BA 469Strategic Management and

Business Policy

Focus: General Management of an organization

An organization is “a system of consciously coordinated activities or forces of two or more persons.”

Learning Outcomes

• Knowledge of strategic management tools and concepts

• Diagnose strategic situations (as described in cases) using these tools and concepts

• Contribute to class and small group discussions of these tools, concepts, and the strategic situations

To Measure Achievement of Learning Outcomes

• Quizzes 40% of total grade– Usually when chapters are assigned– Total of 8: 2 required, 5 of other 6 counted

• Case reports (2) and case briefs (4) - 50% of total grade

• Participation in class discussions – 10% of total grade

Requirements

• Read Chapters and Cases (when no report is due) before coming to class

• Read assigned articles (will be posted in public folder)

• BECOME AN ACTIVE MEMBER OF THE CLASS

Requirements

• Case briefs and reports are due beginning of class (see schedule)

• Chapter outlines will be posted, but may be used as background to lecture.

• Reading material will be added to create awareness of external issues affecting business.

Case Reports

• State the major problem or issue• Justification based on

• Case facts• As interpreted through an appropriate application of tools and

concepts

• Recommendations that• Address the problem or issue• Are based on realities faced by organization

• Justification for recommendation• Note: do not summarize or merely restate case

information.

The Strategic Management Process

Chapter 1

The Strategic Management Process

• Corporate mission and goal

• Analyze external environment - - identify opportunities and threats

• Analyze internal environment - - identify strengths and weaknesses

• Formulate strategy

• Implement strategy

Strategic Management and You

• Where do you intend to be 5 years from now?– At least most of you had some idea

• Product of an internal assessment – what are my strengths, preferences,etc.

• Most students, non-students for that matter usually do not assess external environment

• Strategy – university degree (some will talk about a masters degree), funding, etc.

Why do some organizations succeed while others fail?

• Depends of strategy or set of– Actions managers take to achieve one or

more of an organization’s goals

• Strategic management process– The process by which managers choose a set

of strategies that will allow a company to achieve superior performance

Superior Performance and Competitive Advantage

• Profitability– A measure of a company’s return on its

invested capital

• Superior performance– One company’s profitability relative to that of

other companies in the same or similar business or industry

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

Industry Structure and Profitability

Return on Invested Capital in Selected Industries, 1997-2001

Data Source: Value Line Investment Survey

Performance in Nonprofit Enterprises

• Government agencies, universities, charities– Are not in business “to make a profit”– Should use their resources efficiently and

effectively– Set performance goals unique to the

organization– Set strategies to achieve goals and compete

with other nonprofits for scarce resources

Strategic Managers

• General managers– Responsible for overall company performance

or divisional performance

• Functional managers– Responsible for supervising a particular task

or operation – Example – head of accounting or marketing,

chief financial officer,

Levels of Strategic Management

Key Question for Each Level

• Corporate Strategy – what business(es) should the organization be in?

• Business Strategy – how should the organization compete?

• Functional Strategy – how should the organization’s resources be best employed to support business strategy?

Mission

• What is our business? Who are we as an organization in relation to . . . (Fig 1.4, p.12)– Customer– Needs met– How satisfied

Values

• What should guide how we conduct our business? Go about our work?

• Broad, all encompassing “rules,” for example– Integrity– Service– Empowering

Goals (and Objectives)

• Precise and measurable – not always easy to achieve

• Address crucial issue(s)– may be targeted at a particular priority

• Challenging but realistic - - stretch factor

• Specify a time period - -– ok to set targets for a distant past, but– need immediate targets to measure progress

External Analysis

• Industry

• National

• International and Global

• Interaction between industry and the national and global environment

Internal Analysis

• Resources– tangible– intangible

• Capabilities

Strategy Formulation

• Addresses outcome of external and internal analysis

• Intent, a plan as to what our organization will be

• Defines functional areas within the organization to focus on

Implementation

• How do we go about pursuing our intent?

• Who - - people

• How - - who does what, structure, etc.

• With what - - resources required

Reality Check:What do managers do?

• Phone calls, meetings, run around from place to place . .

• Minor decisions -- Mr. so and so gets to use the office in the basement

• Major decisions - - lets launch, abort

• All in a day’s work - - focus

Reality Check:Can managers predict the future?

• National economy - - Where will interest rates be next month? Will economic growth be 2.5% or 2.75%? Does it matter?

• Industry performance

• Actions of competition

• Actual capabilities and performance of internal resources, i.e. your people

Budget Variances:Provides idea of how targets can be off

• Revenues – volume and price per unit variance– Volume - - predict actual units sold– Price - - anticipate price in the next year

• Cost – volume and cost per unit variance– estimate unit cost of production

• labor, raw materials, machine time, etc.

– administration or overhead component

Emergent vis Intended Strategy

• Honda story is a classic; also consider Toys ‘R’ Us

• Scenario planning to cover possibilities, find, if possible, unknown unknowns

• Listen to field people• Balance commitment to goal and realities

of a changing situation• Serendipity (unintended, accidental,

sometimes wonderful discoveries)

Cognitive Biases

• Prior hypothesis - - rules of thumb, deeply held beliefs

• Escalating commitments

• Reasoning by analogy

• Representativeness

Strategic Management Process

• Not an exact science

• Dealing with – Uncertainty– Scope

• Personal judgment

• Focus on process

ExercisesStrategy in Action

• 1.1 and 1.2: Microsoft – we can assume that some sort of planning went into Microsoft’s original Internet strategy prior to 1994. How could they miss the Internet then?

• 1.4: Duke Energy – explain Duke’s planning process using Scenarios.