Post on 22-Dec-2015
Chapter One
What is Strategy and Why is it Important?
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 firmWhere we are now?Where we going?How are we going to get there?
Strategic Management Defined
• decisions and actions that determine long-term performance
• formulation and implementation of plans designed to achieve objectives
• an action managers take to achieve one or more of an organization’s goals
• 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
• management’s action plan for running the business and conducting operations; commitment to pursue a particular set of actions in growing the business, attracting customers, competing successfully, conducting operations, and improving financial and market performance
What is Strategy?
Strategy is not doing similar activities better than your rivals – that’s operational effectiveness• continual improvement not a
sustainable advantage• industry-wide cost reductions do not
lead to increased profitability
What is Strategy?
1) Strategy is performing different activities or performing similar activities in a different way
As suggested by the book: 4 of the most dependable approaches are 1) low cost, 2) differentiating features, 3) fulfilling specialized needs, and 4) build unassailable set of capabilities.
What is Strategy?
1) Strategy is performing different activities or performing similar activities in a different way
Strategy is about positioninga) Variety-based positioning
• offering a unique choice of goods/services – b) Needs-based positioning
• serving most/all of a particular group of customers’ needs -
c) Access-based positioning• serving a set of customers that require unique
access –
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
What is Strategy?
3) Strategy is about combining activities as advantages come from fit and reinforcing
What is Strategy?
3) Strategy is about combining activities as advantages come from fit and reinforcing
Operational effectiveness is about excellence in individual activities
Fit/integration increases sustainability by reducing imitability
What is Strategy?
4) The desire to grow is most threatening to an effective strategy • Blurs uniqueness• Creates compromises• Reduces fit• Erodes original advantages
Fig. 1.2: A Company’s Strategy Is Partly Proactive and Partly Reactive
Emergent strategy elements
What do Good Strategies Have in Common?
Chapter Two
Managerial Process of Crafting and Executing
Strategy
Fig. 2.1: The Strategy-Making, Strategy-Executing Process
Developing a Strategic Vision
A strategic vision describes the route a company intends to take in developing and strengthening its business. It lays out the company’s strategic
course in preparing for the future.
A strategic vision exists only as words and has no organizational impact unless and until it wins the commitment of company personnel and energizes them to
act in ways that move the company along the intended strategic path!
Elements of a Strategic Vision
• Delineates management’s aspirations for the business
• Provides a panoramic view of “where we are going” by charting a strategic path
• Is distinctive and specific• Avoids use of generic, dull & boring language
that could apply to most any company
• Captures employees’ emotions steers them in a common direction
• Is challenging and a bit beyond a company’s immediate reach
Strategic Vision vs. Mission
• A strategic vision concerns “wherewe are going” • Markets to be
pursued• Future product/
market/customer/ technology focus
• Kind of company management is trying to create
• The mission statement focuses on its “who we are and what we do”• Current product and
service offerings• Customer needs
being served• Technological
and businesscapabilities
Mission Statements
• Boundaries of the current business• Fundamental purpose that sets it
apart from other firms of its type• Conveys
• Who we are,• What we do, and• Why we are here
A well-conceived mission statement distinguishes a company’s business makeup from that of other profit-seeking enterprises in language specific enough to give the company its own identify!
Objectives
• Turns mission into performance outcomes• Organizations produce what is measured• Long and Short term• Strategic Intents• All levels of the organization• Top-down, not Bottom-up
Types of Objectives Required
Outcomes focused
on improving
financial performance
Outcomes focused on improving
competitive vitality and future business
position
Financial Objectives Strategic Objectives
$
6 Characteristics of a Good Objective
• • • • • • •
Importance of Stretch Objectives
There’s no better way to avoid ho-hum results thanby setting stretch objectives and using compensation
incentives to motivate organization members toachieve the stretch performance targets!
BHAG = Big Hairy Audacious Goals!
• Current financial results are “lagging indicators” reflecting results of past decisions and actions—good profitability now does not translate into stronger capability for delivering better financial results later
• However, meeting or beating strategic performance targets signals growing competitiveness & strength in the marketplace, thus developing the capability for better financial performance in the years ahead
• Good strategic performance is thus a “leading indicator” of a company’s capability to deliver improved future financial performance
Unless a company sets and achieves stretch strategic objectives, it is not developing the
competitive muscle to deliver even better financial results in the years ahead!
Leading versus Lagging Indicators
• A balanced scorecard for measuringcompany performance is optimal; it entails• Setting financial and strategic objectives• Placing balanced emphasis on achieving
both types of objectives
Just tracking financial performance overlooks the importance of measuring whether a company is strengthening its competitiveness and market position.
The surest path to sustained future profitability year afteryear is to relentlessly pursue strategic outcomes
that strengthen a company’s business position andgive it a growing competitive advantage over rivals!
One Balanced Scorecard
A Second Balanced Scorecard
Comprehensive view of the firm from the customer, internal, financial and innovation/learning perspectives• 1) How do customers see us?
• Time, quality, service & performance, costs
• 2) What must we excel at?• 3) How do we look to shareholders?• 4) Can we continue to improve and
create value?
A Third Balanced Scorecard
• Triple Bottom-line• Economic, social and environmental
performance
Levels of Strategic Management
HP’s Business Strategy
Enterprise Storage & Servers
HP Services
Software Personal Systems
Imagining and Printing
Financial Services
So….how can firm’s be profitable?
1) Choose an attractive industry in which to compete -
2) Attain a competitive advantage within an industry -
Two Models of Profitability
I/O Model (Industrial/Organizational Economics Model)
Resource Based View of the Firm
I/O Model
General EnvironmentIndustry EnvironmentCompetitive Environment
Strategy&
Performance
3 Assumptions1) 2) 3)
General EnvironmentIndustry EnvironmentCompetitive Environment
Resource Based View
The Firm’s Resources &Capabilities
Strategy&
Performance
3 assumptions1) 2) 3)