Thinking Strategically: The Three Big Strategic Questions
1. Where are we now? 2. Where do we want to go?
Business(es)
Buyer
to be in and market positions to stake out
needs and groups to serve to achieve
Outcomes
3. How will we get there?
A
companys answer to how will we get there? is its strategy
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What Is Strategy?
Consists of the combination of competitive moves and
business approaches used by managers to run the company
Managements game plan to
Attract Stake
and please customers
out a market position successfully
Compete Grow
the business
Achieve
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targeted objectives
The Hows That Define a Firm's Strategy
How to please customers How to respond to changing market conditions
How to outcompete rivals
How to grow the business
How to manage each functional piece of the business and
develop needed organizational capabilities
How to achieve strategic and financial objectives
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Striving for Competitive Advantage
To achieve sustainable competitive advantage, a
Providing
companys strategy usually must be aimed at either
a distinctive product or service or Developing competitive capabilities rivals can not match
Achieving a sustainable competitive advantage greatly
enhances a companys prospects for
Winning
in the marketplace and Realizing above-average profits
What separates a powerful strategy from an ordinary strategy is managements ability to forge a series of moves, both in the marketplace and internally, that produces sustainable competitive advantage!
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Strategic Approaches to Building Competitive Advantage
Strive to be the industrys low-cost provider Outcompete rivals on a key differentiating feature Focus on a narrow market niche, doing a better job
than rivals of serving the unique needs of niche buyers
Develop expertise, resource strengths, and
capabilities not easily imitated by rivals
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Why Do Strategies Evolve?
A companys strategy is a work in progress Changes may be necessary to react to
Fresh
moves of competitors customer preferences
Evolving
Technological
Shifting
breakthroughs
market conditions
Crisis
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situations
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 can do to should not do and unsavory or shady and Allows management to fulfill its ethical duties to all stakeholders
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A Firms 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
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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
Look Do
at revenue streams the strategy is expected to produce
at associated cost structure and potential profit margins
resulting earnings streams and ROI indicate the strategy makes sense and the company has a viable business model for making money?
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Relationship Between Strategy and Business Model
Strategy - Deals with a companys competitive initiatives and business approaches Business Model Concerns whether revenues and costs flowing from the strategy demonstrate the business can be amply profitable and viable
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Tests of a Winning Strategy
GOODNESS OF FIT TEST
How
well does strategy fit the firms situation?
COMPETITIVE ADVANTAGE TEST
Does
strategy lead to sustainable competitive advantage?
PERFORMANCE TEST
Does
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strategy boost firm performance?
Other Criteria for Judging the Merits of a Strategy
Internal consistency and unity among all pieces of the
strategy
Degree of risk the strategy poses as compared to
alternative strategies
Degree to which the strategy is flexible and adaptable to
changing circumstances While these criteria are relevant, they seldom override the importance of the three tests of a winning strategy!
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Good Strategy + Good Strategy Execution = Good Management
Crafting and executing strategy are core management functions Among all things managers do, nothing affects a companys
ultimate success or failure more fundamentally than how well its management team
Charts the companys direction, Develops competitively effective strategic moves and business approaches, and Pursues what needs to be done internally to produce good dayin/day-out strategy execution
Excellent execution of an excellent strategy is the best test of managerial excellence -- and the most reliable recipe for winning in the marketplace!
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