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Today: The Concept of Strategy

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1 Today: The Concept of Strategy
Administrative issues: Class count: add/drop Seating chart Current Events How to be Successful at Case Write-ups Assign Case #1: Wal-mart Stores, Inc. WEBSITE:

2 Business Strategy and Policy
Notecards Name Phone Number Address Major & Class Standing Career or Personal Interest(s) Work Experience (industry, length of time)

3 Fundamental Concepts in Strategic Thinking
Modeling your Thought

4 Model of Strategic Management
Analysis/Scanning External Analysis (Chapter 3) Internal Analysis (Chapter 4) Strategy Formulation Business Level (Chapter 5) Corporate Level (Chapter 6) Functional Level (Chapter 7) Strategy Implementation Organizing (Chapter 8) Staffing (Chapter 9) Evaluation & Control Metrics (Chapter 10)

5 Strategic Management Process
Strategic Inputs: Internal and External Scanning Strategic Actions: Formulation and implementation of strategy Strategic Outcomes: Above, at or below average returns

6 Intro to Strategic Management
From Organizational Vision to Tactical Steps Define the Organization: Vision Mission Statement Understand the Operating Environment External Environment (Threats and Opportunities) Internal Conditions (Strengths and Weaknesses) Determine Strategic Alternatives Formulate Strategy (long term) Implement Strategy through Tactics (short term)

7 Role of Strategy Business - Link Between Strategy, Resources, & Organization
Position Resources & Capabilities Organization

8 Strategy: Levels and Dynamics
Corporate: general perspective towards growth and management of various business units, product lines, functional areas Business: Strategic Business Units (SBUs), focus on improvement of competitive position of products and services Functional: 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 Industry Functional – Operational and Marketing Strategies, etc.

10 Path to Realized Strategy
Intended Strategy Unrealized Strategy Deliberate Strategy Emergent Strategy Realized Strategy

11 Phases of Strategy Development
Phase 1 – Basic Financial Planning: operational control Phase 2 – Forecast-based Planning: plan for growth Phase 3 – External Oriented Planning: respond to markets and competitors Phase 4 – Strategic Management: seek sustainable competitive advantage

12 Initiation of Strategy Triggering Events
Intervention New CEO Performance Gap Ownership Threat

13 What makes a decision strategic?
Rare – Have no precedent Consequential – Commitment of resources Directive - Cascade of precedents

14 How Did Strategy Develop?
Harvard in the 1960’s How 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. Strategy Finance Acctg. H.R. Competitive Environment Government Regulation Technology Industry Environment National/ Int’l Economies Other Competitors Related Industries

17 Natural Competition Evolutionary vs. revolutionary
Natural competition is expedient in interaction but slow to alter species’ behavior Strategic competition is deliberate and reasoned but consequences may be radical Fundamental inhibitions: Failure Rivals’ response or anticipation

18 Modes of Strategic Thinking (Mintzberg and Quinn)
Entrepreneurial Adaptive Planning Logical incrementalism

19 How did you get your textbook?
University bookstore www. Question: 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 governance How does a corporation function?

22 Corporate Governance Corporate Governance is . . .
In a Corporation: Shareholders share in profits without operating responsibilities Management operates company without providing the funds Board 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 strategy Hiring/firing CEO & top management Controlling, monitoring and supervising top management Reviewing and approving use of resources Representing stakeholder interests What is the idea of “due care”?

24 Corporate Governance Board of Directors
Inside Directors - employees (or alumni) of firm Outside Directors - not employees of firm Greater Objectivity(for Outside) vs.Greater Competence (for Inside)

25 Interlocking Directorates
Corporate Governance Interlocking Directorates Direct: two firms share a director Indirect: two directors from different firms sit on board of third firm Benefits: Knowledge about external (competitive, regulatory) trends.

26 Corporate Governance Responsibilities of Top Management: The CEO:
Articulates the strategic vision Acts as a role model Communicates performance standards

27 Friedman’s View of Social Responsibility
Fundamentally subversive doctrine Corporation’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 responsibilities Can 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 Events Read Chapter 3: Environmental Scanning Porter’s Five Forces (handout in class) Analyze Wal-mart Case Teams Chosen Assign Case #2: RCA Records WEBSITE:

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