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Chapter One

Chapter One. Strategic Management and Strategic Competiveness Pages 2 - 31. Why do we need strategy?. The reasons why firms succeed and fail is perhaps the central question in strategy Answers the fundamental question of the firm Where we are now? Where we going?

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Chapter One

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  1. Chapter One Strategic Management and Strategic Competiveness Pages 2 - 31

  2. Why do we need strategy? The reasons why firms succeed and fail is perhaps the central question in strategy Answers the fundamental question of the firm Where we are now? Where we going? How are we going to get there?

  3. Strategic Management Defined • decisions and actions that determine long-term performance • formulation and implementation of plans designed to achieve objectives • unifying theme that gives coherence and direction to organizational/individual decisions • game plan management has for positioning the company in its chosen market, competing successfully, satisfying customers, and achieving good business performance • integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage What is a competitive advantage?

  4. Competitive Advantage • When a firm implements a strategy that rivals can’t duplicate, or find it too expensive to do try to imitate

  5. Today’s Competitive Landscape New Managerial Mindset Global Economy Technology Change & Diffusion • Strategic Flexibility • Intelligence Management • Global Perspective • Speed, Innovation & Integration Hypercompetition Information Technology Knowledge Intensity

  6. What is Strategy? Strategy is not doingsimilar activitiesbetter than your rivals – that’s operational effectiveness • continual improvement not a sustainable advantage • industry-wide cost reductions do not lead to increased profitability • examples: PCs, automobiles, airlines

  7. What is Strategy? • Strategy is performing different activitiesor performing similar activities in a different way

  8. What is Strategy? Doing things differently, strategically, puts a firm in a different position. Strategy is about positioning yourself relative to rivals. For example, a firm could: -offer a unique choice of goods/services - Chic-fil-a -serve most or all of a customer group’s needs - Babies R Us -serve a set of customers that require unique access – Kinkos, Movie Gallery, Superette

  9. What is Strategy? 2) Strategy is about choosing a position which requires tradeoffs, choosing what not to do • without tradeoffs, all firms would imitate vs. vs. vs. vs.

  10. Time Magazine • So why haven't American, United, US Airways and the three other full-service carriers, which lost $11 billion last year and stand to lose an additional $5 billion this year, followed the lead of the profitable discounters by cutting costs and fares? Because that's not the way their business works. They have made, and lost, their money by providing the frequent departures, quick connections, spacious seats and other amenities that have been demanded by business flyers and charging them dearly for that service — more than five times the cost of a discount fare. • Hard to Straddle and Hard to Reposition!

  11. What is Strategy? 2) Strategy is about choosing a position which requires tradeoffs, choosing what not to do • without tradeoffs, all firms would imitate Tradeoffs arise from • inconsistent image/reputation • different activities, products, equipment, employees, skills, systems, machines • priorities, internal coordination, and control So, once a position is chosen and pursued, it is difficult to fulfill another position or move to another position

  12. What is Strategy? 3) Strategy is about combining activities as advantages come from fit/integration of consistent, reinforcing activities

  13. Secondary Airports No meals Short hauls No seats No baggage transfers Quick Turns Standard Fleet Lean ground crews Low Fares

  14. Secondary Airports No meals Short hauls No seats No baggage transfers Quick Turns Standard Fleet Lean ground crews Low Fares

  15. Secondary Airports No meals Short hauls No seats No baggage transfers Quick Turns Standard Fleet Lean ground crews Low Fares

  16. Secondary Airports No meals Short hauls No seats No baggage transfers Quick Turns Standard Fleet Lean ground crews Low Fares

  17. Secondary Airports No meals Short hauls No seats No baggage transfers Quick Turns Standard Fleet Lean ground crews Low Fares

  18. Secondary Airports Secondary Airports No meals No meals Short hauls No seats No baggage transfers No baggage transfers No baggage transfers Quick Turns Quick Turns Standard Fleet Lean ground crews Low Fares Low Fares

  19. Secondary Airports Secondary Airports No meals No meals Short hauls No seats No baggage transfers No baggage transfers No baggage transfers Quick Turns Quick Turns Standard Fleet Lean ground crews Low Fares Low Fares How can Delta copy that? What about Jet Blue?

  20. What is Strategy? 3) Strategy is about combining activities as advantages come from fit/integration of consistent, reinforcing activities Operational effectiveness is about excellence in individual activities Fit/integration increases sustainability by reducing imitability

  21. What is Strategy? 4) The desire to grow is most threatening to an effective strategy

  22. What is Strategy? 4) The desire to grow is most threatening to an effective strategy • Blurs uniqueness • Creates compromises • Reduces fit • Erodes original advantages

  23. So….how can firm’s be profitable? 1) Choose an attractive industry in which to compete - Where we compete? • Corporate level strategy 2) Attain a competitive advantage within an industry - How we compete? • Business level strategy

  24. Two Models of Profitability I/O Model (Industrial/Organizational Economics Model) Resource Based Model

  25. I/O ModelEnvironment Drives Strategy & Performance • Three Key Assumptions • Firm’s environment imposes pressures/constraints upon the firm • Firms possess similar resources • Resources are mobile across firms • Therefore, firms must find an attractive industry or segment within the industry to gain above average profitability

  26. I/O ModelEnvironment Drives Strategy & Performance

  27. Resource Based ModelFirms’ Resources Drive Strategy & Performance • Three Key Assumptions • Firms’ resources and capabilities are critical to strategic action • Firms possess unique resources • Resources are not mobileacross firms • Therefore, firms must find an attractive industry or segment within the industry to gain above average profitability

  28. Resource Based ModelFirms’ Resources Drive Strategy & Performance

  29. What is strategic effectiveness? Consistent, long-term goals and objectives Consistent, long-term goals and objectives

  30. What is strategic effectiveness? Consistent, long-term goals and objectives Consistent, long-term goals and objectives Reflects and understanding of the environment

  31. What is strategic effectiveness? Consistent, long-term goals and objectives Consistent, long-term goals and objectives Reflects and understanding of the environment Takes resources into consideration

  32. What is strategic effectiveness? Consistent, long-term goals and objectives Consistent, long-term goals and objectives Reflects and understanding of the environment Takes resources into consideration Effectively implemented

  33. What is strategic effectiveness? Consistent, long-term goals and objectives Consistent, long-term goals and objectives Reflects and understanding of the environment Strategic Effectiveness (fit) Takes resources into consideration Effectively implemented

  34. Strategic Vision vs. Mission • Astrategic visionconcerns“wherewe are going” or ”what do we want to be.” • Markets to be pursued • Future product/ market/customer/ technology focus • Kind of company management is trying to create • Amission statementconcerns“who we are and what we do” • Current product and service offerings • Customer needs being served • Technologicaland businesscapabilities

  35. Mission Statements • Boundaries of the currentbusiness • Fundamental purpose that sets it apart from other firms of its type • Conveys • Who we are, • What we do, and • Why we are here

  36. Don’t offer me things Don’t offer me shoes Offer me comfort for my feet & the pleasure of walking Don’t offer me clothes Offer me fashion, style, or an certain image Don’t offer me books Offer me hours of escape & the benefit of knowledge Don’t offer me furniture Offer me comfort and a peaceful place to lounge Don’t offer me things Offer me ideas, emotions, ambience, feelings, benefits

  37. (Our) vision is to dominate the global foodservice business industry. Global dominance means setting the performance standards for customer satisfaction while increasing market share and profitability through our Convenience, Value and Execution Strategies.

  38. (Our) vision is to dominate the globaltoothpick industry. Global dominance means setting the performance standards for customer satisfaction while increasing market share and profitability through our Convenience, Value and Execution Strategies.

  39. Our mission is to provide a customer a means of moving people and things up, down, sideways over short distances with higher reliability than any similar enterprise in the world.

  40. One vision drives everything we do: A computer on every desk and in every home using great software as an empowering tool

  41. Our business is renting cars. Our mission is total customer satisfaction.

  42. Our business is leasing camels. Our mission is to totally alienate all of our customers.

  43. To be the premier organization in nurturing and enriching the bond between people and animals

  44. We supply the computing industry with chips, boards, systems, and software. Our products are used as “building blocks” to create advanced computing systems for PC users. Our mission is to be the preeminent building block supplier to the new computing industry worldwide. • To be the leading supplier of PCs and PC servers in all customer segments.

  45. Objectives • Turns mission into performance outcomes • Organizations produce what is measured • Long and Short term

  46. $ Types of Objectives Required Strategic Objectives Financial Objectives Outcomes focusedon improving financial performance Outcomes focused on improving competitive vitality and future business position

  47. 6 Characteristics of a Good Objective 1. Stretching/Motivating

  48. 6 Characteristics of a Good Objective 2) Measurable

  49. 6 Characteristics of a Good Objective 3) Realistic/Achievable

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