1 Introduction to Strategic Management BUS496 Strategic Management & Policy Prof. Steven E. Phelan

2 Exercise  In groups of 3 to 5 answer: What is the difference between… Planning & strategy A business plan, corporate plan, & strategic plan Strategy & tactics A goal & an objective A vision & a mission

3 Comparison: military and corporate strategy Military  Fight to win  Zero-sum-game: cooperation extremely difficult if at all possible  Discrete with limited timeframe Corporate  Compete to win/gain  Positive-sum-game likely: cooperation not easy but very likely  Continuous

4 Key issues of strategic management  Why do some organizations succeed while others fail?  How do I make my firm succeed?  What is strategy? An action a company takes to attain one or more of its goals (textbook) An action a company takes to attain superior performance (textbook) An action taken to increase the firm’s (perceived?) value to its present or future owners (in a for-profit enterprise)  How do these definitions differ?  Why should managers care about the last definition?

5 Firm-Specific Performance and Profitability  Competitive advantage A firm’s profitability is greater than the average profitability for all firms in its industry  Sustained competitive advantage A firm maintains competitive advantage for a number of years  Business model Management’s model of how strategy will allow the company to gain competitive advantage and achieve superior profitability

6 What is the strategic management process? The process by which managers choose, implement, and adapt a set of strategies for the enterprise to pursue its vision. Distinguish between strategic (what to do?), tactical (how and when to do it?) and operational (do it now!) decisions.

7 Define Vision/Mission and Set Top-Level Goals External Analysis of Opportunities and Threats Internal Analysis of Strengths and Weaknesses Selection of Appropriate Strategies Implementation of Chosen Strategies Basic Planning Model Basic Strategic Planning Model

8 Levels of Strategic Management

9  Strengths and Weaknesses  Opportunities and Threats (SWOT Analysis) Strategic Choice Business Functional Global Corporate SWOT and Strategic Choice

10 The Mission or Vision  What the company is trying to achieve over the medium to long term  The Boeing Company in 2016: “People working together as a global enterprise for aerospace leadership”  Microsoft: “To empower people through great software, any time, any place, on any device”

11 Values  How managers and employees should conduct themselves  Organizational culture The set of values, norms, and standards that control how employees work to achieve an organization’s mission and goals Often seen as a source of competitive advantage  In high-performing organizations, values respect the interests of key organizational stakeholders.

12 Values at Nucor  “Management is obligated to manage Nucor in such a way that employees will have the opportunity to earn according to their productivity.”  “Employees should be able to feel confident that if they do their jobs properly, they will have a job tomorrow.”  “Employees have the right to be treated fairly and must believe that they will be.”  “Employees must have an avenue of appeal when they believe they are being treated unfairly.”

13 Strategic Leadership  Vision, eloquence, and consistency  Commitment to the vision  Being well informed  Willingness to delegate and empower  Astute use of power  Emotional intelligence

14 Intended and Emergent Strategies

15 Strategy as an Emergent Process  Strategy making in an unpredictable world Creates the necessity for flexible strategic approaches.  Strategy making by lower-level managers Strategy evolves through autonomous action.  Serendipity and strategy Accidental discoveries and happenstances can have dramatic effects on strategic direction.  Intended and emergent strategies Realized strategies are combinations of intended and emergent strategies.

16 Different processes…

17 Strategic Planning in Practice  Planning under uncertainty Scenario planning for dynamic environmental change  Ivory tower planning Lack of contact with operational realities The importance of involving operating managers Procedural justice in the decision-making process  Engagement, explanation, and clarity of expectations  Planning for the present: Strategic Intent Recognition of the static nature of the strategic fit model Strategic intent in focusing the organization on winning by achieving stretch goals

18 Improving Strategic Decision Making  Cognitive biases systematically influence the rationality of decision makers.

19 Groupthink and Strategic Decisions  Pitfalls of groupthink Failing to question underlying assumptions. Coalescing around a single person or policy. Filtering out conflicting information. Developing after-the-fact rationalizations. Having an emotional (nonobjective) commitment to an action.

20 Techniques for Improving Decision Making  Two decision- making processes that counteract cognitive biases and groupthink.

21 Exercises  Design a planning system for an internet role-playing company  Yahoo Case