1. BUS 189 STRATEGIC MANAGEMENT CHAPTER 1, 9TH EDITION DR. MARK FRUIN SPRING 2010

2. INTRO BEFORE CHAPTER 1 REVIEW –VALUE ADDING ACTIVITY SEQUENCE/STREAM –INDUSTRIES & SECTORS –FIRMS & FIRM BOUNDARIES –VALUE CHAINS –STRATEGY STACK –ENVIRONMENTS SHAPE FIRMS, EXCEPT IN SPECIAL CASES, WHICH ARE? –WHAT IS STRATEGY –2.5 MODELS OF STRATEGY

3. WHY DO SOME FIRMS SUCCEED WHILE OTHERS FAIL? STRATEGIES HAVE MAJOR IMPACTS ON PERFORMANCE (THE HYPOTHESIS) A STRATEGY IS A SET OF RELATED ACTIONS THAT MANAGERS TAKE TO INCREASE THEIR COMPANY’S PERFORMANCE (p. 3) –STRATEGIC LEADERSHIP (p. 3) INCLUDES STRATEGY FORMULATION STRATEGY IMPLEMENTATION STRATEGY ASSESSMENT (not on p. 3) STRATEGY RE-FORMULATION & IMPLEMENTATION (not p.3) IF A FIRM’S STRATEGIES RESULT IN SUPERIOR PERFORMANCE, IT IS SAID TO HAVE A COMPETITIVE ADVANTAGE

4. TERMS STRATEGIC LEADERSHIP STRATEGY-MAKING PROCESS STRATEGY FORMULATION STRATEGY IMPLEMENTATION STRATEGY MEASURING, MONITORING & MANAGEMENT

5. MEASURING PERFORMANCE MAXIMIZING SHAREHOLDER VALUE –FIRST, SHAREHOLDERS PROVIDE RISK CAPITAL; MANAGERS PURSUE STRATEGIES –SECOND, SHAREHOLDERS ARE OWNERS MEASURING PROFITABILITY –RETURN ON INVESTED CAPITAL –SHORT-TERM OR LONG-TERM? PROFIT GROWTH –INCREASE IN NET PROFITS OVER TIME

6. PROFITABILITY PROFITABILITY IS THE MOST COMMON MEASURE OF STRATEGIC SUCCESS PROFITABILITY MEASURES RETURNS ON INVESTED CAPITAL PROFIT USUALLY MEANS BEFORE-TAX PROFITS CAPITAL = STOCKHOLDERS’ EQUITY + DEBT (LIABILITIES)

7. MORE TERMS SUSTAINABLE COMPETITIVE ADVANTAGE –DURABLE/LONG LASTING –VALUABLE –HARD TO IMITATE STRATEGY = HOW TO ENABLE BUS MODEL –HOW TO CREATE AN ORGANIZATION ABLE TO DO THINGS WELL REPEATEDLY AND OFTEN? BUSINESS MODEL –HOW DO WE MAKE MONEY SELECT CUSTOMERS PRODUCT OFFERINGS CREATE VALUE ORGANIZE ACTIVITIES CONFIGURE RESOURCES

8. CHOICE OF INDUSTRY IN ADDITION TO BUSINESS MODEL AND ASSOCIATED STRATEGIES, CHOICE OF INDUSTRY IS HUGE –INDUSTRIES VARY SIGNIFICANTLY IN TERMS OF GROWTH RATES & AVE PROFITS –A FIRM’S SUCCESS DEPENDS ON IN WHICH INDUSTRY/IES DOES IT COMPETE? WHICH STRATEGIES IT PURSUES

9. STRATEGY STACK = LEVEL OF STRATEGIC MANAGEMENT FUNCTIONAL LEVEL –BUSINESS FUNCTIONS COMPANYWIDE BUSINESS LEVEL –DIVISIONAL MANAGEMENT CORPORATE LEVEL –CEO, BOARDS, AND CORPORATE STAFF

10. STRATEGY-MAKING PROCESS FORMAL PROCESS HAS 5 STEPS –SELECT FIRM MISSION & GOALS –ANALYZE EXTERNAL ENVIRONMENT –ANALYZE INTERNAL ENVRIRONMENT –SELECT STRATEGIES BASED ON ANALYSES –IMPLEMENT STRATEGIES –SIMILAR BUT NOT IDENTICAL TO SWOT (COMING UP IN A FEW SLIDES)

11. VISION, MISSION & GOALS VISION IS LONG-TERM MISSION IS MID-TERM GOALS ARE SHORT-TERM RECOGNIZE THAT THESE (VISION, MISSION & GOALS) ARE INFLUENCED BY –EXTERNAL ENVIRONMENT (NATIONAL CULTURE & INSTITUTIONS) –CORPORATE GOVERNANCE MODELS –INTERNAL ENVIRONMENT (ORG. CULTURE)

12. GOALS PRECISE & MEASURABLE ADDRESS KEY/CRITICAL ISSUES CHALLENGING BUT REALISTIC SPECIFY TIME PERIODS WITHIN WHICH GOALS ARE REALIZED OR, AT LEAST, MEASURED STRETCH GOALS AS OPPOSED TO GOALS EASILY REALIZED W/O MUCH EFFORT

13. SWOT ANALYSIS STRENGTHS WEAKNESSES OPPORTUNITIES STRENGTHS GIVES DIRECTION TO SELECTION & IMPLEMENTATION OF STRATEGIES

14. STRATEGY AS EMERGENT PROCESS STRATEGIC PLANNING & IMPLEMENTATION ARE ONGOING, NEVER ENDING UNCERTAINTY MEANS FLEXIBILITY & ADAPTABILITY ARE KEY LOWER LEVEL ORGANIZATIONAL MEMBERS, MORE NUMEROUS THAN ANY, ARE THE KEY TO STRATEGIC SUCCESS –AUTONOMOUS ACTIONS –UNPLANNED RESPONSES TO UNFORESEEN CIRCUMSTANCES –HONDA & FORTUITOUS CIRCUMSTANCES (LUCK), 24-25

15. TO COPE WITH UNCERTAINTY STRATEGY AS SCENARIO PLANNING STRATEGY AND DECENTRALIZATION –CHAN KIM & RENEE MAUBORGNE’S PROCEDURAL JUSTICE (DISTRIBUTIVE JUSTICE) STRATEGIC INTENT –PRAHALAD AND HAMEL’S NOTION –AMBITIOUS GOALS HELD BY THE ORGANIZATIONAL MAJORITY

16. STRATEGIC DECISION MAKING COGNITIVE BIASES –PRIOR HYPOTHESIS BIAS –ESCALATING COMMITMENT –REASONING BY ANALOGY –REPRESENTATIVENESS –ILLUSION OF CONTROL (HUBRIS) GROUPTHINK –DEVIL’S ADVOCACY –DIALECTIC INQUIRY –ANALOGOUS PAST INITIATIVES

17. STRATEGIC LEADERSHIP VISION, ELOQUENCE & CONSISTENCY ARTICULATION OF BUSINESS MODEL COMMITMENT BEING WELL INFORMED WILLINGNESS TO DELEGATE/EMPOWER ASTUTE USE OF POWER (OVER RESOURCES) EMOTIONAL INTELLIGENCE –SELF-AWARE, SELF-REGULATE, EMPATHY, SOCIAL SKILLS, MOTIVATION BEYOND MONEY

18. PLEASE NOTE MY SLIDES ARE MY SUMMARY OF A CHAPTER YOU SHOULD HAVE YOUR OWN SUMMARY OR, AT LEAST, YOU SHOULD AUGMENT MY SLIDES WITH YOUR OWN THOUGHTS THE REASON THAT I GIVE YOU HARD COPY IS SO YOU CAN WRITE ON THEM THE BOOK IS LONG AND THE AUTHORS TRY TO INCLUDE EVERYTHING THAT THEY THINK IS RELEVANT –BUT EVERYTHING’S NOT RELEVANT –AND TRYING TO PLEASE EVERYONE MEANS THAT THERE’S A LOT OF UNNECESSARY STUFF

19. END OF CHAPTER AT THE END OF EVERY CHAPTER, THERE ARE STUDY QUESTIONS, A SUMMARY, AND OFTEN A CASE TO ILLUSTRATE THE KEY POINTS OF THE CHAPTER I DON’T GO OVER THE END OF THE CHAPTER MATERIAL, BUT YOU SHOULD THE PLAN IS –EVERY TUESDAY, WE GO OVER THE APPROPRIATE CHAPTER –IF THERE ARE SLIDES NOT COVERED ON TUESDAY, WE DO SO ON THURSDAY –ON THURSDAYS, WE APPLY CHAPTER CONCEPTS TO THE CASE AND DISCUSS IT; THIS MEANS KNOW THE CONCEPTS, READ THE CASE BEFORE CLASS TAKE NOTES ON THE CHAPTER & CASE BE READY TO APPLY CONCEPTS & ANSWER QUESTIONS ABOUT THE CASE THE SAME CASE IS USED FOR SEVERAL CHAPTERS