2 CHAPTER The Strategic Management Process McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. Instructor: Dr.Gehan Shanmuganathan

LO 2-1 Explain the role of vision, mission, and values in the strategic management process. LO 2-2 Describe and evaluate the role of strategic intent in achieving long-term goals. LO 2-3Distinguish between customer-oriented and product-oriented missions and identify strategic implications. LO 2-4Critically evaluate the relationship between mission statements and competitive advantage. LO 2-5Explain why anchoring a firm in ethical values is essential for long- term success. LO 2-6Compare and contrast strategic planning, scenario planning, and strategy as planned emergence, and discuss strategic implications. 2-2

ChapterCase 2 Teach For America: Inspiring Future Leaders TFA Mission: Eliminate educational inequalityTFA Mission: Eliminate educational inequality  Started by an undergraduate student  Inspiring mission  Provide a meaningful service option for bright young people Make teaching to the neediest high prestigeMake teaching to the neediest high prestige  Over 40,000 applicants for 4,500 jobs TFA Video 2-3

VISION, MISSION, AND VALUES What are visionary organizations?What are visionary organizations?  Begin with the end in mind  Similar to designing & building a home  Vision – what to ultimately accomplish?  Mission – what is the firm about?  Values – how to accomplish goals? 2-4

VISION, MISSION, AND VALUES What is forming strategic intent?What is forming strategic intent?  Staking out a desired leadership position in the long term that far exceeds a company's current situation  Often used in Japanese corporate settings  Canon will "beat Xerox"  Effective use of stretch goals  Competitive advantage for tomorrow 2-5

VISION, MISSION, AND VALUES CUSTOMER-ORIENTED MISSIONSCUSTOMER-ORIENTED MISSIONS Define the firm in terms of solutions for customersDefine the firm in terms of solutions for customers  Disney: "Make People Happy"  Enhanced strategic flexibility  NOT the same as listening to customers PRODUCT-ORIENTED MISSIONSPRODUCT-ORIENTED MISSIONS Define the firm in terms of products or servicesDefine the firm in terms of products or services  U.S. Railroads: "Safest… N. American railroad”  Missed the chance to move into delivery before UPS & Federal Express 2-6

MISSION STATEMENTS AND COMPETITIVE ADVANTAGE Do mission statements help gain & sustain competitive advantage?Do mission statements help gain & sustain competitive advantage?  Results are inconclusive  Need strategic commitments to succeed Positive associations – Visionary firmsPositive associations – Visionary firms Negative associations – Better World BooksNegative associations – Better World Books No associations – IntelNo associations – Intel 2-7

Living the Values Ethical standards and norms that govern behavior.Ethical standards and norms that govern behavior.  How do we accomplish our goals? McKesson – ICAREMcKesson – ICARE  Shared principles a framework for daily interactions Dark side of valuesDark side of values  Bernard Madoff  Ponzi scheme estimated at $65 billion in fraud  Enron  One of the largest bankruptcies in U.S. history  Over 50,000 jobs lost (Enron & Arthur Anderson) 2-8

The Strategic Management Process 1.Strategic Planning 2.Scenario Planning 3.Strategy as Planned Emergence 2-9

Strategy as Strategic Planning Top-down rational planningTop-down rational planning  Define mission, vision, & goal (strategic intent)  External analysis of opportunities and threats  Internal analysis of strengths and weaknesses  Create strategic fit through SWOT  Formulate appropriate strategy  Implement chosen strategy  Monitor performance & modify if necessary 2-10

Strategy as Scenario Planning Scenario planningScenario planning  Envision different "what-if" plans  Generates a dominant plan  Must implement the most probable option  Keeps other scenarios in the event of changes…  "Arab Spring" impact on the oil industry?  Good example of the AFI framework 2-11

Strategy as Planned Emergence Strategic InitiativeStrategic Initiative  Google 50% from the "20% rule"  Enron wind investment… Mintzberg Planned EmergenceMintzberg Planned Emergence Strategy can come from top or bottomStrategy can come from top or bottom  Some intended strategies drop off in the process  Allows for new emerging ideas to become realized  Resource allocation process (RAP)  Serendipity can have dramatic effects 2-12

Bottom-up Strategic Initiatives / Autonomous Actions MicrosoftMicrosoft  Internet Explorer  Xbox IntelIntel  DRAM exit and entry into semiconductors StarbucksStarbucks  Frappuccino GoogleGoogle  50% of new products come from 20% autonomous time 2-13

STRATEGY HIGHLIGHT 2.3 ”It’s Not What We Do!” StarbucksStarbucks  Autonomous action of mid-level manager  Tenacity and persistence of a store manager  Risk of failure  Possible career-limiting action  Organization must be willing to accept new ideas  Frappuccino was born!  Contributing 20% of revenues for Starbucks recently 2-14

CHAPTERCASE 2 /Consider This… Teach For America is TWENTY years old!Teach For America is TWENTY years old! A $200 million dollar organizationA $200 million dollar organization  Teacher effectiveness improves with…  Student–oriented achievement course objectives What role did TFA’s vision statement have?What role did TFA’s vision statement have? How have they recruited so many into teaching?How have they recruited so many into teaching? Could it have worked as a for-profit firm?Could it have worked as a for-profit firm? 2-15