1 Understand what a strategy is and identify the difference between business-level and corporatelevel strategy
2
Understand the relationship between strategy formulation and implementation
3 Describe the determinants of competitive advantage
4 Recognize the difference between a fundamental and a dynamic competitive advantage
5 Understand why we study strategic management
2
A TALE OF TWO STORES
Sears launches catalog business Takes control of production and distribution Rapid growth, driven by endbased locations and companycontrolled factories
Experts believe
Sears way was the only way to compete “The paragon of retailers” Financial trouble; sells off all non-retail businesses Acquired by KMart
1970
1891
1924
Moves into on-premise retailing/General Robert
Wood takes over
1960
1980
1990
2000 2005
Expands into banking, investments, real estate services, and insurance
Sam Walton opens first Wal-Mart with focus on low-prices
Dizzying growth 1962 1970
1980
30 stores located in
“one-horse towns which everybody else was ignoring”; Sam Walton
Perfects model; grows; expands into new markets
(international) and store concepts (Sam’s clubs)
A Firm’s performance is directly related to the quality of its strategy and its competency in implementing it
2000
Invests $500 million in inventory management technology 3
TWO RETAILERS AT A GLANCE
Sears
Wal-Mart
Year founded
1891
1962
Stores 1980
Stores 2004
864
2026
Revenues 1980
Revenues 2004
$25,194 million
$36,100 million
Net profits 1980
Net profits 2004
606M (2.4% return on sales)
507M (-1.4% return on sales)
$55 M(3.3% return on sales)
$10,267 M
(3.6% return on sales)
The central, integrated, externally oriented concept of how a firm will achieve its objectives Implementation levers and
Strategic
leadership
8
QUESTIONS OF CORPORATE-LEVEL AND BUSINESS-LEVEL STRATEGY
Unit of measure
Corporate-level strategy should ask
?
• In which markets do we compete today?
• In which markets do we want to compete tomorrow?
• How does our ownership of a business ensure its competitiveness today and in the future?
Business-level strategy should ask
?
• How do we compete in this market today? • How will we compete in this market in the future?
9
STRATEGY AND IMPLEMENTATION ITERATE
Strategy:
The process of deciding what to do
Compete as discount retailer in rural markets
WAL-MART EXAMPLE
Leverage inventory and sourcing systems to be low-cost leader
Implementation:
The process of performing all the activities necessary to do what has been planned Invest heavily in organizational structure, systems, and processes
