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Summary OBS310 EXAM notes
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- Instelling
this provides an overview of all the work covered in the exam (block1-6)
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Voorbeeld van de inhoud
If highlighted= NB!OBS 310
Block 1: Introduction to Strategy and Charting a Company’s Direction
Strategy
• Set of actions that its managers take to outperform the company’s competitors and achieve superior
profitability. It supports growth and secures the future over long term
Strategy is about Competing differently
▪ doing what rival firms don’t do or can’t do (differing in some important aspects)
▪ strategy has better chance of succeeding in actions, business approaches and competitive moves aimed
at: appealing to buyers in ways that set a company apart from its rivals and staking out a market position
that is not crowded with strong competitors
▪ strategy provides direction and guidance to what the company should do and should not do, at BEST it’s
a waste of resources, at WORSE it’s a survival risk on the long-term
Strategy and the Quest for Competitive Advantage
A company achieves competitive advantage (ca) when it provides buyers with superior value compared to
rival sellers or offers the same value at a lower cost to the firm.
Distinctive strategy is a company’s most reliable ticket for ca, otherwise there’s no ca for meeting
customer needs or being more efficiently than other
The advantage is sustainable if the strategy gives buyers lasting reasons to prefer a company’s products
or services over competitors
5 strategic approaches to setting a company apart from rivals, building strong customer loyalty, and
winning a competitive advantage are:
Low-cost provider strategy, Focused low-cost strategy, Broad differentiation strategy, Focused
differentiation strategy, Best-cost provider strategy
Strategy evolves over time
➢ Managers of companies must be willing to modify strategy in:
▪ changing market conditions
▪ advancing tech
▪ unexpected moves by competitors
▪ shifting buyer needs
▪ new ideas for improving strategy
➢ Major strategy shifts are needed in signs of failing or dramatic changes in conditions
➢ Industry environments characterized by high-velocity change require companies to repeatedly adapt their
strategies e.g. smartphones or medical equipment
➢ Evolving strategy= work in progress
A Company’s Strategy and its Business Model
Core of every strategy= business model
Business model- management’s blueprint for delivering valuable product or service to customers in a
manner that will generate revenues sufficient to cover costs and yield an attractive profit
2 Elements:
1. Customer value proposition (V)- lays out company’s approach to satisfying buyer wants and needs at
a price customers consider good value
©MeganMeiring
, 2. Profit formula (P)- company’s approach to determining a cost structure to allow acceptable profits,
given the pricing tied to its customer value proposition
V= V - P
(value getting for money)
P= P - C
Greater value delivered (V) and lower the price (P)= more attractive V
Lower costs (C) given V (V – P) = money-maker business model
What makes a strategy a winner? 3 tests
1. The Fit Test- How well does the strategy fit the company’s situation? To qualify as a winner,
→ strategy has to match industry, competitiveness, best market opportunities.
→ exhibit external fit with respect to current market conditions and tailored to company’s resources
→ exhibit internal fit and compatible with company’s ability to execute strategy. Internal + external
fit= underperformer and fall short of winning strategy
→ exhibit dynamic fit to evolve over time in a manner that maintains close + effective alignment
with company’s situation even as external and internal conditions change
2. The Competitive Advantage Test- Is the strategy helping the company achieve a sustainable competitive
advantage? Winning strategies= ca over rivals and is long-lasting. Bigger + more durable ca = more
powerful
3. The Performance Test- Is the strategy producing superior company performance? Winning strategies=
strong performance. 2 performance indicators:
→ competitive strength and market standing
→ profitability and financial strength
failure to pass 1/ more tests= managers must change existing strategy immediately
Why crafting and executing strategy are important tasks
1. clear + reasoned strategy= doing business, ca, game plan for pleasing customers, improving
performance. Only handful companies hitting home runs in marketplace > right , right , right
Companies have to capitalize on their luck, build on what’s working, and discard rest.
2. Process of crafting + executing strategies must go to be successful in long-term.
Good Strategy + Good Strategy Execution = trustworthy signs of Good Management
• Crafting + executing strategy= core management tasks
• Company’s success/ failure affected by how well management team sets out direction, develops effective
strategic moves + pursues what needs to be done internally to produce good day-in, day-out strategy
execution and operating excellence.
• Thus, Good Strategy + Good Strategy Execution = trustworthy signs of Good Management
The better conceived a company’s strategy and the more competently it is executed= more likely
the company will be a standout performer in marketplace
What does the strategy-making, strategy-executing process entail?
1. Developing a strategic vision that charts the company’s long-term direction, a mission statement that
describes the company’s purpose, and a set of core values to guide the pursuit of the vision and mission
2. Setting objectives for measuring the company’s performance and tracking its progress in moving in the
intended long-term direction
©MeganMeiring
, 3. Crafting a strategy for advancing the company along the path management has charted and achieving its
performance objectives
4. Executing the chosen strategy efficiently and effectively
5. Monitoring developments, evaluating performance, and initiating corrective adjustments in the company’s
vision and mission statement, objectives, strategy and new opportunities
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
Stage 1: Developing a strategic vision, mission statement, and set of core values
• Senior managers of a company wrestle about what directional path to take and if changes to long-term
direction are needed
• Developing strategic vision:
Strategic vision- charts the company’s long-term direction
“where we are going” and why business makes sense
Communicates management’s aspirations to stakeholders
Well-conceived visions= distinctive& specific; they avoid generic, feel-good statements like “to be
market leader”
• Why a Sound, Well-Communicated Strategic Vision Matters
1. crystallizes senior executives’ own views about the firm’s long-term direction
2. reduces the risk of rudderless decision making
3. tool for winning the support of organization members to help make the vision a reality
4. helps an organization prepare for the future
• Developing a Company Mission Statement:
Mission- “who we are, what we do, and why we are here”
Mission statement:
1. identifies company’s products and/or services
2. specifies buyer needs the company seeks to satisfy+ the customer groups/ markets it serves
3. gives the company its own identity
Must employ language specific enough to distinguish its business makeup and purpose from
those of other enterprises and give the company its own identity
Stage 2: Setting objectives
• Convert vision + mission into specific performance targets
• Objects- organization’s performance targets- the specific results management wants to achieve
• Well-stated objectives must be: specific, measurable, challenging, deadline for achievement
• Objectives are valuable:
1. focus organizational attention and align actions throughout the organization
2. they serve as yardsticks for tracking a company’s performance and progress
3. they motivate employees to expend greater effort and perform at a high level
• The Imperative of Setting Stretch Objectives:
Stretch objectives- set performance targets high enough to stretch an organization to perform at
its full potential and deliver the best possible results
“stretch” gains in performance pushes an enterprise to be more inventive, improves financial
performance + business position
©MeganMeiring
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