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 don.neubaum@bus.oregonstate.edu 541-737-6036 400E Bexell

Class Sessions Monday & Wednesday - 8:00am 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

Grading Individual Grades - 80% Group Grades – 20% Midterm/Final – 20% each (40% total) Industry analysis – 20% Case write ups – 2 @ 5% (10% total) Strategic issue summary – 10% Group Grades – 20% In-class case exam – 10% Strategic plan presentation – 10%

Grades If you NEED a specific grade in this class, other than to simply “pass,” then you MUST email 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 (Home Depot) 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 emailed to you the morning of the 29th Answers due by the end of the day Work in your group using laptop/PC and email your answers to me in the evening

Group Strategic Plan and Presentation Groups of four or five Last week of the quarter – 11/26 and 11/28 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 Be thinking about who you might want in your group. We will be forming them early in class Wednesday.

Get out a single sheet of paper and write down some thoughts or ideas to the question “What makes a company successful” You have about 2-3 minutes

Now, pass the paper (don’t exchange). Spend a couple of minutes elaborating, structuring, adding, critiquing, etc. the paper you received.

What is Strategy and Why is it Important? Chapter One What is Strategy and Why is it Important?

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? 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?

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? Strategy is performing different activities or performing similar activities in a different way As suggested by the book: 4 of the most dependable approaches are 1) low cost, 2) differentiating features, 3) fulfilling specialized needs, and 4) build unassailable set of capabilities.

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

Time Magazine HARD TO STRADDLE AND REPOSITION! 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? Tradeoffs arise from 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

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

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

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

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

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

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

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

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

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

Strategic Inflection Points Order-of-magnitude change that Dramatically alters future prospects Mandates radical revision Critical decisions have to be made Responding quickly lessens a company’s chances of Becoming trapped in a stagnant business Letting attractive new growth opportunities slip away

Prior to mid-1980s Starting in mid-1980s 1998 Focus on memory chips Abandon memory chip business (due to lower-cost Japanese companies Become preeminent supplier of microprocessors to PC industry Make PC central appliance in workplace and home 1998 Shift focus from PC technology to becoming the preeminent building block supplier to Internet economy

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 Strategic Effectiveness (fit) Takes resources into consideration Effectively implemented

Managerial Process of Crafting and Executing Strategy Chapter Two Managerial Process of Crafting and Executing Strategy

Fig. 2.1: The Strategy-Making, Strategy-Executing Process

Developing a Strategic Vision A strategic vision describes the route a company intends to take in developing and strengthening its business. It lays out the company’s strategic course in preparing for the future. A strategic vision exists only as words and has no organizational impact unless and until it wins the commitment of company personnel and energizes them to act in ways that move the company along the intended strategic path!

Elements of a Strategic Vision Delineates management’s aspirations for the business Provides a panoramic view of “where we are going” by charting a strategic path Is distinctive and specific Avoids use of generic, dull & boring language that could apply to most any company Captures employees’ emotions steers them in a common direction Is challenging and a bit beyond a company’s immediate reach

Examples of Strategic Visions Hilton Hotels Corporation Our vision is to be the first choice of the world’s travelers. Hilton intends to build on the rich heritage and strength of our brands by: Consistently delighting our customers Investing in our team members Delivering innovative products and services Continuously improving performance Increasing shareholder value Creating a culture of pride Strengthening the loyalty of our constituents.

Examples of Strategic Visions Caterpillar Be the global leader in customer value. eBay Provide a global trading platform where practically anyone can trade practically anything.

Strategic Vision vs. Mission A strategic vision concerns “where we are going” Markets to be pursued Future product/ market/ customer/ technology focus Kind of company management is trying to create The mission statement focuses on its “who we are and what we do” Current product and service offerings Customer needs being served Technological and business capabilities

Mission Statements Boundaries of the current business A well-conceived mission statement distinguishes a company’s business makeup from that of other profit-seeking enterprises in language specific enough to give the company its own identify! Boundaries of the current business Fundamental purpose that sets it apart from other firms of its type Conveys Who we are, What we do, and Why we are here

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 Offer me ideas, emotions, ambience, feelings, benefits

(Our) vision is to dominate the global foodservice business industry (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 (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 business is renting cars. Our mission is total customer satisfaction.

Our business is leasing camels 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.

Fig. 2.1: The Strategy-Making, Strategy-Executing Process

Objectives Turns mission into performance outcomes Organizations produce what is measured Long and Short term Strategic Intents All levels of the organization Top-down, not Bottom-up

Types of Objectives Required Financial Objectives Strategic Objectives Outcomes focused on improving financial performance Outcomes focused on improving competitive vitality and future business position $

6 Characteristics of a Good Objective 1. Stretching/Motivating

6 Characteristics of a Good Objective 2) Measurable

6 Characteristics of a Good Objective 4) Realistic/Achievable

6 Characteristics of a Good Objective 3) Agreeable

6 Characteristics of a Good Objective 5) Timebound

6 Characteristics of a Good Objective 6) Understandable

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

Importance of Stretch Objectives There’s no better way to avoid ho-hum results than by setting stretch objectives and using compensation incentives to motivate organization members to achieve the stretch performance targets! BHAG = Big Hairy Audacious Goals!

Leading versus Lagging Indicators Current financial results are “lagging indicators” reflecting results of past decisions and actions—good profitability now does not translate into stronger capability for delivering better financial results later However, meeting or beating strategic performance targets signals growing competitiveness & strength in the marketplace, thus developing the capability for better financial performance in the years ahead Good strategic performance is thus a “leading indicator” of a company’s capability to deliver improved future financial performance Unless a company sets and achieves stretch strategic objectives, it is not developing the competitive muscle to deliver even better financial results in the years ahead!

Setting financial and strategic objectives A balanced scorecard for measuring company performance is optimal; it entails Setting financial and strategic objectives Placing balanced emphasis on achieving both types of objectives Just tracking financial performance overlooks the importance of measuring whether a company is strengthening its competitiveness and market position. The surest path to sustained future profitability year after year is to relentlessly pursue strategic outcomes that strengthen a company’s business position and give it a growing competitive advantage over rivals!

Fig. 2.1: The Strategy-Making, Strategy-Executing Process

Fig. 2.1: A Company’s Strategy-Making Hierarchy

Levels of Strategic Management

Levels of Strategic Management Answers the question “Where?”

Levels of Strategic Management Answers the question “How?” “How?” “How?”

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

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

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

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

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

I/O Model Strategy & Performance General Environment Industry Environment Competitive Environment General Environment Industry Environment Competitive Environment 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.

Resource Based View Strategy The Firm’s & Resources & Performance 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.

Fig. 2.1: The Strategy-Making, Strategy-Executing Process

Team Name Write a team mission Write 3 objectives for your team Send them to angrybeaverz@yahoo.com by 8PM Tuesday