September 6, 2011

Centennial College
FALL 2011 Semester
MGMT402
Instructor: James Farmer
Lecture Notes: Chapter 1 of Crafting and Executing Strategy
** NOTE: Core Concepts are essential to understand, to earn a good mark in
this course **
Chapter 1
(Page 3) Strategy (Corporate) is a full-blown action plan capable of moving
the company in the intended direction, growing it business, strengthening its ability
to compete, and improving its financial performance
CORE CONCEPT (Page 4) A companys strategy consists of the competitive
moves and business approaches that managers are employing to grow the business,
attract and please customers, compete successfully, conduct operations, and
achieve the targeted levels of organizational performance.
A companys strategy is managements action plan for running the business and
conducting operations. The crafting of a strategy represents a managerial
commitment to pursue a particular set of actions in growing the business, attracting
and pleasing customers, competing successfully, conducting operations, and
improving the companys financial and market performance. Thus, a companys
strategy is all about how:
Management intends to grow the business
It will build a loyal clientele and outcompete rivals
Each functional piece of the business (R & D, supply chain activities,
production, sales and marketing, distribution, finance, and HR) will be
operated and,

 Performance will be boosted

STRATEGY
1) At companies intent on gaining sales and market share, at the expense of
competitors, management will typically opt for offensive strategies. For example,
if the companys stated goal is to capture 40% of the Canadian market (in terms of
sales), it will use strategies such as aggressive marketing, frequent sales calls,
direct marketing and automatic reshelving .
2) At companies already in a strong industry position, are prone to strategies that
emphasize gradual gains in the marketplace. An example would be a dominant
market leader that intends to increase its sales volume, by adding one only product
to its product line, each year.
3) Risk-averse companies often prefer conservative strategies preferring to
follow the successful moves of pioneering companies whose managers are willing
to take the risks of being first to make a bold or pivotal move.
NOTE (Page 5) : A companys strategy stands a better chance of succeeding when
it is predicated on actions, business approaches, and competitive moves aimed at
appealing to buyers in ways that set the company apart from rivals and at carving
out its own market position.
CORE CONCEPT (Page 5) : A company achieves a sustainable competitive
advantage when an attractive number of buyers prefer its products or services over
the offerings of competitors and when the basis for this preference is durable. A
competitive advantage is sustainable when actions and elements in the strategy
cause an attractive number of buyers to have a lasting preference for a companys
products or services.

(Page 5) Generic corporate strategies Four of the most frequently used and
dependable strategic approaches to setting a company apart from rivals, building
strong customer loyalty, and winning a sustainable competitive advantage are:
1. Striving to be the industrys low-cost provider a company may attempt to earn
a strong market position because of low-cost advantages they have achieved over
their rivals and their consequent ability to under price competitors.
2. Creating a differentiation-based advantage keyed to such features as higher
quality, wider product selection, added performance, value-added services, more
attractive styling, technological superiority, or unusually good value for the
money.
3. Focusing on serving the special needs and tastes of buyers comprising a narrow
market niche
4. Developing expertise and resource strengths that give the company
competitively valuable capabilities that rivals cannot easily match, copy, or trump
with substitute capabilities.
Since competitive advantage and profitability are tightly connected, the result is
that the quest for sustainable competitive advantage always ranks centre stage in
crafting a strategy. The key to successful strategy making is to come up with one or
more strategy elements that act as a magnet to draw customers and that produce a
lasting competitive edge over rivals. Effective strategies occur when management
forges a series of moves, both in the marketplace and internally, that set the
company apart from its rivals, tilt the playing field in the companys favour by
giving buyers reason to prefer its products or services, and produce a sustainable
competitive advantage over rivals.
NOTE: Figure 1.1 Indentifying a Corporate Strategy (Page 8)
CORE CONCEPT (Page 9) Strategy is a fluid and on-going process. Changing
circumstances and ongoing management efforts to improve the strategy cause a
companys strategy to evolve over time a condition that makes crafting a strategy
a process, not a one-time event. Every company must be willing and ready to
modify its strategy in response to changing market conditions, advancing
technology, the fresh moves of competitors, shifting buyer needs and preferences,

emerging market opportunities, new ideas, and mounting evidence that the strategy
is not working well. Thus, a companys strategy is always a work in progress.
A companys strategy is shaped partly by management analysis and choice and
partly by the necessity of adapting and learning by doing.
A Companys Strategy is Partly Proactive and Partly Reactive (Page 9)
The evolving nature of strategy means that the typical company strategy is a blend
of 1) proactive decisions to improve the companys financial performance and
secure a competitive edge, and 2) as-needed reactions to unanticipated
developments and fresh market conditions (see Fig. 1.2 on page 10). The biggest
portion of a companys current strategy flows from previously initiated actions and
business approaches that are working well enough to merit continuation and newly
launched initiatives aimed at boosting financial performance and edging out rivals.
This portion of managements action plan for running the company consists of its
proactive strategy elements.
Managers must always be willing to supplement or modify all the proactive
strategy elements with as-needed reactions to unanticipated developments. Hence,
a portion of a companys strategy is always developed on the fly, coming as a
response to fresh strategic manoeuvres on the part of rival firms, unexpected shifts
in customer requirements and expectations, fast-changing technological
developments, newly appearing market opportunities, a changing political or
economic climate, or other unanticipated happenings in the surrounding
environment. These adaptive strategy adjustments form the reactive strategy
elements.
(Page 11) CORE CONCEPT to meet the standard of being ethical, a strategy
must entail actions that can pass moral scrutiny in the sense of not being shady,
unconscionable, or injurious or unnecessarily harmful to the environment.
(Page 12) CORE CONCEPT A companys business model explains the
rationale for why its business approach and strategy will be profitable. Absent the
ability to deliver good profitability, the strategy is not viable and the survival of the
business is in doubt.

Business model (defined) page 12 A companys business model is

managements story line for how the strategy will be a money maker. The story
line sets forth the key components of the enterprises business approach, indicates
how revenues will be generated, and makes a case for why the strategy can deliver
value to customers and create a profit for the company. A companys business
model thus identifies the basis for why its strategy will result in enough revenues
to cover costs and return a profit to the owners/ investors.
Key points about the business model Can the chosen strategy make good
business sense from a moneymaking perspective? Why is there a convincing
reason to believe that the strategy is capable of generating a profit? How will
customers be served? How will the business generate its revenues? Will those
revenues be sufficient to cover operating costs? Thus, the concept of the business
model is more narrowly focused than the concept of the companys strategy. A
companys strategy relates broadly to its competitive initiatives and action plan for
running the business (but it may or may not lead to profitability). In contrast, a
companys business model focuses on the principle business components by which
the business will generate revenues sufficient to cover costs and produce an
attractive return on investment.
Page 13 What makes a Strategy a Winner? Three questions can be asked to
determine this:
1) How well does the strategy fit the companys situation?
2) Is the strategy helping the company achieve a sustainable competitive
advantage?
3) Is the strategy resulting in better company performance?
CORE CONCEPT (Page 13) A winning strategy must fit the enterprises
external and internal situation, build a sustainable competitive advantage and,
improve company performance.
If management is evaluating alternative strategic options, then, it should pursue
those options with the highest prospective passing scores on all of the (above) three
questions. The highest ranking (in terms of scores) prospective options can be
regarded as the best or most attractive strategic alternatives.

Why Are Crafting and Executing Strategy Important? (Page 15)

1. Crafting and executing strategy are top-priority managerial tasks for two
reasons. First, there is a compelling need for managers to proactively shape (craft),
how the companys business will be conducted. High-achieving enterprises are
nearly always the product astute, creative, proactive strategy-making that sets a
company apart from its rivals.
2. A strategy-focused enterprise is more likely to be a strong bottom-line performer
than a company whose management team does not take its strategy making
responsibilities seriously. In general, strategy-focused enterprises are thorough,
self-disciplined and accurately executed.
Good Strategy + Good Strategy Execution = Good Management (Page 15)
Crafting and executing strategy are core management functions. Nothing affects a
companys ultimate success or failure more than how well its management team
charts the companys direction, develops competitively effective strategic moves
and business approaches, and pursues what needs to be done internally to produce
good day-in, day-out strategy execution and operating excellence. The better
conceived a companys strategy and the more competently it is executed, the more
likely that the company will be a standout performer in the marketplace.
Key Point: Good management inherently requires good strategic thinking and
good management of the strategy-making, strategy-executing process. (Page 16)