MGT 499 Strategic Management Walter J. Ferrier, Ph.D.

Page 2 What is strategic management?

Page 3 Strategic Management…Action that Creates Value Alfa Mythos Beer Mythos Beer

Page 4 Alfa’s Strategic Actions Mythos’ Strategic Actions Rivalry Competitive Outcomes Industry Characteristics Organizational Characteristics

Page 5 Strategic Management – Developing a set of coordinated and integrated capabilities, decisions, and actions required to achieve competitive advantage…

Page 6 Profit = (Price – Cost) x Qty. … i.e., action that creates value

Page 7 Strategic Management in the News Low price leader…Price cutting Differentiated player…Unique product or marketing M&A…Restructuring…Turnaround Alliance…Joint venture New international market…Off-shore manufacturing New plants & equipment…Efficient manufacturing Market pioneer…Innovator….New products

Your News Reports What is the industry? Which company is the news about? What is the key point? What is so interesting, curious, surprising, disappointing, or confusing about your news story?

Page 9 Strategy in “Other Markets” and Non-Profits Regulated Utilities Educational Institutions, Departments & Programs Government Institutions Philanthropic Organizations Creative Arts Organizations Religious Organizations Political & Social Organizations Environmental Organizations Resources Legitimacy Human Capital “Market Share” Position Reputation Survival Effectiveness Attention

Page 10 Where Does Strategy Occur? CEO & Board of Directors Top Management Functional Management Marketing Production R&D Logistics Acct./Fin. Everyone else Strategy is everyone’s job

Page 11 Be strategy-savvy… Top Management Don’t let you this be you. ?

Page 12 Start-ups, small business, autonomous business units YOU will be a top officer, strategist, decision- maker: –Pazzo’s vs. Joe Bologna’s vs. Domino’s –Lexington Brewing Co. vs. Anheuser-Busch –John’s Running Shop vs. Footlocker –Pannell’s Swim Shop vs. Dick’s Sporting Goods

Page 13 What do strategists do/think about? Strive for competitive advantage / above-average returns Assess external factors causing change Develop internal factors that create advantage Navigate stakeholder landscape Strategic management process… Five Stages

Page 14 What else…..? External Stuff Globalization Technological change Diverse and increasingly vocal and influential stakeholders Wall Street The Natural Environment Internal Stuff Building functional capabilities Organizational culture Leadership Strategic HRM Board of Directors Efficiency

Page 15 Levels of Strategy Corporate Strategy Business Strategy Functional Strategy Value can be created an any or all levels

Page 16 Corporate Strategy Decide scope/reach of the firm In which businesses or industries do we compete? GENERAL ELECTRIC Aircraft Engines Light Bulbs AppliancesPower Generation

Page 17 Corporate Strategy PROCTER & GAMBLE SoapsFoodBeveragesPaper Products

Page 18 Corporate Strategy PEPSI Carbonated Beverages Juices, Water, Sports drinks Snack Foods Fast Food

Page 19 COCA-COLA Carbonated Beverages Juices, Water, Sports drinks Corporate Strategy

Page 20 Business Strategy Since we’re in the XYZ industry, how do we compete? Profit = (Price – Cost) x Qty. Cost advantage Size advantage Differentiation advantage Positional advantage…New market space Bridge converging industries

Page 21 Functional Strategy Given our choice of corporate- and/or business-level strategy… – Marketing – Production – R&D – Human resource management – Finance How do we coordinate and integrate business functions to carry out the strategy? What functional changes or innovations are required to improve the strategy?

Page Articulate Mission / Intent Sense of purpose, direction… In which industries does firm compete? How does firm compete? Who are customers? Who are competitors? Strategic Management Process

Page Set Objectives & Performance Targets Financial – Achieve 10% ROE and $1.55 EPS by 2011 – Increase stock price by $ /share by 2011 Strategic – Become low price leader in industry by 2012 – Enter five new country markets by 2015

Page Develop a Strategy Strategic themes/thrusts …How to compete: – International expansion – Increase brand name and reputation – Innovate by introducing new products – Aggressive behavior against rivals in old products

Page Implement Strategy Develop action plan at functional level –Establish European distribution center Buy warehouse facility near airport in Germany Re-tool with robotic material handling system –Create new ad campaign for 2011 Formula 1 racing season Get endorsement contract with famous soccer players Develop TV ad with European MTV –Launch new version of product Create multifunctional design team License Oracle’s newest technology Increase R&D budget by 30% –Cut prices on older version of product by 33%

Page Evaluation and Adjustment Assess results relative to goals –Established price leadership in 2012 –Achieved only 4% ROI in 2011 Identify new opportunities / constraints –New technologies are coming –Rivals are merging Change strategy / implementation plan (as needed)

Page 27 Dropped Strategic Actions Intended Strategy Carried Out Emergent Strategic Actions Strategic Planning vs. Strategizing

Schedule, Topics, Tasks, Materials Page 28 Week 1 JAN 12 Course Introduction and Kick-off Framing questions: What are the key processes, tools and perspectives that organizational leaders use to create, implement, and evaluate cross-functional decisions that will enable the organization to achieve its long-term objectives? How do organizational leaders use strategy to navigate complex, dynamic and uncertain contexts (i.e., globalization, technological change, geopolitics, calls for social justice, economic crisis, etc.)? Web: Hierarchical Levels of Strategy Web: Strategic Management Process PPoint: What is strategy? Week 2 JAN 19 Situation Analysis + Resources & Capabilities Framing questions: Which analytical frameworks and tools enable organizational leaders to better assess the current and likely future states of the organization’s context or situation it faces? …to better assess its own strengths/weakness in current and future capabilities relative to rivals? Web: PEST Analysis Web: Porter’s Five Forces Analysis Web: SWOT Analysis Web: Value Chain Analysis Web: Competitive Advantage Task: Analysis of the Coffee Industry (presentations/discussion) PPoint: Situation Analysis PPoint: Resources and Capabilities

QuickMBA Web Page Page 29

Graded Assignments Page 30 ASSIGNMENTWEIGHT Business Planning & Strategy Implementation Simulation20% Global New Product Launch Simulation20% Global Post-Acquisition Integration Simulation10% Wargaming Simulation10% In-Class Participation, Discussion, Presentations and Tasks20% Peer Evaluation, Team participation/contribution20% TOTAL100%

Strategic Management …Questions?