Chapter 1 - What is strategy and why is it important? When you finish this chapter, you should: Learn what we mean by a company’s strategy, grasp the concept of a sustainable competitive advantage, develop an awareness of the five most basic strategic approaches for winning a sustainable competitive advantage,. | CHAPTER 1 WHAT IS STRATEGY AND WHY IS IT IMPORTANT? STUDENT VERSION WHAT DO WE MEAN BY STRATEGY? What is our present situation? Business environment and industry conditions Firm’s financial and competitive capabilities Where do we want to go from here? Creating a vision for the firm’s future direction How are we going to get there? Crafting an action plan for heading the firm in the intended direction, staking out a market position, attracting customers, achieving the targeted financial and market performance, and getting the firm where it wants to go is its strategy. WHAT IS STRATEGY ABOUT? Strategy is all about How: How to attract and please customers. How to compete against rivals. How to position the firm in the marketplace. How best to respond to changing economic and market conditions. How to capitalize on attractive opportunities to grow the business. How to achieve the firm’s performance targets. WHY BOTHER WITH STRATEGY? A firm needs a strategy to specify what actions are going to be taken: To improve its financial performance. To strengthen its competitive position. To gain a sustainable competitive advantage over its market rivals. A creative, distinctive strategy: Helps produce above-average profits. Increases competitive pressures on rivals. STRATEGY AND COMPETITORS Strategy is about competing differently from rivals— Doing what they don’t do or doing it better! Doing what they can’t do! Doing things in ways that attract customers and set a firm apart from its rivals. Doing things in a manner calculated to produce a competitive edge over rivals. STRATEGY AND THE QUEST FOR COMPETITIVE ADVANTAGE Competitive Advantage Require meeting customer needs either more effectively (with products or services that customers value more highly) or more efficiently (by providing products or services at lower cost). Sustainable Competitive Advantage Requires giving buyers lasting reasons to prefer a firm’s products or services over those of its competitors. . | CHAPTER 1 WHAT IS STRATEGY AND WHY IS IT IMPORTANT? STUDENT VERSION WHAT DO WE MEAN BY STRATEGY? What is our present situation? Business environment and industry conditions Firm’s financial and competitive capabilities Where do we want to go from here? Creating a vision for the firm’s future direction How are we going to get there? Crafting an action plan for heading the firm in the intended direction, staking out a market position, attracting customers, achieving the targeted financial and market performance, and getting the firm where it wants to go is its strategy. WHAT IS STRATEGY ABOUT? Strategy is all about How: How to attract and please customers. How to compete against rivals. How to position the firm in the marketplace. How best to respond to changing economic and market conditions. How to capitalize on attractive opportunities to grow the business. How to achieve the firm’s performance targets. WHY BOTHER WITH STRATEGY? A firm needs a strategy to specify what actions .
