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Chapter one, What is Strategy?
What is our presentsituation?
Business environment andindustry conditions
Firms fnancial andcompetitive capabilities
Where do we want to gorom here?
Creating a vision or the frmsuture direction
ow are we going to getthere?
Crating an action planthatwill get us there
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!he Strategy"#a$ing, Strategy"%&ecuting 'rocess
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W(! )S STRATEGY (B*+!?
Strategy is all about
Howto outcompete rivals
Howto respond toeconomic and mar$etconditions and growthopportunities
Howto manage unctionalpieces o the business
Howto improve thefrmsfnancial and mar$etperormance
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W- .* STRATEGY ?
( frm does strategy/
!o improve its fnancialperormance
!o strengthen its competitive
position!o gain a sustainable
competitive advantage overits mar$et rivals
( creative, distinctive
strategy/ Can yield above"average
profts
#a$es competition di0cult orrivals
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STRATEGY(1.C*#'%!)!*2S
Strategy is aboutcompeting diferentlyrom rivals3
.oing what they dontdo or doing it better4
.oing what they cantdo4
.oing that which setsthe frm apart andattracts customers SunnyD and Rum - THE POP SINGLE!
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Common elements in successulstrategies
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Sources o superior proftability
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1.1 Identifying a Company St"ategy#$%at to Loo& 'o"
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!he 5uest or Competitive (dvantage
Competitive (dvantage #eeting customer needs more
e6ectively, with products or services
that customers value more highly, ormore e0ciently, at lower cost
Sustainable Competitive (dvantage
7iving buyers lasting reasonsto preera frms products or services overthose o its competitors
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Why a Firms Strategy %volves over !ime
#anagers modiy strategy inresponse to/ Changing mar$et conditions
(dvancing technology
Fresh moves o competitors
Shiting buyer needs
%merging mar$et opportunities 1ew ideas or improving the strategy
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1.( ) Company St"ategy I a *+end of P"oa,tie Initiatie
and Rea,tie )dutment
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Strategy as DecisionSupport
Strategy as a Coordinating
Device
Strategy as Target
Improves the qualityo decision ma!ing
Creates consistency
and unity
Improves perorm"
ance #y setting
high aspirations
$hat %oles does Strategy &erorm'
Strategy as (nimation and
)rientation
*otivates
and mo#ilises
+,89:;9 2obert # 7rant < =udith =ordanwwwoundationsostrategycom
http://www.foundationsofstrategy.com/http://www.foundationsofstrategy.com/ -
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What )s a Strategic 'lan?
It t"ategi, iion/ 0uinemiion/ and ,o"e a+ue
It t"ategi, and finan,ia+
o0e,tie
It ,%oen t"ategy
E+ement of a 'i"m
St"ategi, P+an
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The Strategy"*a!ing 3ierarchy
Co"po"ateSt"ategy
*ulti#usiness Strategy4ho. to gain synergies rom managing aportolio o #usinesses together rather than as separate #usinesses
*uine
St"ategy
3o. to strengthen mar!et position and gain competitive advantage (ctions to #uild competitive capa#ilities o single #usinesses *onitoring and aligning lo.er"level strategies
'un,tiona+ )"ea
St"ategie
(dd relevant detail to the ho.5s o the #usiness strategy
&rovide a game plan or managing a particular activity in .ays that
support the #usiness strategy
Ope"ating
St"ategie
(dd detail and completeness to #usiness and unctional strategies
&rovide a game plan or managing speciic operating activities .ith
strategic signiicance
T.o"$ay Inluence
T.o"$ay Inluence
T.o"$ay Inluence
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)S *+2 S!2(!%7- (W)11%2?
$inning
St"ategy
T%e St"ategi,
'it Tet
T%e Competitie
)dantage Tet
T%e Pe"fo"man,e
Tet
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( winning strategy must pass three tests/
The Fit Test.oes it e&hibit dynamic ft with the e&ternal and internal aspects o the frms overallsituation?
The Competitive Advantage TestCan it help the frm achieve a signifcant and sustainable competitive advantage?
The Performance TestCan it produce good perormance as measured by the frms proftability, fnancial andcompetitive strengths, and mar$et standing?
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Strategy (nalysis 3o. to gain a
competitive advantage-
$hat do you thin! the *ission and ision or this #usiness is'
$hat is the pro#lem or issue to #e resolved'1inance/ 3%/ *ar!eting/ gro.th opportunity/ merger or acquisition etc
)#ectives " 8$hat do you thin! this irm .ould li!e to accomplish over the ne9t : years';
Situation analysis 8S$)T;
$hat internal t"engt% and 3ea&nee does this company have'
3o. .ell is the irm5s present strategy .or!ing'
$hat are the irm5s competitively important resources and capa#ilities'
Is the irm a#le to ta!e advantage o mar!et opportunities and overcome e9ternal threats to its e9ternal .ell"#eing'
(re the irm5s prices and costs competitive .ith those o !ey rivals/ and does it have an appealing customer value
proposition'
Is the irm competitively stronger or .ea!er than !ey rivals'
$hat strategic issues and pro#lems merit ront"#urner managerial attention'
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$hat e9ternal environmental oppo"tunitie and t%"eat
8driving orces; should this company #e a.are o'
&
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Financial (nalysis
2*( proft ater ta&>total assets 2*% proft ater ta&>owners e@uity
Current 2atio Current assets>current liability
5uic$ 2atio Current assets " )nventory>current liability
.ebt to assets .ebt>(ssets
.ebt %@uity .ebt>%@uity
Financial (nalysis/
*n what basis do customers choose between competing brands o sellers?
(re the driving orces causing demand for productto increase or decrease?
(re the driving orces acting to ma$e competitionmore or less intense?
Will the driving orces lead to higher or lower industryprotability?
.oes this industry o6er good prospects or attractive profts?
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Structural determinants o the
competitive orces
Please analyze the following
competitive forces
ow intense is the rivalry o e&isting
competitors or consumer dollars
ow li$ely>easy would it be or new
competitors to enter this mar$et?
(re there a lot o suppliers to this industry or
very ew?
.o customers have a lot o competitors to
choose rom or very ew?
(re there any frms in other industries
o6ering suitable substitutes?
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es
>es
>es
>es
>es >es >es
2o
2o
2o Disadvantage
&arity
Temporary
(dvantage
Sustained
(dvantage
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sustainable competitiveadvantage tests
.oes this business have a resource that is valuable/rare
)s the resource competitively superior?
.o they have a resource that is hard to copy?
Can the resource be made obsoleteby the di6erent capabilities o
competitors?
)s the frm organizedto e&ploit its valuable, rare, costly to imitate resource?
.o you thin$ this company has a sustainable competitive advantage?
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What competitive strategy is this
business ollowing?
)s this the best competitive strategy or them to ollow?
)s their strategy well"matched to the industrys uture $ey
success actors?
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7rowth Strategies
ow are customer needs
and e&pectations
changing?
(re there any promising
mar$et opportunities that
ought to be pursued?
What strategy would you
recommend and why?
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Strategic 2ecommendation/What do you advise the frm to do?
!ests o a winning Strategy
!he tests o strategic leadership are whether the frm has a good strategy and business model,
whether its strategy is competently e&ecuted, and whether the frm is achieving its
perormance targets
GOODNESS OF FIT TEST
ow is your strategy well"matched to their resource strengths, competencies, and competitiveadvantages?
O!"ETITI#E $D#$NT$GE TEST
ow does your strategy lead to sustainable competitive advantage?
"E%FO%!$NE TEST
ow does your strategy boost frm perormance?
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'roft and 'urpose
Companies and
individuals who are
most ocused on
proftability and the
creation o wealth areoten remar$ably
unsuccessul
Successul companies
and people tend to bemotivated by
something other than
proft
Robert Kearns invented the intermittentwindshield wiper systems used on
most automobilesfrom 1969 to the present. Ford and Chrysler had to pay him
$30 million for patent infrinement
http://en.wikipedia.org/wiki/Windscreen_wiperhttp://en.wikipedia.org/wiki/Automobilehttp://en.wikipedia.org/wiki/Automobilehttp://en.wikipedia.org/wiki/Automobilehttp://en.wikipedia.org/wiki/Windscreen_wiper -
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W- C2(F!)17 (1. %%C+!)17S!2(!%7- (2% )#'*2!(1! !(SS
Strategy provides/ ( prescription or doing business
( road map to competitive advantage ( game plan or pleasing customers
( ormula or attaining long"termstandout mar$etplace perormance
Good Strategy + Good Strategy Execution =
?ood *anagement
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