BUS 189 STRATEGIC MANAGEMENT CHAPTER 1, 7TH EDITION DR. MARK FRUIN 2007

INTRO BEFORE CHAPTER 1 REVIEW –VERTICAL INTEGRATION/VALUE ADDED 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

WHY DO SOME FIRMS SUCCEED WHILE OTHERS FAIL? STRATEGIES HAVE MAJOR IMPACT ON PERFORMANCE (THE HYPOTHESIS) A STRATEGY IS A SET OF RELATED ACTIONS THAT MANAGERS TAKE TO INCREASE THEIR COMPANY’S PERFORMANCE (p. 3) IF A FIRM’S STRATEGIES RESULT IN SUPERIOR PERFORMANCE, IT IS SAID TO HAVE A COMPETITIVE ADVANTAGE

TERMS STRATEGIC LEADERSHIP STRATEGY-MAKING PROCESS STRATEGY FORMULATION STRATEGY IMPLEMENTATION

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

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)

MORE TERMS SUSTAINABLE COMPETITIVE ADVANTAGE STRATEGY = HOW ENABLE BUS MODEL BUSINESS MODEL –HOW DO WE MAKE MONEY SELECT CUSTOMERS PRODUCT OFFERINGS CREATE VALUE ORGANIZE ACTIVITIES CONFIGURE RESOURCES

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

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

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

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

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 REALIZABLE W/O TOO MUCH EFFORT

SWOT ANALYSIS STRENGTHS WEAKNESSES OPPORTUNITIES STRENGTHS GIVE DIRECTION TO SELECTION & IMPLEMENTATION OF STRATEGIES

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

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

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

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