Professional Documents
Culture Documents
What Is Strategy
Chapter Title
and Why Is
It Important?
1-4
What Do We Mean By “Strategy”?
1-10
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
1-11
A Powerful Strategy Leads to
Sustainable Competitive Advantage
A company achieves sustainable competitive advantage
when an attractive number or buyers prefer its
products/services over those of rivals and when the basis
for this preference can be maintained over time
Its nice when a strategy produces a temporary
competitive edge but a durable edge over rivals greatly
enhances a company’s prospects for winning in the
marketplace and realizing above-average profits
1-12
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,
better performance, wider selection, 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)
1-13
Competitive Advantage Examples
1-16
Test Your Knowledge
A company’s strategy and its quest for competitive advantage are
tightly related because
A. a company’s strategy determines whether it will have lower or
higher costs than rivals and thus be at a competitive advantage or
disadvantage.
B. competitive advantage is essential to having a profitable business
model.
C. choosing a competitive advantage to pursue also helps a company
choose which business model is most appropriate.
D. competitive advantage enables a company to achieve its strategic
objectives.
E. a strategy that leads to sustainable competitive advantage is a
company’s most reliable means of achieving above-average
profitability and financial performance.
1-17
Why Do Strategies Evolve?
1-19
Crafting Strategy Is an
Exercise in Entrepreneurship
Strategy-making is a market-driven activity involving
Studying market trends and competitors’ actions
Keen observation of customer needs
Scrutinizing business possibilities based on new
technologies
Building firm’s market position via acquisitions or new
product introductions
Pursuing ways to strengthen firm’s competitive
capabilities
Proactively searching out opportunities to
Do new things or
Do existing things in new or better ways
1-20
Linking Strategy With Ethics
Employees
Employees -- Rightfully
Rightfullyexpect
expectto tobe
betreated
treated with
with dignity
dignity
and
and respect
respectfor
for devoting
devoting their
their energies
energiestotothe
theenterprise
enterprise
Customers
Customers -- Rightfully
Rightfullyexpect
expectaaseller
seller to
toprovide
provide them
them
with
with aareliable,
reliable, safe
safeproduct
productor
orservice
service
Suppliers
Suppliers-- Rightfully
Rightfullyexpect
expectto
tohave
haveananequitable
equitable
relationship
relationship with
withfirms
firmsthey
they supply
supply and
and be
betreated
treatedfairly
fairly
Community
Community-- Rightfully
Rightfullyexpect
expectbusinesses
businessesto
to be
begood
good
citizens
citizensin
intheir
theircommunity
community
1-22
Role of Senior Executives:
Linking Strategy with Ethics
Forbid pursuit of ethically questionable business
opportunities
Insist all aspects of company strategy
reflect high ethical standards
Make it clear all employees are
expected to act with integrity
Install organizational checks and balances to
Monitor behavior
Enforce ethical codes of conduct
Provide guidance to employees in gray areas
Display genuine commitment to conduct business
activities ethically
1-23
Test Your Knowledge
A company's strategy can be considered “ethical”
A. if all of its different actions and elements are legal and in
compliance with governmental rules and regulations.
B. so long as its actions and behaviors can pass the test of
“moral scrutiny” and are aboveboard in the sense of not being
shady or unconscionable, injurious to others, or unnecessarily
harmful to the environment.
C. only if all elements of the strategy are in accord with what is
generally considered as being in the overall best interests of
society at large.
D. so long as religious authorities and noted ethics experts find
nothing “wrong” in the company’s actions.
E. if it is in compliance with the company’s code of ethics and has
been approved by the company’s chief ethics officer.
1-24
What Is a Business Model?
gy
a te s
r
St nes
si el
Bu od
M
1-26
Microsoft’s Business Model
Most costs in developing software are fixed; variable costs are small;
once break-even volume is reached, revenues from additional sales
are almost pure profit
Provide
Provide modest
modest level
level of
of technical
technical support
support to
to users
users at
at no
no cost
cost
Rejuvenate
Rejuvenate revenues
revenues by
by periodically
periodically introducing
introducing next-generation
next-generation
software
software with
with features
features inducing
inducing PC
PC users
users toto upgrade
upgrade their
their operating
operating
systems
systems
1-27
Red Hat’s Business Model
Make
Make source
source code
code open
open and
and available
available to
to all
all users
users
Capitalize
Capitalize on
on specialized
specialized expertise
expertise required
required to
to use
use Linux
Linux by
by
providing
providing fee-based
fee-based training,
training, consulting,
consulting, software
software customization,
customization, and
and
client-directed
client-directed engineering
engineering to
to Linus
Linus users
users
1-28
Test Your Knowledge
1-30
Tests of a Winning Strategy
PERFORMANCE TEST
Does strategy boost firm performance?
1-31
Other Criteria for Judging
the Merits of a Strategy
Internal consistency and unity among all pieces of
the strategy