BA 490: Business Strategy and + Policy Lecture 1: What Is Strategy and Why Is It Important?

Instructor: Miriam Plavin-Masterman

+

Thinking Strategically: The 3 Big Strategic Questions
1. What’s the company’s present situation? 2. Where does the company need to go from here?
  

Business(es) to be in and market positions to stake out Buyer needs and groups to serve Direction to head

3. How should it get there?

A company’s answer to “how will we get there?” is its strategy

+ What Do We Mean By “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 of organizational performance .

+ Identifying a Company’s Strategy .

+ 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 .

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) . better performance.Four +  “Best” Strategic Approaches to Building 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. wider selection.

+ Why Do Strategies Evolve?   A company’s strategy is a work in progress Changes may be necessary to react to        Shifting market conditions Technological breakthroughs Fresh moves of competitors Evolving customer preferences Emerging market opportunities New ideas to improve strategy Crisis situations .

2: A Company’s Strategy Is Partly Proactive and Partly Reactive . 1.+ Fig.

+ Linking Strategy With Ethics    Ethical and moral standards go beyond  Prohibitions of law and the language of “thou shalt not” to issues of Duty and “right” vs. “wrong”  Ethical and moral standards address “What is the right thing to do?”  Two criteria of an ethical strategy:  Does not entail actions and behaviors that cross the line from “should do” to “should not do” and “unsavory” or “shady” and  Allows management to fulfill its ethical duties to all stakeholders .

+ A Firm’s Ethical Responsibilities Its Stakeholders  to Owners/shareholders – Rightfully expect some form of return on their investment Employees .Rightfully expect to have an equitable relationship with firms they supply and be treated fairly     Community .Rightfully expect businesses to be good citizens in their community .Rightfully expect to be treated with dignity and respect for devoting their energies to the enterprise Customers . safe product or service Suppliers .Rightfully expect a seller to provide them with a reliable.

+ What Is a Business Model?  A business model addresses “How do we make money in this business?”  Is the strategy capable of delivering good bottom-line results?  Do the revenue-cost-profit economics of the strategy make good business sense?    Look at revenue streams the strategy is expected to produce Look at associated cost structure and potential profit margins Do resulting earnings streams and ROI indicate the strategy makes sense and the company has a viable business model for making money? .

. . Business Model . Concerns Deals with a company’s competitive initiatives and business approaches whether revenues and costs flowing from the strategy demonstrate a business can be amply profitable and viable . .+ Relationship Between Strategy and Business Model Strategy . .

+ Tests of a Winning Strategy  GOODNESS  OF FIT TEST How well does strategy fit the firm’s situation?  COMPETITIVE  ADVANTAGE TEST Does strategy lead to sustainable competitive advantage?  PERFORMANCE  TEST Does strategy boost firm performance? .

+ Why Is Strategy Important?  A compelling need exists for managers to proactively shape how a firm’s business will be conducted  A strategy-focused firm is more likely to be a strong bottom-line performer than one that views strategy as secondary .

16% .+ Overview of BA 490 – Performance Evaluation  Two required texts – the textbook and the case book  On Blackboard there are cases that are not in the case book   Class Attendance – 10% In class participation -10%     2 Thinkpieces– 14% total 2 in-Class Case Reports [14 pts each] 28% total 2 Team presentations in-class – 22% total Final case writeup .

These can be personal reflections. policy proposals. research ideas. or reactions to theoretical arguments and debates   DO NOT JUST SUMMARIZE THE READINGS   Thinkpiece #1 due by September 27th Thinkpiece #2 due by the beginning of class October 30th . Focus on one interesting idea or insight that the course has inspired in you.+ Thinkpieces – in detail  Thinkpieces should be 2-3 pages in length and must address the course material. empirical observations.

+ Case Reports-in detail  You will know which case will be used two weeks ahead of time. Questions will be provided in class for you to address     Preparation questions will be posted on Blackboard In-class there will be a question or two from what you have already prepared. You will be able to bring in the case and one double-sided sheet of notes on the case for use in the writeup. There will be 2-3 other questions that will build on the preparation work you should have done    In-class case writeup #1 – October 11th In-class case writeup #2 November 15th .

All members are responsible for answering the case study questions and relationship to the text.   One member will be responsible for the assembly and formatting of the PowerPoint slides (pull it all together).   . Team workload will be assigned equally. The week after next you will begin the case presentations Questions for the cases are posted on Blackboard and you and your team can work on the questions as soon as you would like.   You are expected to assume and carry out the responsibilities as agreed upon by your team.+ In Class Team Case Presentationsin detail  You will form case study teams of 4-5 -.today. One member will be responsible for the financials.

As with the in class reports.+ Final Case Writeup-in detail  I will give you a specific case to use for the final case write-up two weeks ahead of time along with questions you need to address. perform whatever analysis and evaluation is appropriate. the expectation is that you will:  identify all the pertinent issues that management needs to address.     **Note that this assignment has a 10 page typed limit** Final Case Analysis #3 Due DECEMBER 17th in my mailbox . and propose an action plan and set of recommendations addressing the issues you have identified. given the questions you are answering.

+ Groups  Let’s take a few minutes and form groups .