session 1 - what is strategy
DESCRIPTION
Session 1 - What is StrategyTRANSCRIPT
The Concept of Strategy
Session 1
What is ‘Strategy’? Consists of competitive moves and business
approaches used by managers to run the company
Management’s “action plan” to Grow the business
Attract and please customers
Compete successfully
Conduct operations
Achieve target levels oforganizational performance
2
What is ‘Strategy’? … Contd.
A firm’s strategy is found in its investments in resources and capabilities that 1) determine its market position and 2) defend this position from competitors
Benefits of an effective strategy Relates the firm’s resources and capabilities to its markets Provides a framework for integrating activities within the firm Acts as a guide for decisions regarding management and
organization Businesses achieve competitive advantage by emphasizing
cost, value to the customer, or both.
3
The Three Strategic Questions What’s the company’s present situation?
Where does the company need to go from here?
Businesses to be in and market positions to stake out
Buyer needs and groups to serve
Direction to head
How should it get there?
A company’s answer to “how will we get there?” is its strategy
4
Origins of Strategy Basic origins of strategy include:
Industrial and evolutionary economics Case studies of exemplary companies Business and industry history Economic and organizational sociology Strategic planning tools Institutional economics
5
6
10 Schools of Strategy
Strategy Safari (Mintzberg, Ahlstrand, Lampel)
7
5 Ps of Strategy
Plan. A direction, guide, course of action.
Pattern. Consistency in behavior over time.
Position. Locating specific products in specific
markets.
Perspective. Way of doing things.
Ploy. Specific maneuver to outwit.
Strategy Safari (Mintzberg, Ahlstrand, Lampel)
Strategy Formulation and Implementation Strategy formulation
Information gathering and identification of resources and capabilities
Deciding which strategy the firm should follow Strategy implementation
Taking action necessary for the strategy to be successful
8
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
9
A Powerful Strategy Leads to Sustainable Competitive Advantage A company achieves sustainable competitive
advantage when an attractive number or buyers prefer its products/services over those of rivals and when the basis for this preference can be maintained over time
Its nice when a strategy produces a temporary competitive edge but a durable edge over rivals greatly enhances a company’s prospects for winning in the marketplace and realizing above-average profits
What separates a powerful strategy from an ordinarystrategy is management’s ability to forge a series ofmoves, both in the marketplace and internally, that
produces sustainable competitive advantage!
10
Four “Best” Strategic Approaches toBuilding Sustainable Competitive Advantage Being the industry’s low-cost provider (a cost-based
competitive advantage) 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)
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)
Developing expertise and resource strengths not easily imitated or matched by rivals (a capabilities-based competitive advantage)
11
Strategy Execution Entails continuous development, maintenance and
improvement of resources and capabilities Elements of execution:
Incentives and compensation Control and coordination systems Degree of consistency among a firm’s activities Firm’s culture and human resource systems
Effective execution requires each element to reinforce the others
Not the same as strategic planning
12
Strategic Planning Details the process for developing business
strategies and links them to operational programs and investments
Details the logic behind cash flow forecasts Provides process for:
Development of the firm’s mission Goal setting Identification of strategic initiatives Program development, scheduling and accountability Problem solving and innovation
13
Tests of a Winning Strategy
Goodness of fit test
How well does strategy fitthe firm’s situation?
Competitive advantage test
Does strategy lead to sustainablecompetitive advantage?
Performance test
Does strategy boost firm performance?
14
15
Thank You