what is strategy? why does it matter? 2-1 chapter 1
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1-1-22
Strategy involves …
What Is Strategy?
Time - the present, the future, and the track between
Choices – products, markets, services, ….
Resources – money, people, tools, etc.
Competencies – what we are good at
Something that is VRI-O
Much more!
1-1-33
Strategy is …
The combination of competitive moves and business approaches used by managers to run the company
Management’s theory about how to gain competitive advantage – BTW, what’s a theory?
A comprehensive plan stating how the firm will achieve its mission and objectives
What Is Strategy?
1-1-44
Strategy is …
Management’s “game plan” or, its HOW TO
•Attract and please customers
•Stake out a market position
•Compete successfully
•Grow the business
•Achieve targeted objectives
What Is Strategy?
1-1-55
Strategy is …
The General’s view (Strategos)
Integrated
Externally oriented
What Is Strategy?
Cyclical:
Conceptual … Planned … Executed … Reviewed
1-1-66
1984 Profits: $242 Million
Theme Park Operations: 77 percent of profits
Consumer Products: 22 percent of profits
Filmed Entertainment: 1 percent of profits
Walt Disney Company
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Hired Michael Eisner - 1984
1. Increased admission prices at theme parks1984 - $186 m 1989 - $787 m
2. Focused on movie studios (character development)1984 - $2.42 m 1994 - $845 m
3. Diversified into television (ABC), hotels, retail stores,sport team, cruise line, publishing, consumerproducts, licensing, etc. (Huey & McGowan, 1995)
Walt Disney Company
Market Cap: 1984 = $2 billion 1994 = $28 billion
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Inferring Strategy
A company’s strategy is reflected in what it does and says (see p. 6 of your text)
What do you think Eisner’s strategy was?
Eisner’s basic theory (strategy) may have been:
People will pay a premium price for extraordinaryentertainment. We have the necessary resources tocreate extraordinary entertainment. Therefore, let’sredeploy our resources in a different way and offersomething extraordinary to people.
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So Why is Strategy Important?
Strategy + Execution = ?
Management !It is management’s job to get results
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Summary
Strategy is about creating a desirable future,
and it is important because that future is desired.
1-1-1313
Chapter 2
The Managerial Process The Managerial Process
of of
Crafting and Executing StrategyCrafting and Executing Strategy
1-1-1414
Mission Objectives
ExternalAnalysis
InternalAnalysis
StrategicChoice
StrategyImplementation
CompetitiveAdvantage
The Strategic Management Process
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The Strategic Management Process
Objectives
ExternalAnalysis
InternalAnalysis
StrategicChoice
StrategyImplementation
CompetitiveAdvantage
Mission
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The Strategic Management Process
Objectives:
• specific, measurable targets, etc. (SMART)
• the things a firm needs to ‘do’ to achieveits mission
• should influence other elements in the strategicmanagement process
See text p. 28 for examples
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The Strategic Management Process
External and Internal Analysis
External Analysis
Systematic Examinationof the Environment
Internal Analysis
• interest rates
• demographics
• social trends
• technology
• human resources(knowledge)
• manufacturingabilities
• technology
1-1-1818
The Strategic Management Process
Strategic Choice
ExternalAnalysis
InternalAnalysis
StrategicChoice
BusinessLevel
CorporateLevel
• positioninga business
• which businesses?
1-1-1919
The Strategic Management Process
Strategy Implementation
• how strategies are carried out
• who will do what
• organizational structure and control
• who reports to whom
• how does the firm hire, promote, pay, etc.
1-1-2020
A Strategy Is Only As Good As Its Implementation
Strategy Implementation
The Strategic Management Process
• every strategic choice has strategy implementationimplications
• strategy implementation is just as important asstrategy formulation (or maybe more so – my view)
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The Strategic Management Process
Competitive Advantage
Definition: the ability to create more economic valuethan competitors
• all other elements of the strategic managementprocess are aimed at achieving competitive advantage
Mission Objectives
ExternalAnalysis
InternalAnalysis
StrategicChoice
StrategyImplementation
CompetitiveAdvantage
1-1-2222
Competitive Advantage
The Ability to Create More EconomicValue Than Competitors
• there must be something different about a firm’soffering vis-à-vis competitors’ offerings
• if all firms’ strategies were the same, no firmwould have a competitive advantage
• competitive advantage is the result of doingsomething different and/or better than competitors
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Competitive Advantage
Two Types of Difference
1) Preference for the firm’s output
2) Cost advantage vis-à-vis competitors
• people choose the firm’s output over others’
• people are willing to pay a premium
• lower costs of production/distribution
Example: Nordstrom
Example: Wal-Mart
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Competitive Advantage
ExternalAnalysis
InternalAnalysis
StrategicChoice
StrategyImplementation
CompetitiveAdvantage
• identify and exploit differences that may leadto competitive advantage
Example: Apple’s iPod
The Strategic Management Process
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Competitive Advantage
Temporary & Sustainable
• competition limits the duration of competitiveadvantage in most cases
• profits attract competition
• competitive advantage typically results in high profits
Therefore,
• most competitive advantage is temporary
• competitors imitate the advantage or offersomething better
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Competitive Advantage
Measuring Competitive Advantage
Superior Economic Performance Is Viewed asEvidence of Competitive Advantage
• it is rather easy to see the evidence ofcompetitive advantage
• measuring the source of the advantage per seis typically impossible
• it’s difficult to ‘measure’ technology
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Competitive Advantage & The Strategic Management Process
Emergent vs. Intended Strategies
• the strategic management process leads managersto intended strategies
However,
• conditions often change or new informationbecomes available
• managers respond and adopt emergent strategies
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The Strategic Management Process
Summary
This course is not about mere survival, it is aboutthriving—achieving competitive advantage
• the strategic management process helps managersachieve competitive advantage
• competitive advantage depends on differences
• strategy is about discovering and exploiting these differences
1-1-2929
The Strategic Management Process
Applying Strategy to Your Career
• a solid understanding of strategy concepts willhelp set you apart from other job candidates
• you can use the process to identify andexploit difference between you and others
• you can use the process to determine if youwant to stay with a company
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