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    STRATEGIC CONCEPTS 1. Text Chapter 1 STRATEGIC CONCEPTS 1. Text Chapter 1 Presentation Transcript

    • 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
    • Definitions of Strategy
        • 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.
        • 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.
        • 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.
    • Strategy Origins
      • Business strategy is a young field – but its roots go back to early military strategy.
      • Strategy comes from the Greek word strategos , which is formed from stratos , meaning army, and –ag , meaning to lead .
      • 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.”
    • How do you define Strategic Management?
      • Strategy : The unifying theme that gives coherence and direction to the decisions of an organization
      • (entails choices among alternatives and signals organizational commitments, competitive approaches, and ways of doing business)
      • D&L: “Strategic management consists of the analysis, decisions, and actions an organization undertakes in order to create and sustain competitive advantages.”
      • Note: Also known as analysis, formulation, and implementation
      • (strategic management = active)
    • More History of Business Strategy
      • 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.
        • 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.
        • Chester Barnard, Senior Executive of New Jersey Bell, 1930s - Argued managers should pay attention to “strategic factors” which depend on “personal or organizational action.”
      • Wartime (WWI and WWII) efforts also impacted strategic thinking and use of formal strategic tools and concepts:
        • Allocation of scarce resources
        • Use of quantitative analysis in planning
        • The concept of “learning curves”
        • 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).
      • 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.
      • These concepts serve as the foundation of strategic management study:
        • Previous “Business Policy” perspectives looked at maintaining a “balance in accord with the underlying policies of the business as a whole.” – Harvard
        • Kenneth Andrews’ SWOT Analysis was developed – still in use today.
        • 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.
        • 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.
        • BCG developed the “experience curve” and portfolio analysis concepts.
        • McKinsey & Company’s development of SBUs and the nine-block matrix.
        • Mintzberg’s “Deliberate, Emergent & Realized Strategies”
        • Porter’s Generic Strategies
      More History
    • More History
      • Max Weber’s “traditional bureaucracy”- this started research on Organizational Theory, but gives us a strong example of strategy.
      • Weber’s (1947) description of the ideal type of bureaucracy:
        • Hierarchy of Authority
        • Limited Authority
        • Division of Labor
        • Technically Competent Participants
        • Procedures for Work
        • Rules for Incumbents
        • Differential Rewards
    • 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
    • BCG’s Growth-Share Matrix ? Bark!! Star Question Mark Cash Cow Dog High Share Low Share High Growth Slow Growth
    • Deliberate Strategy Forms of Strategy Realized Strategy Intended Strategy Unrealized Strategy Emergent Strategy **Normally emergent strategy comes from learning and dissemination within the organization.
    • 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
    • Are Strategies Needed ?
      • To proactively shape how a company’s business will be conducted.
      • To mold the independent actions and decisions of managers and employees into a coordinated, company-wide game plan.
      • To help the organization to succeed against its competition !!
      • Key Attributes of Strategic Management (D&L) :
      • Directs the organization toward overall goals and objectives.
      • Involves the inclusion of multiple stakeholders in decision making.
      • Needs to incorporate short-term and long-term perspectives.
      • Recognizes tradeoffs between efficiency and effectiveness.
    • Strategy, Survival and Success
      • The ultimate goal of the organizations is to be successful – success is:
          • Survival (long-term success)
          • Achievement of Goals
          • Profitability (probably most important, because it determines the ability to achieve the above two)
      • Strategy can help achieve success, but it doesn’t guarantee it—certain features of strategy directly contribute to success:
          • Goals that are simple, consistent, and long-term.
          • Profound understanding of the competitive environment.
          • Objective appraisal of resources.
          • Effective implementation.
      • These observations concerning the role of strategy can be made in relation to most human endeavors be it warfare, chess, politics, sport or business.
    • Competition and Competitive Advantage
      • Competition provides the rationale for strategy – without competition, strategy is of no concern.
      • The essence of strategy is the interdependence of competitors—or the establishment of sustainable competitive advantage over rivals.
      • The study of strategy involves how we go about identifying, establishing, and sustaining competitive advantage .
    • Competitive Advantages
      • Difference between competitive advantage, sustainable competitive advantage, and distinctive competency.
        • NFL example
        • Will be seen in Princess Bride Video.
        • Competitive advantage through Life-Time customer (customer service).
    • Thinking Strategically: The Three Big Strategic “Analysis” Questions
      • 1. Where are we now? What is our situation?
      • 2. Where do we want to go?
        • Business(es) we want to be in and market positions we want to stake out
        • Buyer needs and groups we want to serve
        • Outcomes we want to achieve
      • 3. How will we get there?
    • The Strategy Concept Key Elements
    • 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
    • The Strategy Concept Levels of Analysis
      • Where to Compete?
      • How to Compete?
      • How to Contribute?