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Lecture Crafting and executing strategy: The quest for competitive advantage - Concepts and cases (18/e) - Chapter 1

In this chapter students will be able to: Understand the role of business strategies in moving a company in the intended direction, growing its business, and improving its financial and market performance; develop an awareness of the four most reliablestrategic approaches for setting a company apart from rivals and winning a sustainable competitive advantage; learn that business strategies evolve over time because of changing circumstances and ongoing management efforts to improve the company’s strategy. | CHAPTER 1 WHAT IS STRATEGY AND WHY IS IT IMPORTANT? Student Version McGraw-Hill/Irwin Copyright ®2012 The McGraw-Hill Companies, Inc. 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? Crafting an action plan that will get us there WHAT IS STRATEGY ABOUT? Strategy is all about How: How to outcompete rivals. How to respond to economic and market conditions and growth opportunities. How to manage functional pieces of the business. How to improve the firm’s financial and market performance. WHY DO STRATEGY ? A firm does strategy: To improve its financial performance. To strengthen its competitive position. To gain a sustainable competitive. advantage over its market rivals. A creative, distinctive strategy: Can yield above-average profits. Makes competition difficult for rivals. STRATEGY AND COMPETITORS Strategy is about competing differently from rivals— Doing what they don’t do or doing it better! Doing what they can’t do! Doing that which sets the firm apart and attracts customers. Doing what we should or should not do to produce a competitive edge. The Quest for Competitive Advantage Competitive Advantage Meeting customer needs more effectively, with products or services that customers value more highly, or more efficiently, at lower cost. Sustainable Competitive Advantage Giving buyers lasting reasons to prefer a firm’s products or services over those of its competitors. STRATEGIC APPROACH CHOICES Low-cost provider Differentiation on features Focus on market niche Best-cost provider Building Competitive Advantage 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 . | CHAPTER 1 WHAT IS STRATEGY AND WHY IS IT IMPORTANT? Student Version McGraw-Hill/Irwin Copyright ®2012 The McGraw-Hill Companies, Inc. 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? Crafting an action plan that will get us there WHAT IS STRATEGY ABOUT? Strategy is all about How: How to outcompete rivals. How to respond to economic and market conditions and growth opportunities. How to manage functional pieces of the business. How to improve the firm’s financial and market performance. WHY DO STRATEGY ? A firm does strategy: To improve its financial performance. To strengthen its competitive position. To gain a sustainable competitive. advantage over its market rivals. A creative, distinctive strategy: Can yield above-average profits. Makes competition difficult for .