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The Strategic Management Process. Part 1 Strategy Analysis. LO 2-1 Explain the role of vision, mission, and values in the strategic management process. LO 2-2 Describe and evaluate the role of strategic intent in achieving long-term goals. - PowerPoint PPT Presentation
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2CHAPTER
McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
The Strategic Management Process
.
Part 1 Strategy Analysis
2–2
LO 2-1 Explain the role of vision, mission, and values in the strategic management process.
LO 2-2 Describe and evaluate the role of strategic intent in achieving long-term goals.
LO 2-3 Distinguish between customer-oriented and product-oriented missions and identify strategic implications.
LO 2-4 Critically evaluate the relationship between mission statements and competitive advantage.
LO 2-5 Explain why anchoring a firm in ethical values is essential for long-term success.
LO 2-6 Compare and contrast strategic planning, scenario planning, and strategy as planned emergence, and discuss strategic implications.
2-3
Chapter Case 2 Chapter Case 2 Teach For America: Inspiring Future Leaders
• TFA Mission: Eliminate educational inequality Started by an undergraduate student,
Wendy Kopp
Inspiring mission
Provide a meaningful service option for bright young people
• Make teaching to the neediest high prestige
Over 45,000 applicants for 4,500 jobs
TFA Video
Vision, Mission, and Values
• What are visionary organizations?
Begin with the end in mind
Similar to designing & building a home Frank Lloyd Wright
Vision – what to ultimately accomplish?
Mission – what is the firm about?
Values – how to accomplish goals?
2–5
1–6
STRATEGY HIGHLIGHT 2.1STRATEGY HIGHLIGHT 2.1Winning Through Strategic
Intent: The “Pocketable” Radio
• Small Japanese Company after WWII, founded by Masura Ibuka
Invented an electric rice cooker
Wanted to license the transistor from Bell Labs in U.S.
Japanese Government & Bell Labs both said NO
Persisted with request – Finally,1953 got transistor.
“Beat Bell Labs” to pocket-sized radio
1957 – Launched world’s FIRST pocket radio
1958 – Changed company name to….
LO 2-1 Explain the role of vision, mission, and values in the strategic management process.
LO 2-2 Describe and evaluate the role of strategic intent in achieving long- term goals.
LO 2-3 Distinguish between customer-oriented and product-oriented missions and identify strategic implications.
LO 2-4 Critically evaluate the relationship between mission statements and competitive advantage.
LO 2-5 Explain why anchoring a firm in ethical values is essential for long-term success.
LO 2-6 Compare and contrast strategic planning, scenario planning, and strategy as planned emergence, and discuss strategic implications.
2-7
Vision, Mission, and Values
• Customer-Oriented Missions
• Define the firm in terms of solutions for customers Disney: "Make People Happy" Enhanced strategic flexibility NOT the same as listening to customers
• Product-Oriented Missions
• Define the firm in terms of products or services U.S. Railroads: "Safest… North American railroad”
Missed the opportunity to move into delivery before
UPS & Federal Express
2–8
Defining the Business: The Starting Point of Strategy
•Example: Fall of the Railroads
““They let others take customers away from them because they assumed themselves to be in the railroad business rather than in the transportation business. The reason they defined their industry wrong was because they were railroad oriented instead of transport oriented; they were product oriented instead of customer oriented.”
Theodore Levitt “Market Myopia”
2–9
Mission Statements andCompetitive Advantage
• Do mission statements help gain and sustain competitive advantage?
Results are inconclusive Need strategic commitments to succeed
(e.g., Boeing Dreamliner)
• Positive associations – Visionary firms, like Merck
• Negative associations – Better World Books
• No associations – Intel
LO 2-1 Explain the role of vision, mission, and values in the strategic management process.
LO 2-2 Describe and evaluate the role of strategic intent in achieving long-term goals.
LO 2-3 Distinguish between customer-oriented and product-oriented missions and identify strategic implications.
LO 2-4 Critically evaluate the relationship between mission statements and competitive advantage.
LO 2-5 Explain why anchoring a firm in ethical values is essential for long-term success.
LO 2-6 Compare and contrast strategic planning, scenario planning, and strategy as planned emergence, and discuss strategic implications.
2–11
Living the Values
• Ethical standards and norms that govern behavior.
• McKesson (health care) – ICARE
Shared principles a framework for daily interactions
• Dark side of values
Bernard Madoff Ponzi scheme estimated at $65 billion in fraud
Enron One of the largest bankruptcies in U.S. history Over 50,000 jobs lost (Enron and Arthur Andersen)
LO 2-1 Explain the role of vision, mission, and values in the strategic management process.
LO 2-2 Describe and evaluate the role of strategic intent in achieving long-term goals.
LO 2-3 Distinguish between customer-oriented and product-oriented missions and identify strategic implications.
LO 2-4 Critically evaluate the relationship between mission statements and competitive advantage.
LO 2-5 Explain why anchoring a firm in ethical values is essential for long term success.
LO 2-6 Compare and contrast strategic planning, scenario planning, and strategy as planned emergence, and discuss strategic implications.
2–13
Strategy as Strategic Planning
• Top-down rational planning
Define mission, vision, and goal (strategic intent)
External analysis of opportunities and threats
Internal analysis of strengths and weaknesses
Create strategic fit through SWOT
Formulate appropriate strategy
Implement chosen strategy
Monitor performance and modify if necessary
2–14
6
Identify current mission and strategic goals
Conduct competitive analysis:•strengths•weakness•opportunity•threats
Develop specific strategies:•corporate•business•functional
carry out strategic plans
maintain strategic control
assess organisational factors
assess environmental factors
Strategy implementationStrategy formulation
Fundamental Question of the Choice of Goals: Planning for what Purpose(s)?
•Profitability (net profits)•Efficiency (low costs)•Market Share•Growth (e.g., increase in total
assets, sales, etc)•Shareholder Wealth
(dividends plus stock price appreciation)
•Utilization of Resources (e.g., ROE, ROI)
•Reputation•Contribution to
Stakeholders (e.g., employees, society)
•Survival (avoid bankruptcy)
Strategy as Scenario Planning
• Scenario planning
Envision different "what-if" plans
Generates a dominant plan
Must implement the most probable option
Keeps other scenarios in the event of changes…
"Arab Spring" impact on the oil industry?
Good example of the AFI framework
Scenario planning at Shell
2–17
EXHIBIT 2.2 Scenario Planning in the AFI Strategy Framework
2–18
1–19
STRATEGY HIGHLIGHT 2.2STRATEGY HIGHLIGHT 2.2 Shell’s Future Scenarios
• Petroleum industry use of scenario planning
Shell made right move in the 1960s
Again in the 1980s
Communism might fall in Soviet Union
Now projecting 20% energy from renewables by 2025
Strategy as Planned Emergence
• Strategic Initiative Google 50% of the firm's new products come from
the "20% rule" (one day a week on own ideas) Enron Wind investment by GE
• Mintzberg Planned Emergence
• Strategy can come from top or bottom: Some intended strategies drop off in the process Allows for new emerging ideas to become realized Resource allocation process Serendipity can have dramatic effects
2–20
Strategic Initiatives and Serendipity
• Japan Railways
Constructing a bullet train through the mountains north of Tokyo, which required many tunnels
Persistent flooding
Complex engineering plans to drain the water
Maintenance worker suggested that the fresh water off the mountains should not be drained, but rather should be bottled
1,000 vending machines on 1,000 railroad platforms in and around Tokyo, and home delivery of water, juices, and coffee followed.
The employee’s proposal had turned this “bottom-up” strategy into a multi-million dollar business. 2–21
EXHIBIT 2.3 Mintzberg’s Planning Framework
2–22
23
Strategy Making : Design or Process?Strategy Making : Design or Process?
Strategy as Design
Planning andrational choice
INTENDEDSTRATEGY
Many decision makersresponding to multitude ofexternal and internal forces
REALIZED STRATEGY
EMERGENTSTRATEGY
Strategy as Process
Mintzberg’s Critique of Formal Strategic Planning:•The fallacy of prediction – the future is unknown•The fallacy of detachment -- impossible to divorce formulation from
implementation•The fallacy of formalization --inhibits flexibility, spontaneity,
intuition and learning.
Mintzberg’s Critique of Formal Strategic Planning:•The fallacy of prediction – the future is unknown•The fallacy of detachment -- impossible to divorce formulation from
implementation•The fallacy of formalization --inhibits flexibility, spontaneity,
intuition and learning.
Strategy Making : Design or Process?Strategy Making : Design or Process?
Strategy as Design
Planning andrational choice
INTENDEDSTRATEGY
Many decision makersresponding to multitude ofexternal and internal forces
REALIZED STRATEGY
EMERGENTSTRATEGY
Strategy as Process
Mintzberg’s Critique of Formal Strategic Planning:•The fallacy of prediction – the future is unknown•The fallacy of detachment -- impossible to divorce formulation from
implementation•The fallacy of formalization --inhibits flexibility, spontaneity,
intuition and learning.
Mintzberg’s Critique of Formal Strategic Planning:•The fallacy of prediction – the future is unknown•The fallacy of detachment -- impossible to divorce formulation from
implementation•The fallacy of formalization --inhibits flexibility, spontaneity,
intuition and learning.
1–24
STRATEGY HIGHLIGHT 2.3STRATEGY HIGHLIGHT 2.3 “It’s Not What We Do!”
• Starbucks
Autonomous action of mid-level manager Tenacity and persistence of a store manager in
Southern California
Risk of failure
Possible career-limiting action
Organization must be willing to accept new ideas
Frappuccino was born! Contributing 20% of the $11billion in revenues for Starbucks
in 2010.
25BARTOL, MANAGEMENT: A PACIFIC RIM FOCUS 3E © McGraw-Hill Australia 20019
Managers as decision makersAssumptions of the Rational Model
Managers as decision makersAssumptions of the Rational Model
Rationaldecisionmaking
Rationaldecisionmaking
An optimal decision is possible
An optimal decision is possible
All relevant informationis available
All relevant informationis available
All relevant information is understandable
All relevant information is understandable
All alternatives are knownAll alternatives are known
All possible outcomes knownAll possible outcomes known
26BARTOL, MANAGEMENT: A PACIFIC RIM FOCUS 3E © McGraw-Hill Australia 200110
Managers as decision makersSatisficing
Managers as decision makersSatisficing
‘Satisficing’decisionmaking
‘Satisficing’decisionmaking
Time constraintsTime constraints
Limited ability to understand all factors
Limited ability to understand all factors
Inadequate baseof information
Inadequate baseof information
Limited memory ofdecision-makers
Limited memory ofdecision-makers
Poor perception of factorsto be considered
in decision process
Poor perception of factorsto be considered
in decision process
27
1-40
Improving Strategic Improving Strategic DecisionDecision--MakingMaking
Prior Hypothesis
Bias
EscalatingCommitment
Reasoningby
Analogy
Representa-tiveness
Illusion of
Control
Copyright
28
14-25Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
Symptoms of Groupthink and How to Prevent It
• Symptoms
• Illusion of invulnerability
• Belief in the inherent morality of the group
• Stereotyped views of members of opposing groups
• Application of pressure to members who express doubts about the group’s shared allusions or question the validity of arguments proposed
• Practice of self-censorship
• Appointment of mindguards
Groupthink
29
14-24Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
Using Conflict-Inducing Decision-Making Techniques in Case Analysis
Groupthink
Devil’s Advocacy
Dialectical Inquiry
Use conflict-inducing decision-making techniques to help prevent groupthink and lead to better decisions.
14-29Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
Two Conflict-Inducing Decision-Making Processes
Adapted from Exhibit 14.4 Two Conflict-Inducing Decision-Making Processes
2–30
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