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  1. 1. STRATEGIC CONCEPTS 1. Text Chapter 1 Reading Recommendations : 2. “What is Strategy?” Michael Porter, Harvard Business Review , 1996. 3. “Marketing Myopia” Theodore Levitt, Harvard Business Review , 1960. 4. “Of Strategies, Deliberate and Emergent,” Mintzberg & Waters, Strategic Management Journal , 1985. 5. Wall Street Journal 6. BusinessWeek
  2. 2. Definitions of Strategy <ul><ul><li>Oxford Dictionary : The art of war, especially the planning of movements of troops and ships etc., into favorable positions; plan of action or policy in business or politics etc. </li></ul></ul><ul><ul><li>Alfred D. Chandler Jr .: The determination of the long run goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals. </li></ul></ul><ul><ul><li>Kenneth Andrews : Strategy is the pattern of objectives, purposes or goals and the major policies and plans for achieving these goals, stated in such a way as to define what business the company is in or is to be in and the kind of company it is or is to be. </li></ul></ul>
  3. 3. Strategy Origins <ul><li>Business strategy is a young field – but its roots go back to early military strategy. </li></ul><ul><li>Strategy comes from the Greek word strategos , which is formed from stratos , meaning army, and –ag , meaning to lead . </li></ul><ul><li>Carl von Clausewitz wrote in the early 1800’s that “tactics…[involve] the use of armed forces in the engagement, strategy [is] the use of engagements for the objects of war.” </li></ul>
  4. 4. How do you define Strategic Management? <ul><li>Strategy : The unifying theme that gives coherence and direction to the decisions of an organization </li></ul><ul><li>(entails choices among alternatives and signals organizational commitments, competitive approaches, and ways of doing business) </li></ul><ul><li>D&L: “Strategic management consists of the analysis, decisions, and actions an organization undertakes in order to create and sustain competitive advantages.” </li></ul><ul><li>Note: Also known as analysis, formulation, and implementation </li></ul><ul><li>(strategic management = active) </li></ul>
  5. 5. More History of Business Strategy <ul><li>Not until very large companies with the ability to influence the competitive environment within their industries did strategic thinking in the business world begin to be articulated. </li></ul><ul><ul><li>Alfred Sloan, CEO of GM, 1923 – 1946 - One of the first to analyze competition, Ford, and devise a strategic plan based on its strengths and weaknesses. </li></ul></ul><ul><ul><li>Chester Barnard, Senior Executive of New Jersey Bell, 1930s - Argued managers should pay attention to “strategic factors” which depend on “personal or organizational action.” </li></ul></ul><ul><li>Wartime (WWI and WWII) efforts also impacted strategic thinking and use of formal strategic tools and concepts: </li></ul><ul><ul><li>Allocation of scarce resources </li></ul></ul><ul><ul><li>Use of quantitative analysis in planning </li></ul></ul><ul><ul><li>The concept of “learning curves” </li></ul></ul><ul><ul><li>The concept of “distinctive competence (capability)” - first mentioned by Philip Selznick, a sociologist, in a debate about whether or not to combine the military forces into a single unit (i.e., no Army, Navy, Air Force, Marines, just the US Military). </li></ul></ul>
  6. 6. <ul><li>It wasn’t until the 1950’s that strategy was truly introduced in business schools as a way of analyzing the competitive environment and setting organizational goals and objectives to fit that environment. </li></ul><ul><li>These concepts serve as the foundation of strategic management study: </li></ul><ul><ul><li>Previous “Business Policy” perspectives looked at maintaining a “balance in accord with the underlying policies of the business as a whole.” – Harvard </li></ul></ul><ul><ul><li>Kenneth Andrews’ SWOT Analysis was developed – still in use today. </li></ul></ul><ul><ul><li>Theodore Levitt’s “Marketing Myopia” argued that when companies fail it typically is because firms focus on the product rather than the changing patterns of consumer needs and tastes. </li></ul></ul><ul><ul><li>Igor Ansoff argued, in response to Levitt, that a firm’s mission should exploit an existing need in the market, rather than using the consumer as the common thread in business. “In reality a given type of customer will frequently have a range of product missions or needs.” Corporate Strategy , 1965. </li></ul></ul><ul><ul><li>BCG developed the “experience curve” and portfolio analysis concepts. </li></ul></ul><ul><ul><li>McKinsey & Company’s development of SBUs and the nine-block matrix. </li></ul></ul><ul><ul><li>Mintzberg’s “Deliberate, Emergent & Realized Strategies” </li></ul></ul><ul><ul><li>Porter’s Generic Strategies </li></ul></ul>More History
  7. 7. More History <ul><li>Max Weber’s “traditional bureaucracy”- this started research on Organizational Theory, but gives us a strong example of strategy. </li></ul><ul><li>Weber’s (1947) description of the ideal type of bureaucracy: </li></ul><ul><ul><li>Hierarchy of Authority </li></ul></ul><ul><ul><li>Limited Authority </li></ul></ul><ul><ul><li>Division of Labor </li></ul></ul><ul><ul><li>Technically Competent Participants </li></ul></ul><ul><ul><li>Procedures for Work </li></ul></ul><ul><ul><li>Rules for Incumbents </li></ul></ul><ul><ul><li>Differential Rewards </li></ul></ul>
  8. 8. Ansoff’s Product / Mission Matrix *Categories define the common thread in an organization’s business/corporate strategy. Market Penetration Product Development Market Development Diversification Present Product New Product Present Mission New Mission
  9. 9. BCG’s Growth-Share Matrix ? Bark!! Star Question Mark Cash Cow Dog High Share Low Share High Growth Slow Growth
  10. 10. Deliberate Strategy Forms of Strategy Realized Strategy Intended Strategy Unrealized Strategy Emergent Strategy **Normally emergent strategy comes from learning and dissemination within the organization.
  11. 11. Porter’s Generic Strategies Strategy 1 Cost Leadership Strategy 2 Differentiation Strategy 3A Cost Focus Strategy 3B Differentiation Focus Competitive Advantage Lower Cost Differentiation Competitive Scope Broad Target Narrow Target
  12. 12. Are Strategies Needed ? <ul><li>To proactively shape how a company’s business will be conducted. </li></ul><ul><li>To mold the independent actions and decisions of managers and employees into a coordinated, company-wide game plan. </li></ul><ul><li>To help the organization to succeed against its competition !! </li></ul><ul><li>Key Attributes of Strategic Management (D&L) : </li></ul><ul><li>Directs the organization toward overall goals and objectives. </li></ul><ul><li>Involves the inclusion of multiple stakeholders in decision making. </li></ul><ul><li>Needs to incorporate short-term and long-term perspectives. </li></ul><ul><li>Recognizes tradeoffs between efficiency and effectiveness. </li></ul>
  13. 13. Strategy, Survival and Success <ul><li>The ultimate goal of the organizations is to be successful – success is: </li></ul><ul><ul><ul><li>Survival (long-term success) </li></ul></ul></ul><ul><ul><ul><li>Achievement of Goals </li></ul></ul></ul><ul><ul><ul><li>Profitability (probably most important, because it determines the ability to achieve the above two) </li></ul></ul></ul><ul><li>Strategy can help achieve success, but it doesn’t guarantee it—certain features of strategy directly contribute to success: </li></ul><ul><ul><ul><li>Goals that are simple, consistent, and long-term. </li></ul></ul></ul><ul><ul><ul><li>Profound understanding of the competitive environment. </li></ul></ul></ul><ul><ul><ul><li>Objective appraisal of resources. </li></ul></ul></ul><ul><ul><ul><li>Effective implementation. </li></ul></ul></ul><ul><li>These observations concerning the role of strategy can be made in relation to most human endeavors be it warfare, chess, politics, sport or business. </li></ul>
  14. 14. Competition and Competitive Advantage <ul><li>Competition provides the rationale for strategy – without competition, strategy is of no concern. </li></ul><ul><li>The essence of strategy is the interdependence of competitors—or the establishment of sustainable competitive advantage over rivals. </li></ul><ul><li>The study of strategy involves how we go about identifying, establishing, and sustaining competitive advantage . </li></ul>
  15. 15. Competitive Advantages <ul><li>Difference between competitive advantage, sustainable competitive advantage, and distinctive competency. </li></ul><ul><ul><li>NFL example </li></ul></ul><ul><ul><li>Will be seen in Princess Bride Video. </li></ul></ul><ul><ul><li>Competitive advantage through Life-Time customer (customer service). </li></ul></ul>
  16. 16. Thinking Strategically: The Three Big Strategic “Analysis” Questions <ul><li>1. Where are we now? What is our situation? </li></ul><ul><li>2. Where do we want to go? </li></ul><ul><ul><li>Business(es) we want to be in and market positions we want to stake out </li></ul></ul><ul><ul><li>Buyer needs and groups we want to serve </li></ul></ul><ul><ul><li>Outcomes we want to achieve </li></ul></ul><ul><li>3. How will we get there? </li></ul>
  17. 17. The Strategy Concept Key Elements
  18. 18. D&L Where are we now? Where do we want to go? How will we get there? Chapter 1 Analyzing Goals and Objectives Chapter 2 Analyzing the External Environment Chapter 3 Analyzing the Internal Environment Chapter 4 Assessing Intellectual Capital Chapter 5 Formulating Business-Level Strategies Chapter 7 Formulating International Strategies Chapter 6 Formulating Corporate-Level Strategies Chapter 8 Formulating Internet Strategies Chapter 9 Implementation: Strategic Controls Chapter 10 Implementation: Organization Design Chapter 11 Strategic Leadership: Excellence, Ethics, and Change Chapter 12 Strategic Leadership: Fostering Entrepreneurship Strategy Analysis Strategy Formulation Strategy Implementation Chapter 13 Case Analysis
  19. 19. The Strategy Concept Levels of Analysis <ul><li>Where to Compete? </li></ul><ul><li>How to Compete? </li></ul><ul><li>How to Contribute? </li></ul>