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  • New Rules for Directors Numbers Knowledge -- In 2007, companies will be reporting the CEO pay in their SEC filings, Board of Directors need to know and be able to explain the numbers Strategy Focus -- In addition to compliance, Boards need to focus on the strategy and leadership Time & Understanding -- Even non-financial members of the board need to keep an eye on the numbers; the number of earnings restatement hit an all time high in 2006 Watchdog -- About 120 companies are being investigated for options backdating and more than 50% of the 100 largest companies have replaced their CEOs in last 5 years – Boards need to become a watchdog instead of relying on crisis management Source: Tipsheet, Business Week, January 22, 2007
  • Starbucks Coffee Company Commitment to Origins: Starbucks makes an investment into their worldwide suppliers of coffee to improve their local communities, families, and environment. Helping protect the environment: Starbucks believes in being at the forefront of the environmental movement towards being "green".  The intent is to preserve and restore the lush natural resources around the world. Starbucks in your community: Starbucks actively attempts to improve the local communities where their employees live by volunteering for local events and providing programs that can positively affect community members. Commitment to partners: Starbucks refers to its 100,000 employees worldwide as "partners" in order promote a sense of commitment and passion for the organization. The company is committed to treat their employees the same way they treat their partners. Source: www.starbucks.com

Transcript

  • 1. Strategic Management: Creating Competitive Advantages Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Strategic Management: Text and Cases, 4e 1
  • 2. Two Perspectives of Leadership
    • Romantic view
      • Leader is the key force in organization’s success
    • External control perspective
      • Focus is on external factors that affect an organization’s success
    • Leaders can make a difference
      • Must be aware of opportunities and threats faced in external environment
      • Must have thorough understanding of the firm’s resources and capabilities
  • 3.
    • Analysis
      • Strategic goals (vision, mission, strategic objectives)
      • Internal and external environment of the firm
    • Strategic decisions
      • What industries should we compete in?
      • How should we compete in those industries?
    • Actions
      • Allocate necessary resources
      • Design the organization to bring intended strategies to reality
    Strategic Management
  • 4. Strategic Management
    • Strategic management is the study of why some firms outperform others
      • How to compete in order to create competitive advantages in the marketplace
      • How to create competitive advantages in the market place
        • Unique and valuable
        • Difficult for competitors to copy or substitute
  • 5. Key Attributes
    • Key Attributes of strategic management:
    • Directs the organization toward overall goals and objectives
    • Includes multiple stakeholders in decision making
    • Needs to incorporate short-term and long-term perspectives
    • Recognizes trade-offs between efficiency and effectiveness
  • 6. Strategic Analysis
    • Starting point in the strategic management process
    • Precedes effective formulation and implementation of strategies
  • 7. Strategic Analysis (cont.)
    • Clear goals and objectives permit effective allocation of resources
    • Hierarchy of goals
      • Vision
      • Mission
      • Strategic objectives
    • Analyzing external environments
      • Managers must scan the environment and analyze competitors
      • General environment
      • Industry environment
  • 8. Strategic Analysis (cont.)
    • Frameworks for analyzing a firm’s internal environment
      • Strengths
      • Weaknesses
    • Analyzing strengths can uncover potential sources of competitive advantage
  • 9. Strategic Analysis (cont.)
    • Intellectual assets are drivers of
      • Competitive advantage
      • Wealth creation
    • Networks and relationships among
      • Employees
      • Customers
      • Suppliers
      • Alliance partners
  • 10. Strategy Formulation
    • Business level strategy:
      • Successful firms develop bases for competitive advantage
        • Cost leadership
        • Differentiation
        • Focusing on narrow or industry-wide market segments
      • Sustainability
      • Industry life cycle
  • 11. Strategy Formulation (cont.)
    • Corporate-level strategy addresses:
    • Firm’s portfolio or group of businesses
      • What business should we be in?
      • How can we create synergies among the businesses?
    • Diversification
      • Related
      • Unrelated
  • 12. Strategy Formulation (cont.)
    • International Strategy
      • Appropriate entry strategies for foreign markets
      • Sustain competitive advantage in global markets
    • Effective strategies for entrepreneurial initiatives
  • 13. Strategy Implementation
    • Informational control
      • Monitor and scan the environment
      • Respond effectively to threats and opportunities
    • Behavioral control
    • Effective corporate governance
      • Interests of managers and owners of the firm
    • Organizational structure and design
  • 14. Strategy Implementation (cont.)
    • Organizational boundaries
      • Flexible
      • Permeable
    • Strategic Alliances
    • Develop organization that is committed to
      • Excellence
      • Ethical behavior
  • 15. Strategy Implementation (cont.)
    • Learning organization responsive to
      • Rapid and unpredictable change
    • Corporate entrepreneurship and innovation
      • New opportunities
      • Enhance innovative capacity
      • Autonomous entrepreneurial behavior
      • Product champions
  • 16. Corporate Governance and Stakeholder Management
    • Corporate governance: the relationship among various participants in determining the direction and performance of corporations
      • Shareholders
      • Management (led by the CEO)
      • Board of Directors
  • 17. Corporate Governance and Stakeholder Management (cont.)
    • Board of Directors
      • Elected representatives of the owners
      • Ensure interests and motives of management are aligned with those of the owners
        • Effective and engaged Board of Directors
        • Shareholder activism
        • Proper managerial rewards and incentives
  • 18. Example: New Rules for Directors
    • In light of numerous corporate scandals, the role and rules for board of directors are being redefined. Few areas of focus :
      • Numbers Knowledge
      • Strategy Focus
      • Time & Understanding
      • Watchdog
    Source: Tipsheet, Business Week, January 22, 2007
  • 19. Stakeholder Management
    • Two views of stakeholder management
      • Zero sum
        • Stakeholders compete for attention and resources of the organization
        • Gain of one is a loss to the other
      • Symbiosis
        • Stakeholders are dependent upon each other
        • Mutual benefits
  • 20. Social Responsibility
    • Social responsibility: the expectation that businesses or individuals will strive to improve the overall welfare of society
      • Managers must take active steps to make society better
      • Socially responsible behavior changes over time
      • Triple bottom line
  • 21. Example: Social Responsibility
    • Starbucks Coffee Company
      • Corporate social responsibility is embedded throughout the organization.
      • The following are some of the commitments they have made to be socially responsible:
        • Commitment to origins
        • Helping protect the environment
        • Starbucks in your community
        • Commitment to partners
    Source: www.starbucks.com
  • 22. Strategic Management Perspective
    • Integrative view of the organization
    • Assess how functional areas and activities “fit together” to achieve goals and objectives
    • All managers and employees must take and integrative, strategic perspective of issues facing the organization
  • 23. Enhancing Employee Involvement
    • Have significant profit and loss responsibility
    Local Line Leaders
  • 24. Enhancing Employee Involvement
    • Champion and guide ideas
    • Create a learning infrastructure
    • Establish a domain for taking action
    Executive Leaders Local Line Leaders
  • 25. Enhancing Employee Involvement
    • Have little positional power and formal authority
    • Generate their power through the conviction and clarity of their ideas
    Executive Leaders Local Line Leaders Internal Networkers
  • 26. Coherence in Strategic Direction
    • Company vision
      • Massively inspiring
      • Overarching
      • Long-term
      • Driven by and evokes passion
      • Fundamental statement of the organization’s
        • Values
        • Aspiration
        • Goals
    Company vision Hierarchy of Goals
  • 27. Coherence in Strategic Direction
    • Mission statements
      • Purpose of the company
      • Basis of competition and competitive advantages
      • More specific than vision
      • Focused on the means by which the firm will compete
    Company vision Mission statements Hierarchy of Goals
  • 28. Coherence in Strategic Direction
    • Strategic objectives
      • Operationalize the mission statement
      • Provide guidance on how the organization can fulfill or move toward the “higher goals”
      • More specific
      • Cover a more well-defined time frame
    Company vision Mission statements Strategic objectives Hierarchy of Goals
  • 29. Coherence in Strategic Direction
    • Strategic objectives
      • Measurable
      • Specific
      • Appropriate
      • Realistic
      • Timely
      • Challenging
      • Resolve conflicts that arise
      • Yardstick for rewards and incentives
    Company vision Mission statements Strategic objectives Hierarchy of Goals