Business Strategy Chapter 1 WHAT IS STRATEGY AND WHY IS IT IMPORTANT?

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Slide 1 : What  Is  Strategy and  Why  Is It  Important?

Slide 2 : Thinking  Strategically:

                 The  Three  Big  Strategic  Questions

·         1. What’s the company’s present situation?

·         2. Where does the company need to go from here?

·         Business(es) to be in and market positions to stake out

·         Buyer needs and groups to serve

·         Direction to head

·         3. How should it get there?

·         A company’s answer to “how
will we get there?” is its strategy

Slide 3 : What  Do  We  Mean  By  “Strategy” ?

                (1)Consists of competitive moves and business approaches used by managers to run the company.

(2)Management’s “action plan” to

·         Grow the business

·         Attract and please customers

·         Compete successfully

·         Conduct operations

·         Achieve target levels of
organizational performance

Slide 4 : 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

Slide 5 : Four  “Best”  Strategic  Approaches  to Building  Sustainable  Competitive  Advantage.

    1.       Being the industry’s low-cost provider (a cost-based competitive advantage)

2.       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)

3.       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)

4.       Developing expertise and resource
strengths not easily imitated or matched by rivals
(a capabilities-based competitive advantage)

Slide 6 : Understanding a company’s strategy-What to look For.

Slide 7: Why  Do  Strategies  Evolve?

•     =>  A company’s strategy is a work in progress

•      =>Changes may be necessary to react to

–      Shifting market conditions

–      Technological breakthroughs

–      Fresh moves of competitors

–      Evolving customer preferences

–      Emerging market opportunities

–      New ideas to improve strategy

–      Crisis situations

Slide 8: Fig. 1.2:  A Company’s Strategy Is Partly Proactive and Partly Reactive.

Slide 9: Linking  Strategy  With  Ethics

•       Ethical and moral standards go beyond

–      Prohibitions of law and the language of “thou shalt not”

•                       to issues of

–      Duty and “right” vs. “wrong”

•       Ethical and moral standards address
“What is the right thing to do?”

•       Two criteria of an ethical strategy:

–      Does not entail actions and behaviors that cross the line from “should do” to “should not do” and “unsavory” or “shady” and

–      Allows management to fulfill its ethical duties to all stakeholders

Slide 10: A  Firm’s  Ethical Responsibilities  to  Its  Stakeholders.

          Owners/shareholders – Rightfully expect some form of return on their investment

          Employees - Rightfully expect to be treated with dignity and respect for devoting their energies to the enterprise

Customers - Rightfully expect a seller to provide them with a reliable, safe product or service

            Suppliers - Rightfully expect to have an equitable relationship with firms they supply and be treated fairly

              Community - Rightfully expect businesses to be good citizens in their community

Slide 11 : What  Is  a  Business  Model?

•       A business model addresses “How do we make money in this business?”

–      Is the strategy capable of delivering
good bottom-line results?

•       Do the revenue-cost-profit economics
of the strategy make good business sense?

–      Look at revenue streams the strategy is expected to produce

–      Look at associated cost structure and potential profit margins

–      Do resulting earnings streams and ROI indicate the strategy makes sense and the company has a viable business model for making money?

Slide 12: Relationship  Between Strategy  and  Business  Model.

Strategy . . .

Deals with a company’s competitive initiatives and business approaches

Business Model . . .

Concerns whether revenues and costs flowing from the strategy demonstrate a business can be amply profitable and viable

Slide 13: Tests  of  a  Winning  Strategy.

•       GOODNESS OF FIT TEST

–      How well does strategy fit
the firm’s situation?

•       COMPETITIVE ADVANTAGE TEST

–      Does strategy lead to sustainable
competitive advantage?

•       PERFORMANCE TEST

–      Does strategy boost firm performance?

Slide 14 : Why  Is  Strategy  Important?

•       A compelling need exists for managers
to proactively shape how a firm’s
business will be conducted

•       A strategy-focused firm is more likely
to be a strong bottom-line performer
than one that views strategy as secondary

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