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Week 3 Assignment 1
Student Full Name
Strayer University
BUS499 Business Administration Capstone
Dr. Grizzell
Dr. Gardner
Date
Everything in Blue should be deleted
Due Week 3 and worth 115 points
Choose one (1) public corporation in an industry with which you are familiar. For a list of companies you can choose from, go to https://www.forbes.com/top-public-companies/list/5/#tab:overall . Research the company on its own website, the public filings on the Securities and Exchange Commission EDGAR database (http://www.sec.gov/edgar.shtml), in the University's online databases, and any other credible sources you can find. The annual report will often provide insights that can help address some of these questions.
Read chapters 1 -3 in the course textbook and complete the LEARN E-Activities for Weeks 1-3 as they set the foundation to this assignment. Be sure to cite your sources!
Begin your paper on Page 2 below and write a minimum of four (4) pages. The minimum page count does not include the Title or Source pages.
Week 3 Assignment 1
Write your introduction here. Include one (1) paragraph (not more than 6 lines of text) that explains what your paper will discuss. Much of your introduction may be taken from the assignment instructions (in your own words). Read all assignment resources to understand what should be included in your paper. Be sure to review the assignment instructions in Blackboard, the grading rubric, and the recorded writing workshop to understand the requirements. Do not exceed 6 lines of text in this introduction. There should be no direct quotes in this introduction.
Globalization
Thoroughly assess how globalization has impacted the corporation you researched. Provide a thoughtful and well researched response. Consider for example, how your chosen company has been involved in expanding globally, how it has been impacted by global competition, and the global economy. Do not simply define the term globalization. You will need to conduct an assessment (i.e. an evaluation) of the impact globalization has had on your selected corporation.
Your assessment/evaluation should demonstrate that you have read, understand, and can apply the globalization concepts covered in the textbook and course resources. Do not write about globalization in general terms. Your assessment should be directly related to your selected corporation. If your company has locations in other countries, do not simply list the various countries in which the company does business. Your writing here should thoroughly assess how globalization has impacted your chosen corporation. Do not Google “globalization” or simply provide a definition. You must display an understanding based on what is studied in this course and an ability to apply the concepts in a real-world evaluation of a corporation.
Your textbook must be a source along with other credible sources that support the globalization concepts covered in this course. Read Chapters 1-3 in the course text book as each chapter provides a solid background and clues on Globalization that apply to this section . Review the Week 1 & 2 Learn video Lectures for supporting content . Cite your sources and avoid or limit the use of direct quotes.
Technology
Thoroughly assess how technological changes have impacted the corporation you researched. Provide a thoughtful and well researched response. Consider for example, how the company has been impacted by cloud computing, social media, crowdfunding, program apps, email, texting, websites, mobile, automation, robotics, IOT (Internet of Things), AI (Artificial Intelligence), e-commerce, data and analytics, etc. Research how the company may have been impacted by diffusion and disruptive technologies as explained in the textbook. Do not simply define the term technology. You will need to conduct an assessment (i.e. an evaluation) of the impact changes in technology have had on your selected corporation.
Your assessment/evaluation should demonstrate that you have read, understand, and can apply the concept of technology covered in the textbook and course resources. Do not write about technology in general terms. Your assessment should be directly related to your selected corporation. If your company is technologically advanced, do not simply list the various technologies they possess but rather evaluate how changes in technology have impacted the corporation. You must display an understanding based on what is studied in this course and an ability to apply the concepts in a real-world evaluation of a corporation. Do not Google “technology” or simply provide a definition. Your writing here should thoroughly assess how changes in technology have impacted your chosen corporation.
Your textbook must be a source along with other credible sources that support the technology concepts covered in this course. You must display an understanding based on what is studied in this course. Read Chapters 1-3 in the course text book as each chapter provides a solid background and clues on Technology that apply to this section. Review the Week 1 & 2 Learn video Lectures for supporting content . Cite your sources and avoid or limit the use of direct quotes.
Industrial Organization Model
Thoroughly apply the industrial organization model to determine how your corporation could earn above-average returns (i.e. revenue). This model is based upon the corporation’s external environment which is anything outside of the corporation that can influence or impact its business (macro)/operations (micro). Your application should walk through what the model suggests is needed to earn above average returns (hint: see figure 1.2 in the textbook). Do not Google “Industrial Organization Model” or simply provide a definition or write in general terms. Your writing here should apply the model to your specific corporation, demonstrate your understanding of the concepts, as described in this course, and your ability to apply those concepts to a real-world corporation. Read Chapter 1 in the course text book as it provides a solid background and clues on this model that apply to this section. Review the Week 1 Learn video Lecture for supporting content . Cite your sources and avoid the use of direct quotes.
Resource-Based Model
Thoroughly apply the resource-based model to determine how your corporation could earn above-average returns (i.e. revenue). Consider the corporation’s unique resources (corporate culture, land, location, equipment, brand, reputation, trademarks, patents, etc.) and capabilities (skills, experience, capabilities, etc. that set it apart from its competition). Your application should walk through what the model suggests is needed to earn superior returns (hint: see figure 1.3 in the textbook). Do not Google “Resource-Based Model” or simply provide a definition or write in general terms. Your writing here should apply the model to your specific corporation, demonstrate your understanding of the concepts, as described in this course, and your ability to apply those concepts to a real-world corporation. Read Chapter 1 in the course text book as it provides a solid background and clues on this model that apply to this section. Review the Week 1 Learn video Lecture for supporting content. Cite your sources and avoid the use of direct quotes.
Vision
Thoroughly assess how the vision statement of the corporation influences its overall success. Include the actual vision statement for your chosen company (be sure to quote and cite per SWS or APA). Consider the key concepts discussed in chapter 1 regarding vision in your assessment of your selected corporation’s vision statement. Do not simply provide a definition of vision or general statements. In addition to the actual vision statement for your corporation, your writing must demonstrate that you understand the concept of vision, as discussed in this course, and can assess the impact your corporation’s vision statement has on its overall success. Read Chapter 1 in the course text book as it provides a solid background and clues on vision that apply to this section. Review the Week 1 Learn video Lecture for supporting content . Cite your sources.
Mission
Thoroughly assess how the mission statement of the corporation influences its overall success. Include the actual mission statement for your chosen company (be sure to quote and cite per SWS or APA). Consider the key concepts discussed in chapter 1 regarding mission in your assessment of your selected corporation’s mission statement. Do not simply provide a definition of mission or general statements. In addition to the mission statement of your selected corporation, your writing must demonstrate that you understand the concept of mission, as discussed in this course, and can assess the impact your corporation’s mission statement has on its overall success. Read Chapter 1 in the course text book as it provides a solid background and clues on mission that apply to this section. Review the Week 1 Learn video Lecture for supporting content. Cite your sources.
Stakeholders
Thoroughly evaluate how each category of stakeholder impacts the overall success of your selected corporation. Do not Google “stakeholders” and simply provide a definition or list. You must provide an evaluation that demonstrates your understanding of each classification of stakeholders, as described in this course. Do not write in general terms about stakeholders. Your evaluation must describe how each classification of stakeholders impacts your selected corporation’s success. Study Chapter 1 for additional background on Stakeholders as it provides a solid background on stakeholders that apply to this section. Review the Week 1 Learn video Lecture for supporting content. Cite your sources and avoid the use of direct quotes.
Sources
List your sources on this page and remember to delete the instructions, which are in blue font.
Use at least three (3) quality sources, one of which must be the course text book to support your ideas/work. Note: Wikipedia and college essay sites do not qualify as academic resources.
Cite your sources throughout your work when you borrow someone else’s words or ideas.
The source page must include all sources used. All sources listed here must be cited in your paper.
Look for a permalink tool for a webpage when possible (especially when an electronic
source requires logging in.
When using SWS remember to organize sources in a numbered list and in order of use throughout the paper; use the original number when citing a source multiple times; and follow this format for all sources:
Author. Publication Date. Title. Page # (written as p. #). How to Find (e.g. web address)
The APA format may also be used for a Reference page.
Questions to ask yourself before submitting your paper.
· Did I read the required course material and complete the required activities?
· Have I deleted the blue font instructions in this template?
· Did I leave the provided section headings in place, as provided in this template?
· After deleting the blue fonts in this template, have I changed all font to black?
Additional things to keep in mind.
· You will be graded on the quality of your answers, the logic/organization of the report, your language skills, and your writing skills using the grading rubric.
· Strayer uses SafeAssign – an automated plagiarism checker. It is advised that you do your own writing and use external resources to support what you have written in your own words.
Crafting and Executing Strategy
Arthur A. Thompson, Margaret A. Peteraf
John E. Gamble, Dr. A.J. Strickland
The Quest for Competitive Advantage
What is Strategy and Why is It Important?
Chapter 1
Chapter 1
Strategy is about making choices, trade-offs; it’s about deliberately choosing to be different … Michael Porter – Professor and Consultant
If your firm’s strategy can be applied to any other firm, you don’t have a very good one … David J. Collis and Michael G. Rukstad -- Consultants and professors
If you don’t have a competitive advantage, don’t compete … Jack Welch – former CEO of General Electric
LEARNING OBJECTIVES
What is meant by a company’s strategy
Concept of a sustainable competitive advantage
The 5 most basic strategic approaches for setting a company apart from rivals and winning a sustainable competitive advantage
A company’s strategy tends to evolve because of changing circumstances and ongoing efforts by management to improve the strategy
Why it is important for a company to have a viable business model that outlines the company’s customer value proposition and its profit formula
The 3 tests of a winning strategy
Chapter 1
How to please customers
How to respond to changing market conditions
How to outcompete rivals
How to grow the business
How to manage each functional piece of the business and develop needed organizational capabilities
How to achieve strategic and financial objectives
Management commitment to a coherent array of well consider choices about how to compete
Chapter 1
A company strategy is the set of actions that the managers take to outperform the company’s competitors and achieve superior profitability
Strategy is about competing differently from rivals – doing what competitors don’t do or even better doing what they can’t do
The pattern of actions and business approaches that define a company’s strategy
Actions to gain sales and market share via more performance features, more appealing-design, better quality or customer service, wider product selection, or other such actions
Actions to gain sales and market shear with lower prices based o lower costs
Actions enter new product or geographic markets or to exit existing ones
Actions to capture emerging market opportunities and defend against external threats to the company’s business prospects
Actions to strengthen market standing and competitiveness by acquiring or merging with other companies
Actions to strengthen competitiveness via strategic alliances and collaborative partnerships
Actions and approaches used in managing R&D, production, sales and marketing, finance, and other key activities
Actions to upgrade, build, or acquire competitively important resources and capabilities
Actions to strengthen the firm’s bargaining position with suppliers, distributors, and others
Identifying a Company’s Strategy – WHAT to LOOK FOR
Sustainable Competitive Advantage
5 Basic
Strategic Approaches
Chapter 1
The 5
The first 2 are standard approaches
1. Low cost provider strategy
Achieving cost-based advantage over rivals – when rivals find it hard to match the low-cost leader’s approach to driving costs off the business
e.g. Southwest Airlines and Walmart
2. A broad differentiation strategy
Seeking to differentiate the company’s products or services of rivals in ways that will appeal to a broad spectrum of buyers (one way is through innovation)
e.g. BMW (engineering design and performance), LVMH (luxury and prestige), John & Johnson baby products (reliability)
Chapter 1
The 5
The next 2 begin to narrow the standard approaches
3. A Focused Low cost strategy
Focus on a market niche buyer and outcompeting rivals by having lower costs
e.g. private label manufacturers of food, health and beauty products, and nutritional supplements use their low-cost advantage to compete against brand names
4. A broad differentiation strategy
concentrate on a narrow buyer segment by offering buyers customized attributes that meet their specialized need and tastes better than rivals’ products
e.g. Jiffy Lube International in quick oil change, The Weather Chanel
Chapter 1
The 5
The last strategy is a HYBRID
5. A best-cost provider strategy
A hybrid strategy blends elements of low-cost prover and differentiation strategies --- the aim is to have lower cost than rivals while simultaneously offering bitter differentiation attributes
Giving customers more value for the money by satisfying their EXPECTATIONS ON KEY QUALITY FEATURES, PERFORMANCE, AND/OR SERVICE ATTRIUTES WHILE BEATING THEIR PRICE EXPECTATIONS
e.g. Target is know for its hip product design ( a reputation built by cheap-chic designers as Isaac Mizrahi) and more appealing shopping ambience for discount store shoppers
Chapter 1
ProActive AND ReActive Strategy
External Factors
Industry and competitive conditions
Buyers Preferences
Societal, political, economic, regulatory, technological, and environmental considerations
Internal Factors
Resource strengths and weaknesses
Competitive capabilities
Chapter 1
Abandoned
strategy elements
New planned initiatives plus ongoing strategy elements continued from prior periods
New strategy elements that emerge as managers react adaptively to changing circumstances
A company’s Current (or Realized) Strategy
Emergent Strategy
(reactive, Adaptive Elements)
Deliberate Strategy
(Proactive Strategy Elements)
What Makes a Strategy a WINNER?
A winning strategy must pass three tests:
The FIT TEST
How well does strategy fit the firm’s situation?
The COMPETITIVE ADVANTAGE TEST
Is the strategy helping the company achieve a sustainable competitive advantage?
The PERFORMANCE TEST
Is the strategy producing good company performance?
Chapter 1
The Fit Test … no strategy can work well unless it exhibits good external fit and is in sync with prevailing market conditions … a wining strategy must be tailored to the company’s resources and competitive capabilities and be supported by a complementary set of functional activities.
It must also exhibit internal fit and the capability with company’s ability to execute the strategy in a competent manner
Unless a strategy exhibits a good fit both external and internal aspects it is likely to under perform
Winning strategies also exhibit a dynamic fit in the sense it is evolving over time
The Competitive Advantage test … the bigger and more durable the competitive advantage the more powerful it is
The Performance test … 2 kinds of performance indicator (1) competitive strength and market standing and (2) profitability and financial strength
Above-average financial performance or gains in the market share, competitive position or profitability are signs of a winning strategy
Good Strategy + Good Strategy Execution = Good Management
Strategy Link to Ethics
Ethical strategies must entail actions and behaviour that can pass the test of moral scrutiny in the sense of NOT BEING deceitful, unfair or harm to others, disrespectable, or unreasonably damaging to the environment
Core Management Functions
Good strategy and good strategy execution are the most telling and trustworthy signs of good management
Management team charts the company’s direction
Develops competitive effective strategic moves
And pursues what needs to be done internally to produce day-in and day-out strategy execution and operation excellence
Chapter 1
LEARNING OBJECTIVES
What is meant by a company’s strategy
Concept of a sustainable competitive advantage
The 5 most basic strategic approaches for setting a company apart from rivals and winning a sustainable competitive advantage
A company’s strategy tends to evolve because of changing circumstances and ongoing efforts by management to improve the strategy
Why it is important for a company to have a viable business model that outlines the company’s customer value proposition and its profit formula
The 3 tests of a winning strategy
Chapter 1
Assignment
Read Chapters 1 & 2
The chapters begin with Learning Objectives (L.O.) by the authors
Select two L.O.s from each chapter and discuss how the author succeeded with you – i.e. explain the learnings from your perspective (minimum 100 words per L.O.).
Suggest applying the concepts toward your final paper.
Submit all responses in the appropriate Blackboard Discussions module
Chapter 1
Crafting and Executing Strategy
The Quest for Competitive Advantage
Arthur A. Thompson, Margaret A. Peteraf
John E. Gamble, Dr. A.J. Strickland
Charting a Company’s Direction
Chapter 2
Learning Objectives.
LO 2-1 | Explain why it is critical for managers to have a clear strategic vision of where the company needs to head | |
LO 2-2 | Explain the importance of setting both strategic and financial objectives | |
LO 2-3 | Explain why the strategic initiatives taken at various organizational levels must be tightly coordinated | |
LO 2-4 | Identify what a company must do to achieve operating excellence and to execute it strategy proficiently | |
LO 2-5 | Explain the role and responsibility of a company’s board of directors in overseeing the strategic management process | |
Stage 1 : Developing a Strategic Vision, Mission Statement and Set of Core Values
https://images.search.yahoo.com
Stage 1: Developing
Develop a strategic vision
The views and conclusions about the company’s long term direction
Decide what product-market-customer business mix seems optimal
Tells the stakeholders what direction the company is headed
Be distinct, specific, and avoid broad statements
Should be able to direct lower-level managers on decisions in line with the company’s values
Developing a Strategic Vision
A strategic vision describes management’s aspirations for the company’s future and the course and direction charted to achieve them
An effectively communicated vision is a valuable management tool for enlisting the commitment of company personnel to action tat moves the company in the intended long-term direction
The real purpose of a vision statement is to serve as a management tool for giving the organization a sense of direction
For a strategic vision to function as a valuable management tool, it must convey what top executives want the business to look like and provide managers at all organizational levels with a reference point in making strategic decisions and preparing the company for the future
Wording of Vision Statement … the Dos and Don’ts
The Dos | The Don’ts |
Be graphic … paint a clear picture | Don’t be vague or incomplete … identify specifics |
Be forward-looking and directional– what are the future plans | Don’t dwell on the present … where are we going |
Keep it focused … in making decisions and allocating resources | Don’t use overly broad language |
Have some wiggle room … allow language with flexibility to adjust to changes in the market, customers, technology | Don’t state the vision in bland or uninspiring terms |
Be sure the journey is feasible … what the company can accomplish overtime | Don’t be generic |
Indicate why the directional path makes good business sense … what are long term interests of stakeholders | Don’t rely on superlatives |
Make it memorable … a vision statement should be short, easy to communicate and memorable | Don’t run on and on … get to the point |
Developing a Mission Statement
The distinction between a strategic vision and mission statement is
A strategic vision portrays a company’s aspirations for it future … where we are going
A mission statement describes the scope and purpose of the present business… who we are, what we do, and why we are here
A well worded mission statement must employ language specific enough to distinguish its business makeup and purpose from those of other enterprises and give the company its own identity
Mission Statement describes the scope and purpose of the present business
Who we are
What we do
Why we are here
Mission Statement
Mission Statement- the enterprise’s present business and purpose
Who we are, what we do, and why we are here
Developing the mission statement
Identifies the company’s products and/or services
Specify the buyer needs that the company wants to satisfy and the customer group to satisfy
Gives the company its own identity
Youtube mission statement- “To provide fast and easy video access and the ability to share videos frequently”
The vision and mission statement are linked to the core values of the company
Linking vision and Mission with Company Values
Company Core Values .. Determined as a guide to pursuit of its vision and mission
Certain designated beliefs and traits
Behavioral norms
Zappos 10 core values
1. Deliver WOW through service
2. Embrace and Drive change
3. Create Fun and a Little Weirdness
4. Be Adventurous, Creative, and Open-Minded
5. Pursue Growth and Learning
6. Build Open and Hones Relationships with Communication
7. Build a Positive Team and Family Spirit
8. Do More with Less
9. Be Passionate and Determined
10. Be Humble
Values relate to such things as fair treatment, honor and integrity, ethical behavior, innovativeness, teamwork, a passion for top-notch quality or superior customer service, social responsibility, and community citizenship
Stage 2 Setting Objectives
Objectives
Objectives are an organization’s performance targets – which are
Specific
Measurable
Time limited
Challenging
Achievable
Objectives
Purpose: Convert the vision and mission into specific performance targets |
Objectives should be: Measurable, quantifiable, and should contain deadlines |
Why measurable? Focus efforts and align actions throughout organization Serve as “yardsticks” for tracking a company’s performance and progress Motivate to reach for higher goals and extend greater effort |
Using OBJECTIVES
Stretch OBJECTIVES | Types of Objective to Set |
Best way to promote outstanding company performance is through setting targets high enough to stretch an organization to perform at it’s full potential and deliver the best possible results. | Financial Objectives: financial performance target Strategic Objectives: strengthening market standing, competitive position, future business prospects |
Helps promote: Urgency in improving financial performance and business position More intentional actions | Both should have both short-term (quarterly) and long-term(3 to 5 years)targets. |
Strategic intent: using all of the company’s resources and competitive actions on reaching these objectives | Short term should focus on delivering performance improvements in the current period to satisfy shareholder expectations for near-term progress |
Long-term focus on what company position they should focusing on now to improve performance for later Long-term>Short-term |
Balanced Approach to Objective Setting
Don’t solely focus on financial indicators to predict a company’s future prospects |
The most reliable leading indicators of a company’s future financial performance is its strategic outcomes to determine its market position and whether it’s weakening or strengthening |
Balanced Scorecard-method for measuring strategic and financial objectives Provides employees clear guidelines about how their jobs are linked to overall objectives 50% of Global Companies adopt this approach to setting objectives Ex. UPS, Hilton Hotels, etc. |
Setting Objectives for Every Organizational Level
Top-down process |
Break down objectives for each separate business department, product lines, functional departments, etc. |
Narrow objectives guide employees to better reach these goals Team effort approach and consistently knowing strategic roles will produce desired results |
Stage 3 : Crafting Strategies .
Putting a strategy together entails addressing the “Hows”
How to attract customers
How to compete against rivals
How to respond to market change
How to capitalize on opportunities
How to achieve strategic and financial objectives
Good strategy makers can foresee a shift in the market before it happens and plan his/her strategy accordingly
Top Level and Lower Level Strategies
Top level management strategies
The CEO is ultimately responsible for leading of strategy implementation and execution.
Takes full credit/responsibility for the strategies successes and/or failures
Board Members and key subordinates are often sought after for advice/approval.
In most cases the CFO, VP of marketing, VP of production, vp of HR, etc help influence and fashion specific component of the chief strategy.
Lower level management strategies
Usually the bigger and more complex a company becomes the more important it is to delegate strategy crafting and implementation
Managers of specific operating units can often have a bigger advantage over top level managers when it comes to making in the field strategic decisions
In most companies today every manager have a role to play in the strategy making process
Strategy Making Hierarchy
Corporate strategy (set of businesses as a whole)
Orchestrated by the CEO and other senior executives
How to gain advantage from managing a set of businesses
Business strategy (one for each diversified business)
Orchestrated by general managers of companies different lines of business (with input from executive heads)
How to gain and sustain a competitive advantage for a single line of business
Functional area strategies (within each business)
Orchestrated by the heads of major functional activities within a particular business
How to manage a particular activity within a business in ways that support the strategy.
Operating strategies (within each functional area)
Orchestrated by managers of strategicaly important activities
How to manage activities of strategic value within each functional area
Corporate strategy (set of business as a whole
Business strategy … one for each diversified business
Functional area strategies … within each business
Operating strategies .. Within each functional area
Uniting the strategy making hierarchy
All pieces of the company's strategy making hierarchy but fit together
If not the overall company strategy could be compromised and impair company performance
CEO and top executives are responsible for achieving unity
Standard approach: Strategy-making must start at the top of the organization and work its way down
Stage 4 Executing Strategies
Most demanding part of strategy development
Takes the most time
Tests manager's ability
Direct change
Motivate employees
Meet goals
Management action plan
“What needs to be done?”
“What do I need to do to accomplish the plan?”
Diligent pursuit of operating excellence
Success hinges on skills and cooperation
Principle Aspects of Managing Execution
Creating a strategy-supporting structure
Staffing
Developing strategy-supporting structure
Allocating ample resources
Ensure policies facilitate execution
Organizing “Best Practices”
Installing systems to enable activities
Motivating people
Creating a company culture
Lead others
Stage 5: Evaluating Performance and Initiating Corrective Adjustments
Evaluating Performance and Initiating Corrective Adjustments
Managers must Determine
Is current strategy a Good Fit?
Do they have a competitive Advantage?
Strong Performance?
Maintain Course?
Establish New Plan?
Corporate Governance: The Role of the Board of Directors in Strategy-Crafting, Strategy-Executing Process
Oversee company's financial accounting and financial reporting
Ensure Financials Meet GAAP
Create and Manage Audit Committee
Oversee CEO and top executives
Responsible for accuracy of Financial Statements
Appraise company’s
Direction
Strategy
Business Approaches
The board makes independent judgments about the validity and wisdom of management’s proposed strategic actions.
The Role of the Board of Directors
3. Evaluate Senior Executives
Create metrics to measure executives performance.
Evaluates current CEO
Is current strategy on track?
How well strategy is executed?
How well issues are problem solved by other managers?
C. Exercise due diligence in evaluating leadership skills of other senior executives in line to succeed the CEO.
4. Institutes Compensation Plan
Determines Top Executives Pay
Determines Bonus Structure
Establish metrics for bonuses
Learning Objectives.
LO 2-1 | Explain why it is critical for managers to have a clear strategic vision of where the company needs to head | |
LO 2-2 | Explain the importance of setting both strategic and financial objectives | |
LO 2-3 | Explain why the strategic initiatives taken at various organizational levels must be tightly coordinated | |
LO 2-4 | Identify what a company must do to achieve operating excellence and to execute it strategy proficiently | |
LO 2-5 | Explain the role and responsibility of a company’s board of directors in overseeing the strategic management process | |
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CHAPTER 1 What Is Strategy and Why Is It Important?
Copyright © McGraw-Hill Education. Permission required for reproduction or display.
LEARNING OBJECTIVES
THIS CHAPTER WILL HELP YOU UNDERSTAND:
What we mean by a company’s strategy
The concept of a sustainable competitive advantage
The five most basic strategic approaches for setting a firm apart from rivals and winning a sustainable competitive advantage
That a firm’s strategy tends to evolve because of changing circumstances and ongoing efforts by management to improve the strategy
Why it is important for a firm to have a viable business model that outlines the firm’s customer value proposition and its profit formula
The three tests of a winning strategy
© McGraw-Hill Education.
CORE CONCEPT (1 of 4)
A company’s strategy is the set of actions that its managers take to outperform the company’s competitors and achieve superior profitability.
© McGraw-Hill Education.
WHAT DO WE MEAN BY STRATEGY?
What is our present situation?
Business environment and industry conditions
Firm’s financial and competitive capabilities
Where do we want to go from here?
Creating a vision for the firm’s future direction
How are we going to get there?
By crafting an action plan that heads the firm in the direction of its intended market position, attracts customers, achieves financial and market performance targets, and gets it where it wants to go—that is, its strategy
© McGraw-Hill Education.
WHAT IS STRATEGY ABOUT?
Strategy is all about How:
How to position the firm in the marketplace
How to attract customers
How to compete against rivals
How to achieve the firm’s performance targets
How to capitalize on opportunities to grow the business
How to respond to changing economic and market conditions
© McGraw-Hill Education.
STRATEGIC MANAGEMENT PRINCIPLE (1 of 3)
Strategy as a choice
Is about deciding to compete differently from rivals—doing what competitors do not do or, even better, doing what they cannot do!
Is likely to be successful when its actions, business approaches, and competitive moves appeal to buyers in ways that
Set a company apart from its rivals
Stake out a market position that is not crowded with strong competitors
© McGraw-Hill Education.
STRATEGY AND COMPETITORS
Strategy is about competing differently from rivals.
Doing what they do not do or doing it better
Doing what they cannot do
Doing things that attract customers and set a firm apart from its rivals
Doing things calculated to produce a competitive edge over rivals
Doing what the firm must do and also knowing what it must not do
© McGraw-Hill Education.
WHY BOTHER WITH STRATEGY?
A firm needs a strategy to specify what actions will be taken.
To improve its financial performance
To strengthen its competitive position
To gain a sustainable competitive advantage over its market rivals
A creative, distinctive strategy
Helps produce above-average profits
Increases competitive pressures on rivals
© McGraw-Hill Education.
FIGURE 1.1 Identifying a Company’s Strategy–What To Look For
© McGraw-Hill Education.
Starbucks’s Strategy in the Coffeehouse Market
Key elements of Starbucks’ strategy:
Train baristas to serve a wide variety of specialty coffee drinks that satisfy individual customer preferences in a customized way
Emphasize store ambience and elevation of the customer experience at Starbucks stores
Purchase and roast only top-quality coffee beans
Foster commitment to corporate responsibility
Expand the number of Starbucks stores domestically and internationally
Broaden and periodically refresh in-store product offerings
Fully exploit the growing power of the Starbucks name and brand image with out-of-store sales
© McGraw-Hill Education.
STRATEGY AND THE QUEST FOR COMPETITIVE ADVANTAGE
Competitive advantage
Requires meeting customer needs either more effectively (with products or services that customers value more highly) or more efficiently (by providing products or services at a lower cost to customers)
Sustainable competitive advantage
Requires giving buyers lasting reasons to prefer a firm’s products or services over those of its competitors
© McGraw-Hill Education.
BASIC STRATEGIC APPROACHES
Jump to Appendix 2 long image description
Low-cost provider
Broad differentiation
Focused differentiation
Best-cost provider
Strategies for Building Competitive Advantage
Focused low-cost
© McGraw-Hill Education.
STRATEGIC APPROACHES
Building a competitive advantage by:
Striving to become the industry’s low-cost provider
Efficiency in controlling provider costs
Outcompeting rivals on differentiating features
Effectiveness in delivering value to customers
Offering customers the lowest prices for differentiated goods
Best-cost provider
Focusing on better serving a niche market’s needs
Efficiency and effectiveness
© McGraw-Hill Education.
CORE CONCEPT (2 of 4)
A firm achieves a competitive advantage when it provides buyers with superior value compared to rival sellers or offers buyers the same value as its rivals but at a lower cost to the firm.
The firm achieves a sustainable competitive advantage if the basis for its advantage persists despite the best efforts of competitors to match or surpass its advantage.
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GAINING SUSTAINABLE COMPETITIVE ADVANTAGE
How to create a sustainable competitive advantage:
Develop valuable expertise and competitive capabilities over the long-term that rivals cannot readily copy, match, or best
Put the constant quest for sustainable competitive advantage at center stage in crafting your strategy
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WHY A COMPANY’S STRATEGY EVOLVES OVER TIME
Managers modify strategy in response to:
Changing market conditions
Advancing technology
Fresh moves of competitors
Shifting buyer needs
Emerging market opportunities
New ideas for improving the strategy
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STRATEGIC MANAGEMENT PRINCIPLE (2 of 3)
Changing circumstances and ongoing management efforts to improve the strategy cause a firm’s strategy to evolve over time—a condition that makes the task of crafting strategy a work in progress, not a one-time event.
A firm’s strategy is shaped partly by management analysis and choice and partly by the necessity of adapting and of learning by doing.
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THE EVOLVING NATURE OF A FIRM’S STRATEGY
Realized (current) strategy is a blend of:
Proactive (deliberate) strategy elements that include planned initiatives to improve the company’s financial performance and secure a competitive edge
Reactive (emergent) strategy elements developed on the fly in response to unanticipated developments and fresh market conditions
Abandoned and superseded strategy elements that no longer fit with the firm’s ongoing strategy
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CORE CONCEPT (3 of 4)
A firm’s deliberate strategy consists of proactive strategy elements that are both planned and realized as planned.
Its emergent strategy consists of reactive strategy elements that emerge as changing conditions warrant.
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FIGURE 1.2 A Company’s Strategy Is a Blend of Proactive Initiatives and Reactive Adjustments
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THINKING STRATEGICALLY (1 of 2)
Just for Fun
Using the terms shown in Figure 1.2, explain why U.S. football teams get four downs to make a first down.
How does risk affect play selection (reactive strategy) as a team fails to advance on each of its four downs?
What rules of play in other sports affect how the basic principles of strategy are applied to game play?
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A FIRM’S STRATEGY AND ITS BUSINESS MODEL
How the firm will make money:
By providing customers with value
The firm’s customer value proposition
By generating revenues sufficient to cover costs and produce attractive profits
The firm’s profit formula
It takes a proven business model—one that yields appealing profitability—to demonstrate viability of a firm’s strategy.
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THE RELATIONSHIP BETWEEN A FIRM’S STRATEGY AND ITS BUSINESS MODEL
Realized Strategy
Competitive Initiatives
Business Approaches
Business Model
Value Proposition
Profit Formula
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CORE CONCEPT (4 of 4)
A firm’s business model sets forth the logic for how its strategy will create value for customers, while at the same time generate revenues sufficient to cover costs and realize a profit.
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BUSINESS MODEL ELEMENTS: The Customer Value Proposition
The customer value proposition
Satisfying buyer wants and needs at a price customers will consider a good value
The greater the value provided (V) and the lower the price (P), the more attractive the value proposition is to customers
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BUSINESS MODEL ELEMENTS: The Profit Formula
The profit formula
Creating a cost structure that allows for acceptable profits, given that pricing is tied to the customer value proposition
V – the value provided to customers
P – the price charged to customers
C – the firm’s costs
The lower the costs (C) for a given customer value proposition (V–P), the greater the ability of the business model to be a moneymaker.
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THINKING STRATEGICALLY (2 of 2)
Amazon has begun to acquire its own fleet of cargo planes to deliver packages to customers.
What internal and external factors are contributing to this change in its strategy?
How could the move be explained in terms of changes in the value, price, and cost factors associated with Amazon's business model?
How does the forward integration entry of Amazon into the freight delivery markets in which FedEx and United Parcel Service compete affect the sustainability of their business models over the long term?
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Pam (P) - Not sure to what "their" refers.
FIGURE 1.3 The Business Model and the Value-Price-Cost Framework
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IS OUR STRATEGY A WINNER?
Three Tests of a Winning Strategy
The Fit Test
The Competitive Advantage Test
The Performance Test
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WHAT MAKES A STRATEGY A WINNER?
A winning strategy must pass three tests:
The fit test
Does it exhibit fit with the external and internal aspects of the firm’s dynamic situation?
The competitive advantage test
Does it help the firm achieve a sustainable competitive advantage?
The performance test
Will it produce superior performance as indicated by the firm’s profitability, financial and competitive strengths, and market share?
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Pandora, Sirius XM, and Broadcast Radio: Three Contrasting Business Models
Who listens to the radio anymore?
How sustainable are the business models of Pandora, Sirius XM and over-the-air broadcasters over the long term?
Given the changes in user listening habits, which competitor’s present strategy best passes the three tests of a winning strategy?
What internal and external factors will create particular difficulties for each competitor in changing its strategy or business model?
© McGraw-Hill Education.
WHY CRAFTING AND EXECUTING STRATEGY ARE IMPORTANT TASKS
Strategy provides:
A prescription for doing business
A road map to competitive advantage
A game plan for pleasing customers
A formula for attaining long-term standout marketplace performance
Good Strategy + Good Strategy Execution = Good Management
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STRATEGIC MANAGEMENT PRINCIPLE (3 of 3)
How well a company performs is directly attributable to the caliber of its strategy and the proficiency with which the strategy is executed.
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THINKING STRATEGICALLY (3 of 3)
Google’s browser-based Chrome operating system and its online applications suite are now challenging Microsoft’s long-term dominance of those marketplace sectors.
What should be Microsoft’s near-term response to this competitive challenge?
How will Microsoft’s long-term response to this competitor’s actions affect its business model?
Which competitor’s strategy will likely be the eventual winner in the marketplace? Why?
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THE ROAD AHEAD
Strategy is about asking the right questions.
What must managers do, and do well, to make a firm a winner in the marketplace?
Strategy requires getting the right answers.
Good strategic thinking and good management of the strategy-making, strategy-executing process
First-rate capabilities and skills in crafting and executing strategy are essential to managing successfully
Welcome and best wishes for your success!
© McGraw-Hill Education.
Appendix 1 Figure 1.1 Identifying a Firm’s Strategy–What to Look For
The actions to look for would be:
Strengthening of its bargaining position with suppliers, distributors, and others
Gaining sales and market share via more performance features, more appealing design, better quality or customer service, wider product selection, or other such actions
Gains in sales and market share with lower prices based on lower costs
Entering into or exiting from new or existing product lines or geographic markets
Using new approaches in managing R&D, production, sales and marketing, finance, and other key activities
Upgrading, building, or acquiring competitively important resources and capabilities
Capturing emerging market opportunities and defending against external threats to the firm’s business prospects
Strengthening market standing and competitiveness by acquiring or merging with other firms
Strengthening competitiveness via strategic alliances and collaborative partnerships
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Appendix 2 Basic Strategic Approaches
Strategies for building competitive advantage include:
Low-cost provider
Focused low-cost
Best-cost provider
Focused differentiation
Broad differentiation
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Appendix 3 Figure 1.2 A Company’s Strategy Is a Blend of Proactive Initiatives and Reactive Adjustments
Deliberative strategy (or proactive strategy elements) includes new planned initiatives plus ongoing strategy elements continued from prior periods.
Emergent strategy (or reactive strategy elements) includes new strategy elements that emerge as managers react adaptively to changing circumstances.
Both of these result in a firm's current (or realized) strategy.
Prior strategy elements may also be abandoned.
© McGraw-Hill Education.
Appendix 4 Figure 1.3 The Business Model and the Value-Price-Cost Framework
Customer value (V) is the customer's share (customer value proposition). This value may affect or be affected by product price (P) which is the firm's share (profit formula). These values in turn affect and are affected by the per-unit cost (C).
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