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WhatChapter
Is Strategy
Title
and Why Is
It Important?
1-4
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
Grow the business
Attract and please customers
Compete successfully
Conduct operations
Achieve target levels of
organizational performance
1-5
The Hows That
Define a Firm's Strategy
How to grow the business
How to please customers Strategy
is HOW
How to outcompete rivals to . . .
1-10
Strategy and the Quest for
Competitive Advantage
The heart and soul of any strategy are the actions
and moves in the marketplace that a company
makes to strengthen its competitive position and
gain a competitive advantage 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
Competing with a competitive advantage is more
profitable than competing with no advantage
Competing with a competitive disadvantage nearly
always results in below-average profitability
1-11
A Powerful Strategy Leads to
Sustainable Competitive Advantage
A company achieves sustainable competitive advantage
when an attractive number or buyers prefer its
products/services over those of rivals and when the basis
for this preference can be maintained over time
Its nice when a strategy produces a temporary
competitive edge but a durable edge over rivals greatly
enhances a company’s prospects for winning in the
marketplace and realizing above-average profits
1-12
Four “Best” Strategic Approaches to
Building Sustainable Competitive Advantage
Being the industry’s low-cost provider (a cost-based
competitive advantage)
Incorporate differentiating features (a “superior product”
type of competitive advantage keyed to higher quality,
better performance, wider selection, value-added
services, or some other attribute)
Focusing on a narrow market niche (winning a
competitive edge by doing a better job than rivals
of serving the needs and preferences of
buyers comprising the niche)
Developing expertise and resource
strengths not easily imitated or matched by rivals
(a capabilities-based competitive advantage)
1-13
Competitive Advantage Examples
1-16
Test Your Knowledge
A company’s strategy and its quest for competitive advantage
are tightly related because
A. a company’s strategy determines whether it will have lower or
higher costs than rivals and thus be at a competitive advantage
or disadvantage.
B. competitive advantage is essential to having a profitable
business model.
C. choosing a competitive advantage to pursue also helps a
company choose which business model is most appropriate.
D. competitive advantage enables a company to achieve its
strategic objectives.
E. a strategy that leads to sustainable competitive advantage is a
company’s most reliable means of achieving above-average
profitability and financial performance.
1-17
Why Do Strategies Evolve?
1-19
Crafting Strategy Is an
Exercise in Entrepreneurship
Strategy-making is a market-driven activity involving
Studying market trends and competitors’ actions
Keen observation of customer needs
Scrutinizing business possibilities based on new
technologies
Building firm’s market position via acquisitions or new
product introductions
Pursuing ways to strengthen firm’s competitive
capabilities
Proactively searching out opportunities to
Do new things or
Do existing things in new or better ways
1-20
Linking Strategy With Ethics
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Stra es
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Bu od
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1-26
Microsoft’s Business Model
Most costs in developing software are fixed; variable costs are small;
once break-even volume is reached, revenues from additional sales
are almost pure profit
1-30
Tests of a Winning Strategy
PERFORMANCE TEST
Does strategy boost firm performance?
1-31
Other Criteria for Judging
the Merits of a Strategy
Internal consistency and unity among all pieces of
the strategy