BUS 189 STRATEGIC MANAGEMENT

1. BUS 189STRATEGIC MANAGEMENT CHAPTER 1, 9TH EDITION DR. MARK FRUIN SPRING 2010

2. INTRO BEFORE CHAPTER 1 • REVIEW • VALUE ADDING ACTIVITY SEQUENCE/STREAM • INDUSTRIES & SECTORS • FIRMS & FIRM BOUNDARIES • VALUE CHAINS • STRATEGY STACK • ENVIRONMENTS SHAPE FIRMS, EXCEPT IN SPECIAL CASES, WHICH ARE? • WHAT IS STRATEGY • 2.5 MODELS OF STRATEGY

3. WHY DO SOME FIRMS SUCCEED WHILE OTHERS FAIL? • STRATEGIES HAVE MAJOR IMPACTS ON PERFORMANCE (THE HYPOTHESIS) • A STRATEGY IS A SET OF RELATED ACTIONS THAT MANAGERS TAKE TO INCREASE THEIR COMPANY’S PERFORMANCE (p. 3) • STRATEGIC LEADERSHIP (p. 3) INCLUDES • STRATEGY FORMULATION • STRATEGY IMPLEMENTATION • STRATEGY ASSESSMENT (not on p. 3) • STRATEGY RE-FORMULATION & IMPLEMENTATION (not p.3) • IF A FIRM’S STRATEGIES RESULT IN SUPERIOR PERFORMANCE, IT IS SAID TO HAVE A COMPETITIVE ADVANTAGE

4. TERMS • STRATEGIC LEADERSHIP • STRATEGY-MAKING PROCESS • STRATEGY FORMULATION • STRATEGY IMPLEMENTATION • STRATEGY MEASURING, MONITORING & MANAGEMENT

5. MEASURING PERFORMANCE • MAXIMIZING SHAREHOLDER VALUE • FIRST, SHAREHOLDERS PROVIDE RISK CAPITAL; MANAGERS PURSUE STRATEGIES • SECOND, SHAREHOLDERS ARE OWNERS • MEASURING PROFITABILITY • RETURN ON INVESTED CAPITAL • SHORT-TERM OR LONG-TERM? • PROFIT GROWTH • INCREASE IN NET PROFITS OVER TIME

6. PROFITABILITY • PROFITABILITY IS THE MOST COMMON MEASURE OF STRATEGIC SUCCESS • PROFITABILITY MEASURES RETURNS ON INVESTED CAPITAL • PROFIT USUALLY MEANS BEFORE-TAX PROFITS • CAPITAL = STOCKHOLDERS’ EQUITY + DEBT (LIABILITIES)

7. MORE TERMS • SUSTAINABLE COMPETITIVE ADVANTAGE • DURABLE/LONG LASTING • VALUABLE • HARD TO IMITATE • STRATEGY = HOW TO ENABLE BUS MODEL • HOW TO CREATE AN ORGANIZATION ABLE TO DO THINGS WELL REPEATEDLY AND OFTEN? • BUSINESS MODEL • HOW DO WE MAKE MONEY • SELECT CUSTOMERS • PRODUCT OFFERINGS • CREATE VALUE • ORGANIZE ACTIVITIES • CONFIGURE RESOURCES

8. CHOICE OF INDUSTRY • IN ADDITION TO BUSINESS MODEL AND ASSOCIATED STRATEGIES, CHOICE OF INDUSTRY IS HUGE • INDUSTRIES VARY SIGNIFICANTLY IN TERMS OF GROWTH RATES & AVE PROFITS • A FIRM’S SUCCESS DEPENDS ON • IN WHICH INDUSTRY/IES DOES IT COMPETE? • WHICH STRATEGIES IT PURSUES

9. STRATEGY STACK = LEVEL OF STRATEGIC MANAGEMENT • FUNCTIONAL LEVEL • BUSINESS FUNCTIONS COMPANYWIDE • BUSINESS LEVEL • DIVISIONAL MANAGEMENT • CORPORATE LEVEL • CEO, BOARDS, AND CORPORATE STAFF

10. STRATEGY-MAKING PROCESS • FORMAL PROCESS HAS 5 STEPS • SELECT FIRM MISSION & GOALS • ANALYZE EXTERNAL ENVIRONMENT • ANALYZE INTERNAL ENVRIRONMENT • SELECT STRATEGIES BASED ON ANALYSES • IMPLEMENT STRATEGIES • SIMILAR BUT NOT IDENTICAL TO SWOT (COMING UP IN A FEW SLIDES)

11. VISION, MISSION & GOALS • VISION IS LONG-TERM • MISSION IS MID-TERM • GOALS ARE SHORT-TERM • RECOGNIZE THAT THESE (VISION, MISSION & GOALS) ARE INFLUENCED BY • EXTERNAL ENVIRONMENT (NATIONAL CULTURE & INSTITUTIONS) • CORPORATE GOVERNANCE MODELS • INTERNAL ENVIRONMENT (ORG. CULTURE)

12. GOALS • PRECISE & MEASURABLE • ADDRESS KEY/CRITICAL ISSUES • CHALLENGING BUT REALISTIC • SPECIFY TIME PERIODS WITHIN WHICH GOALS ARE REALIZED OR, AT LEAST, MEASURED • STRETCH GOALS AS OPPOSED TO GOALS EASILY REALIZED W/O MUCH EFFORT

13. SWOT ANALYSIS • STRENGTHS • WEAKNESSES • OPPORTUNITIES • STRENGTHS • GIVES DIRECTION TO SELECTION & IMPLEMENTATION OF STRATEGIES

14. STRATEGY AS EMERGENT PROCESS • STRATEGIC PLANNING & IMPLEMENTATION ARE ONGOING, NEVER ENDING • UNCERTAINTY MEANS FLEXIBILITY & ADAPTABILITY ARE KEY • LOWER LEVEL ORGANIZATIONAL MEMBERS, MORE NUMEROUS THAN ANY, ARE THE KEY TO STRATEGIC SUCCESS • AUTONOMOUS ACTIONS • UNPLANNED RESPONSES TO UNFORESEEN CIRCUMSTANCES • HONDA & FORTUITOUS CIRCUMSTANCES (LUCK), 24-25

15. TO COPE WITH UNCERTAINTY • STRATEGY AS SCENARIO PLANNING • STRATEGY AND DECENTRALIZATION • CHAN KIM & RENEE MAUBORGNE’S PROCEDURAL JUSTICE (DISTRIBUTIVE JUSTICE) • STRATEGIC INTENT • PRAHALAD AND HAMEL’S NOTION • AMBITIOUS GOALS HELD BY THE ORGANIZATIONAL MAJORITY

16. STRATEGIC DECISION MAKING • COGNITIVE BIASES • PRIOR HYPOTHESIS BIAS • ESCALATING COMMITMENT • REASONING BY ANALOGY • REPRESENTATIVENESS • ILLUSION OF CONTROL (HUBRIS) • GROUPTHINK • DEVIL’S ADVOCACY • DIALECTIC INQUIRY • ANALOGOUS PAST INITIATIVES

17. STRATEGIC LEADERSHIP • VISION, ELOQUENCE & CONSISTENCY • ARTICULATION OF BUSINESS MODEL • COMMITMENT • BEING WELL INFORMED • WILLINGNESS TO DELEGATE/EMPOWER • ASTUTE USE OF POWER (OVER RESOURCES) • EMOTIONAL INTELLIGENCE • SELF-AWARE, SELF-REGULATE, EMPATHY, SOCIAL SKILLS, MOTIVATION BEYOND MONEY

18. PLEASE NOTE • MY SLIDES ARE MY SUMMARY OF A CHAPTER • YOU SHOULD HAVE YOUR OWN SUMMARY OR, AT LEAST, YOU SHOULD AUGMENT MY SLIDES WITH YOUR OWN THOUGHTS • THE REASON THAT I GIVE YOU HARD COPY IS SO YOU CAN WRITE ON THEM • THE BOOK IS LONG AND THE AUTHORS TRY TO INCLUDE EVERYTHING THAT THEY THINK IS RELEVANT • BUT EVERYTHING’S NOT RELEVANT • AND TRYING TO PLEASE EVERYONE MEANS THAT THERE’S A LOT OF UNNECESSARY STUFF

19. END OF CHAPTER • AT THE END OF EVERY CHAPTER, THERE ARE STUDY QUESTIONS, A SUMMARY, AND OFTEN A CASE TO ILLUSTRATE THE KEY POINTS OF THE CHAPTER • I DON’T GO OVER THE END OF THE CHAPTER MATERIAL, BUT YOU SHOULD • THE PLAN IS • EVERY TUESDAY, WE GO OVER THE APPROPRIATE CHAPTER • IF THERE ARE SLIDES NOT COVERED ON TUESDAY, WE DO SO ON THURSDAY • ON THURSDAYS, WE APPLY CHAPTER CONCEPTS TO THE CASE AND DISCUSS IT; THIS MEANS • KNOW THE CONCEPTS, READ THE CASE BEFORE CLASS • TAKE NOTES ON THE CHAPTER & CASE • BE READY TO APPLY CONCEPTS & ANSWER QUESTIONS ABOUT THE CASE • THE SAME CASE IS USED FOR SEVERAL CHAPTERS