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What Is Strategy andWhat Is Strategy and
Why Is It Important?Why Is It Important?
11
Chapter
Screen graphics created by:Jana F. Kuzmicki, Ph.D.
Troy State Uniersity!F"orida and #estern $egion
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%hapter $oadmap%hapter $oadmap
What Is Strategy?
Identifying a Companys Strategy
Strategy and the Quest for Competitive Advantage
Strategy Is Partly Proative and Partly !eative
Strategy and "this# Passing the $est of %oral Srutiny
$he !elationship &et'een a Companys Strategy and Its
&usiness %odelWhat %a(es a Strategy a Winner?
Why Are Crafting and ")euting Strategy Important?
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Thinking Strategica""y:Thinking Strategica""y:The Three &ig StrategicThe Three &ig Strategic
'uestions'uestions
1.Where are 'e no'?
2.Where do 'e 'ant to go?
&usiness+es, to e in and mar(et positions to sta(e out
&uyer needs and groups to serve
.utomes to ahieve
3./o' 'ill 'e get there?
A ompanys ans'er to 0ho'
'ill 'e get there? is its strategy
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#hat (s Strategy)#hat (s Strategy)
Consists of the combinationof competitive movesandbusiness approachesused y managers to run the
ompany
%anagements game plantoAttrat and please ustomers
Sta(e out a mar(et position
Compete suessfully3ro' the usiness
Ahieve targeted o4etives
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Howto please ustomers
Howto respond to hanging
mar(et onditions
Howto outompete rivals
Howto gro' the usiness
Howto manage eah funtional piee of the usiness anddevelop needed organi6ational apailities
Howto ahieve strategi and finanial o4etives
Strategyis HOW
to . . .
TheThe HowsHows ThatThatDe*ne a Firm+s StrategyDe*ne a Firm+s Strategy
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Fig. 1.1: Identifying a Companys StrategyFig. 1.1: Identifying a Companys Strategy
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Striing orStriing or%ompetitie -dantage%ompetitie -dantage
$o ahieve sustainale ompetitive advantage9 aompanys strategy usually must e aimed at either
Providing a distintive produt or servie or
:eveloping ompetitive apailities rivals an not math
Ahieving a sustainale ompetitive advantage greatlyenhanes a ompanys prospets for
Winning in the mar(etplae and
!eali6ing aove-average profits
What separates apowerful strategyfrom an ordinary strategyis managements ability to forge a series of moves,
both in the marketplace and internally, thatproduces sustainable competitive advantage!
St t i - h tSt t i - h t
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Strategic -pproaches toStrategic -pproaches to&ui"ding %ompetitie&ui"ding %ompetitie
-dantage-dantage Strive to e the industrys lo'-ost provider
.utompete rivals on a (ey differentiating feature
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Fig. ./: - %ompany0s StrategyFig. ./: - %ompany0s Strategy(s Part"y Proactie and Part"y(s Part"y Proactie and Part"y
$eactie$eactie
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"thial and moral standards go eyond
Prohiitions of la' andthelanguage of thou shalt not
to issues of
Dutyand right vs. wrong
"thial and moral standards address
What is the right thing to do
$'o riteria of an ethical strategy
:oes not entail ations and ehaviors that ross the line from
can doto should not do"and unsavoryor shadyand
Allo's management to fulfill its ethial duties to all sta(eholders
2inking Strategy #ith2inking Strategy #ith1thics1thics
- Firm0s 1thica"- Firm0s 1thica"
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- Firm0s 1thica"- Firm0s 1thica"$esponsibi"ities$esponsibi"ities
to (ts Stakeho"dersto (ts Stakeho"ders
#wners$shareholders Rightfully epect some form ofreturn on their investment
#wners$shareholders Rightfully epect some form ofreturn on their investment
%mployees! Rightfully epect to be treated "ith dignity
and respect for devoting their energies to the enterprise
%mployees! Rightfully epect to be treated "ith dignity
and respect for devoting their energies to the enterprise
Customers! Rightfully epect a seller to provide them"ith a reliable, safe product or service
Customers! Rightfully epect a seller to provide them"ith a reliable, safe product or service
&uppliers! Rightfully epect to have an e#uitablerelationship "ith firms they supply and be treated fairly
&uppliers! Rightfully epect to have an e#uitablerelationship "ith firms they supply and be treated fairly
Community! Rightfully epect businesses to be goodciti$ens in their community
Community! Rightfully epect businesses to be goodciti$ens in their community
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#hat (s a &usiness#hat (s a &usiness3ode")3ode")
A usiness model addresses How do we make money inthis business
Is the strategy apale of delivering
good ottom-line results?
:o the revenue'cost'profit economics
of the strategy ma(e good usiness sense?
@oo( at revenue streamsthe strategy is e)peted to produe
@oo( at assoiated cost structureand potentialprofit margins :o resulting earnings streams and !.I indiate the strategy
ma(es sense and the ompany has a viale usiness model for
ma(ing money?
$e"ationship &et4een$e at ons p &et4een
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&trategy- :eals 'ith aompanys ompetitive
initiatives and usiness
approahes
(usiness )odel
-Conerns 'hether
revenues and osts flo'ing
from the strategydemonstrate the usiness
an e amply profitale
and vialeStr
ategy
Busines
s
Model
$e"ationship &et4een$e at ons p &et4eenStrategy and &usinessStrategy and &usiness
3ode"3ode"
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Tests o a #inningTests o a #inningStrategyStrategy
*##D+%&& #, ,- %&
/o' 'ell does strategy fit
the firms situation?
C#)/%--0% 1D01+1*% %&
:oes strategy lead to sustainale
ompetitive advantage?
/%2,#2)1+C% %&
:oes strategy oost firm performane?
t er r ter a orer r er a or
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t er r ter a orer r er a orJudging the 3erits o aJudging the 3erits o a
StrategyStrategy Internal onsisteny and unity among all piees of the
strategy
:egree of ris( the strategy poses as ompared to
alternative strategies
:egree to 'hih the strategy is fle)ile and adaptale to
hanging irumstanes
While these criteria are relevant, they seldom override
the importance of the three testsof a winning strategy!
6ood Strategy 7 6ood6ood Strategy 7 6ood
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6ood Strategy 7 6ood6ood Strategy 7 6oodStrategy 18ecution 9 6oodStrategy 18ecution 9 6ood
3anagement3anagement
Crafting and e)euting strategy are ore management funtionsAmong all things managers do9 nothing affets a ompanys
ultimate suess or failure more fundamentally than ho' 'ell
its management team
Charts the ompanys diretion9 :evelops ompetitively effetive strategi moves and usiness
approahes9 and
Pursues 'hat needs to e done internally to produe good day-
inday-out strategy e)eution
%3cellent e3ecutionof an ecellent strategy is the besttest of managerial e3cellence!! and the most reliable
recipe for "inning in the marketplace%