1. StrategicManagementAn Introduction to Strategy

2. Learning Outline What is strategic management? Why is strategic managementimportant? Who is involved with strategicmanagement? Strategic management today2 3. A definition of strategy Goal-directed decisions and actions inwhich capabilities and resources arematched with the opportunities andthreats in the environment.3 4. Military influences in strategy Strategos referred to a general incommand of an army The art of the general By 450 B.C. it came to mean managerial skill By 330 B.C. it referred to the skill of employing forcesto overcome positions to create a system of globalgovernance Carl von Clausewitz tactics(involve) theuse of armed forces in the engagement,strategy (is) the use of engagements for theobject of war 1838 On War4 5. Academic influences in strategy 1911 Scientific management (Taylor) Still in placetoday (UPS), some consider it micromanaging HBS requires a class in Business Policy in 1912 Adam Smiths invisible hand (the market) gives way toAlfred Sloan (GM CEO from 1923-1946) concept of thevisible handmiddle manager Chester Bernard influential book The Executive arguesthat managers should pay attention to strategic factors Ronald Coases 1937 article why firms exist (NobelPrize in economics) and Joseph Schumpters concept ofdisruptive technologies written in 1942 bring inorganizational economics Max Weber warns against bureaucratic organizations butsees a shift toward this way of organizing5 6. Recent influences in strategy 1960s (Strategy and structure; CorporateStrategy) 1963 Harvard business conference leads to SWOT analysis BCG founded in 1963 strategy boutique Created the portfolio analysis Stars, dogs, cash cows, question marks 1980s (Porters 5 forces) 1990s (Resource based view of the firm)6 7. Why is strategic managementimportant? Gives everyone a role Makes a difference in performance levels Provides systematic approach touncertainties Coordinates and focuses employees7 8. Why Strategy? To change, an organization needs Burning Platform Vision Leadership Strategic Management Political Management8 9. Strategy vs. StrategicManagement Strategy StrategicA series of goal- management Analyze currentdirected decisionsand actionssituation Developmatching anorganizations appropriate strategiesskills and Put strategies intoresources with the actionopportunities and Evaluate, modify,threats in its or changeenvironmentstrategy9 10. Strategy vs. Strategic Management Strategy involves Strategic Organizations managementgoals Planning Goal-oriented Organizingaction Related decisions Implementingand actions Controlling Internal strengths Externalopportunities andthreats 10 11. Basics of StrategicManagementFour aspects that set strategic management apart Interdisciplinary Capstone of the Business degree External focus Competition Internalfocus Future direction11 12. Strategic ManagementProcessAnalyzingDecidingPuttingEvaluating and Currenton Strategies ChangingSituationStrategies in Action StrategiesSituation StrategyStrategy StrategyAnalysis Formulation Implementation EvaluationExternalAnalysis Chapter 2 Chapter 3 Functional Competitive Chapter 5Chapter 6InternalAnalysis Corporate Chapter 4 Chapter 712 13. Strategic ManagementProcessSituation Analysis Scanning& evaluating context Internal and External environmentsStrategy formulation Functional Competitive Corporatestrategies13 14. Levels of strategy CorporateWhat direction are we going and what business(es) are we in or do we want to be in? Competitive: How are we going to compete in our chosen business(es)? FunctionalWhat resources and capabilities do we have to support the corporate and competitive strategies?14 15. Strategic ManagementProcessStrategy implementation Process of putting strategies into action Consider implementation at each levelStrategy evaluation Wasthe strategy effective? Close the loop15 16. Who does strategy? The Role of the Board of Directors Elected representatives of the companys stockholders Legally obligated to represent and protect stockholders The Role of Top Management Responsible for decisions and action of every employee Providing effective leadership Other Organizational Employees Implement put the strategies into action and monitorperformance Evaluatedo the actual evaluations and take necessaryactions16 17. The Role of the Board ofDirectorsReview and approve strategic goals and plansReview and approve organizations financial standards and policiesApprove an organizational philosophyMonitor organizational performance and regularly review performance resultsSelect, evaluate, and compensate top-level managersDevelop management succession plansMonitor relations with shareholders and other key stakeholders17 18. Who is on the board ofdirectors?Chairman of the board Chief Executive officer (CEO)President Chief Operating officer (COO)Other Cs Chief Financial officer Chief Information officerInside board membersOutside board members18 19. The Role of Top ManagementDetermining OrganizationalPurpose or VisionEstablishing Exploiting andAppropriately MaintainingBalanced ControlsCore Competencies Effective StrategicLeadership DevelopingEmphasizing Human CapitalEthical Decisionsand Practices Creating andSustaining StrongOrganizational Culture 19 20. Strategic ManagementPrincipleEffective strategy-making begins with a vision of wherethe organization needs tohead!20 21. Elements of a Strategic Vision Use the mission statement as astarting point Develop a strategic vision that spells out a course to pursue Communicate the vision in aclear and exciting manner21 22. Characteristics of aMission Statement Defines current business activities Highlights boundaries of currentbusiness ConveysWho we are,What we do, andWhere we are now22 23. Characteristics of aMission Statement Company specific, not generic soas to give a company its own identity A companys mission is not tomake a profit ! The real mission is alwaysWhatwill we do to make a profit?23 24. Examples of Missions Microsoft CorporationEmpower people through great software anytime, anyplace, and on any device.24 25. Examples of MissionsOtis Elevator Our mission is to provide any customer a means of moving peopleand things up, down, and sidewaysover short distances with higherreliability than any similar enterprise in the world. 25 26. Examples of Mission American Red CrossThe mission of the American Red Cross isto improve the quality of human life; to enhance self-reliance and concern for others; and to help people avoid, preparefor, and cope with emergencies.26 27. Ritz-Carlton Hotels The Ritz-Carlton Hotel is a place where thegenuine care and comfort of our guests is ourhighest mission. We pledge to provide the finest personal service and facilities for our guests who will always enjoy a warm, relaxed yet refinedambiance. The Ritz-Carlton experience enlivensthe senses, instills well-being, and fulfills eventhe unexpressed wishes and needs of ourguests (vision) 27 28. Characteristics of a Strategic Vision Charts a companys futurestrategic course Defines the business makeup for 5years (or more) Specifies future technology-product-customer focus 28 29. Communicating the Vision An exciting, inspirational vision Challenges and motivates workforce Arouses strong sense of organizationalpurpose Induces employee buy-in Galvanizes people to live the business29 30. Value of a Well-ConceivedStrategic Vision and MissionCrystallizes long-term directionReduces risk of rudderlessdecision-makingConveys organizational purpose and identityKeeps direction-related actions of lower- level managers on common pathHelps organization prepare for the future30 31. Concept of Strategic Intent A company exhibits strategicintent when it relentlessly pursues an ambitious strategic objective and concentrates itscompetitive actions and energieson achieving that objective!31 32. Lessons about change: Builtto lastUnderstand why superior companies are better than peer companies which are better than most companies $1invested in stock market in 1926 yields $420 in all other companies $960 in peer companies $6360 in superior (visionary) companies32 33. Who are these companiesVisionary Peer companies 3M Norton Boeing McDonnell Douglass GE Westinghouse IBM Burroughs Zenith Motorola Melville Nordstrom Colgate P&G Kenwood Sony Ames Wal-mart33 34. So what did they find? Great companies had BHAG Big Hairy Audacious Goals What ever your values are stick withit Deal with the AND, not the OR Seek Alignment (internally)34 35. Characteristics of Strategic Intent Indicates firms intent to stake out aparticular position over the long-term Involves establishing a BHAG - big, hairy,audacious goal Signals relentless commitment to winning35 36. Example of BHAG General Electric All businesses are held to a standard of being #1 or #2 in their industries as well as achieving good business results John F. Kennedy Put a man on the moon and return safely by the end of the decade36 37. Crafting a Strategy An organizations strategy deals with How to make the strategic vision a reality and achieve target objectives The game plan for Pleasing customers Conducting operations Building a sustainable competitive advantage 37 38. Take Aways Strategy has become more important Information, technology, globalization Key ideas in the strategy making process Mission(who are we) Vision (where do we want to go) Strategic intent / BHAG (major goal) Strategy (specific plan at different levels) Ethics (code of conduct or values) Linkage & communication are important Avoid mission creep!38 39. Take Aways Where strategy came from Strategic Management Process Who does strategy Next week ReadAirline Simulation Book (1-35) Bring Laptop39