• How to attract and please customers

• How to compete against rivals

• How to position the company in the marketplace

• How best to respond to changing economic and market conditions

• How to capitalize on attractive opportunities to grow he business

• How to achieve the company’s performance targets

three ways to use a strategy to compete differently

• Attract customers and gives a competitive edge

• Mimicking a strategy never works 

• Doing  what rival firms cant and/or wont do

• it provides buyers with superior value compared to rival sellers or offers the same value at a lower cost to the firm

  • If a strategy is not distinctive than there can be no competitive advantage

  • The advantage is sustainable if it persists despite the best efforts of competitors to match or surpass the advantage

must evolve

• Changing circumstances and ongoing management efforts to improve the strategy causes a company strategy to evolve over time

• A condition that makes the takes of crafting strategy a work in progress not a one-time event

• Change strategy in response to new learnings an and unfolding events

• consists of proactive strategy elements that are both planned and realize as planned

• consists of reactive strategy elements that emerge as changing conditions

• A portion of the company’s strategy is always developed on the fly

• sets forth the logic for how its strategy will create value for customers, while at the same time generates revenues sufficient to cover costs and realize a profit

the fit test

the competitive advantage test

performance test

1. a strategy has to be well matched to industry and competitive conditions, a company’s best market opportunities, and other pertinent aspects of the business environment in which the company operates

   1. It must also evolve over time with the changing markets

1. a strategy that enables a company to achieve a competitive advantage over key rivals that is long-lasting.

   1. The bigger and more durable the competitive advantage is the more powerful it is

1. Two types of indicator tell the most about the caliber of a company’s strategy

1. Competitive strength and market standing

2. Profitability and financial strength

GOOD STRATEGY + GOOD STRATEGY EXECUTION =

GOOD MANAGEMENT

describes managements aspiration for the future and delineates the company’s strategic course and long term direction

• Gives an idea of where we are going

• valuable management tool for enlisting the commitment of company personnel to engage in the actions that move the company forward

  • Put where you are going and why in writing

  • One to two paragraphs and can explain in 5-10 min

• Five reasons why a well-communicated strategic vision matters

1. It crystallizes senior executives own views about the firms long-term direction

2. It reduces the risk of rudderless solutions

3. It is a tool for winning the support of organization members to help make the vision a reality

4. It provides a beacon for lower-level managers in setting departmental objectives and crafting department strategies so they are in sync with the company’s overall strategy

5. It helps an organization prepare for the future

• describes the enterprises present business and purpose

• “who we are, what we do, and why we are here.”

1. Identifies the company’s product/services

2. Specifies the buyer needs that it seeks to satisfy and customer groups or markets it serves

3. Gives the company its own identity

• the beliefs, traits, and behavioral norms that company personal are expected to display in conducting the company’s business and pursuing its strategic vision and mission

  • Four to eight core values that all personnel must have

are an organizations performance targets-the specific results management wants to achieve

Well stated objectives are quantifiable or measurable, and contain a deadline for achievement                

• “You cannot manage what you cannot measure…and what gets measured gets done.”

• Concrete, measurable objectives are managerially valuable for three reasons:

• The focus efforts and align actions throughout the organization

• They serve as yardsticks for tracking a company’s performance and progress

• They motivate employees to expand greater effort and perform at a high level

• a company shows this when the relentlessly pursues an ambitious strategic objective concentrating the full force of its resources and competitive actions on achieving the objective

• relate to the financial performance targets management has established for the organization to achieve (can be a lagging indicator) (is for place in time not future)

• relate to target outcomes that indicted a company is strengthening its market standing, competitive position and future business prospects

  • Looking at short term (quarterly or annually) long term (3-5 years)

  • Long term force manager to think what can I do NOW to put company is a position to perform better later

A stronger market standing and greater competitive vitality

• The best and most reliable leading indicator of a company’s future financial performance and business prospects are strategic outcomes that indicate whether the company competitiveness and market position are stronger or weaker

• is a widely used method for combining the use of both strategic and financial objectives, tracking their achievement, and giving management a more complete and balanced view of how well an organization is performing

• Company objectives need to be broken down into performance targets for each of the organization’s separate businesses, product lines, functional departments, and individual work units

• Objective setting is a top-down process that must extend to the lowest organizational levels

• Asking a series of HOW questions

  • How to attract customer’s, how to compete against rivals, how to position the company in the marketplace, how to respond to changing market conditions,

  • Good strategy making is therefore inseparable from good business entrepreneurship. One cannot exist without the other

1) corporate strategy

2) business strategy

3)Functional area strategy

4) operating strategies

• strategy at the multi-business level, concerning how to improve company performance or gain competitive advantage by managing a set of business simultaneously

• at the single business level concerning how to improve the performance or gain competitive advantage in a particular line of business

Building competitive advantages in a single business unit

• concern the relatively narrow strategic initiatives and approaches for managing key operating units and specific operating activities with strategic significance,

• A strategic vision + objectives + strategy =

• A company’s vision and mission, as well as its objectives, strategy execution are never final: managing strategy is an ongoing process and never stops

1. Oversee the company’s financial accounting and financial reporting practices

2. Critically appraise the company’s direction, strategy, and business approaches

3. Evaluate the caliber of senior executives strategic leadership skills

4. Institute a compensation plan for top executives that rewards them for actions and results that serve the shareholders

1. Political factors

2. Environmental forces

3. Legal/regulatory factors

4. Technological factors

5. Sociocultural forces

Economic Conditions

• How strong are the industry’s competitive forces?

• What are the driving forces in the industry, and what impact will they have on competitive intensity and industry profitability?

• What market positions do industry rivals occupy-Who is strongly positioned and who is not?

• What strategic movies are rivals likely to make next?

• What are the industry outlook conductive to good profitability?

• Is the industry outlook conductive to good profitability?

• Five Sources of competition inside and industry

1. Competition from rival sellers

2. Competition from potential new entrants to the industry

3. Competition from producers of substitute products

4. Supplier bargaining power

5. Customer bargaining power

• Three steps when using he five forces model

1. For each of the five forces, identify the different parties involved, along with the specific factors that bring about competitive pressures

2. Evaluate how strong the pressures stemming from each of the five forces are (strong, moderate or weak)

3. Determine whether the strength of the five forces, overall, is conductive to earning attractive profits in the industry

Competition from rivals is strong when

• Rivalry increases when buyer demand is growing slowly or declining

• Rivalry increase as it becomes less costly for buyers to switch brands

• Rivalry increases as the products of rival sellers become less strongly differentiated

• Rivalry is more intense when there is excess supply or unused production capacity , especially if the industry’s product has high fixed cost or high storage cost

• Rivalry intensifies as the number of competitors increases and they become more equal in size and capacity

• Rivalry becomes more intense as the diversity of competitors increase in terms or long-term directions, objectives, strategies, and counties of origin

• Rivalry is strong when high exit barriers keep unprofitable firms from leaving the industry

• Competing weapons against rivals

• Price discounting, clearance sales, lowers price

• Couponing, advertising items on sales, lower prices and increase unit sales

• Advertising product or service characteristics, using ads to enhance a company’s image, increase value, may increase unit cost and/or lower profit margins per unit sold

• Innovating to improve product performance and quality, increase in value and increase unit cost

• Introducing new or improved features, increasing the number of styles to provide greater product selection, increase value and cost

• Increasing customization of product or service, increase value and cost

• Building a bigger, better dealer network, increase cost but boost sales

• Improving warranties, offering low-interest financing, increase value and unit cost

Competition from potential new entrants to the industry

• The most widely encountered barriers of entry are:

• Cost advantage enjoyed by people already in the industry

• Strong brand preferences and high degrees of customer loyalty

• Strong network effects in customer demand-customers attrached to something because more people use it (network effect)

• High capital requirements

• The difficulties of building a network of distributors or dealers and securing adequate space on retail shelves

• Restrictive government policies

• The strongest competitive pressures associated with potential entry frequently come not from outsiders but current industry participants looking for growth opportunities

Competitive pressures from the sellers of substitutes products

• Competitive pressures from substitutes are stronger when

3

1. Good substitutes are readily available and attractively priced

2. Substitutes have comparable or better performance features

3. Buyers have low costs in switching to substitutes

• As a rule, the lower the price of substitutes, the higher their quality and performance, and the lower the switching costs, the more intense the competitive pressure posed

Competitive pressures from stemming from supplier bargaining power

• Supplier bargaining power is strong when:

• Supplier bargaining power is strong when:

  • Supplier products/service are in short supply

  • Supplier products/services are differentiated

  • Industry members incur high costs in switching their purchases to alternative suppliers

  • The supplier industry is more concentrated than the industry it sells to and is dominated by a few large companies

  • Suppliers products/services account for a small percentage of industry members costs

  • Industry members cant integrate backward and self-supply

  • There are no good substitutions or what the suppliers provide

  • Suppliers are not dependent on the industry for ta large portion of their revenues

Competitive pressures stemming from buyer bargaining power and price sensitivity

• Factors determining the strength of buyer power in an industry

• Buyer power increases when buyer demand is weak in relation to industry supply

• Buyer power increases when industry goods are standardized or differentiation is weak

• Buyers bargaining power is greater when their cost of switching to competing brands or substitutes are relatively low

• Buyers have more power when they are large and few in number of relative to the number of sellers

• Buyers gain leverage if they are all well informed about seller’s products, prices and costs. (the more information you have the more bargaining power you have)

• Buyer bargainging power is greater when they pose a credible threat of integrating backward into the business of sellers

• Buyers have the ability to postpone purchases

• Buyers are price sensitive

Is the industry outlook conductive to good profitability?

• The strongest of the five forces determines the extent of the downward pressure on an industry’s profitability

• The more strong forces an industry has the more unattractive it is

• Driving forces analysis has three steps

1. Identify what the driving forces are

2. Assessing whether the drives of change are, on the whole, acting to make the industry more or less attractive

3. Determining what strategy changes are needed to prepare for the impact of the driving forces

1) Are the driving forces as a whole causing demand for the industry’s product to increase or decrease?

2) Is the collective impact of the driving forces making competition more or less intense?

3) Will the combined impacts of the driving forces lead to higher or lower industry profitability?

1. Changes in the long-term industry growth rate

2. Increasing globalization

3. Emerging new internet capabilities and applications

4. Changes in who buys the product and how they use it

5. Technological change and manufacturing process innovation

6. Product and marketing innovation

7. Entry or exit of major firms

8. Diffusion of technical know-how across companies and countries

9. Changes in cost and efficiency  

10. Reductions in uncertainty and business risk

11. Regulatory influences and government policy changes

12. Changing societal concerns, attitudes, and lifestyles

An industry can only have 3 to 4 factors powerful enough to qualify as the major determinants of why and how an industry’s competitive conditions are changing  

-is a technique for displaying the different market or competitive positions that rival firms occupy in the industry

to make one vertical is the price or percieved quailty with it being low or high

the horizontal is geographic market scope with narrow and broad

write companies in where they fall then put circle depending how much they do

How can you predict what strategic moves a rival is about to make?

• Studying competitors past behavior and preferences provides a valuable assist in anticipating what moves rivals are likely to make next and out maneuvering them in the marketplace

What are Michael Porter’s framework for competitor analysis four indicators of a rivals likely strategic moves and countermoves?

• Rivals current strategy-how the company is competing currently

• Objectives-strategic and performance objectives

• Capabilities-key strengths and weaknesses

• Assumptions-held about itself and the industry

the strategy elements, products, and service attributes, operational approaches, resources, and competitive capabilities that are essential to surviving thriving in the industry

• The three best indicators of how well a company’s strategy is working

• Whether the company is achieving its stated financial and strategic objective

• Whether its financial performance is above industry average

• Whether its gaining customers and increasing its market share

• What are competitive assets?

• The company’s resources and capabilities are big determinants of its competitiveness and ability to succeed in the marketplace and what a firms strategy depends on to develop sustainable competitive advantage over its rivals

first you identify the companines resources and capabilites then you use the four test of a resources competitive power 

• powerful tool for sizing up a company’s competitive assets and determining if the can support a sustainable competitive advantage over market rivals

• The four tests of a resources competitive power

• Is the resource (or capability) competitively valuable? (valuable)

• IS the resource rare- is it something rivals lack? (Rare)

• Is the resource hard to copy? (inimitable)

• Can the resource by overcome by different types of resources and capabilities-are there good substitutes available for the resource? (non-substitutable)

• Three types of market opportunities

• An absolute market

  • Represents much potential but is hidden in the fog of the future

• A marginally interesting market

  • Presents high risk questionable profit potential

• An unsuitable/mismatched market

  • The firm’s strengths are not matched to market factors-best avoid

• identifies the primary activities that create customer value

  • Primary activities-supply chain management, operations, distribution, sales and marketing, service, profit margin

  • Supporting activities-product R&D, technology, and systems development, human resource management, general administration