive assets weaknesses and competitive deficiencies page 95 A resource is a competitive asset that is owned or controlled by a company; a capability (or competence) is the capacity of a firm to perform some internal activity competently. Capabilities are developed and enabled through the deployment of a company's resources. A dynamic capability is an ongoing capacity of a company to modify its existing resources and capabilities or create new ones. The concept of a company value chain A company's value chain identifies the primary activities and related support activities that create customer value. Benchmarking Benchmarking is a potent tool for improving a value chain activities that is based on learning how other companies perform them and borrowing their "best practices." Strategic options for remedying a cost or value disadvantage There are three main areas in a company's total value chain system where company managers can try to improve its efficiency and effectiveness in delivering customer value: (1) a company's own internal activities, (2) suppliers' part of the value chain system, and (3) the forward-channel portion of the value chain system. Is the company competitively stronger or weaker than key rivals? • Step 1 in doing a competitive strength assessment is to make a list of the industry's key success factors and other telling measures of competitive strength or weakness (6 to 10 measures usually suffice). • Step 2 is to assign weights to each of the measures of competitive strength based on their perceived importance. (The sum of the weights for each measure must add up to 1.) • Step 3 is to calculate weighted strength ratings by scoring each competitor on each strength measure (using a 1-to-10 rating scale, where 1 is very weak and 10 is very strong) and multiplying the assigned rating by the assigned weight. • Step 4 is to sum the weighted strength ratings on each factor to get an overall measure of competitive strength for each company being rated. • Step 5 is to use the overall strength ratings to draw conclusions about the size and extent of the company's net competitive advantage or disadvantage and to take specific note of areas of strength and weakness. • You should also review the BA 410 Sample Exam Questions from Chapter 1 document as part of your Exam 1 preparation (Sakai Syllabus folder). • BONUS QUESTION: How to cite the course textbook (Sakai Syllabus folder) References Thompson, A. A., Peteraf, M. A., Gamble, J. E. & Strickland, A. J. (2020). Crafting and executing strategy: The quest for competitive advantage. Concepts and cases. (22nd ed.). Boston: McGraw-Hill Irwin.