Robin Hood Does Robin Hood have a mission? What INTERNAL issues/problems is he facing? What EXTERNAL issues problems is he facing? What alternatives might be consider? What should he do?

Strategic Management Dr. Don Neubaum E Bexell

Class Sessions Monday & Wednesday - 8:00am Monday & Wednesday - 10:00am Both in 415 Bexell Monday & Wednesday – 2:00PM 207 Bexell

WIC Writing Intensive Curriculum Writing as a critical aspect of the learning process Significant portion of your grade – over 30% Reflecting writing with typical business content

Individual Grades - 80% Midterm/Final – 20% each (40% total) Industry analysis – 20% Case write ups – 5% (10% total) Strategic issue summary – 10% Group Grades – 20% In-class case exam – 10% Strategic plan presentation – 10% Grading

Grades If you NEED a specific grade in this class, other than to simply “pass,” then you MUST me and come see me by the end of next week.

Midterm and Final Multiple Choice and Short Answer Midterm – 10/22 Chapters 1-4 Final – 12/5 Chapters 5-13, non-cumulative Both exams will focus on lecture material and text terms.

Typical Questions What four generic strategies exist? Why does Porter call them generic? According to Porter, when should firms diversify? What rules does he forward to judge the merits of diversification? What is the goal of executive compensation? Why is it so difficult to design an effective compensation package? What are the axis on the BCG and the GE Nine-Cell Matrix? Which model is superior and why?

Industry Analysis Within teams, you will select one of the following industries Pharmaceutical Supermarket/Grocery Store Wireless Communication (service providers) Casual Dining (Applebee’s) DIY Retailing Due 10/31 Highest team average will receive 5 extra points

Case Write Ups Analyzing two cases Napster - Due 10/8 Nike – Due 11/14 3 pages, double spaced Specific questions and guidelines will be provided for each case Re-write each based on feedback you get from classmates.

Strategic Issues Start most class sessions with 2-3 of these Articles from WSJ, Forbes, Fortune, etc. highlighting an aspect of strategy 2 page summary and a short (3 - 5 slides) 5 minute presentation Written feedback – allowing you to re- write the paper and redo your slides Sign up sheet will be distributed Graded equally on paper and presentation

Group In class Case Exam Group Exam – 10/29 Case handed out a week ahead of time Questions ed to you the morning of the 29th Answers due by the end of the day Work in your group using laptop/PC and your answers to me in the evening

Group Strategic Plan and Presentation Groups of four or five Last week of the quarter – 10/26 and 10/28 Company of your choice, with my approval PowerPoint presentation of 20 minutes – no paper necessary Can not analyze a company in Pharmaceutical, supermarket, wireless communication, casual dining, or DIY retailing industries Sign up sheet for time slots will be distributed

Peer Evaluations Your group members will evaluate your contribution throughout the quarter Your group grades can be adjusted up and down, based upon their assessment of your contribution and effort.

One Minute Papers Write a short, ungraded essay at the end of most classes: 1) something you learned 2) giving an example 3) asking a question or clarification 4) making a comment 5) anything else Paper notebook with name and section marked on the cover

Participation While not specifically graded, I will be assessing your attendance, participation and one-minute papers. Final grades might be adjusted up and down, based upon my assessment. Students attending every class period will receive 5 points on the final

Golden Rule “No Tolerance” policy for cheating Guilty parties receive an F and will be dropped from the class Disciplinary actions may be taken

Standing-O Earn 5 bonus points on midterm Announce to us a recent accomplishment or achievement While you may do as many Standing-Os you want, you can only earn the 5 points once

Team Specials Teams can earn points from “Team Specials” tasks and assignments These points are tabulated over the quarter Students may also request team special points, subject to instructor approval Awards: Gold – exempt from Final Silver – 15 points added to midterm Bronze – opt out of one essay on final

Be thinking about who you might want in your group – we will be forming them early in class today

Chapter One Basic Concepts of Strategic Management

Why do we need strategy? The reasons why firms succeed and fail is perhaps the central question in strategy Answers the fundamental question of the firm Where we are now? Where we going? How are we going to get there?

Hi Dr. Neubaum: I followed up with our chairmen and CEO today, and found that our board of directors determined development of a strategic plan is premature at this time.

Strategic Management Defined decisions and actions that determine long-term performance formulation and implementation of plans designed to achieve objectives an action managers take to achieve one or more of an organization’s goals unifying theme that gives coherence and direction to organizational/individual decisions game plan management has for positioning the company in its chosen market, competing successfully, satisfying customers, and achieving good business performance management’s action plan for running the business and conducting operations; commitment to pursue a particular set of actions in growing the business, attracting customers, competing successfully, conducting operations, and improving financial and market performance

The “how” of Strategy How will we grow, build clientele, boost performance, etc. Improve performance? Lower cost? Superior products? Outstanding service? Target high or low end? Narrow or board product line? Focus on one part of the vertical chain or be fully integrated? Local or global competitor? Single or multiple industry? Manufacture or outsource? Offensive or defensive? Incremental or radical change? Conservative or bold?

Fig. 1.2: A Company’s Strategy Is Partly Proactive and Partly Reactive

Emergent strategy elements

So….how can firm’s be profitable ? 1) Choose an attractive industry in which to compete - Where we compete? Corporate level strategy 2) Attain a competitive advantage within an industry - How we compete? Business level strategy

Levels of Strategic Management

Answers the question “Where?”

Levels of Strategic Management Answers the question “How?”

HP’s Corporate Strategy Enterprise Storage & Servers HP Services SoftwarePersonal Systems Imagining and Printing Financial Services Where are we going to compete? What businesses are we in?

HP’s Business Strategy Enterprise Storage & Servers HP Services SoftwarePersonal Systems Imagining and Printing Financial Services How are we going to compete against Dell? How are we going to compete against Sun Microsystems? Xerox? Cannon?

HP’s Business Strategy Enterprise Storage & Servers HP Services SoftwarePersonal Systems Imagining and Printing Financial Services Profits are won and lost at the business level!!

Two Models of Profitability I/O Model (Industrial/Organizational Economics Model) Resource Based View of the Firm

I/O Model General Environment Industry Environment Competitive Environment Strategy & Performance 3 Assumptions 1) external environment imposes pressures/constraints 2) firms within an industry possess similar resources 3) resources are highly mobile Therefore, firms must identify attractive segments within an industry and acquire skills/resources to achieve superior profitability It’s about finding the right “place” to compete. General Environment Industry Environment Competitive Environment

Resource Based View The Firm’s Resources & Capabilities Strategy & Performance 3 assumptions 1) internal environment critical to strategic action 2) firms are bundles of unique resources 3) resources may not be mobile across firms Therefore, firms must develop the skill and resources to take advantage of opportunities in their industries It’s about finding the right “way” to compete.

Generic Strategies Broadly speaking, only 2 “ways” to compete Differentiation Low Cost

Generic Strategies Broadly speaking, only 2 “ways” to compete Differentiation Low Cost If you aren’t different, what are you? If you don’t have low costs, what are you?

What is Strategy? Strategy is not doing similar activities better than your rivals – that’s operational effectiveness continual improvement not a sustainable advantage industry-wide cost reductions do not lead to increased profitability examples: PCs, automobiles, airlines

What is Strategy? 1) Strategy is performing different activities or performing similar activities in a different way

Who sells the most toilet paper in the U.S? 1 billion rolls Who is the country’s largest retailer of wine? Who is the country’s third largest grocer? Where can you buy Dom Perignon for $90, $11,000 crystal vases, 42-plasma screen TVs for $3,000, and live Maine lobsters?

What is Strategy? 1) Strategy is performing different activities or performing similar activities in a different way Strategy is about positioning a) Variety-based positioning offering a unique choice of goods/services - Chic-fil-a, GameStop b) Needs-based positioning serving most/all of a particular group of customers’ needs - Babies R Us c) Access-based positioning serving a set of customers that require unique access – Kinkos, Movie Gallery, Superette

What is Strategy? 2) Strategy is about choosing a position which requires tradeoffs, choosing what not to do without tradeoffs, all firms would imitate vs.

Time Magazine So why haven't American, United, US Airways and the three other full-service carriers, which lost $11 billion last year and stand to lose an additional $5 billion this year, followed the lead of the profitable discounters by cutting costs and fares? Because that's not the way their business works. They have made, and lost, their money by providing the frequent departures, quick connections, spacious seats and other amenities that have been demanded by business flyers and charging them dearly for that service — more than five times the cost of a discount fare. HARD TO STRADDLE AND REPOSITION!

What is Strategy? 2) Strategy is about choosing a position which requires tradeoffs, choosing what not to do without tradeoffs, all firms would imitate Tradeoffs arise from inconsistent image/reputation different activities, products, equipment, employees, skills, systems, machines priorities, internal coordination, and control

What is Strategy? 3) Strategy is about combining activities as advantages come from fit and reinforcing

Quick Turns No meals Short hauls Standard Fleet No baggage transfers Low Fares No seats Lean ground crews Secondary Airports

Quick Turns No meals Short hauls Standard Fleet No baggage transfers Low Fares No seats Lean ground crews Secondary Airports

Quick Turns No meals Short hauls Standard Fleet No baggage transfers Low Fares No seats Lean ground crews Secondary Airports

Quick Turns No meals Short hauls Standard Fleet No baggage transfers Low Fares No seats Lean ground crews Secondary Airports

Quick Turns No meals Short hauls Standard Fleet No baggage transfers Low Fares No seats Lean ground crews Secondary Airports

Quick Turns No meals Short hauls Standard Fleet No baggage transfers Low Fares No seats Lean ground crews Secondary Airports No baggage transfers Low Fares Secondary Airports Quick Turns No meals No baggage transfers

Quick Turns No meals Short hauls Standard Fleet No baggage transfers Low Fares No seats Lean ground crews Secondary Airports No baggage transfers Low Fares Secondary Airports Quick Turns No meals No baggage transfers How can Delta copy that? What about Jet Blue?

What is Strategy? 3) Strategy is about combining activities as advantages come from fit and reinforcing Operational effectiveness is about excellence in individual activities Fit/integration increases sustainability by reducing imitability

What is Strategy? 4) The desire to grow is most threatening to an effective strategy

What is Strategy? 4) The desire to grow is most threatening to an effective strategy Blurs uniqueness Creates compromises Reduces fit Erodes original advantages Growth needs to be deeper, not broader

What do Good Strategies Have in Common? Consistent, long-term goals and objectives

What do Good Strategies Have in Common? Consistent, long-term goals and objectives Reflects and understanding of the environment

What do Good Strategies Have in Common? Consistent, long-term goals and objectives Reflects and understanding of the environment Takes resources into consideration

What do Good Strategies Have in Common? Consistent, long-term goals and objectives Reflects and understanding of the environment Takes resources into consideration Effectively implemented

What do Good Strategies Have in Common? Consistent, long-term goals and objectives Reflects and understanding of the environment Takes resources into consideration Effectively implemented Strategic Effectiveness (fit)

Mission & Vision Today vs. tomorrow fundamental purpose which sets the firm apart from other firms of its type Based on several fundamental beliefs product, service, customer, market, geographic domain customer need growth, profitability - outcome, not a goal management philosophy, self-concept and values

Don’t offer me things Don’t offer me shoes Offer me comfort for my feet & the pleasure of walking Don’t offer me clothes Offer me fashion, style, or an certain image Don’t offer me books Offer me hours of escape & the benefit of knowledge Don’t offer me furniture Offer me comfort and a peaceful place to lounge Don’t offer me things Offer me ideas, emotions, ambience, feelings, benefits

(Our) vision is to dominate the global foodservice business industry. Global dominance means setting the performance standards for customer satisfaction while increasing market share and profitability through our Convenience, Value and Execution Strategies.

(Our) vision is to dominate the global toothpick industry. Global dominance means setting the performance standards for customer satisfaction while increasing market share and profitability through our Convenience, Value and Execution Strategies.

Our mission is to provide a customer a means of moving people and things up, down, sideways over short distances with higher reliability than any similar enterprise in the world.

One vision drives everything we do: A computer on every desk and in every home using great software as an empowering tool

Our business is renting cars. Our mission is total customer satisfaction.

Our business is leasing camels. Our mission is to totally alienate all of our customers.

To be the premier organization in nurturing and enriching the bond between people and animals

We supply the computing industry with chips, boards, systems, and software. Our products are used as “building blocks” to create advanced computing systems for PC users. Our mission is to be the preeminent building block supplier to the new computing industry worldwide. To be the leading supplier of PCs and PC servers in all customer segments.

Objectives Turns mission into performance outcomes Organizations produce what is measured Strategic or financial, long or short term Keep in mind what will the industry/competition allow what will it take to succeed does this objective support what we are trying to do

6 Characteristics of a Good Objective

2) Measurable

6 Characteristics of a Good Objective

U SMART Understandable Stretching Measurable Agreeable Realistic Timebound

Objectives To be one of the top three banking companies in terms of market share in all significant markets we serve. To provide shareholders a secure investment with a superior return. To be the low-cost producer of aluminum and to outperform the average ROE of the Standard and Poor’s industrial stock index. To achieve 100% total customer satisfaction… everyday…in every restaurant…for every customer To be the industry's innovative leader 30% of the company’ annual sales must come from products fewer than four years old

Objectives Increase sales growth 6% to 8% and accelerate core earning growth from 13% to 15% per share in each of the next five years Capitalize on e-commerce Develop a smart card strategy that will help us play a key role in shaping on-line payments Reduce greenhouse gasses by 10% by 2010 We want to operate 6,000 stores by 2010 Cut corporate overhead costs by $30 million per year

So, strategy is sort of like playing chess

… except you can’t see the whole board

..and you are playing against an unknown number of competitors