Slide 1Why do we need strategy?Strategic Management DefinedCompetitive AdvantageToday’s Competitive LandscapeWhat is Strategy?What is Strategy?What is Strategy?What is Strategy?What is Strategy?So….how can firm’s be profitable?Two Models of ProfitabilityI/O Model Environment Drives Strategy & PerformanceI/O Model Environment Drives Strategy & PerformanceSlide 15Slide 16What is strategic effectiveness?Strategic Vision vs. MissionMission StatementsObjectivesTypes of Objectives Required6 Characteristics of a Good ObjectiveSlide 23StakeholdersLevels of Strategic ManagementHP’s Corporate StrategyChapter OneWhat is Strategy and Why is it Important?Why do we need strategy?The reasons why firms succeed and fail is perhaps the central question in strategyAnswers the fundamental question of the firmWhere we are now?Where we going?How are we going to get there?Strategic Management Defineddecisions and actions that determine long-term performanceformulation and implementation of plans designed to achieve objectivesunifying theme that gives coherence and direction to organizational/individual decisionsgame plan management has for positioning the company in its chosen market, competing successfully, satisfying customers, and achieving good business performanceintegrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantageWhat is a competitive advantage?Competitive AdvantageWhen a firm implements a strategy that rivals can’t duplicate, or find it too expensive to do try to imitateToday’s Competitive LandscapeGlobal EconomyKnowledge IntensityInformationTechnologyTechnology Change & DiffusionHypercompetition•Strategic Flexibility•Intelligence Management•Global Perspective•Speed, Innovation & IntegrationNew Managerial MindsetWhat is Strategy? Strategy is not doing similar activities better than your rivals – that’s operational effectivenesscontinual improvement not a sustainable advantageindustry-wide cost reductions do not lead to increased profitabilityexamples: PCs, automobiles, airlinesWhat is Strategy? 1) Strategy is performing different activities or performing similar activities in a different wayStrategy is about positioninga) Variety-based positioningoffering a unique choice of goods/services - Chic-fil-a, GameStopb) Needs-based positioningserving most/all of a particular group of customers’ needs - Babies R Usc) Access-based positioningserving a set of customers that require unique access – Kinkos, Movie Gallery, SuperetteWhat is Strategy? 2) Strategy is about choosing a position which requires tradeoffs, choosing what not to dowithout tradeoffs, all firms would imitateTradeoffs arise frominconsistent image/reputationdifferent activities, products, equipment, employees, skills, systems, machinespriorities, internal coordination, and controlWhat is Strategy? 3) Strategy is about combining activities as advantages come from fit and reinforcing Operational effectiveness is about excellence in individual activitiesFit/integration increases sustainability by reducing imitabilityWhat is Strategy? 4) The desire to grow is most threatening to an effective strategy Blurs uniquenessCreates compromisesReduces fitErodes original advantagesSo….how can firm’s be profitable?1) Choose an attractive industry in which to compete - Where we compete? •Corporate level strategy2) Attain a competitive advantage within an industry - How we compete?•Business level strategyTwo Models of ProfitabilityI/O Model (Industrial/Organizational Economics Model)Resource Based ModelI/O ModelEnvironment Drives Strategy & PerformanceThree Key Assumptions Therefore, firms must find an attractive industry or segment within the industry to gain above average profitability14I/O ModelEnvironment Drives Strategy & PerformanceResource Based ModelFirms’ Resources Drive Strategy & PerformanceThree Key Assumptions Therefore, firms must find an attractive industry or segment within the industry to gain above average profitabilityResource Based ModelFirms’ Resources Drive Strategy & PerformanceWhat is strategic effectiveness?Strategic Vision vs. MissionA strategic vision concerns “wherewe are going” or ”what do we want to be.”Markets to be pursuedFuture product/ market/customer/ technology focusKind of company management is trying to createThe mission statement focuses on its “who we are and what we do”Current product and service offeringsCustomer needs being servedTechnologicaland businesscapabilitiesMission StatementsBoundaries of the current businessFundamental purpose that sets it apart from other firms of its typeConveysWho we are,What we do, andWhy we are hereObjectivesTurns mission into performance outcomesOrganizations produce what is measuredLong and Short termTypes of Objectives RequiredOutcomes focusedon improving financial performanceOutcomes focused on improving competitive vitality and future business positionFinancial Objectives Strategic Objectives$6 Characteristics of a Good ObjectiveU SMARTUnderstandableStretchingMeasurableAgreeableRealisticTimeboundCurrent financial results are “lagging indicators” reflecting results of past decisions and actions—good profitability now does not translate into stronger capability for delivering better financial results laterHowever, meeting or beating strategic performance targets signals growing competitiveness & strength in the marketplace, thus developing the capability for better financial performance in the years aheadGood strategic performance is thus a “leading indicator” of a company’s capability to deliver improved future financial performanceLeading versus Lagging IndicatorsStakeholdersIndividual or groups whoAffect mission/vision of the firmAre affected by strategic outcomes of the firmHave enforceable claims on the performance of the firmCapital Market StakeholdersShareholders and capital suppliersProduct Market StakeholdersCustomers, suppliers, communities, unionsOrganizational StakeholdersEmployeesToday’s firms must affectively balance the demands and expectations of all stakeholders.Levels of Strategic ManagementHP’s Corporate StrategyEnterprise Storage & ServersHP ServicesSoftware Personal SystemsImagining and PrintingFinancial
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