3Joel Ross and Michael Kami “Without a strategy the organization is like a ship without a rudder.”Joel Ross and Michael Kami
4Chapter Roadmap What Is Strategy? Identifying a Company’s StrategyStrategy and the Quest for Competitive AdvantageStrategy Is Partly Proactive and Partly ReactiveStrategy and Ethics: Passing the Test of Moral ScrutinyThe Relationship Between a Company’s Strategy and Its Business ModelWhat Makes a Strategy a Winner?Why Are Crafting and Executing Strategy Important?
5Thinking Strategically: The Three Big Strategic Questions 1. Where are we now?2. Where do we want to go?Business(es) to be in and market positions to stake outBuyer needs and groups to serveOutcomes to achieve3. How will we get there?A company’s answer to “how will we get there?” is its strategy
6What Is Strategy?Consists of the combination of competitive moves and business approaches used by managers to run the companyManagement’s “game plan” toAttract and please customersStake out a market positionCompete successfullyGrow the businessAchieve targeted objectives
7Large-scale, future-oriented plan Used to interact within competitive environment to achieve company goalsProvides a framework for managerial decisionsReflects a company’s awareness of the main elements of competition
8Strategy is about affecting the overall activities of an organization in ways to make the organization a winner.Strategy is about survival in fierce (severe) competition.
9Strategy – A Seminal (determining) Definition In his book, Russel L Ackoff (1970) discuss the characteristics of strategy. He describe three characteristics that define the concept of strategy.Strategy deals with concerns that are central to the livelihood and survival of the entire corporation and usually involve a large portion of the organizations resources.
10Strategy represents new activities or areas of concern and typically addresses issues that are unusual for the organization rather than issues that lend themselves to routine decision making.Strategy has repercussive (consequence) for the way other, lower lend decisions in the organization are made
11The Hows That Define a Firm's Strategy How to please customersHow to respond to changing market conditionsHow to outcompete rivalsHow to grow the businessHow to manage each functional piece of the business and develop needed organizational capabilitiesHow to achieve strategic and financial objectivesStrategy is HOW to . . .
12Strategic choices are based on . . . What Are a Company’s Strategic Choices?Trial-and-error organizational learning aboutWhat has worked andWhat has not workedManagement’s appetite for taking risksManagerial analysis and strategic thinking about how best to proceed, given prevailing circumstancesStrategic choices are based on . . .
13Strategy Strategic Management A series of goal directed decisions and actions matching an organizations skills and resources with the opportunities and threats in itsenvironmentAnalyze current situationDevelop appropriatestrategiesPut strategies into actionEvaluate, modify, orchange strategy
15Dimensions of Strategic Decisions Strategic issues require top-management decisionsStrategic decisions overarch several areas of a firm’s operationsUsually only top management has the perspective needed to understand their broad implicationsUsually only top managers have the power to authorize necessary resource allocations
16Dimensions of Strategic Decisions Strategic issues require large amounts of the firm’s resourcesThey involve substantial allocations of people, physical assets, and moneyStrategic decisions commit the firm to actions over an extended periodIn highly competitive firms, achieving and maintaining customer satisfaction frequently involves commitment from every facet of the firm
17Dimensions of Strategic Decisions Strategic issues often affect the firm’s long-term prosperityStrategic decisions commit the firm for a long time, typically 5 years; however the impact lasts much longerOnce a firm has committed itself to a strategy, its image and competitive advantages are usually tied to that strategyFirms become known for what they do and where they compete. Shifting away from that can jeopardize their previous gains.
18Dimensions of Strategic Decisions Strategic issues are future-orientedThey are based on what managers forecast, rather than what they knowEmphasis is on the development of solid projections that will enable a firm to seek the most promising strategic optionsA firm will succeed only if it takes a proactive (anticipatory) stance toward change
19Dimensions of Strategic Decisions Strategic issues usually have multifunctional or multi-business consequences.Strategic decisions have complex implications for most areas of the firmDecisions about customer mix, competitive emphasis, or organizational structure involve a number of the firm’s SBUs, divisions, or program units
20Dimensions of Strategic Decisions Strategic issues require considering the firm’s external environmentAll businesses exist in an open system. They affect and are affected by external conditions that are largely beyond their controlSuccessful positioning requires that strategic managers look beyond operations and consider what relevant others are likely to do
21Three Levels of Strategy Corporate level: board of directors, CEO & administration [Highest]Business level: business and corporate managers [Middle]Functional level: Product, geographic, and functional area managers [Lowest]
22The Nature and Value of Strategic Management The set of decisions and actions that result in formulation and implementation of plans designed to achieve a company’s objectives
23Nine Critical Tasks of Strategic Management Formulate the company’s missionConduct an internal analysisAssess the external environment – competitive and general contextsAnalyze the company’s options by matching its resources with the external environmentIdentify the most desirable options in light of the mission
24Select a set of long-term objectives and grand strategies that will achieve the most desirable optionsDevelop annual objectives and short-term strategies that are compatible with long-term objectives and grand strategiesImplement the strategic choicesEvaluate the success of the strategic process for future decision making
26Characteristics of Strategic Management Decisions: Corporate Often carry greater risk, cost, and profit potentialGreater need for flexibilityLonger time horizonsChoice of businesses, dividend policies, sources of long-term financing, and priorities for growth
27Characteristics of Strategic Management Decisions: Functional Implement the overall strategy formulated at the corporate and business levelsInvolve action-oriented and operational issuesRelatively short range and low riskModest costs: depend upon available resourcesRelatively concrete and quantifiable
28Characteristics of Strategic Management Decisions: Business Help bridge decisions at the corporate and functional levelsLess costly, risky, and potentially profitable than corporate-level decisionsMore costly, risky, and potentially profitable than functional-level decisionsInclude decisions on plant location, marketing segmentation, and distribution
29Formality in Strategic Management Formality is the degree to which participation, responsibility, authority, and discretion in decision-making are specified in strategic management
30Forces Determining Formality Organizational SizePredominant Management StylesComplexity of EnvironmentProduction ProcessProblems in the FirmPurpose of the Planning SystemStage of Firm’s Development
31Benefits of Strategic Management Managers at all levels interact in planning and implementing strategySimilar to participative decision makingAssessing strategy formulation requires looking at nonfinancial evaluations as well as financial onesPromoting positive behavioral consequences enables achievement of financial goals
32Risks of Strategic Management Managers’ time away from other responsibilitiesUnrealistic expectations promised by strategy formulatorsPossible disappointment of participating subordinates if goal is not reached
33Why Do Strategies Evolve? (Develop) A company’s strategy is a work in progressChanges may be necessary to react toFresh moves of competitorsEvolving customer preferencesTechnological breakthroughsShifting market conditionsCrisis situations
34Crafting Strategy Is an Exercise in Entrepreneurship Strategy-making is a market-driven activity that involvesStudying market trends and competitors’ actionsKeen observation of customer needsScrutinizing business possibilities based on new technologiesBuilding firm’s market position via acquisitions or new product introductionsPursuing ways to strengthen firm’s competitive capabilitiesProactively searching out opportunities toDo new things orDo existing things in new or better ways