1. MBA 614 Strategic Innovation and Competitive Rivalry Walter J. Ferrier, Ph.D.

2. Page 2 The Paper Fight Two stacks of paper Anything goes… … Go!

3. Page 3 The Paper Fight What happened?

4. Page 4 The Paper Fight What happened? Another round…?

5. Page 5 The Paper Fight What happened? Another round…? What was different this time…?

6. The Big Picture Page 6 RIM Business Fundamentals New Product Development Supply Chain Management Mergers & Acquisitions Electives Project Connect

7. The Big Picture Page 7 RIM Business Fundamentals New Product Development Supply Chain Management Mergers & Acquisitions Electives Project Connect Top-line Revenue: Opportunity-seeking Innovation advantage Uniqueness advantage

8. The Big Picture Page 8 RIM Business Fundamentals New Product Development Supply Chain Management Mergers & Acquisitions Electives Project Connect Operational Efficiency: Cost advantage Timing advantage Quality advantage

9. The Big Picture Page 9 RIM Business Fundamentals New Product Development Supply Chain Management Mergers & Acquisitions Electives Project Connect Growth and Synergy: Diversification Scale advantages Corporate Venturing

10. The Big Picture Page 10 New Product Development Strategy, Competitive Rivalry NPD Processes Marketing Finance Accounting Management Processes

11. Schedule Page 11 Oct 11Oct 12Oct 13Oct 14Oct 15 Morning Cohort Afternoon Cohort 8:00-10:00 1:00-3:00 10:00-12:00 3:00-5:00 8:00-10:00 Combined a.m. and p.m. cohorts 9:00-12:00 @ Awesome Inc. 1:00-4:00 @ Awesome Inc. 4:00-5:30 Oct 18Oct 19Oct 20Oct 21Oct 22 Morning Cohort Afternoon Cohort 8:00-10:00 1:00-3:00 10:00-12:00 3:00-5:00 8:00-10:00 1:00-3:00 10:00-12:00 3:00-5:00

12. Topics and Readings Page 12 Live Web Links

13. Graded Assignments Page 13 Genetically-Modified Food Debate Memo10% Wargaming Simulation Memo10% New Product Strategy Audit Oral Presentation60% Peer Evaluation10% In-Class Participation/Discussion10%

14. Page 14 What is strategic management?

15. Page 15 Strategic Management…Action that Creates Value Pazzo’s Lynagh’s Pub Lynagh’s Pub

16. Page 16 Coke’s Strategic Actions Pepsi’s Strategic Actions Rivalry Competitive Outcomes Industry Characteristics Organizational Characteristics

17. Page 17 Strategic Management – Developing a set of coordinated and integrated capabilities, decisions, and actions required to achieve competitive advantage…

18. Page 18 Profit = (Price – Cost) x Qty. … i.e., action that creates value

19. Page 19 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

20. Page 20 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

21. Page 21 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

22. Page 22 Be strategy-savvy… Top Management Don’t let you this be you. ?

23. Page 23 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

24. Page 24 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

25. Page 25 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

26. Page 26 Levels of Strategy Corporate Strategy Business Strategy Functional Strategy Value can be created an any or all levels

27. Page 27 Corporate Strategy Decide scope/reach of the firm In which businesses or industries do we compete? GENERAL ELECTRIC Aircraft Engines Light Bulbs AppliancesPower Generation

28. Page 28 Corporate Strategy PROCTER & GAMBLE SoapsFoodBeveragesPaper Products

29. Page 29 Corporate Strategy PEPSI Carbonated Beverages Juices, Water, Sports drinks Snack Foods Fast Food

30. Page 30 COCA-COLA Carbonated Beverages Juices, Water, Sports drinks Corporate Strategy

31. Page 31 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

32. Page 32 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?

33. Page 33 1. Articulate Mission / Intent Sense of purpose, direction… In which industries does firm compete? How does firm compete? Who are customers? Who are competitors? Strategic Planning Process

34. Page 34 2. Set Objectives & Performance Targets Financial – Achieve 10% ROE and $1.55 EPS by YE2011 – Increase stock price by $4.00-5.00/share Strategic – Become low price leader in industry by YE2012 – Enter five new country markets by YE2014

35. Page 35 3. 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

36. Page 36 4. 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 2012 Olympics Get endorsement contract with Lance Armstrong, Marylou Retton, Mia Hamm, and Michael Johnson Develop TV ad with Spike Lee –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%

37. Page 37 5. 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)

38. Page 38 Dropped Strategic Actions Intended Strategy Carried Out Emergent Strategic Actions Strategic Planning vs. Strategizing

39. Flexibility, Quick Decisions Adaptive Agility Opportunism White space opportunity New voices and perspective Experimentation Innovation Dynamic Maneuvering Break the rules Thrive in chaos Page 39 Strategic Planning is “Dead”

40. Strategic Management …Questions?