September 15, 2022

Cooperative Strategy Each week, you will be asked to respond to the prompt or prompts in the discussion forum. Your initial post should be a minimum of 300 words in length, and, yo

Cooperative Strategy

Each week, you will be asked to respond to the prompt or prompts in the discussion forum. Your initial post should be a minimum of 300 words in length, and, you should respond to two additional posts from your peers. If you have not done so lately, please review the Rules of Discussion.

For your follow up post…review the responses provided by your peers. Engage in conversation, or even civil debate, as you discuss their insights and viewpoints. You may ask questions for clarification (if you are confused by their initial post) or pose questions that advance the conversation. You might even find a topic that leads you to further research in the area!

You will use the Internet to find two articles describing firms' use of a cooperative strategy: one where trust is being used as a strategic asset and another where contracts and monitoring are being emphasized. What are the differences between the managerial approaches being used in the two companies? Which of the cooperative strategies has the highest probability of being successful? Why?

W1 Video Lecture

Chapter1StrategicManagement.pptx

chapter 1 What Is Strategy and Why Is It Important?

Arthur A. Thompson The University of Alabama

An e-book published and distributed by McGraw Hill Education

Sixth Edition of Strategy: Core Concepts and Analytical Approaches (2020-2021). Arthur A. Thompson, The University of Alabama. Published and distributed by McGraw Hill Education. Image of globe comprised of puzzle pieces with several pieces dislodged and scattered below the globe. Chapter 1 What Is Strategy and Why Is It Important?

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“Strategy means making clear-cut choices about how to compete.”

Jack Welch Former CEO General Electric

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“Without a strategy the organization is like a ship without a rudder.”

Joel Ross and Michael Kami

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“If your firm’s strategy can be applied to any other firm, you don’t have a very good one.”

David J. Collis and Michael G. Rukstad

Learning Objectives

Understand the concept of “strategy,” how to identify a firm’s strategy, and the tight connection between its strategy and its quest for sustainable competitive advantage.

Learn why a firm’s strategy evolves over time and why its strategy is partly proactive and partly reactive.

Understand why a company’s strategy needs to pass ethical scrutiny.

Understand the “business model” concept, how a firm’s business model connects to its strategy, and why its business model is important.

Learn the three tests that distinguish a winning strategy from a weak or flawed strategy and why good strategy and good strategy execution are the most trustworthy signs of good management.

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Chapter 1 Roadmap

What Do We Mean by “Strategy”?

Strategy and the Quest for Competitive Advantage

Identifying a Firm’s Strategy

Why a Firm’s Strategy Evolves Over Time

A Firm’s Strategy Is Partly Proactive and Partly Reactive

Strategy and Ethics: Passing the Test of Moral Scrutiny

The Relationship of a Firm’s Strategy to Its Business Model

What Makes a Strategy a Winner

Why Crafting and Executing Strategy Are Important Tasks

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Three Strategic Questions All Firms Must Answer

Industry conditions

Competitive pressures

Market standing vis-à-vis rivals

Competitive strengths and weaknesses

New buyer needs to satisfy

Growth opportunities to pursue

Markets to deemphasize or abandon

How to measure success

Strategy for competing successfully

How to attract customers

Deciding what market position to stake out

Actions to achieve performance targets

What is the firm’s present situation?

What direction to head and what performance targets to set?

How to run the firm in ways that produce good results?

A firm’s strategy is defined by the specific market positioning, competitive moves, and business approaches that form management’s answer to “What’s our plan for running the firm and producing good results?”

When managers craft and embrace a strategy, they are committing to undertake one set of actions rather than another in endeavoring to make the firm successful in the marketplace and achieve good business performance.

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What Do We Mean by “Strategy”?

Core Concept

A firm’s strategy consists of the competitive moves and business approaches that managers employ to attract and please customers, compete successfully, capitalize on opportunities to grow the business, respond to changing market conditions, conduct operations, and achieve the targeted financial and market performance.

A strategy represents managerial commitment to undertake one set of actions rather than another.

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The Hows That Define a Firm’s Strategy

A coherent combination of actions and approaches about how to run the company

How to respond to changing economic and market conditions

How to manage the functional pieces of the business

How to achieve the firm’s performance targets

How to attract, please, and retain customers

How to compete against rivals

How to capitalize on growth opportunities

In arriving at choices among all the “hows” and combining them into a coherent strategy for the company to pursue, management is saying:

“Among all the many different ways of competing we could have chosen, we have decided to employ this combination of competitive and operating approaches to move the firm in the intended direction, strengthen its market position and competitiveness, and meeting or beating our performance objectives.”

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Choosing the Strategy

Thinking Strategically

There is no one roadmap or prescription for running a firm in a successful manner. Many different avenues exist for competing successfully, staking out a market position, and operating the different pieces of a business.

A creative, distinctive strategy that sets a firm apart from rivals and delivers superior value to customers is its most reliable ticket for winning a competitive advantage over rivals.

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Crafting a good strategy entails deliberately choosing to compete differently from rivals.

A 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 a firm apart from rivals, particularly when it comes to doing what rivals don’t do or can’t do

Staking out a market position that is not crowded with strong competitors

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Strategy Is About Competing Differently

Successful strategies contain distinctive “aha” elements that

Attract buyer attention with appealing product attributes unlike those of rivals

Deliver a perception of superior value that converts buyers into loyal customers

Gives the company added competitive power in the marketplace

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The Importance of Competing Differently

Copycat strategies rarely work!!!

Why Bother with Crafting a Strategy?

A clear, specific, and deliberate action plan:

Avoids ineffective strategic actions and decisions while strengthening the firm’s competitive position

Wins a competitive edge over rivals

Improves the firm’s financial performance

A creative, distinctive strategy:

Helps a firm stand out from its rivals

Attracts buyers despite competitors’ efforts

Is a reliable pathway to above average profitability

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A firm is typically able to earn higher profits and otherwise be a stronger performer in the marketplace when it enjoys the benefits of a competitive advantage over rivals, as opposed to when it has no advantage or, even worse, suffers from a competitive disadvantage.

Pursuing ways that hold potential for achieving a competitive advantage should always be a top priority consideration in management’s efforts to a craft the company’s strategy!

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Why Competitive Advantage Matters

A strategy that produces a sustainable long-term competitive advantage over rival firms is always the most desirable type of competitive edge.

What makes a competitive advantage sustainable (or durable) as opposed to temporary are actions and elements in the strategy that cause an attractive number of buyers to have lasting reasons to purchase a company’s products or services, despite competitors’ best efforts to nullify or overcome those reasons.

Thus, in crafting a company’s strategy, company managers should always strive to include strategy elements that cannot quickly or inexpensively be copied or overcome by rivals.

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Strategy and the Quest for Sustainable Competitive Advantage

Become the low-cost provider by achieving cost-based competitive advantages over rivals

Offer features that differentiate the firm’s products from those of rivals in ways that appeal to buyers

Offer customers more value for the money

Focus on better serving the unique needs and tastes of buyers in a niche market

Develop competitively valuable resources and capabilities that rivals cannot easily imitate or overcome with resources and capabilities of their own

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Strategic Approaches to Building Sustainable Competitive Advantage

Core Concept

A firm achieves competitive advantage when an attractive number of buyers are drawn to purchase its products or services rather than those of competitors.

It achieves sustainable competitive advantage when the basis for buyer preferences for its product offering relative to the offerings of its rivals is durable, despite competitors’ efforts to nullify or overcome the appeal of its offerings.

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Figure 1.1 Identifying a Company’s Strategy—What to Look For

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Access the text alternative for slide image.

Why a Company’s Strategy Evolves over Time

It is often advantageous, and sometimes even necessary, for a firm to modify its strategy in response to:

Changing market conditions

Advancing technology

Fresh moves of competitors

Shifting buyer needs and preferences

Emerging market opportunities

New ideas for improving the strategy

Evidence that the current strategy is not working well

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Core Concept

Changing circumstances and ongoing management efforts to improve the strategy cause a company’s strategy to evolve over time—a condition that makes the task of crafting a strategy a work in progress, not a one-time or every-now-and-then event.

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A firm’s current strategy is typically a blend of:

Deliberate and proactive management actions to secure a competitive edge and improve the firm’s financial performance

Many current proactive strategy elements have usually been previously initiated and are working well enough to be continued, with the remainder being freshly crafted or entirely new

Strategic reactions to unforeseen events and fresh market conditions—emerge on an as-needed basis

The latest version of a firm’s strategy reflects the disappearance of obsolete or ineffective strategy elements and the current prevailing combination of proactive and reactive elements.

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A Firm’s Strategy Is Partly Proactive and Partly Reactive

Figure 1.2 A Company’s Strategy Is a Blend of Proactive Initiatives and Reactive Adjustments

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Access the text alternative for image.

A strategy is ethical only if it can pass the test of moral scrutiny.

To pass the test of moral scrutiny and qualify as ethical, a company’s actions and behaviors cannot cross the line from “should do” to “should not do”

A company’s strategy definitely crosses into the should not do zone and cannot pass moral scrutiny if it entails actions and behaviors that are deceitful, unfair or harmful to others, disreputable, or unreasonably damaging to the environment.

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Strategy and Ethics: Passing the Test of Moral Scrutiny

Core Concept

A strategy cannot be considered ethical just because it involves actions that are legal. To meet the standard of being ethical, a strategy must entail actions that can pass moral scrutiny in the sense of not being morally objectionable, deceitful, unfair or harmful to others, disreputable, or unreasonably damaging to the environment.

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A legal strategic action or business approach does not automatically qualify as ethical or morally acceptable.

Ethical standards are about

“Right” versus “wrong”, “moral” versus” immoral”

Not crossing the line from “should do” to “should not do”

“Within the bounds of acceptability” versus “outside the bounds of acceptability”

Many strategic actions fall in a gray zone and can be deemed ethical or unethical depending on how high one sets the bar for what qualifies as ethical behavior.

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Strategy—Distinguishing Between What Is Legal and What Is Ethical

What business behaviors can you identify that are legal but not ethical or morally acceptable?

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The Relationship Between a Firm’s Strategy And Its Business Model

A Firm’s

Strategy

Deals with the firm’s competitive initiatives and its business approaches

A Firm’s Business Model

Concerns whether the revenues and costs flowing from the strategy show that the firm can be profitable and viable

Core Concept

A firm’s business model sets forth how its strategy and operating approaches will create value for customers while also generating ample revenues to cover costs and realize a profit.

Absent the ability to earn good profits, a firm’s strategy and operating blueprint are flawed, its business model is not viable, and its ability to survive is in jeopardy.

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Its Customer Value Proposition

Concerns how the firm will satisfy customer needs and requirements at a price customers will consider to be a good value.

From a customer perspective, the greater the value delivered and the lower the price, the more attractive the firm’s value proposition is to customers.

From a firm’s perspective, however, the greater the value delivered and the higher the price that can be charged, the bigger the margin for covering the costs associated with its business approach and realizing an attractive profit and return on investment

Its Profit Proposition (or “Profit Formula”)

Concerns how the firm intends to generate a revenue stream that is expected to cover the costs of delivering attractive value to customers.

Also concerns how it will control the costs of the value being delivered.

And, further, how the proposition will yield attractive profits for shareholders.

The lower a firm’s costs are in relation to revenues, the greater its profit potential and the more attractive its profit proposition.

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The Two Crucial Elements of a Firm’s Business Model

Can the firm create and deliver the intended customer value in a cost-efficient manner?

Can a profitable price be charged for the value it provides to customers?

Revenues generated are a function of the volume of customers attracted at the price being charged

The costs of the firm’s business model approach depend on the resources and business processes utilized and the cost efficiency of its operating systems

Lower costs in relation to revenues increase the profit potential and the attractiveness of the firm’s profit proposition

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Testing a Firm’s Profit Proposition

Proven vs. Unproven Business Models

Firms that have been in business for a while and are making at least reasonably attractive profits have a “proven” business model—because there is hard revenue-cost evidence that their strategies and approaches to operating can yield good profits.

Start-up firms and unprofitable firms have “questionable” or “unproven” business models because their strategies and operating approaches have yet to produce good bottom-line results, thus raising doubts about their blueprint for making money and their viability as business enterprises

Firms that operate in uncertain, volatile market environments often have business models that quickly lose their effectiveness; for such firms to survive, they have to be adept at spotting the signs of impending crisis early and then swiftly reinvent their business model and strategy

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The Customer Value Proposition

Provide audiences with free and appealing programming content.

The Profit Proposition

Charge advertising fees to program sponsors based on an audience size that exceed the full costs of providing program content.

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The Business Model of Network TV and Radio Broadcasters

The Customer Value Proposition

To provide a close comfortable shave using a razor (a one-time purchase) and razor blades (repeat purchases).

The Profit Proposition

To sell a “master product”—the razor—at an attractively low price and then make money on repeat purchases of inexpensively-produced razor blades priced to yield high profit margins.

Printer manufacturers pursue much the same business model—selling printers at low-to-breakeven prices to get in a position to capture large profit margins on repeat purchases of printer supplies and, especially, ink cartridges.

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Gillette’s Business Model in Razor Blades

The Customer Value Proposition

Delivering valuable or interesting information and entertainment to a diversity readers.

The Profit Proposition

Securing sufficient revenues from advertising fees and reader subscriptions to more than cover the costs of producing and delivering their products to readers.

Is this business model in danger of becoming obsolete and failing?

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The Business Model of Newspapers and Magazines

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What Makes a Strategy a Winner?

Testing the merits of one strategy versus another strategy and distinguish a winning strategy from a flawed or weak strategy requires asking:

How well does the strategy fit the company’s situation?

Is the strategy helping the company achieve a sustainable competitive advantage?

Is the strategy producing good company performance?

Strategies—either existing or proposed—that come up short on one or more of the tests are plainly less appealing than strategies passing all three tests with flying colors.

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The Three Tests of a Winning Strategy

To qualify as a winning strategy, a strategy must pass all three tests

The Goodness of Fit Test

Is the strategy well-matched to the company’s internal and external situation?

The Competitive Advantage Test

Is the strategy helping the company achieve a sustainable competitive advantage?

The Performance Test

Is the strategy producing good company performance?

Core Concept

A winning strategy must be well-suited to the firm’s external and internal situation, help build a sustainable competitive advantage, and improve company performance.

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There is a compelling need for managers to proactively shape how the company’s business will be conducted.

A clear and reasoned strategy is management’s prescription for doing business, its road map to competitive advantage, and its game plan for pleasing customers and improving financial performance.

High-performing enterprises are nearly always the product of astute, creative, and proactive strategy-making. Companies don’t get to the top of the industry rankings or stay there with flawed strategies, copycat strategies, or with strategies built around timid actions to try and do better

Even the best-conceived strategies will result in performance shortfalls if they are not executed proficiently. Good day-in/day-out strategy execution and operating excellence are essential for a company to perform close to its full potential.

Flawed and/or inept implementation and execution of a company’s strategy are a surefire recipe for underachievement, both financially and in competing against rivals.

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Why Crafting and Executing Strategy Are Important Tasks

Good Strategy + Good Strategy Execution = Good Management

The better conceived and more competently a firm’s strategy is executed, the more likely that the firm will be a standout performer financially in the marketplace.

In contrast, a firm that has a muddled or flawed strategy and/or can’t seem to execute its strategy competently is most likely an underperformer and in need of better management.

Weak implementation and execut

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Cooperative Strategy Each week, you will be asked to respond to the prompt or prompts in the discussion forum. Your initial post should be a minimum of 300 words in length, and, yo

Cooperative Strategy

W1 Video Lecture

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