1 STRATEGIC MANAGEMENT, TERMS & CONCEPTS, BUSINESS ETHICS Those actions (or by default, inactions) which determine the long term future of an organization.

2 THREE KEY QUESTIONS 1. Where is the organization today? 2. Where do we want it to be in the future? 3. What needs to be done to get there?

3 CHARACTERISTICS OF STRATEGIC ACTIONS AND DECISIONS Infrequent Consequential Precedent -- and policy -- setters Multifunctional

4 SOME EXAMPLES Miller Beer and Philip Morris Lockheed and the Electra

5 HIERARCHY OF STRATEGY Corporate Business Functional Ideally, these play together Realistically, there’s often conflict

6 SOME EXAMPLES OF CONFLICT Clara Peller and Wendy’s Ford, Kawasaki, and social responsibility

7 WHAT IS THE PURPOSE OF A BUSINESS? Profit? Revenue? Jobs? Meet society’s needs? Something else?

8 JAMES INVESTMENT RESEARCH, INC. Firm Objectives Provide highest quality service to our clients – Good performance – Lots of communications – Provide economic or such other advice/assistance as possible Provide good work environment for our employees Compensate staff at high levels – Stable and growing client base – Low expenditures except for salaries – High firm profits to be shared with employees Technological leadership in investment research – State of the art equipment – Emphasis on innovation and creativity Strong professional reputation of the firm and its personnel – Honesty and integrity – Competence – Quality of work

9 THE CONCEPT OF STAKEHOLDER Old view: maximize stockholder value New view: one maximizes stockholder value over the long run by balancing the benefits to all stakeholders: customersneighbors employeesstockholders managementvendors governmentcompetitors & more... Some examples...

10 STRATEGIC DECISION MAKERS Boards of Directors Senior management Roles, skills, tasks

11 BOARD OF DIRECTORS Elected by shareholders Mission: – Protect interests of owners – Hire -- and fire -- top management – Approve management initiatives Trends: – Codetermination – Board responsibility – Board activism – Strong owners, e.g., mutual funds

12 MANAGEMENT TASKS DIFFER WITH LEVEL SupervisorManagerCEO Technical Interpersonal Conceptual

13 STRATEGIC PLAN: A VITAL TOOL Seven parts: – Evaluate current performance – Scan external environment: Identify opportunities and threats – Scan internal environment: Identify strengths and weaknesses

14 SEVEN PARTS (cont.) – Analyze strategic factors: SWOT – Develop and select alternative strategies – Implement the strategy – Evaluate and control the strategy

15 BUSINESS ETHICS Is this just something taught in schools? Some real life cases: – Ford’s Pinto – Manville’s asbestos – Financial houses: Barings, Saloman Brothers – Tobacco – Handguns – International Fabricating Corporation Impacts? Financial? People?

16 WHY BE ETHICAL? 1. Moral reasons 2. Self-interest 3. Financial well-being 4. Retain autonomy

17 AN ETHICAL MODEL From The Power of Ethical Management, by Peale and Blanchard: 1. Is it legal? 2. Is it balanced? 3. How does it make you feel about yourself?

18 MOVING FROM INDIVIDUAL TO CORPORATE 1. Hire correctly 2. Set standards 3. Model, or “What you can learn from your dog.” 4. Talk 5. Institutionalize into decision- making 6. Reward, and sanction