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Crafting and executing strategy ebook download - Crafting and Executing Strategy Concepts and Cases The Quest for Competitive Advantage 21st ...
Verified Purchase. Good condition and fast delivery. I bought this as it's needed for my course but I much prefer the Gerry Gallagher book If you're an Irish accounting student - it focuses on what's relevant for professional exams. One person found this helpful.
Too expensive to a student, but I have no choice coz it's textbook of strategy management. Case is good, I have a weekly case study, but rest of them I don't think they are necessary because I can get them by lecturer. Great quality. Great seller, great book. I needed the book as basic literature for my master dissertation. It provided me with the needed information and excited to think beyond my original ideas. A great book, which reads very well and highlights the main ideas with great case studies and real-business examples.
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Does this item contain quality or formatting issues? Your recently viewed items and featured recommendations. Back to top. Get to Know Us. Make Money with Us. Amazon Payment Methods. Let Us Help You. Peteraf John E. Company co-managers have to make decisions relating to product quality, production, workforce compensation and training, pricing and marketing, and financing of company operations.
The challenge is to craft and execute a strategy that is powerful enough to deliver good financial performance despite the competitive efforts of rival companies. C 9 lululemon athletica, inc. C 10 Etsy, Inc. Thompson Jr. Cooney, Research Assistants, Dartmouth College. C Rochelle R. Brunson, Baylor University Marlene M. Reed, Baylor University. C Arthur A. Thompson, The University of Alabama. C John D. C A. C John E.
Strickland, The University of Alabama J. LO 3 The five most basic strategic approaches for setting a company apart from rivals and winning a sustainable competitive advantage. LO 6 The three tests of a winning strategy. Strategy means making clear-cut choices about how to The underlying principles of strategy are enduring, compete. We explain circumstance can explain why some companies are what is meant by a competitive advantage, dis- blessed with initial, short-lived success.
We look holders, and other stakeholders alike in the pro- at what sets a winning strategy apart from others cess. By the end of this mind—but long-lived success is not just the prov- chapter, you will have a clear idea of why the tasks ince of U. In most industries, companies have considerable freedom in choosing the hows of LO 1 strategy. Some companies opt for wide product lines, while others concentrate their energies on a narrow product lineup.
Some deliberately confine their operations to local or regional markets; others opt to compete nationally, internationally several countries , or globally all or most of the major country markets worldwide. Strategy Is about Competing Differently Mimicking the strategies of successful industry rivals—with either copycat product offerings or maneuvers to stake out the same market position—rarely works. A strategy stands a better chance of succeeding when it is predicated on actions, business approaches, and competitive moves aimed at 1 appealing to buyers in ways that set a company apart from its rivals and 2 staking out a market position that is not crowded with strong competitors.
Knowing what not to competing differently do can be as important as knowing what to do, strategically. At best, making the from rivals—doing what wrong strategic moves will prove a distraction and a waste of company resources. Figure 1. LO 2 Strategy and the Quest for Competitive Advantage The heart and soul of any strategy are the actions in the marketplace that managers are The concept of a taking to gain a competitive advantage over rivals.
There are many routes to competitive advantage, but they all involve either giving buyers what they perceive as superior value compared to the offerings of rival sellers or giving buyers the same value as others at a lower cost to the firm.
Actions to strengthen Actions to strengthen competitiveness via market standing and strategic alliances competitiveness and collaborative by acquiring or merging partnerships with other companies. Delivering superior value or delivering value more efficiently—whatever form it takes—nearly always requires per- forming value chain activities differently than rivals and building capabilities that are not readily matched.
In Illustration Capsule 1. The company also music, and the aromas all blended to create an inviting focused on making Starbucks a global brand, expanding environment that evoked the romance of coffee and its reach to more than 65 countries in Non-coffee products by Starbucks included teas, while they had their coffee. The music CDs, and coffee mugs and accessories. Starbucks did not use Consumer Packaged Goods division included domes- chemicals or artificial flavors when preparing its roasted tic and international sales of Frappuccino, coffee ice coffees.
By differentiating itself in this manner from other coffee purveyors, Starbucks has been able to charge prices for its coffee that are well above those of its rivals and far exceed the low cost of its inputs. Its expansion policies have allowed the company to make it easy for customers to find a Starbucks shop almost anywhere, further enhancing the brand and cementing customer loyalty.
If a strategy is not distinctive, then there can be no competitive advantage, since no firm would be meeting customer needs better or operating more efficiently than any other. A low-cost provider strategy—achieving a cost-based advantage over rivals. Walmart and Southwest Airlines have earned strong market positions because LO 3 of the low-cost advantages they have achieved over their rivals.
One way to sustain this type of competitive advantage is to be sufficiently innovative to thwart the efforts of clever rivals to copy or closely imitate the product offering. A focused low-cost strategy—concentrating on a narrow buyer segment or market niche and outcompeting rivals by having lower costs and thus being able to serve niche members at a lower price.
Private-label manufacturers of food, health and beauty products, and nutritional supplements use their low-cost advantage to offer supermarket buyers lower prices than those demanded by producers of branded products.
Lulule- mon, for example, specializes in high-quality yoga clothing and the like, attract- ing a devoted set of buyers in the process. This approach is a hybrid strat- egy that blends elements of low-cost provider and differentiation strategies; the aim is to have lower costs than rivals while simultaneously offering better dif- ferentiating attributes.
Its dual focus on low costs as well as differentiation shows how a best-cost provider strategy can offer customers great value for the money. Winning a sustainable competitive edge over rivals with any of the preceding five strategies generally hinges as much on building competitively valuable expertise and capabilities that rivals cannot readily match as it does on having a distinctive product offering. Clever rivals can nearly always copy the attributes of a popular product or service, but for rivals to match the experience, know-how, and specialized capabilities that a company has developed and perfected over a long period of time is substan- tially harder to do and takes much longer.
FedEx, for example, has superior capabili- ties in next-day delivery of small packages, while Apple has demonstrated impressive product innovation capabilities in digital music players, smartphones, and e-readers.
Capabilities such as these have been hard for competitors to imitate or best. However, managers of every company tends to evolve because of changing must be willing and ready to modify the strategy in response to changing market condi- circumstances and tions, advancing technology, unexpected moves by competitors, shifting buyer needs, ongoing efforts by emerging market opportunities, and new ideas for improving the strategy.
Industry envi- ronments characterized by high-velocity change require companies to repeatedly adapt their strategies. Deliberate Strategy Proactive Strategy Elements. Emergent Strategy Reactive Strategy Elements. The proposition and its profit formula, on a per-unit basis, can be expressed as P — C. Plainly, from a customer profit formula. On the other hand, the lower the costs C , given the customer value proposition V — P , the greater the ability of the business model to be a moneymaker.
Thus the profit formula reveals how efficiently a com- pany can meet customer wants and needs and deliver on the value proposition. Just because company managers have crafted a strategy for competing and running the business does not automatically mean that the strategy will lead to profitability—it may or it may not.
The company retains ownership model sets forth the of the engines and is able to minimize engine maintenance costs through the use logic for how its strategy of sophisticated sensors that optimize maintenance and repair schedules.
Printer manufactur- sufficient to cover costs and ers like Hewlett-Packard, Canon, and Epson pursue much the same business model realize a profit. Its profit formula involves such elements as standardized cost-efficient store design, strin- gent specifications for ingredients, detailed operating procedures for each unit, sizable investment in human resources and training, and heavy reliance on advertising and in- store promotions to drive volume. Illustration Capsule 1.
Pandora One subscribers. Profit Revenue generation: Display, Revenue generation: Monthly Revenue generation: formula audio, and video ads targeted subscription fees, sales of Advertising sales to national to different audiences and sold satellite radio equipment, and and local businesses. Cost structure: Fixed costs subscription revenues generated Cost structure: Fixed costs associated with terrestrial from an advertising-free option associated with operating a broadcasting operations.
Profit margin: Profitability Profit margin: Profitability Profit margin: Profitability dependent on generating dependent on attracting a dependent on generating sufficient advertising revenues and sufficiently large number of sufficient advertising subscription revenues to cover subscribers to cover costs and revenues to cover costs and costs and provide attractive profits.
Three tests can be applied to determine whether a strategy is a winning strategy: LO 6 1. To qualify as The three tests of a a winner, a strategy has to be well matched to industry and competitive conditions, winning strategy. No strategy can work well unless it exhibits good external fit with respect to prevailing market conditions. The Competitive Advantage Test: Is the strategy helping the company achieve a sustainable competitive advantage? Strategies that fail to achieve a persistent competitive advantage over rivals are unlikely to produce superior performance for more than a brief period of time.
Winning strategies enable a company to achieve a competitive advantage over key rivals that is long-lasting. The bigger and more durable the competitive advantage, the more powerful it is. The Performance Test: Is the strategy producing superior company perfor- mance? The mark of a winning strategy is strong company performance. Above-average financial performance or gains in market share, 1. The fit test competitive position, or profitability are signs of a winning strategy.
The competitive Strategies—either existing or proposed—that come up short on one or more of advantage test the preceding tests are plainly less appealing than strategies passing all three tests 3. The performance test with flying colors. Failure to pass one or more of the three tests should prompt managers to make immediate changes in an existing strategy. High-performing enterprises are nearly always the product of astute, creative, and proactive strategy making.
Only a handful of companies can boast of hit- ting home runs in the marketplace due to lucky breaks or the good fortune of having stumbled into the right market at the right time with the right product. Even if this is the case, success will not be lasting unless the companies subsequently craft a strategy that capitalizes on their luck, builds on what is working, and discards the rest.
Second, even the best-conceived strategies will result in performance shortfalls if they are not executed proficiently. The processes of crafting and executing strategies must go hand in hand if a company is to be successful in the long term.
The chief executive officer of one successful company put it well when he said: In the main, our competitors are acquainted with the same fundamental concepts and techniques and approaches that we follow, and they are as free to pursue them as we are. More often than not, the difference between their level of success and ours lies in the relative thoroughness and self-discipline with which we and they develop and execute our strategies for the future. Indeed, good strategy and good strategy execution are the most telling and trustworthy signs of good management.
THE ROAD AHEAD How well a company Throughout the chapters to come and in Part 2 of this text, the spotlight is on the fore- performs is directly most question in running a business enterprise: What must managers do, and do well, attributable to the caliber to make a company a winner in the marketplace?
The answer that emerges is that of its strategy and the doing a good job of managing inherently requires good strategic thinking and good proficiency with which the management of the strategy-making, strategy-executing process.
The mission of this book is to provide a solid overview of what every business stu- dent and aspiring manager needs to know about crafting and executing strategy. We will explore what good strategic thinking entails, describe the core concepts and tools of strategic analysis, and examine the ins and outs of crafting and executing strategy. The accompanying cases will help build your skills in both diagnosing how well the strategy- making, strategy-executing task is being performed and prescribing actions for how the strategy in question or its execution can be improved.
The strategic management course that you are enrolled in may also include a strategy simulation exercise in which you will run a company in head-to-head competition with companies run by your classmates.
Your mastery of the strategic management concepts presented in the following chapters will put you in a strong position to craft a winning strategy for your company and figure out how to execute it in a cost-effective and profitable manner.
As you progress through the chap- ters of the text and the activities assigned during the term, we hope to convince you that first-rate capabilities in crafting and executing strategy are essential to good management. A company achieves a competitive advantage when it provides buyers with supe- rior value compared to rival sellers or offers the same value at a lower cost to the firm. The advantage is sustainable if it persists despite the best efforts of competi- tors to match or surpass this advantage.
These elements are illustrated by the value-price-cost framework. A winning strategy will pass three tests: 1 fit external, internal, and dynamic consistency , 2 competitive advantage durable competitive advantage , and 3 performance outstanding financial and market performance.
Crafting and executing strategy are core management functions. How well a com- pany performs and the degree of market success it enjoys are directly attributable to the caliber of its strategy and the proficiency with which the strategy is executed. Does the strategy seem to be keyed to a cost-based advantage, differentiating features, serv- LO 1, LO 2, ing the unique needs of a niche, or some combination of these?
Go to investor. Are its subscription fees increasing or declining? Are its revenue stream advertising and equipment sales LO 5 growing or declining? Does its cost structure allow for acceptable profit margins? Where do we want to take the company during the time we are in charge? How are we going to get there? Brandenburger and H. Stuart, , www. Hoopes, T.
Toward a Theory of 3 Michael E. Peteraf and J. Mark W. Johnson, Clayton M. Brown and Kathleen M. LO 3 Why the strategic initiatives taken at various organizational levels must be tightly coordinated to achieve companywide performance targets.
LO 4 What a company must do to achieve operating excellence and to execute its strategy proficiently. Sound strategy starts with having the right goal. Apple is so focused on its vision that it does things in a very careful, deliberate way. Michael Porter—Professor and consultant John Sculley—Former CEO of Apple Good business leaders create a vision, articulate the vision, passionately own the vision, and relentlessly drive it to completion. But exactly responsibilities—charting a strategic course, set- what is involved in developing a strategy and exe- ting performance targets, and choosing a strategy cuting it proficiently?
What goes into charting a com- capable of producing the desired outcomes. Is is coverage of why strategy making is a task for a any analysis required? What are the various components kinds of strategic decisions tend to be made at of the strategy-making, strategy-executing process which levels of management. The chapter con- and to what extent are company personnel—aside cludes with a look at the roles and responsibilities from senior management—involved in the process?
Crafting a strategy for advancing the company along the path management has charted and achieving its performance objectives. Executing the chosen strategy efficiently and effectively. Stage 1 Stage 2 Stage 3 Stage 4 Stage 5. Monitoring Crafting a developments, Developing strategy evaluating a strategic Setting to achieve the Executing vision, performance, objectives objectives and the strategy mission, and and initiating the company corrective core values vision adjustments.
Figure 2. The first three stages of the strategic management process involve making a strategic plan. A strategic plan maps out where a company is headed, establishes strategic and financial targets, and outlines the competitive moves and approaches to be used in achieving the desired business results. Some could apply to almost any company in any industry. Many read like a public relations statement—high-sounding words that someone came up with because it is fashionable for companies to have an official vision statement.
The real purpose of a vision statement is to serve as a management tool for giving the organization a sense of direction. For a strategic vision to function as a valuable management tool, it must convey what top executives want the business to look like and provide managers at all orga- An effectively communicated vision is a nizational levels with a reference point in making strategic decisions and preparing valuable management tool the company for the future.
Table 2. It is particularly important for executives to provide a compelling ratio- nale for a dramatically new strategic vision and company direction. Be graphic. Never skimp on specifics headed and the market position s the company is striving about where the company is headed or how the company to stake out.
Be forward-looking and directional. Keep it focused. Avoid all-inclusive guidance in making decisions and allocating resources. Have some wiggle room. Be sure the journey is feasible. A vision statement that could apply should be within the realm of what the company can to companies in any of several industries or to any of accomplish; over time, a company should be able to several companies in the same industry is not specific demonstrate measurable progress in achieving the vision.
Visions that claim the sense. Make it memorable. A vision statement that is not communicated, and memorable. Ideally, it should be concise and to the point will tend to lose its audience. Sources: John P. Ideally, executives should present their vision for the com- pany in a manner that reaches out and grabs people. An engaging and convincing stra- tegic vision has enormous motivational value—for the same reason that a stonemason is more inspired by the opportunity to build a great cathedral for the ages than a house.
Vision Statement Effective Elements Shortcomings. We are a mission-driven company that aims to set the standards of excellence for food retailers. Quality is a state of mind at Whole Foods Market.
Our success in fulfilling our vision is measured by customer satisfaction, team member happiness and excellence, return on capital investment, improvement in the state of the environment and local and larger community support. Our ability to instill a clear sense of interdependence among our various stakeholders the people who are interested and benefit from the success of our company is contingent upon our efforts to communicate more often, more openly, and more compassionately.
Better communication equals better understanding and more trust. A number of organizations have summed up their vision in a brief phrase. When top executives are a strategic vision and a able to demonstrate significant progress in achieving these five benefits, the first mission statement is fairly step in organizational direction setting has been successfully completed.
A person unfamiliar with Microsoft could not discern from its mission statement that it is a globally known provider of PC software and a leading maker of video game consoles the popular Xbox Occasionally, companies couch their mission in terms of making a profit.
This, To be well worded, a too, is flawed. Profit is more correctly an objective and a result of what a com- company mission statement pany does. Moreover, earning a profit is the obvious intent of every commercial must employ language enterprise. Companies such as Gap Inc. Values relate to such behavioral norms that things as fair treatment, honor and integrity, ethical behavior, innovativeness, team- company personnel are work, a passion for top-notch quality or superior customer service, social responsi- expected to display in bility, and community citizenship.
At Samsung, five core values are linked to its desire to contrib- ute to a better global society by creating superior products and services: 1 giving people opportunities to reach their full potential, 2 developing the best products and services on the market, 3 embracing change, 4 operating in an ethical way, and 5 being dedicated to social and environmental responsibility. American Express embraces seven core values: 1 respect for people, 2 commitment to customers, 3 integrity, 4 teamwork, 5 good citizenship, 6 a will to win, and 7 personal accountability.
Do companies practice what they preach when it comes to their professed values? Sometimes no, sometimes yes—it runs the gamut. At one extreme are companies with window-dressing values; the values are given lip service by top executives but have little discernible impact on either how company personnel behave or how the company operates. Such companies have value statements because they are in vogue and make the company look good.
At companies where the stated values are real rather than cosmetic, managers con- nect values to the pursuit of the strategic vision and mission in one of two ways.
If the company changes to a different vision or strategy, executives make a point of explaining how and why the core values continue to be relevant. Few companies with sincere commitment to established core values ever undertake strategic moves that conflict with ingrained values. In new companies, top management has to consider what values and business conduct should characterize the company and then draft a value statement that is circulated among managers and employees for discussion and possible modification.
A final value statement that incorporates the desired behaviors and that connects to the vision and mission is then officially adopted. Illustration Capsule 2. Well-stated objectives must and financial be specific, quantifiable or measurable, and challenging and must contain a deadline objectives. And what gets measured gets done.
The Imperative of Setting Stretch Objectives The experiences of countless companies teach that one of the best ways to pro- mote outstanding company performance is for managers to set performance targets high enough to stretch an organization to perform at its full potential and deliver the best possible results.
Integrity: Relationships built on integrity and respect. Environmentalism: Serve as a catalyst for personal and corporate action. Not Bound by Convention: Our success—and much of the fun—lies in developing innovative ways to do things. While its mission is relatively who make its products, Patagonia relentlessly pursues vague about the types of products Patagonia offers, it integrity in sourcing production inputs. The four core values individually reinforce use sustainable and recyclable materials, ethically pro- the mission in distinct ways, charting a defined path cured.
Demonstrating leadership in environmentalism, for employees to follow. At the same time, each value Patagonia established foundations to support ecologi- is reliant on the others for maximum effect.
Since its founding all. Routinely, the company opts for more expensive in by rock climber Yvon Chouinard, Patagonia has materials and labor to maintain internal consistency remained remarkably consistent to the spirit of these with the mission.
Patagonia learned early on that it values. This has endeared the company to legions of could not make good products in bad factories, so it loyal customers while leading other businesses in pro- holds its manufacturers accountable through a variety tecting the environment. More than an apparel and gear of auditing partnerships and alliances. In this way, the company, Patagonia inspires everyone it touches to do company maintains relationships built on integrity their best for the planet and each other, in line with its and respect.
In addition to keeping faith with those mission and core values. Sources: Patagonia, Inc. Stretch objectives spur excep- tional performance and help build a firewall against contentment with modest gains in organizational performance. A company exhibits strategic CORE CONCEPT intent when it relentlessly pursues an ambitious strategic objective, concentrating Stretch objectives set the full force of its resources and competitive actions on achieving that objective.
As of , both companies had tested their systems and filed for Federal Aviation Administration registration of their drones. A company exhibits strategic intent when it relentlessly pursues What Kinds of Objectives to Set an ambitious strategic Two distinct types of performance targets are required: those relating to financial objective, concentrating the performance and those relating to strategic performance.
Longer-term targets three to five years off force managers to consider what to do now to put Financial objectives relate the company in position to perform better later.
Long-term objectives are critical to the financial performance for achieving optimal long-term performance and stand as a barrier to a near- targets management sighted management philosophy and an undue focus on short-term results. When has established for the trade-offs have to be made between achieving long-term objectives and achieving organization to achieve. Furthermore, subpar earnings and a weak balance sheet alarm shareholders and creditors and put the jobs of senior executives at risk.
The Balanced Scorecard However, good financial performance, by itself, is not enough. The accomplishment of strategic objectives signals that the company is well positioned to sustain or improve its per- formance. Consequently, it is important to use a performance measurement system that strikes a balance between financial objectives and strategic objectives.
Army Medical Command, and over 30 colleges and universi- ties. UPS Increase the percentage of business-to-consumer pack- age deliveries from 46 percent of domestic deliveries in to 51 percent of domestic deliveries in ; increase intraregional export shipments from 66 per- cent of exported packages in to 70 percent of exported packages in ; lower U. Employees within various functional areas and operating levels will be guided much better by specific objectives relating directly to their departmental activities than broad organizational-level goals.
Objective set- ting is thus a top-down process that must extend to the lowest organizational levels. Such consistency signals that organizational units know their strategic role and are on board in helping the company move down the chosen strategic path and produce the desired results.
Astute entrepreneurship is called for various organizational in choosing among the various strategic alternatives and in proactively searching for levels must be tightly coordinated opportunities to do new things or to do existing things in new or better ways. Strategy makers have to pay attention to early warnings of future change and be willing to experiment with dare-to-be-different ways to establish a market position in that future.
Masterful strategies come from doing things differ- ently from competitors where it counts—out-innovating them, being more efficient, being more imaginative, adapting faster—rather than running with the herd. Good strategy making is therefore inseparable from good business entrepreneurship. One cannot exist without the other.
The chief executive officer CEO , as captain of the ship, carries the mantles of chief direction setter, chief objective setter, chief strategy maker, and chief strategy implementer for the total enterprise. Ultimate responsibility for leading the strategy- making, strategy-executing process rests with the CEO. And the CEO is always fully accountable for the results the strategy produces, whether good or bad. A CEO-centered approach to strategy development is characteristic of small owner-managed companies and some large corporations that were founded by the present CEO or that have a CEO with strong strategic leadership skills.
But strategy making is by no means solely a top management function, the In most companies, crafting exclusive province of owner-entrepreneurs, CEOs, high-ranking executives, and and executing strategy is board members. On-the-scene managers who oversee level managers do. Managers with day-to-day familiarity of, and authority over, a specific operating unit thus have a big edge over headquarters executives in making wise strategic choices for their unit.
As shown in Figure 2. Corporate Strategy Orchestrated by for the set of businesses as a whole the CEO and other senior executives. Corporate strategy concerns how to CORE CONCEPT improve the combined performance of the set of businesses the company has diver- Corporate strategy sified into by capturing cross-business synergies and turning them into competitive establishes an overall game advantage.
It addresses the questions of what businesses to hold or divest, which plan for managing a set of new markets to enter, and how to best enter new markets by acquisition, creation businesses in a diversified, of a strategic alliance, or through internal development, for example.
Corporate multibusiness company. Business strategy is primarily the responsibility of business unit heads, and building competitive although corporate-level executives may well exert strong influence; in diversified advantage in a single- companies it is not unusual for corporate officers to insist that business-level objec- business company or in a tives and strategy conform to corporate-level objectives and strategy themes.
The single business unit of a business head has at least two other strategy-related roles: 1 seeing that lower- diversified multibusiness level strategies are well conceived, consistent, and adequately matched to the over- corporation.
Lead responsibility for functional strategies within a business is normally delegated to the heads of the respective functions, with the general manager of the busi- ness having final approval. Since the different functional-level strategies must be compatible with the overall business strategy and with one another to have beneficial impact, there are times when the general business manager exerts strong influence on the content of the functional strategies. Operating strategies concern the relatively narrow approaches for managing key operating units e.
Operating strategies, while of limited scope, add further detail and completeness to functional strategies and to the overall business strategy. There was a problem filtering reviews right now. Please try again later. It thoughts are unforgettable. Verified Purchase. This a landmark book about strategy. See all reviews. Report an issue. Does this item contain inappropriate content?
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