1. Strategic Management Dr. Don Neubaum don.neubaum@bus.oregonstate.edu
400E Bexell
Office Hours
W 3:00 – 4:30PM
T 2:00PM – 3:00PM

2. 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

3. Grading Individual Grades - 85% Group Grades – 15%
Midterm/Final – 22.5% each (45% total)
Industry analysis – 20%
Case write ups – 5% (10% total)
Strategic issue summary – 10%
Group Grades – 15%
Strategic plan presentation – 15%
This assignment is only a presentation – no paper required

4. Grades
If you NEED a specific grade in this class, other than to simply “pass,” then you MUST me and come see me by the end of next week.

5. Midterm and Final Multiple Choice (60%) and Short Answer (40%)
Chapters 1-4
Final – 3/17
Chapters 5-9
Both exams will focus on lecture material and text terms.

6. 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?

7. Industry Analysis
Within teams, you will select one of the following industries
Airlines
Automotive Manufacturing
Pharmaceuticals
Supermarket/Grocery Store
Cruise Line
Due 2/11
Highest team average will receive 5 extra points

8. Case Write Ups Analyzing two cases 3 pages, double spaced
Due 1/21 and 2/25
3 pages, double spaced
Specific questions and guidelines will be provided for each case
Re-write each based on feedback you get from classmates. Rewrite once after my initial grade.
Revisions due no later than the final exam.

9. 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
2-3 questions to generate discussion
Written feedback allowing you to re-write the paper.
Sign up sheet will be distributed
Graded equally on paper and presentation
Hand in copy of slides and paper

10. Group Strategic Plan and Presentation
Groups of four or five
Last week of the quarter – 3/9 and 3/11
Company of your choice, with my approval
PowerPoint presentation of 20 minutes – no paper necessary
Can not analyze a company in the Airlines, Pharmaceuticals, Cruise Line, Supermarket/Grocery Store, or Automotive industries
Sign up sheet for time slots will be distributed

11. 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.

12. Participation
While not specifically graded, I will be assessing your attendance and participation.
Final grades might be adjusted up and down, based upon my assessment.
Students attending every class period will receive 5 points on the final

13. Golden Rule “No Tolerance” policy for cheating
Guilty parties receive an F and will be dropped from the class
Disciplinary actions may be taken

14. 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

15. 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

16. 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 first thing Thursday.

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

19. 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?

20. 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.

21. 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

22. 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?

23. 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

24. 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.

25. 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?

26. 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

27. 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.

28. 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!

29. 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

30. What is Strategy?
3) Strategy is about combining activities as advantages come from fit and reinforcing

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

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

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

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

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

36. 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

37. 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?

38. 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

39. What is Strategy?
4) The desire to grow is most threatening to an effective strategy

40. What is Strategy?
4) The desire to grow is most threatening to an effective strategy
Blurs uniqueness
Creates compromises
Reduces fit
Erodes original advantages

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

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

43. What is strategic effectiveness?
Consistent, long-term
goals and objectives

44. What is strategic effectiveness?
Consistent, long-term
goals and objectives
Reflects and understanding
of the environment

45. What is strategic effectiveness?
Consistent, long-term
goals and objectives
Reflects and understanding
of the environment
Takes resources
into consideration

46. What is strategic effectiveness?
Consistent, long-term
goals and objectives
Reflects and understanding
of the environment
Takes resources
into consideration
Effectively
implemented

47. What is strategic effectiveness?
Consistent, long-term
goals and objectives
Reflects and understanding
of the environment
Strategic
Effectiveness
(fit)
Takes resources
into consideration
Effectively
implemented

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

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

50. 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!

51. 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

54. 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.

55. 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.

56. 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

57. 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

58. 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

59. (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.

60. (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.

61. 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.

62. One vision drives everything we do: A computer on every desk and in every home using great software as an empowering tool

63. Our business is renting cars
Our business is renting cars. Our mission is total customer satisfaction.

64. Our business is leasing camels
Our business is leasing camels. Our mission is to totally alienate all of our customers.

65. To be the premier organization in nurturing and enriching the bond between people and animals

66. 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.

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

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

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

70. 6 Characteristics of a Good Objective
1. Stretching/Motivating

71. 6 Characteristics of a Good Objective
2) Measurable

72. 6 Characteristics of a Good Objective
3) Realistic/Achievable

73. 6 Characteristics of a Good Objective
4) Agreeable

74. 6 Characteristics of a Good Objective
5) Timebound

75. 6 Characteristics of a Good Objective
6) Understandable

76. 6 Characteristics of a Good Objective
U SMART
Understandable
Stretching
Measurable
Agreeable
Realistic
Timebound

77. 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

78. 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

79. 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!

80. One Balanced Scorecard
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!

81. A Second Balanced Scorecard
Comprehensive view of the firm from the customer, internal, financial and innovation/learning perspectives
1) How do customers see us?
Time, quality, service & performance, costs
2) What must we excel at?
3) How do we look to shareholders?
4) Can we continue to improve and create value?

82. A Third Balanced Scorecard
Triple Bottom-line
Economic, social and environmental performance

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

84. Levels of Strategic Management

85. Levels of Strategic Management
Answers the question “Where?”

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

87. 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?

88. 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?

89. 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!!

90. 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

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

92. 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.

93. 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.

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