Firm A’s Actions Firm B’s Actions Rivalry CompetitiveOutcomes IndustryCharacteristicsOrganizationalCharacteristics

What Is Strategy? Plan/course of action...to achieve favorable position Alignment of course of action with long- run goals A plan that integrates the goal, action pattern/sequence, and resources into a cohesive whole Steps taken to achieve competitive advantage…sustainable edge over competitors

Why Strategy? …Action that Creates Value Lynagh’s Two Keys Tavern Two Keys Tavern

Is Strategy Important? Execs, consultants, and B-school professors: “...strategy is the single most important management issue and will remain so for many years.” Business Week, Aug Companies that now rely on “strategy groups”: UPS Applied Materials H-P Smucker’s Sears Nokia EDS

Beyond SWOT Environment: Outside-in (I/O) Firm: Inside-out (RBV) Strategy

Destroying Strategic Management Myths Fortune, June 1997 Life is easy as “king of the hill”  Hypercompetition erodes advantages Industry analysis is the key to strategy  Difficult to define “industry” Focus on your direct competitors  Potential competitors greater threat For CEOs, it’s you against the world  Savvy CEO involve more people

What Makes Shareholders Rich?...Create New Wealth Vision looks beyond current boundaries Strategy as continuous process New perspectives, voices, conversations Change rules of game Experimentation, surprise

New Strategy Glossary value migration : movement of growth and profit opportunities from one industry player to another co-evolution : by working with direct competitors, customers, and suppliers, a company can create new businesses, markets, and industries white-space opportunity : overlooked areas of growth possibilities that don't exactly match existing skills strategic intent : corporate goal or destiny that represents a stretch for the organization, a point of view about the competitive position a company hopes to build over the coming decade

Breaking the Rules... S OUTH W EST

Dynamic Strategy Reborn... August 1996June 1997

Where Does Strategy Occur? Top Management Functional Management

What do strategists do? Strive for competitiveness / above-average returns Assess external factors causing change Develop internal factors that create advantage Navigate stakeholder landscape Strategic management process… Five Stages

What else…..? External Stuff Globalization Technological change Diverse and increasingly vociferous stakeholders Wall Street Environment Internal Stuff Building capabilities & core competence Organizational culture Leadership Strategic HR Board of Directors

1. Articulate Mission / Intent Sense of purpose, direction… In which industries does firm compete? How does firm compete? Who are customers? Who are competitors?

2. Set Objectives & Performance Targets Financial: 10% ROI and $1.55 EPS by YE99 Strategic: Achieve lowest prices and enter 5 new country markets by 2001

3. Craft Strategy How to compete: –Differentiated innovator –Multinational markets –Market-push

4. Implement Strategy Delegate responsibility to functional mgt. Develop action plan: –Establish European distribution center –Create new ad campaign for 2004 Olympics –Launch new version of product –Cut prices on older version by 33%

5. Evaluation and Adjustment Assess results relative to goals Identify new opportunities / constraints Change strategy / implementation (as needed)

Dropped Strategic Actions Intended Strategy Carried Out Emergent Strategic Actions Planning vs. Strategy “Process”: What’s the Difference?

a b c d e f g h Competitive Interaction in Chess This Sequence: Black: Knight b4 White: Pawn c3 Black: Bishop g4 White: Queen b5 Black: Pawn c5 Named Sequences: Epaulette’s Mate Sicilian Defense

Different Approaches to Strategy Blueprint Structural Equation Drama Journey Conversation Stimuli-Responses Conversation

Firm A’s Actions Firm B’s Actions Rivalry CompetitiveOutcomes IndustryCharacteristicsOrganizationalCharacteristics