5 Strategic Management Process Strategic Inputs: Internal and External ScanningStrategic Actions: Formulation and implementation of strategyStrategic Outcomes: Above, at or below average returns
6 Intro to Strategic Management From Organizational Vision to Tactical StepsDefine the Organization:VisionMission StatementUnderstand the Operating EnvironmentExternal Environment (Threats and Opportunities)Internal Conditions (Strengths and Weaknesses)Determine Strategic AlternativesFormulate Strategy (long term)Implement Strategy through Tactics (short term)
7 Role of Strategy Business - Link Between Strategy, Resources, & Organization PositionResources& CapabilitiesOrganization
8 Strategy: Levels and Dynamics Corporate: general perspective towards growth and management of various business units, product lines, functional areasBusiness: Strategic Business Units (SBUs), focus on improvement of competitive position of products and servicesFunctional: focus on marketing, R & D, etc. to achieve SBU and overall corporate objectives.
9 The Levels of Strategy Corporate Determining the Portfolio Businesses Business Units/Divisions – Positioning within the IndustryFunctional – Operational and Marketing Strategies, etc.
10 Path to Realized Strategy IntendedStrategyUnrealizedStrategyDeliberate StrategyEmergent StrategyRealized Strategy
11 Phases of Strategy Development Phase 1 – Basic Financial Planning:operational controlPhase 2 – Forecast-based Planning:plan for growthPhase 3 – External Oriented Planning:respond to markets and competitorsPhase 4 – Strategic Management:seek sustainable competitive advantage
12 Initiation of Strategy Triggering Events InterventionNew CEOPerformanceGapOwnershipThreat
13 What makes a decision strategic? Rare – Have no precedentConsequential – Commitment of resourcesDirective - Cascade of precedents
14 How Did Strategy Develop? Harvard in the 1960’sHow do the problems of the general manager differ from those of functional managers?How do we look at the business from a holistic perspective?How do we look at the relationship between the business and its competitive environment?How do managers exercise leadership and manage the process of strategic change?
15 Our Definition of Strategy Strategy is the set of policies and plans relating the different functional areas of a business to each other and the whole firm to its competitive environment.In this context, the objective of strategy is to create a sustainable competitive advantage for the firm.
16 Strategy Relates A Business To Itself and Its Environment Mktg.Oper.StrategyFinanceAcctg.H.R.Competitive EnvironmentGovernment RegulationTechnologyIndustryEnvironmentNational/ Int’l EconomiesOtherCompetitorsRelatedIndustries
17 Natural Competition Evolutionary vs. revolutionary Natural competition is expedient in interaction but slow to alter species’ behaviorStrategic competition is deliberate and reasoned but consequences may be radicalFundamental inhibitions:FailureRivals’ response or anticipation
18 Modes of Strategic Thinking (Mintzberg and Quinn) EntrepreneurialAdaptivePlanningLogical incrementalism
19 How did you get your textbook? University bookstorewww. borders.comQuestion:How to describe their business models?Target customer; Competitive edge;Strategy is always around us!!!
20 Corporate Governance and Social Responsibility Organization and Roles
21 Defining the Corporation What is a corporation?Relationships within corporate governanceHow does a corporation function?
22 Corporate Governance Corporate Governance is . . . In a Corporation:Shareholders share in profits without operating responsibilitiesManagement operates company without providing the fundsBoard of directors approves decisions that will affect long run performance.Corporate Governance is . . .the relationship between these three parties.
23 Role of Board of Directors Setting corporate strategyHiring/firing CEO & top managementControlling, monitoring and supervising top managementReviewing and approving use of resourcesRepresenting stakeholder interestsWhat is the idea of “due care”?
24 Corporate Governance Board of Directors Inside Directors - employees (or alumni) of firmOutside Directors - not employees of firmGreater Objectivity(for Outside) vs.Greater Competence (for Inside)
25 Interlocking Directorates Corporate GovernanceInterlocking DirectoratesDirect: two firms share a directorIndirect: two directors from different firms sit on board of third firmBenefits: Knowledge about external (competitive, regulatory) trends.
26 Corporate Governance Responsibilities of Top Management: The CEO: Articulates the strategic visionActs as a role modelCommunicates performance standards
27 Friedman’s View of Social Responsibility Fundamentally subversive doctrineCorporation’s single goal is to increase profits
28 Four Responsibilities of Business (Carroll) Economic (must do)Legal (have to do)Ethical (should do)Discretionary (might do)Social responsibilitiesCan making enough profit to cover future costs be considered a social responsibility of a firm?
29 Class Discussion From the article by Meyer in Directorship: What are the pros and cons to requiring stock ownership by executives? What about setting a minimum ownership level?What are the pros and cons to using stock ownership for recruitment purposes?
30 Next Time: Wal-Mart Case Historically, what has been Wal-Mart’s “strategy”?How has that strategy created a competitive advantage for Wal-mart?What competitive issues currently face Wal-mart?What is the best strategic direction for Wal-mart? Why?
31 Next Time: Environmental Scanning Current EventsRead Chapter 3: Environmental ScanningPorter’s Five Forces (handout in class)Analyze Wal-mart CaseTeams ChosenAssign Case #2: RCA RecordsWEBSITE: