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Strategy Chapter 1

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CHAPTER 1

WHAT IS STRATEGY AND WHY IS IT IMPORTANT?

1. Understand why every company needs a sound strategy to compete successfully, manage the conduct of its business, and strengthen its prospects for long-term success. 2. Develop an awareness of the four most dependable strategic approaches for setting a company apart from rivals and winning a sustainable competitive advantage. 3. Understand that a company’s strategy tends to evolve over time because of changing circumstances and ongoing management efforts to improve the company’s strategy. 4. Learn 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. 5. Learn the three tests of a winning strategy.

Copyright ®2012 The McGraw-Hill Companies, Inc.

McGraw-Hill/Irwin
1–2

WHAT DO WE MEAN BY STRATEGY ? ♦ What is our present situation?
● ●

WHAT IS STRATEGY ABOUT? ♦ Strategy is all about How:
● ● ● ●

Business environment and industry conditions Firm’s financial and competitive capabilities Creating a vision for the firm’s future direction

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.

♦ Where do we want to go from here?


♦ How are we going to get there?


Crafting an action plan that will get us there
1–3

1–4

WHY DO STRATEGY ? ♦ A firm does strategy:
● ● ●

STRATEGY AND COMPETITORS ♦ Strategy is about competing differently from rivals—
● ● ● ●

To improve its financial performance. To strengthen its competitive position. To gain a sustainable competitive. advantage over its market rivals. Can yield above-average profits. Makes competition difficult for rivals.
1–5

Doing what they don’t do or doing it better! Doing what

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