Chapter 1 explores the concepts surrounding organizational strategy. It begins with an explanation of the term strategy and offers a basis for how to identify a company’s particular strategy. Next, it explores the importance of striving for competitive advantage in the marketplace and examines the role strategy plays in achieving this advantage. The chapter then explores the idea that strategy is partly proactive and partly reactive. Next, a discussion on strategy and ethics is given. This is followed by a close look at the relationship between a company’s strategy and its business model. The chapter proceeds forward with a look at what makes strategy a winner and then presents reasons for why crafting and executing strategy are important. The chapter concludes with thoughts on the equation: good strategy + good strategy execution = good management.
Managers at all companies face three central questions in thinking strategically about their company’s present circumstances and prospects: Where are we now? —concerns the ins and outs of the company’s present situation — its market standing, how appealing its products or services are to customers, the competitive pressures it confronts, its strengths and weaknesses, and its current performance — Where do we want to go? — deals with the direction in which management believes the company should be headed in terms of growing the business and strengthening the company’s market standing and financial performance in the years ahead — How will we get there? — concerns crafting and executing a strategy to get the company from where it is to where it wants to go.
What Is Strategy?
A company’s strategy is management’s game plan for how to grow the business, how to attract and please customers, how to compete successfully, how to conduct operations, and how to achieve targeted objectives.
Normally, companies have a wide degree of strategic freedom in choosing the “hows” of strategy:
They can compete in a single industry.
They can diversify broadly or narrowly.
Markets are usually diverse enough to offer competitors sufficient latitude to avoid look-alike strategies.
At companies intent on gaining sales and market share at the expense of competitors, managers lean toward most offensive strategies while conservative risk-avoiding companies prefer a sound defense to an aggressive offense.
There is no shortage of opportunity to fashion a strategy that tightly fits a company’s own particular situation and that is discernibly different from the strategies of rivals.
Typically, a company’s strategic choices are based partly on trial-and-error organizational learning about what has worked and what has not, partly on management’s appetite for risk taking, and partly on managerial analysis and strategic thinking about how to best proceed, given all the prevailing circumstances.
Illustration Capsule 1.1, The Chief Elements of Southwest Airlines’ Strategy, offers a concrete example of the actions and approaches involved in crafting strategy.
Identifying a Company’s Strategy
A company’s strategy is reflected in its actions in the marketplace and the statements of senior managers about the company’s current business approaches, future plans, and efforts to strengthen its competitiveness and performance.
Figure 1.1, Identifying a Company’s Strategy – What to Look For, shows what to look for in identifying the substance of a company’s overall strategy.
Once it is clear what to look for, the task of identifying a company’s strategy is mainly one of researching information about the company’s actions in the marketplace and business approaches.
To maintain the confidence of investors and Wall Street, most public companies have to be fairly open about their strategies.
Except for some...
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