Académique Documents
Professionnel Documents
Culture Documents
LOl.
Understand the need for having a sound business strategy to successfully compete in the industry manage the functional areas of the business, and develop new capabilities and assemble resources to
strengthen the companfs prospects for long-term success.
LOz-
LO3.
LO4.
Learn why
L05.
Learn the three tests that distinguish a winning strategy from a so-so
or flawed strategy.
Part
One:
.
.
.
Whcre do ue
uant
to go?
"Where are zue nozp? " is answered by examining the company's current financial performance and market standing, its competitively valuable resources
and capabilities, its competitivc weaknesses, and changing indr-rstry conditions that might affect the company. The answer to the question "Wlrcre do we
u)nnt to go7" lies within management's vision of the company's future
direction-rvhat new or different customer groups and customer needs it
should endeavor to satisfy and how it should change its business makcup.
The question "How are we going to get there?" challenges managers to craft and
execute a strategy capable of moving the company in the intcnded direction.
Developing clear answers to the question " Hozu ttre
A company's
competi-
manage
trtc goittg to get there?" is the essence of mana;ing strategically. Rather than relving on the status quo as a roadmap ancl dealing rt'ith new opportunities or threats as
please
the
ing strategically is always the beginning point in the quest for competitive
advantaee.
Chapter
.
o
.
.
.
.
.
.
.
Part
IGUlttl l t
One:
Actons to strenglhen
:lT'.:fl".:::ffiT,"LT:
weaKnesses
a
,
THE ACfrO{S
AI{D
usednb
nance,
and other key activities
APPKTACHES
THAT TTA|(E UP A
cofilPAI{Y'5
Bt stl{Ess
STRATEGY
Actions to strengthen
competitiveness va strategiI
alliances and collaborative
partnershps
busness prospects
1.
2.
orp",',,u.
Oduuntut.
fldence in lhe Unted States. More than 58 million customers visited one of McDonald's 3z,ooo restaurants in 118
countres each day, which alLowed the company to record
2oo8 revenues and earnings of more than $zl.S biltion
and $4 3 billion, respectively. McDonaLd's performance
in the marketplace made it one of only [wo companes
listed on the Dow jones IndustriaIAverage (the other was
Watmart Stores. lnc.) to end zooS with an increase in the
price of its common shares. The company's sales were
holding up well amid the ongoing economic uncertainty
in early zoo9, wth systemwide sates as measured in constant currencies increasing by more than 6 percent during
January and February. The company's success was a result
of lts well conceved and executed Plan to Win business
strategy that focused on "being better, not just bigger."
Key in tiatives of the Plan to Win strategy included:
Part
One:
Chapter
L.
Brown and Kathleen M. Ersenhardt, Competng on the Edge: Str1tegy os Sfructured Chdos (Boston,
MA: Harvard Business School Press, 1998), Chapter 1.
'See Henry Mintzberg and Joseph Lampel, "Reflecting on the Strategy Process, Sloon Manage'
ment Review 4o, no. (Spring 1999), pp. 21 30; Henry Mintzberg and J. A. Waters, "0f Strategies,
Deliberate and Emergent," Str1teqc Monogement Journol (tq8S), pp. 257-272i Costas Markdes,
"strategy as Balance: From'Eitheror'to And,"' Business Strategy Revew 12, no. 3 (September
zoor), pp. 1-1o; Henry Mntzberg, Bruce Ahlstrand, and Joseph Lampel, Strotegy Safori: A Guided
Tour through the Wlds of strategc Management (New York: Free Press, 1998), Chapters 2, 5,
and 7; and C. K. Prahalad and Gary Hamet, "The Core Competence ofthe Corporation," Harvard
Busness Revew 7o, no. 3 (May June r99o), pp.79 93.
Part
IGURE 1.2
One:
Sbetcsy
ne\r, market opportunities call for unplanned, reactive adiustments that form
the cornpany's emergent strategy. As shown in Figure 1.2, a company's realized strategy tends to be a cotnbinatio of deliberate planned elements and
unplanned, emergent elements.
Mark W iohnson, Clayton M. Christensen, and Henning Kagermann, "Reinventing Your Business
Model," Harvard Busness Revew 86, no. rz (December 2oo8), pp. 5z 53 and Joan Magretta, "Why
Business lvlodels Matle" HaNa Busness Revew 8o, no. 5 (May zooz), p- 87.
Chapter
Hewlett-Packard, Lexmark, and Epson pursue much the same business model
as Gillette-achieving economies of scale in production and selling printers
at a low (virtually break-even) price and making large profit margins on the
repeat purchases of printer supplies, especially ink cartridges.
The nitty-gritty issue surrounding a company's business model is whether
it can execute its customer valuc proposition profitably. fust 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 relevance of a company's business model is to clarify (7) how the
busness zuill proaide customers zLtith aalue, (2\ generate rerenues sufficient to coaer
costs and produce nttfttctiae proffs, and (3) identify whatezter resources and processes
are critcal to the customer l1alue propositiotl.
Concepts & Connections 1.2 discusses the contrasting business models of
Sirius XM and over-the-air broaclcast radio stations.
fit
2.
Has the strategy yielded s sustainable competitiae adaantage? Sfiatcgies that fail to achieve a durable 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
3.
Has the strategy ptoduced good financial pctformance? Il would be difficult to categorize a strategy as a "winning strategy" unless it produces
excellent company performance. Two kinds of performance improvements tell the most about the caliber of a company's shategy: (1) gains
in profitability and financial strength and (2) advances in the company's
competitive strength and market standing.
Strategies that come up short on one or more of the above tests are plainly
less appealing than strategies passing all three tests with flying colors.
10
Part
Onc:
charging advertisers
Cuslomer Value
Proposition
Sirius XM
Profit Formula
cls
sl
ng rLrvcn
.rncl
Lrcs
Free
Cost
with
silrvtc(].
Fixod.rnrl r,ri.rlrle costs rel.rtecl to pfogftrrnmin anrl content rovalties, nrarketing, and
sullf)orf .ratlvrtres.
Pport
)r)
TCVCT',TUCS
tO COVCr
autonrobi
Le nr
COSTS
and prOVde
ts.
Chapter
Managers should use the same questions when evaluating either proposed
or existing strategies. New initiatives that don't seem to match the company's
intemal and external situation should be scrapped before they come to ftuition, while existing strategies must be scrutinized on a regular basis to ensure
they have good fit, offer a competitive advantage, and have contributed to
above-average performance.
Kev Points
1
formance. Ideally, this results in a competitive advantage over rivals that then
becomes the company's ticket to above-average profitability.
'
Assurance
of Learning
Exercises
''
i:
i ,:t.. I "..
3.
A company's strategy lvpically evolves over time, arising from a blencl of (1) proactive and deliberate actions on the part of companv managers and (2) as-neecled
cmcrgcnt responses to unanticipated developments and fresh market conditions.
4.
5.
1.
3.
Exercises for
n
rll
LO1
LOz
Based on what you know about the quick-service restaurant industry does
McDonald's strategy as described in Concepts & Corurections 1.1 seem to be
well-matched to industry and competitive conditions? Does the strategy seem to
be keyed to a cost-based advantage, differentiating features, serving the unique
needs of a niche, or developing resource strengths and competitive capabilities rivals can't imitate or trump (or a mixture of these)? What rs there about
McDonald's strategy that can lead to sustainable competitive advantage?
L01
LOz
Go to www. nytco.com/investo rs and check whether the Ntu York Times' recent
financial reports indicate that its business model is working. Does the company's
business model remain sound as moe consumers go to the lnternet to find general information and stay abeast of current events and news stories? ls its revenue stream from advertisements growing or declining? Are its subscription fees
and circulation increasing or declining? Read the company's Iatest press releases.
Is there evidence that the company's business model is evolving? Does the company possess the necessary key resources and process capabilities to support a
change in its business model?
LO4
This chapter discusses tfuee questions that must be answered by managers of orga- LOl
nizations of all sizes. After you have read the player's manual for the strategy simulation exerrise that you will participate in during this academic term, you and your
cG-managers should come up with brief 1- or 2-paragraph answers to the following
three questions prior to entering your first set of decisions. \A/hile your ans$'ers to
the first of the three questions can be developed from your reading of the manual, the
second and thid questions will require a collaborative discussion among the members
of your company's management team about how you intend to manage the company
you have been assigned to run.
"1.
How are we going to get there? (Which of the basic strategic and
approaches discussed in Chapter 1 do you think makes the most
What kind of competitive advantage over rivals do you intend to try