Crafting and Executing Startegy (Chapter 1)

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CHAPTER 1

WHAT IS STRATEGY AND
WHY IS IT IMPORTANT?

1. Understand why every company needs a sound strategy to
compete successfully, manage the conduct of its business, and strengthen its prospects for long-term success.
2. Develop an awareness of the four most dependable strategic approaches for setting a company apart from rivals and
winning a sustainable competitive advantage.
3. Understand that a company’s strategy tends to evolve over time because of changing circumstances and ongoing
management efforts to improve the company’s strategy.
4. Learn why it is important for a company to have a viable
business model that outlines the company’s customer value
proposition and its profit formula.
5. Learn the three tests of a winning strategy.

Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

1–2

WHAT DO WE MEAN BY STRATEGY ?
♦ What is our present situation?


Business environment and industry conditions



Firm’s financial and competitive capabilities

♦ Where do we want to go from here?


Creating a vision for the firm’s future direction

♦ How are we going to get there?


Crafting an action plan that will get us there

Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

1–3

WHAT IS STRATEGY ABOUT?
♦ Strategy is all about How:


How to outcompete rivals.



How to respond to economic and market
conditions
conditions and growth opportunities.



How to manage functional pieces of the
business.



How to improve the firm’s financial and
market performance.

Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

1–4

WHY DO STRATEGY ?
♦ A firm does strategy:


To improve its financial performance.



To strengthen its competitive position.



To gain a sustainable competitive.
advantage over its market rivals.

♦ A creative, distinctive strategy:


Can yield above-average profits.



Makes competition difficult for rivals.

Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

1–5

STRATEGY AND COMPETITORS
♦ Strategy is about competing differently
from rivals—


Doing what they don’t do or doing it better!



Doing what they can’t do!



Doing that which sets the firm apart and
attracts customers.



Doing what we should or should not do to
produce a competitive edge.

Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

1–6

1.1

Identifying a Company’s Strategy—What to Look For

Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

1–7

Key initiatives of the Plan-to-Win strategy:
• Improved restaurant operations
• Affordable pricing
• Wide menu variety and beverage choices
• Convenience and expansion of dining opportunities
• Ongoing restaurant reinvestment and international
expansion

Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

1–8

Follow-up

• Which of McDonald’s Plan-to-Win strategy
initiatives are associated with meeting
customer needs more effectively?
• Which initiatives are focused on more
efficiently
efficiently delivering products and services?
• Which initiatives will likely result in the most
enduring competitive advantage?
• Which of the initiatives will competitors likely
attempt to overcome first?

Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

1–9

The Quest for Competitive Advantage
♦ Competitive Advantage


Meeting customer needs more effectively,
with products or services that customers
value
value more highly, or more efficiently, at
lower cost.

♦ Sustainable Competitive Advantage


Giving buyers lasting reasons to prefer a
firm’s products or services over those of its
competitors.

Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

1–10

STRATEGIC APPROACH CHOICES

Building Competitive...
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