Chapter One


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Chapter One

  1. 1. Strategic Management Dr. Don Neubaum don.neubaum 541-737-6036 400E Bexell
  2. 2. Class Sessions <ul><li>Monday & Wednesday - 8:00am </li></ul><ul><li>Monday & Wednesday - 10:00am </li></ul><ul><ul><li>Both in 415 Bexell </li></ul></ul><ul><li>Monday & Wednesday – 2:00PM </li></ul><ul><ul><li>207 Bexell </li></ul></ul>
  3. 3. WIC <ul><li>Writing Intensive Curriculum </li></ul><ul><ul><li>Writing as a critical aspect of the learning process </li></ul></ul><ul><ul><li>Significant portion of your grade – over 30% </li></ul></ul><ul><ul><li>Reflecting writing with typical business content </li></ul></ul>
  4. 4. <ul><li>Individual Grades - 80% </li></ul><ul><ul><li>Midterm/Final – 20% each (40% total) </li></ul></ul><ul><ul><li>Industry analysis – 20% </li></ul></ul><ul><ul><li>Case write ups – 2 @ 5% (10% total) </li></ul></ul><ul><ul><li>Strategic issue summary – 10% </li></ul></ul><ul><li>Group Grades – 20% </li></ul><ul><ul><li>In-class case exam – 10% </li></ul></ul><ul><ul><li>Strategic plan presentation – 10% </li></ul></ul>Grading
  5. 5. Grades <ul><li>If you NEED a specific grade in this class, other than to simply “pass,” then you MUST email me and come see me by the end of next week. </li></ul>
  6. 6. Midterm and Final <ul><li>Multiple Choice and Short Answer </li></ul><ul><li>Midterm – 10/22 </li></ul><ul><ul><li>Chapters 1-4 </li></ul></ul><ul><li>Final – 12/5 </li></ul><ul><ul><li>Chapters 5-13, non-cumulative </li></ul></ul><ul><li>Both exams will focus on lecture material and text terms. </li></ul>
  7. 7. Typical Questions <ul><li>What four generic strategies exist? Why does Porter call them generic? </li></ul><ul><li>According to Porter, when should firms diversify? What rules does he forward to judge the merits of diversification? </li></ul><ul><li>What is the goal of executive compensation? Why is it so difficult to design an effective compensation package? </li></ul><ul><li>What are the axis on the BCG and the GE Nine-Cell Matrix? Which model is superior and why? </li></ul>
  8. 8. Industry Analysis <ul><li>Within teams, you will select one of the following industries </li></ul><ul><ul><li>Pharmaceutical </li></ul></ul><ul><ul><li>Supermarket/Grocery Store </li></ul></ul><ul><ul><li>Wireless Communication (service providers) </li></ul></ul><ul><ul><li>Casual Dining (Applebee’s) </li></ul></ul><ul><ul><li>DIY Retailing </li></ul></ul><ul><li>Due 10/31 </li></ul><ul><li>Highest team average will receive 5 extra points </li></ul>
  9. 9. Case Write Ups <ul><li>Analyzing two cases </li></ul><ul><li>Napster - Due 10/8 </li></ul><ul><li>Nike – Due 11/14 </li></ul><ul><li>3 pages, double spaced </li></ul><ul><ul><li>Specific questions and guidelines will be provided for each case </li></ul></ul><ul><ul><li>Re-write each based on feedback you get from classmates. </li></ul></ul>
  10. 10. Strategic Issues <ul><li>Start most class sessions with 2-3 of these </li></ul><ul><li>Articles from WSJ, Forbes, Fortune, etc. highlighting an aspect of strategy </li></ul><ul><li>2 page summary and a short (3 - 5 slides) 5 minute presentation </li></ul><ul><li>Written feedback – allowing you to re-write the paper and redo your slides </li></ul><ul><li>Sign up sheet will be distributed </li></ul><ul><li>Graded equally on paper and presentation </li></ul>
  11. 11. Group In class Case Exam <ul><li>Group Exam – 10/29 </li></ul><ul><li>Case handed out a week ahead of time </li></ul><ul><li>Questions emailed to you the morning of the 29th </li></ul><ul><li>Answers due by the end of the day </li></ul><ul><li>Work in your group using laptop/PC and email your answers to me in the evening </li></ul>
  12. 12. Group Strategic Plan and Presentation <ul><li>Groups of four or five </li></ul><ul><li>Last week of the quarter – 10/26 and 10/28 </li></ul><ul><li>Company of your choice, with my approval </li></ul><ul><li>PowerPoint presentation of 20 minutes – no paper necessary </li></ul><ul><li>Can not analyze a company in Pharmaceutical, supermarket, wireless communication, casual dining, or DIY retailing industries </li></ul><ul><li>Sign up sheet for time slots will be distributed </li></ul>
  13. 13. Peer Evaluations <ul><li>Your group members will evaluate your contribution throughout the quarter </li></ul><ul><li>Your group grades can be adjusted up and down, based upon their assessment of your contribution and effort. </li></ul>
  14. 14. One Minute Papers <ul><li>Write a short, ungraded essay at the end of most classes: </li></ul><ul><ul><li>1) something you learned </li></ul></ul><ul><ul><li>2) giving an example </li></ul></ul><ul><ul><li>3) asking a question or clarification </li></ul></ul><ul><ul><li>4) making a comment </li></ul></ul><ul><ul><li>5) anything else </li></ul></ul><ul><li>Paper notebook with name and section marked on the cover </li></ul>
  15. 15. Participation <ul><li>While not specifically graded, I will be assessing your attendance, participation and one-minute papers. </li></ul><ul><li>Final grades might be adjusted up and down, based upon my assessment. </li></ul><ul><li>Students attending every class period will receive 5 points on the final </li></ul>
  16. 16. Golden Rule <ul><li>“No Tolerance” policy for cheating </li></ul><ul><li>Guilty parties receive an F and will be dropped from the class </li></ul><ul><li>Disciplinary actions may be taken </li></ul>
  17. 17. Standing-O <ul><li>Earn 5 bonus points on midterm </li></ul><ul><li>Announce to us a recent accomplishment or achievement </li></ul><ul><li>While you may do as many Standing-Os you want, you can only earn the 5 points once </li></ul>
  18. 18. Team Specials <ul><li>Teams can earn points from “Team Specials” tasks and assignments </li></ul><ul><li>These points are tabulated over the quarter </li></ul><ul><li>Students may also request team special points, subject to instructor approval </li></ul><ul><li>Awards: </li></ul><ul><ul><ul><li>Gold – exempt from Final </li></ul></ul></ul><ul><ul><ul><li>Silver – 15 points added to midterm </li></ul></ul></ul><ul><ul><ul><li>Bronze – opt out of one essay on final </li></ul></ul></ul>
  19. 19. Chapter One What is Strategy and Why is it Important?
  20. 20. Why do we need strategy? <ul><li>The reasons why firms succeed and fail is perhaps the central question in strategy </li></ul><ul><li>Answers the fundamental question of the firm </li></ul><ul><li> </li></ul>
  21. 21. Strategic Management Defined <ul><li>decisions and actions that determine long-term performance </li></ul><ul><li>formulation and implementation of plans designed to achieve objectives </li></ul><ul><li>an action managers take to achieve one or more of an organization’s goals </li></ul><ul><li>unifying theme that gives coherence and direction to organizational/individual decisions </li></ul><ul><li>game plan management has for positioning the company in its chosen market, competing successfully, satisfying customers, and achieving good business performance </li></ul><ul><li>management’s action plan for running the business and conducting operations; commitment to pursue a particular set of actions in growing the business, attracting customers, competing successfully, conducting operations, and improving financial and market performance </li></ul>
  22. 22. What is Strategy? <ul><li>Strategy is not doing similar activities better than your rivals – that’s operational effectiveness </li></ul>
  23. 23. What is Strategy? <ul><li>Strategy is performing different activities or performing similar activities in a different way </li></ul><ul><li>As suggested by the book: 4 of the most dependable approaches are 1) low cost, 2) differentiating features, 3) fulfilling specialized needs, and 4) build unassailable set of capabilities. </li></ul>
  24. 24. What is Strategy? <ul><li>1) Strategy is performing different activities or performing similar activities in a different way </li></ul><ul><li>Strategy is about positioning </li></ul><ul><li>a) Variety-based positioning </li></ul><ul><li>b) Needs-based positioning </li></ul><ul><li>c) Access-based positioning </li></ul>
  25. 25. What is Strategy? <ul><li>2) Strategy is about choosing a position which requires tradeoffs , choosing what not to do </li></ul><ul><ul><li>without tradeoffs, all firms would imitate </li></ul></ul><ul><li>Tradeoffs arise from </li></ul>
  26. 26. What is Strategy? <ul><li>3) Strategy is about combining activities as advantages come from fit and reinforcing </li></ul><ul><li>Operational effectiveness is about excellence in individual activities </li></ul><ul><li>Fit/integration increases sustainability by reducing imitability </li></ul>
  27. 27. What is Strategy? <ul><li>4) The desire to grow is most threatening to an effective strategy </li></ul>
  28. 28. Fig. 1.2: A Company’s Strategy Is Partly Proactive and Partly Reactive
  29. 29. Recognizing Strategic Inflection Points <ul><li>Order-of-magnitude change that </li></ul><ul><ul><li>Dramatically alters future prospects </li></ul></ul><ul><ul><li>Mandates radical revision </li></ul></ul><ul><li>Critical decisions have to be made </li></ul><ul><li>Responding quickly lessens a company’s chances of </li></ul><ul><ul><li>Becoming trapped in a stagnant business </li></ul></ul><ul><ul><li>Letting attractive new growth opportunities slip away </li></ul></ul>
  30. 30. What do Good Strategies Have in Common?
  31. 31. Chapter Two Managerial Process of Crafting and Executing Strategy
  32. 32. Fig. 2.1: The Strategy-Making, Strategy-Executing Process
  33. 33. Developing a Strategic Vision A strategic vision describes the route a company intends to take in developing and strengthening its business. It lays out the company’s strategic course in preparing for the future. A strategic vision exists only as words and has no organizational impact unless and until it wins the commitment of company personnel and energizes them to act in ways that move the company along the intended strategic path!
  34. 34. Key Elements of a Strategic Vision <ul><li>Delineates management’s aspirations for the business </li></ul><ul><li>Provides a panoramic view of “where we are going” by charting a strategic path </li></ul><ul><li>Is distinctive and specific </li></ul><ul><ul><li>Avoids use of generic, dull & boring language that could apply to most any company </li></ul></ul><ul><li>Captures employees’ emotions steers them in a common direction </li></ul><ul><li>Is challenging and a bit beyond a company’s immediate reach </li></ul>
  35. 37. Strategic Vision vs. Mission <ul><li>A strategic vision concerns “where we are going” </li></ul><ul><ul><li>Markets to be pursued </li></ul></ul><ul><ul><li>Future product/ market/ customer/ technology focus </li></ul></ul><ul><ul><li>Kind of company management is trying to create </li></ul></ul><ul><li>The mission statement focuses on its “who we are and what we do” </li></ul><ul><ul><li>Current product and service offerings </li></ul></ul><ul><ul><li>Customer needs being served </li></ul></ul><ul><ul><li>Technological and business capabilities </li></ul></ul>
  36. 38. Characteristics of a Mission Statement <ul><li>Boundaries of the current business </li></ul><ul><li>Fundamental purpose that sets it apart from other firms of its type </li></ul><ul><li>Conveys </li></ul><ul><ul><li>Who we are, </li></ul></ul><ul><ul><li>What we do, and </li></ul></ul><ul><ul><li>Why we are here </li></ul></ul>A well-conceived mission statement distinguishes a company’s business makeup from that of other profit-seeking enterprises in language specific enough to give the company its own identify!
  37. 39. Fig. 2.1: The Strategy-Making, Strategy-Executing Process
  38. 40. Objectives <ul><li>Turns mission into performance outcomes </li></ul><ul><li>Organizations produce what is measured </li></ul><ul><li>Long and Short term </li></ul><ul><li>Strategic Intents </li></ul><ul><li>All levels of the organization </li></ul><ul><li>Top-down, not Bottom-up </li></ul>
  39. 41. Types of Objectives Required <ul><li>Outcomes focused on improving financial performance </li></ul><ul><li>Outcomes focused on improving competitive vitality and future business position </li></ul>Financial Objectives Strategic Objectives
  40. 42. 6 Characteristics of a Good Objective <ul><li>U SMART </li></ul><ul><ul><li>Understandable </li></ul></ul><ul><ul><li>Stretching </li></ul></ul><ul><ul><li>Measurable </li></ul></ul><ul><ul><li>Agreeable </li></ul></ul><ul><ul><li>Realistic </li></ul></ul><ul><ul><li>Timebound </li></ul></ul>
  41. 43. Importance of Setting Stretch Objectives There’s no better way to avoid ho-hum results than by setting stretch objectives and using compensation incentives to motivate organization members to achieve the stretch performance targets!
  42. 44. <ul><ul><li>Current financial results are “lagging indicators” reflecting results of past decisions and actions— good profitability now does not translate into stronger capability for delivering better financial results later </li></ul></ul><ul><ul><li>However, meeting or beating strategic performance targets signals growing competitiveness & strength in the marketplace, thus developing the capability for better financial performance in the years ahead </li></ul></ul><ul><ul><li>Good strategic performance is thus a “leading indicator” of a company’s capability to deliver improved future financial performance </li></ul></ul>Unless a company sets and achieves stretch strategic objectives, it is not developing the competitive muscle to deliver even better financial results in the years ahead! Leading versus Lagging Indicators
  43. 45. <ul><li>A balanced scorecard for measuring company performance is optimal; it entails </li></ul><ul><ul><li>Setting financial and strategic objectives </li></ul></ul><ul><ul><li>Placing balanced emphasis on achieving both types of objectives </li></ul></ul><ul><li>Just tracking financial performance overlooks the importance of measuring whether a company is strengthening its competitiveness and market position. </li></ul>The surest path to sustained future profitability year after year is to relentlessly pursue strategic outcomes that strengthen a company’s business position and give it a growing competitive advantage over rivals!
  44. 46. Fig. 2.1: The Strategy-Making, Strategy-Executing Process
  45. 47. Fig. 2.1: A Company’s Strategy-Making Hierarchy
  46. 48. Levels of Strategic Management
  47. 49. HP’s Corporate Strategy Enterprise Storage & Servers HP Services Software Personal Systems Imagining and Printing Financial Services
  48. 50. So….how can firm’s be profitable ? <ul><li>1) Choose an attractive industry in which to compete - </li></ul><ul><li>2) Attain a competitive advantage within an industry - </li></ul>
  49. 51. Two Models of Profitability <ul><li>I/O Model (Industrial/Organizational Economics Model) </li></ul><ul><li>Resource Based View of the Firm </li></ul>
  50. 52. I/O Model General Environment Industry Environment Competitive Environment Strategy & Performance 3 Assumptions 1) 2) 3)
  51. 53. Resource Based View The Firm’s Resources & Capabilities Strategy & Performance 3 assumptions 1) 2) 3)
  52. 54. Fig. 2.1: The Strategy-Making, Strategy-Executing Process
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