BA 469Strategic Management and

Business Policy

Introductions

• Name

• Major

• What do you want/hope/wish to be doing 5 years from now and where?

Focus: General Management of an organization

An organization is “a system of consciously coordinated activities or forces of two or more persons.”

General management perspective

• Strategic decisions: strategy comes from “strategos,” used in ancient times to refer to administrator of conquered reqions, therefore whole “enterprise”

• Beyond functional areas: for example, a company’s policy on what type of customers to go after affects marketing, production, finance, etc.

• Long-term implications

Learning Outcomes

• Knowledge of strategic management tools and concepts

• Diagnose strategic situations (as described in cases) using these tools and concepts

• “Manage” a business in a simulated computer environment.

• Contribute to class and small group discussions

To Measure Achievement of Learning Outcomes

• Quizzes - 400 points– Will be based on concepts covered in chapter

assigned for the week and readings, but may refer to previously assigned cases, etc.

– 7-8 quizzes, short essay questions

• Case briefs (4) – 300 points

• Simulation game – 225 points

• Participation – 75 points

Simulation Game

• Beaver Republic Game

• Two reports – 200 points– Proposal to Invest (PIN) – 100 points– Post Audit Report (PAR) – 100 points

• Just playing the game – 25 points

• If the game is suspended, a case report will be substituted for PAR. You keep the 25 points for just trying to play.

Requirements

• Case briefs and reports are due beginning of class (see schedule)

• Chapter outlines will be posted, and will be used as background to lecture and discussion.

• Deliverables for Simulation Game– PIN– PAR– Decisions

Requirements

• Read Chapters and Cases before coming to class

• Read assigned articles (if this becomes necessary)

• BECOME AN ACTIVE MEMBER OF THE CLASS

• House rules: – Informal, but remember why we are in class– Keep distractions to a minimum– Speak up (clarification, disagreement, etc.)

The Strategic Management Process

Chapter 1

The Strategic Management Process

• Corporate mission and goal

• Analyze external environment - - identify opportunities and threats

• Analyze internal environment - - identify strengths and weaknesses

• Formulate strategy

• Implement strategy

Strategic Management and You

• Where do you intend to be 5 years from now?– At least most of you had some idea

• Product of an internal assessment – what are my strengths, preferences,etc.

• Most students, non-students for that matter usually do not assess external environment

• Strategy – university degree (some will talk about a masters degree), funding, etc.

Why do some organizations succeed while others fail?

• Depends on strategy or set of– Actions managers take to achieve one or

more of an organization’s goals

• Strategic management process– The process by which managers choose a set

of strategies that will allow a company to achieve superior performance

Superior Performance and Competitive Advantage

• Profitability– A measure of a company’s return on its

invested capital

• Superior performance– One company’s profitability relative to that of

other companies in the same or similar business or industry

Firm-Specific Performance and Profitability

• Competitive advantage– A firm’s profitability is greater than the

average profitability for all firms in its industry

• Sustained competitive advantage– A firm maintains competitive advantage for a

number of years

• Business model– Management’s model of how strategy will

allow the company to gain competitive advantage and achieve superior profitability

Industry Structure and Profitability

Return on Invested Capital in Selected Industries, 1997-2001

Data Source: Value Line Investment Survey

Performance in Nonprofit Enterprises

• Government agencies, universities, charities– Are not in business “to make a profit”– Should use their resources efficiently and

effectively– Set performance goals unique to the

organization– Set strategies to achieve goals and compete

with other nonprofits for scarce resources

Strategic Managers

• General managers– Responsible for overall company performance

or divisional performance

• Functional managers– Responsible for supervising a particular task

or operation – Example – head of accounting or marketing,

chief financial officer,

Levels of Strategic Management

Key Question for Each Level

• Corporate Strategy – what business(es) should the organization be in?

• Business Strategy – how should the organization compete?

• Functional Strategy – how should the organization’s resources be best employed to support business strategy?

Reality Check:What do managers do?

• Phone calls, meetings, run around from place to place . .

• Minor decisions -- Mr. so and so gets to use the office in the basement

• Major decisions - - lets launch, abort

• All in a day’s work - - focus

Reality Check:Can managers predict the future?

• National economy - - Where will interest rates be next month? Will economic growth be 2.5% or 2.75%? Does it matter?

• Industry performance

• Actions of competition

• Actual capabilities and performance of internal resources, i.e. your people

Emergent vis Intended Strategy

• Honda story is a classic; also consider Toys ‘R’ Us

• Scenario planning to cover possibilities, find, if possible, unknown unknowns

• Listen to field people• Balance commitment to goal and realities

of a changing situation• Serendipity (unintended, accidental,

sometimes wonderful discoveries)

Cognitive Biases

• Prior hypothesis - - rules of thumb, deeply held beliefs

• Escalating commitments

• Reasoning by analogy

• Representativeness

Strategic Management Process

• Not an exact science

• Dealing with – Uncertainty– Scope

• Personal judgment

• Focus on process

ExercisesStrategy in Action

• 1.1 and 1.2: Microsoft – we can assume that some sort of planning went into Microsoft’s original Internet strategy prior to 1994. How could they miss the Internet then?

• 1.4: Duke Energy – explain Duke’s planning process using Scenarios.