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Strategic Management – TMO2100
- Basics of Strategic Management - 2. lecture and seminars – 28-29.09.2005
Marko Rillowww.rillo.ee
Chair of Organisation and Management
JUHAN JUURIKAS
Remembered to Take along Your Name Tag?
How are you doing?
Any problems so far with … Downloading materials for last course? Web-based forum? Getting hands on HBR?
Homework? Who has done it properly? Who has taken the original case study and/or solution along? 3 selected case studies get 5 minutes of presentation time Audience: please follow and ask at least one question everyone
What were in your opinion 5 biggest headlines on strategic management? To help you, there are some sites that you may follow:
In the world? http://news.bbc.co.uk/1/hi/business/ - free http://www.economist.com/ - fully available in EBSCO database http://www.ft.com/ - pay service, you may look few selected
texts http://finance.yahoo.com/ - free http://www.business2.com/ - free
In Estonia? http://www.baltictimes.com/ - short summary of news only http://www.balticbusinessnews.com/ - only headlines
Introduction to Strategic Management
Group discussion questions:
How would you define … Strategy? Tactics? Organisation? Management? Strategic management?
How would you see the role of a strategic manager? I.e. what does a good strategic thinker/actor in any organisation have to do?
What would be the actual actions that are carried out when organisation plans, implements and analyses its strategies?
Brief History of Strategic Management
Strategy’s Military Roots Battlefield strategies to gain an edge on the enemy
Academic Origins of Strategic Management Mainstream economic theory Scientific management (Taylor) Bureaucratic organizations (Weber) Administrative functions/open systems (Barnard)
The 1960s Strategic management established as separate field
The 1970s and 1980s Process researchers (“how” strategy is formed) Content researchers (“what” of a strategic decision)
History of Strategic Planning and Thinking
Military Strategy: 4000 B.C. The Harvard School 1962 (Bain) Strategic Planning 1966 (Learned, Anderson, Bain) Structure-Conduct-Performance (SCP) 1968 (Learned,
Anderson, Bain) Porter First Publishes Work on Industry and Firm Analysis
(1975, 1980) Porter Continues to Publish (1985) and continues(1990)
and continues … (1998) Resource-Based View of the Firm Wernerfeldt (1984),
Barney (1986) Complexity Theory, Chaos Theory, and Non-linear
Dynamics, other concepts …
Key Concepts
Strategy: Mintzberg: strategy as five P-s: plan, pattern, position,
perspective and ploy Strategic management
Art & science of formulating, implementing, and evaluating, cross-functional decisions that enable an organization to achieve its objectives
Goal-directed decisions and actions in which its capabilities and resources are matched with the opportunities and threats in its environment
Strategic plan Company game plan
What is Strategy? (M. Porter)
Strategy is the creation of a unique and valuable position, involving a different set of activities.
Economist’s perspective Strategy requires a firm to make trade-offs in competing.
Not doing is also a strategy! Strategy involves creating “fit” among a company’s
activities. Synergy!
What is Strategy? (cont)
Strategy as revolution Hamel (1996)
Strategy as a pattern Mintzberg and Waters (1985)
Strategy as creativity Stacey (1996)
Strategy as ecological adaptation De Geus (1997)
Many companies don’t have strategies Strategy as hindsight?
What is Strategy? (cont)
The essence of strategy is choosing to perform activities differently than rivals do
Where is our strategic plan? Does it leave room for slack?
Art of balancing between short-term and long-term perspectives
Strategy as an interface between external and internal environment
Game Theory
Player A
A’s Strategy 1
A’s Strategy 2
B’s Strategy 1 B’s Strategy 2
Player B
1
2
A’s payoff when A takes
Strategy 1
B’s payoff when B takes
Strategy 1
Love Game
John
Movie
Basketball
Movie BasketballMary
1
2
0
0
0
0
2
1
Prisoner’s Dilemma
B
Confession
Silence
Confession SilenceA
3
3
4
1
1
4
2
2
Gaming Business (cont.)
Company A Company B
Large
Small
Small
Small
Large
Large
(1 , 1 ) Situation D
(3 , 2 ) Situation C
(2 , 4 ) Situation A
(4 , 3 ) Situation B
Company A’s Payoff Company B’s Payoff
10 Schools of Management (Mintzberg)
1. Design2. Planning3. Positioning
4. Entrepreneurial5. Cognitive6. Learning
7. Power8. Cultural9. Environmental
10. Configuration
Lets Get to Business!Introduction to Strategy Process
Strategy Process
Strategy Process
Analysis
Strategy Formulation
Strategy Implementation
Strategy Evaluation
Strategic Analysis
First stage in strategic management, equal to ‘thinking’ What is organisational context External analysis Internal analysis
Strategy formulation - traditional components
Vision & Mission
Strategy Formulation
External Opportunities & Threats
Internal Strengths & Weaknesses
Long-Term Objectives
Alternative Strategies
Strategy Selection
Key Issues in Strategy Formulation
Observation of businesses, looking options and making decisions:
New Business opportunities Businesses to abandon Allocation of resources Expansion or diversification or focusing International markets Mergers or joint ventures Avoidance of hostile takeover
Traditional Steps in Strategy Implementation
Strategy Implementation
Annual Objectives
Policies
Employee Motivation
Resource Allocation
Key Issues in Strategy Implementation
“Action Stage of Strategic Management” Most difficult stage Mobilization of employees & managers Interpersonal skills critical Consensus on goal pursuit
Traditional Steps in Strategy Evaluation
Strategy Evaluation
Internal Review
External Review
Performance Metrics
Corrective Actions
Key Issues in Strategy Evaluation
“Review Stage of Strategic Management” Subject to future modification Today’s success no guarantee of future success New & different problems Complacency leads to demise
Basic Tools for Strategy Analysis – SWOT and TOWS
SWOT Analysis
Opportunities1.2.… etc
Strengths1.2.… etc
Threats1.2.… etc
Weaknesses1.2.… etc.
Internal Environment
ExternalEnvironment
Positive Negative
TOWS Analysis
Weaknesses:1.2.3.
Strengths:1.2.3.
WO StrategiesUse opportunities to
overcome weaknesses
SO StrategiesUse strengths to take advantage of opportunities
Opportunities:1.2.3.
WT StrategiesDefensive strategies
to minimize weaknesses and
avoid threats
ST StrategiesTake advantage of
strengths to avoid
threats
Threats:1.2.3.
From Internal Analysis
From External Analysis
Source: Weihrich
Homework for Tuesday, 04.10
Take the case study uploaded under the course materials and do both SWOT and TOWS analyses for the case company
You may do the analysis in groups of 4 people Upload it to course forum before our seminar on Tuesday
morning 9.00 – please indicate your group Be prepared to present it on Tuesday morning as a group