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What is Strategy? Why Does It Matter? 2-1 Chapter 1

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  • Slide 1
  • What is Strategy? Why Does It Matter? 2-1 Chapter 1
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  • 1-2 Strategy involves What Is Strategy? Time - the present, the future, and the track between Choices products, markets, services, . Resources money, people, tools, etc. Competencies what we are good at Something that is VRI-O Much more!
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  • 1-3 Strategy is The combination of competitive moves and business approaches used by managers to run the company Managements theory about how to gain competitive advantage BTW, whats a theory? A comprehensive plan stating how the firm will achieve its mission and objectives What Is Strategy?
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  • 1-4 Strategy is Managements game plan or, its HOW TO Attract and please customers Stake out a market position Compete successfully Grow the business Achieve targeted objectives What Is Strategy?
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  • 1-5 Strategy is The Generals view (Strategos) Integrated Externally oriented What Is Strategy? Cyclical: Conceptual Planned Executed Reviewed
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  • 1-6 1984Profits: $242 Million Theme Park Operations: 77 percent of profits Consumer Products: 22 percent of profits Filmed Entertainment: 1 percent of profits Walt Disney Company
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  • 1-7 Hired Michael Eisner - 1984 1. Increased admission prices at theme parks 1984 - $186 m 1989 - $787 m 2. Focused on movie studios (character development) 1984 - $2.42 m 1994 - $845 m 3.Diversified into television (ABC), hotels, retail stores, sport team, cruise line, publishing, consumer products, licensing, etc. (Huey & McGowan, 1995) Walt Disney Company Market Cap: 1984 = $2 billion 1994 = $28 billion
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  • 1-8 Inferring Strategy A companys strategy is reflected in what it does and says (see p. 6 of your text) What do you think Eisners strategy was? Eisners basic theory (strategy) may have been: People will pay a premium price for extraordinary entertainment. We have the necessary resources to create extraordinary entertainment. Therefore, lets redeploy our resources in a different way and offer something extraordinary to people.
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  • 1-9 So Why is Strategy Important? Strategy + Execution = ? Management ! It is managements job to get results
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  • 1-10 Summary Strategy is about creating a desirable future, and it is important because that future is desired.
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  • 1-11 But remember The future is foggy!
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  • 1-12 Recommended reading:
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  • 1-13 Chapter 2 The Managerial Process of Crafting and Executing Strategy
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  • 1-14 MissionObjectives External Analysis Internal Analysis Strategic Choice Strategy Implementation Competitive Advantage The Strategic Management Process
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  • 1-15 Objectives External Analysis Internal Analysis Strategic Choice Strategy Implementation Competitive Advantage Mission
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  • 1-16 The Strategic Management Process Objectives: specific, measurable targets, etc. (SMART) the things a firm needs to do to achieve its mission should influence other elements in the strategic management process See text p. 28 for examples
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  • 1-17 The Strategic Management Process External and Internal Analysis External Analysis Systematic Examination of the Environment Internal Analysis interest rates demographics social trends technology human resources (knowledge) manufacturing abilities technology
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  • 1-18 The Strategic Management Process Strategic Choice External Analysis Internal Analysis Strategic Choice Business Level Corporate Level positioning a business which businesses?
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  • 1-19 The Strategic Management Process Strategy Implementation how strategies are carried out who will do what organizational structure and control who reports to whom how does the firm hire, promote, pay, etc.
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  • 1-20 A Strategy Is Only As Good As Its Implementation Strategy Implementation The Strategic Management Process every strategic choice has strategy implementation implications strategy implementation is just as important as strategy formulation (or maybe more so my view)
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  • 1-21 The Strategic Management Process Competitive Advantage Definition: the ability to create more economic value than competitors all other elements of the strategic management process are aimed at achieving competitive advantage MissionObjectives External Analysis Internal Analysis Strategic Choice Strategy Implementation Competitive Advantage
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  • 1-22 Competitive Advantage The Ability to Create More Economic Value Than Competitors there must be something different about a firms offering vis--vis competitors offerings if all firms strategies were the same, no firm would have a competitive advantage competitive advantage is the result of doing something different and/or better than competitors
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  • 1-23 Competitive Advantage Two Types of Difference 1)Preference for the firms output 2)Cost advantage vis--vis competitors people choose the firms output over others people are willing to pay a premium lower costs of production/distribution Example: Nordstrom Example: Wal-Mart
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  • 1-24 Competitive Advantage External Analysis Internal Analysis Strategic Choice Strategy Implementation Competitive Advantage identify and exploit differences that may lead to competitive advantage Example: Apples iPod The Strategic Management Process
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  • 1-25 Competitive Advantage Temporary & Sustainable competition limits the duration of competitive advantage in most cases profits attract competition competitive advantage typically results in high profits Therefore, most competitive advantage is temporary competitors imitate the advantage or offer something better
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  • 1-26 Competitive Advantage Measuring Competitive Advantage Superior Economic Performance Is Viewed as Evidence of Competitive Advantage it is rather easy to see the evidence of competitive advantage measuring the source of the advantage per se is typically impossible its difficult to measure technology
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  • 1-27 Competitive Advantage & The Strategic Management Process Emergent vs. Intended Strategies the strategic management process leads managers to intended strategies However, conditions often change or new information becomes available managers respond and adopt emergent strategies
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  • 1-28 The Strategic Management Process Summary This course is not about mere survival, it is about thrivingachieving competitive advantage the strategic management process helps managers achieve competitive advantage competitive advantage depends on differences strategy is about discovering and exploiting these differences
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  • 1-29 The Strategic Management Process Applying Strategy to Your Career a solid understanding of strategy concepts will help set you apart from other job candidates you can use the process to identify and exploit difference between you and others you can use the process to determine if you want to stay with a company
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  • 1-30 The Strategic Management Process & Competitive Advantage Strategy Matters! success and failure, between mediocrity and excellence Strategy is often the difference between: a great manager and average managers stumbling through life and moving ahead with purpose

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