Business Strategy Chapter 1

What is strategic management?
Allocation of the firms limited resources. Resources should be allocated in a way that maximizes the firm’s ability to succeed
What are three benefits of strategic management?
Clearer sense of strategic vision for the firm.

Sharper focus on what is strategically important.

Improved understanding of a rapidly changing environment.

What is strategy formulation?
Development of long-range plans for the effective management of environmental opportunities and threats in light of corporate strengths and weaknesses.
Corporate Strategy
Corporate Strategy describes a company’s overall direction in terms of its general attitude towards growth and the management of its various businesses and product lines. Corporate strategies typically fit within the three main categories of stability, growth and retrenchment.
Business-level Strategy
Business strategy usually occurs at the business unit or product level, and it emphasizes improvement of the competitive position of a corporation’s product or services in the specific industry or segment served by that business unit. Business strategies may fit within the two categories, competitive and cooperative strategies.
Functional Strategy
Functional strategy is the approach taken by a functional area to achieve corporate and business unit objectives and strategies by maximizing resource productivity. It is concerned with developing or nurturing a distinctive competence to provide a company or business unit with a competitive advantage.
What is a sustainable competitive advantage?
When an attractive number of buyers prefer its products/services over those of rivals and when the basis for this preference can be maintained over time.
Why does a company’s strategy evolve over time?
A company’s strategy is a work in progress.

Changes may be necessary to react to:
Competitive Activities
External “Interventions” (e.g., customer lawsuits, supplier changes, new laws, etc.)
Performance “Gaps” (e.g., sales/profit declines, loss of customers, etc.)
Evolving customer preferences/changes in technology
Emerging market opportunities

What is a business model?
A business model addresses “How do we make money in this business?”

Also “Is the strategy capable of delivering
good bottom-line results?”

What is the difference between a corporate strategy and a business model?
A Business Model Puts the numbers to the strategy.

A business model answers the question: “Given the proposed strategy, how much money can we make?”

A strategy answers the question: “How are we going to get there?”

Discuss the three questions that can be used to test the merits of one strategy versus another to distinguish a winning strategy.
(GOODNESS OF FIT TEST)- How well does strategy fit the firm’s situation?

(COMPETITIVE ADVANTAGE TEST)- Does strategy lead to sustainable competitive advantage?

(PERFORMANCE TEST)- Does strategy boost firm performance based on the business model?

Discuss the 8-step strategy process.
Develop a Strategic “Mission” and “Vision”
Contains: Product line definition and SCA, market scope, growth directions

Conduct a “SWOT” Analysis
Internal Strengths and Weaknesses, external Opportunities and Threats
Identify critical weaknesses related to Key Success Factors
Identify critical threats to the firm’s continued success or existence

Set Company Objectives (“SMART” – Specific, Measurable, Attainable, Realistic with a Timetable)

Craft a Corporate Strategy to Allocate Resources Among SBU’s (use decision tools such as the BCG Growth-Share Matrix and/or the Industry Attractiveness-Competitive Strength Matrix)

Craft Business-Level Strategies for each SBU within the Company (use decisions tools such as the TOWS Matrix and Product-Market Matrix). Choose one of the Porter’s generic strategies: overall low-cost leadership, broad differentiation, focused low-cost leadership, or focused niche.

Forecast Sales and Profits

Implement Strategies

Monitor, Review, and Revise as Necessary!

What is a mission statement?
A clear sense of the domain in which the organization’s products and services fit. A vision and sense of future aspirations.

The mission statement of a firm focuses on its present business purpose – “who we are and what we do”

What are the three main components of a mission statement?
Current product and service offerings
Types of customers being served
Geographic coverage
What is a vision statement?
Describes what an organization would like to become.

A strategic vision concerns a firm’s future business path – “where we are going”

How does a vision statement differ from a mission statement?
A strategic vision concerns a firm’s future business path – “where we are going”