Chapter 1 Summary Book Crafting and Executing Strategy

lOMoARcPSD|7421704
MGT Chapter 1 Summary - book "Crafting and Executing

Strategy"
Business Strategy (Clemson University)
StuDocu is not sponsored or endorsed by any college or university

Downloaded by Ridwan Iyas (ridwaniyas@gmail.com)
lOMoARcPSD|7421704
Chapter 1: What is Strategy and Why is it important?
 A company’s strategy is the set of actions that its managers take to outperform the
company’s competitors and achieve superior profitability
o Objective is lasting success that can support growth and secure company’s
future over the long term
o Its purpose is to achieve alignment of corporate actions, policies, and
strategic priorities
 How to attract and please customers
 How to compete against rivals
 How to position the firm in the marketplace to capitalize on
attractive opportunities for growth
 How to respond to changing economic and market conditions
 How to manage each functional piece of the business
 How to achieve the firm’s performance targets
o What is our present situation?
 Business environment and industry conditions
 Firm’s financial and competitive capabilities
o Where do we want to go from here?
 Creating a vision for the firm’s future direction
o How are we going to get there?
 Crafting an action plan for heading the firm in the intended direction,
staking out a market position, attracting customers, achieving the
targeted financial and market performance, and getting the firm
where it wants to go is its strategy
 Strategy Maangement Prinicple: strategy is aabout copeting idffernly from rivals-
doing what competitors don’t do or even better, doing what they cannot do
o Strategy works when it is predicated on actions, business approaches and
competitive moves aimed at appealing to buyers in ways that set a company
apart from its rivals and staking out a market position that is not croweded
with strong competitors
 Strategy and the Quest for Competitve Advantage
o Achieves competitive advantage whenever it has some type fo edge over rivals in
attracting buyers and coping with competitive forces
o Superior value can mean a good product at a lower price, a suspeior product
that is wrkth paying more for or a best-value offereing
o Requires perfomring value chain more efficiently
o A firm needs a strategy to specify what actions are going to be taken:
 To improve its financial performance
 To strengthen its competitive position
 To gain a sustainable competitive advantage over its market rivals
o A creative, distinctive strategy:
 Helps produce above-average profits
 Increases competitive pressures on rivals
o Strategy is about competing differently from rivals:
 Doing what they do not do or doing it better!

lOMoARcPSD|7421704
 Doing what they cannot do!

 Doing things in ways that attract customers and set a firm apart from its
rivals
 Doing things in a manner calculated to produce a competitive edge over
rivals
 Knowing what the firm must do and also what it must not do
o What makes a sustainable competitive advantate are the elemnts of the
strategy that give buyers lasting reaons to prefer a company’s prpduct or
services over those of competitors
 Reasons that competitors are unable to nullify or overcome despite their
best efforts
 Five Strategies for Building Competitive Advantage
o Low-cost: acheieving a cost-based advantage over rivals
 Walmart and southwest have earned strong market positions because of
the low-cost advantages they have ahceived over their rivals
 Can produce a durable competitive edge when rivals find it hard to
match the low-cost leader’s
o Broad Differentiation: seeking to differentiate the copany’s prpduct or service
form that of rivals in ways that will appeal to a broad spectrum
 Apple, Johnson and Johsnon in baby products
 Sufficiently innovative to thwart the efforts of clever rivals to copy or
closely imitate the product offering
o Focused low-cost: concetraing on a narrow buyer segement and outcpmpteing
rivals by having lower costs thus being able to servie niche members at a lower
price
 Private labeled manaufactueres of food/beautiy use this
o Focused idfferenttiaton: concentrainig on a narrow buyer segment and
outcop,te rivals by offer buyers customizated attricuted to mee their specific
needs
 Ex: Lululemon
o Best-cost provider: giving customers more value for the money by satisfying
their expectations on key quality features, performance and/or service
attribures while beating their price expectations
 Bleds low cost and differentiation
 Ex: Target
 Why a Company’s strategy evolves over time
o Managers modify strategy in response to:
 Changing market conditions
 Advancing technology
 Fresh moves of competitors
 Shifting buyer needs
 Emerging market opportunities
 New ideas for improving the strategy
o Company’s strategy changes incrementally as management fine-tunes various
pieces of the strategy and adjusts in response to unfolding events

lOMoARcPSD|7421704
 Proactive and Reactive Strategy

o The evoling nature of company’s strategy means that the typical company
strategy is a blend of
 Proactive (deliberate) strategy elements that include both continued and
new initiatives
 Reactive (emergent) strategy elements that are required due to
unanticipated competitive developments and fresh market conditions
o Deliberate Strategy: consisting of proactive strategy elements that are both
planned and realized as planned (Fig. 1.2)
o Portion is always developed on the fly
o A company’s deliberate strategy consist of proactive strategy elements that
are planned; its emergent strategy consist of reactive strategy elements that
emerge as changing conditions warrant
A Company’s Strategy and Business Model
 A company’s business model sets forth the logic for how its strategy will create value
for customers, while at the same time generate revenues sufficient to cover costs and
realize a profit
o It’s the blueprint for delivering a valuable product or service to customers i
 Two elements are of business model
o Its customer value proposition
 Lays out the company’s approach to satisfying the buyers needs and
wants at aprice customers will consider a good value
o Profit formula
 Creating a cost structure that allows for acceptable profits, given that
pricing is tied
to the customer value proposition:
 V—the value provided to customers
 P—the price charged to customers
 C—the firm’s costs
 The lower the costs (C) for a given customer value proposition (V–P), the
greater the ability of the business model to be a moneymaker
 V-P: customers perception of how much value they are getting
 P-C: profit per unit
o Ex: Gillette’s business model in razor blades involves selling a master product at
a low price and making money of repurchases
What makes a Strategy a winner?
 A winning strategy must pass three tests:
o The Fit Test
 Does it exhibit dynamic fit with the external and internal aspects of the
firm’s overall situation?
 Also dynamic fit in the sense that they evolve over time in a manner that
maintains close and effective alignment with the company’s situation
o The Competitive Advantage Test

lOMoARcPSD|7421704
 Can it help the firm achieve a significant and sustainable competitive

advantage?
o The Performance Test
 Can it produce good performance as measured by the firm’s profitability,
financial and competitive strengths, and market standing?
Why Crafting and Executing Strategy are Important Tasks
 Strategy provides:
o A prescription for doing business
o A road map to competitive advantage
o A game plan for pleasing customers
o A formula for attaining long-term standout marketplace performance
 Good Strategy + Good Strategy Execution = Good Management
 How well a company performs is directly attributable to the caliber of its strategy and
the proficiency with which the strategy is executed.

Chapter 1 Summary Book Crafting and Executing Strategy

Uploaded by

Copyright:

Available Formats

Chapter 1 Summary Book Crafting and Executing Strategy

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Chapter 1 Summary Book Crafting and Executing Strategy

Uploaded by

Copyright:

Available Formats

lOMoARcPSD|7421704

MGT Chapter 1 Summary - book "Crafting and Executing

StuDocu is not sponsored or endorsed by any college or university

Chapter 1: What is Strategy and Why is it important?

Downloaded by Ridwan Iyas (ridwaniyas@gmail.com)

 Doing what they cannot do!

Downloaded by Ridwan Iyas (ridwaniyas@gmail.com)

 Proactive and Reactive Strategy

Downloaded by Ridwan Iyas (ridwaniyas@gmail.com)

 Can it help the firm achieve a significant and sustainable competitive

Downloaded by Ridwan Iyas (ridwaniyas@gmail.com)

You might also like