1-1 chapter 1 strategy and the quest for competitive advantage mcgraw-hill/irwin copyright © 2009...
TRANSCRIPT
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CHAPTER 1CHAPTER 1
Strategy and the Strategy and the Quest for Quest for
Competitive Competitive AdvantageAdvantage
McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
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Thinking Strategically:Thinking Strategically:The Three Big Strategic QuestionsThe Three Big Strategic Questions
1. Where are we now?
External and Internal Analysis
2. Where do we want to go?
Vision and Objectives
Business(es) to be in and market positions
Buyer needs and groups
3. How are we going to get there?
This is its strategy
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What Do We Mean By “Strategy”?What Do We Mean By “Strategy”?
Consists of competitive moves and business approaches used by managers to run the company
Management’s “action plan” to
Attract and please customers
Compete successfully
Conduct operations
Achieve target levels oforganizational performance
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Strategy and Sustainable Strategy and Sustainable Competitive AdvantageCompetitive Advantage
A company achieves sustainable competitive advantage when a
sufficiently large number of buyers develop a lastingpreference for its products/services over those offered by rivals
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Four Proven Strategic Approaches toFour Proven Strategic Approaches toWinning a Sustainable Competitive Winning a Sustainable Competitive AdvantageAdvantage
Developing a cost-based advantage
Creating a differentiation-based advantage
Focusing on a narrow market niche within an industry
Developing unmatched resource strengths and competitive capabilities
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Competitive Strategy ExamplesCompetitive Strategy Examples
Strive to be the industry’s low-cost provider
Wal-Mart
Southwest Airlines
Out-compete rivals on a key differentiating feature
Harley-Davidson – Outlaw image and distinctive engine sound
Rolex – Top-of-the-line prestige
Amazon.com – Wide selection and convenience
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Competitive Strategy ExamplesCompetitive Strategy Examples
Focus on a narrow market nicheMcAfee – Virus protection auctionsStarbucks – Premium coffees and coffee
drinksThe Weather Channel – Cable TV
Develop expertise, resource strengths, andcapabilities not easily imitated by rivalsWalt Disney – Theme park management
and family entertainmentRitz-Carlton – Personalized customer
service
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Why Do Strategies Evolve?Why Do Strategies Evolve?
A company’s strategy is a work in progress
Changes may be necessary to react to
Shifting market conditions
Fresh moves of competitors
Evolving customer preferences
Emerging market opportunities
New ideas to improve strategy
Crisis situations
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What Is a Business Model?What Is a Business Model?
A business model addresses “How do we make money in this business?”
Do the revenue-cost-profit economicsof the strategy make good business sense?
Look at revenue streams the strategy is expected to produce
Look at associated cost structure and potential profit margins
Do resulting earnings streams and ROI indicate the strategy makes sense and the company has a viable business model for making money?
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Microsoft’s Business ModelMicrosoft’s Business Model
Employ highly skilled programmers to develop proprietary code; keep source code hidden from users
Sell resulting OS and software packages to PC makers and users at relatively attractive prices to achieve a 90% or more market share
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 modest level of technical support to users at no cost
Rejuvenate revenues by periodically introducing next-generation software that prompt PC users to upgrade their operating systems
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Red Hat’s Business ModelRed Hat’s Business Model
Rely on collaborative efforts of volunteer programmers to create the software
Collect and test enhancements and new applications submitted by volunteer programmers for evaluation and inclusion in new releases of Linux
Market upgraded and tested family of Red Hat products to large companies, charging a subscription fee that includes 24/7 support within 1 hour in 7 languages
Make source code open and available to all users
Capitalize on specialized expertise required to use Linux by providing fee-based training, consulting, and software customization
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Tests of a Winning StrategyTests of a Winning Strategy
GOODNESS OF FIT TEST
How well does strategy fitthe firm’s situation?
COMPETITIVE ADVANTAGE TEST
Does strategy lead to sustainable competitive advantage?
PERFORMANCE TEST
Does strategy boost firm performance?