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CHAPTER 1

CHAPTER 1. Strategy and the Quest for Competitive Advantage. Thinking Strategically: The Three Big Strategic Questions. Where are we now? Current situational analysis 2. Where do we want to go?

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CHAPTER 1

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  1. CHAPTER 1 Strategy and the Quest for Competitive Advantage

  2. Thinking Strategically:The Three Big Strategic Questions • Where are we now? • Currentsituational analysis 2. Where do we want to go? • Business(es) to be in and market positions to stake out • Buyer needs and groups to serve • Direction to head 3.How are we going to get there? • A company’s answer to “how willwe get there?” is its strategy

  3. What Do We Mean By “Strategy?” • Consists of competitive moves and business approaches used by managers to run the company • Management’s “action plan” to • Attract and please customers • Compete successfully • Conduct operations • Achieve target levels oforganizational performance

  4. Answering the Question, “How Are We Going to Get There?” • How to please customers • How to outcompete rivals • Howto manage each functional piece of the business (R&D, production, marketing, HR, finance, and so on) • How to respond to changing market conditions • Howto achieve targeted levels of performance

  5. Elements of a Company’s Business Strategy

  6. McDonald’s Strategy • Key initiatives of McDonald’s “Plan to Win” Strategy • Improved restaurant operations • Affordable pricing • Wide menu variety and beverage choices • Convenience and expansion of dining opportunities • Ongoing restaurant reinvestment

  7. Strategy and Sustainable Competitive Advantage • A company achievessustainable competitive advantagewhen a sufficiently large number of buyers develop a lasting preference for its products/services over those offered by rivals

  8. Four Proven Strategic Approaches toWinning a Sustainable Competitive Advantage • Developing a cost-based advantage • Creating a differentiation-based advantage • Focusing on a narrow market niche • Developing competitively valuable resources and capabilities rivals can’t easily match, copy, or trump with substitute resources

  9. Competitive Strategy Examples • Strive to be the industry’s low-cost provider • Wal-Mart - distribution capabilities • Southwest Airlines –no frills service • Outcompete with a key differentiating feature • Harley-Davidson– Outlaw image and distinctive engine sound • Rolex– Top-of-the-line prestige • Amazon.com– Wide selection and convenience

  10. Competitive Strategy Examples • Focus on a narrow market niche • Best Buy– Home electronics • eBay– Online auctions • The Weather Channel – Cable TV • Develop competitively important resources or capabilities not easily imitated by rivals • Fed Ex– Superior distribution capabilities • Ritz-Carlton– Personalized customer service

  11. Why Do Strategies Evolve? • A company’s strategy is a work in progress • Changes may be necessary to react to • Shifting market conditions • Changing competitor moves • Evolving customer preferences • Emerging market opportunities • New ideas to improve strategy • Crisis situations

  12. A Company’s Strategy Is a Blend of Planned Initiatives and Unplanned Reactive Adjustments

  13. The Importance of a Company’s Business Model A business model is management’s blueprint for delivering value to customers and earning an attractive profit • Is the strategy capable of delivering profits? • How will business provide customers with value and generate revenues sufficient to cover costs and produce profits? • What resources are needed to deliver value to customers?

  14. Elements of a Business Model • Specifies a customer value proposition (its approach to satisfying buyer wants and needs at a price customers will consider a good value) • Develops a profit formula (determining a cost structure that will allow for acceptable profits given the pricing tied to its customer value proposition) • Identifies key resources and processes necessary to create value and deliver value to customers

  15. Tests of a Winning Strategy • GOODNESS OF FIT TEST • How well does strategy fitthe firm’s situation? • COMPETITIVE ADVANTAGE TEST • Does strategy lead to sustainable competitive advantage? • PERFORMANCE TEST • Does strategy boost firm performance?

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