1. 1 BUS 411 DAY 2

2. Copyright 2005 Prentice Hall Ch 1 -2 Agenda Question? Assignment 1 due January 30 Discussion on the Nature of Strategic Management

3. Assignment 1 Due Jan 30 @ 12:35 PM Complete the Assurance of Learning Exercise 1A on page 37 of your text with the following modifications. This assignment is intended to be an individual assignment, do your own work. Step 1. McDonald’s website has changed since the publication of this text. To get the annual reports, do the following; Go to www.mcdonalds.com On the red menu, place your mouse pointer on “OUR STORY” and select “Corporate Info” from the drop down menu. On the Corporate Info page click on the “ find out what drives our business” link. Click on the “annual reports” link in the top left of the resulting page. Save the 2009 Annual report to your computer. There is no need to print the report.www.mcdonalds.com Step 2 The UMFK library does not subscribe to Standards and Poor but you get industry surveys from the Business & Company Resource Center (Search MCD) and the Value Line Research Center (select “Plus Edition>Look Up Company”. You can get Company and Industry reports from both databases; the databases can be found by selecting the topic “Business” under the Articles for Research link on the Blake Library web page. Skip step 5, we will do this in class to create a collective SWOT analysis for McDonalds. This collectively created SWOT analysis will be required for future assignments. Upload a Word Document with your 12 responses (3 Strengths, 3 Weaknesses, 3 Opportunities & 3 Threats) Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -3

4. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -4 Chapter 1 The Nature of Strategic Management Strategic Management: Concepts & Cases 13 th Edition Fred David

5. McDonalds - Cohesion Case Study Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -5 McDonald’s on Avenue des Champs-Élysées,Paris

6. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -6 Art & science of formulating, implementing, and evaluating, cross-functional decisions that enable an organization to achieve its objectives Strategic Management –Defined

7. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -7 Purpose of Strategic Management To exploit and create new and different opportunities for tomorrow

8. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -8 Strategic Management In essence, the strategic plan is a company’s game plan

9. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -9 3 Stages of the Strategic Management Process Strategy formulation Strategy implementation Strategy evaluation

10. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -10 No campaign plan survives first contact with the enemy Field Marshall Helmuth Graf von MoltkeHelmuth Graf von Moltke

11. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -11 Vision & Mission Strategy Formulation External Opportunities & Threats Internal Strengths & Weaknesses Long-Term Objectives Alternative Strategies Strategy Selection

12. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -12 Issues in Strategy Formulation Businesses to enter Businesses to abandon Allocation of resources Expansion or diversification International markets Mergers or joint ventures Avoidance of hostile takeover Businesses to enter Businesses to abandon Allocation of resources Expansion or diversification International markets Mergers or joint ventures Avoidance of hostile takeover

13. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -13 Strategy Implementation Annual Objectives Policies Employee Motivation Resource Allocation

14. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -14 Strategy Implementation Steps Developing a strategy-supportive culture Creating an effective organizational structure Redirecting marketing efforts Preparing budgets Developing and utilizing information systems Linking employee compensation to organizational performance

15. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -15 Issues in Strategy Implementation Action Stage of Strategic Management Mobilization of employees & managers Most difficult stage Interpersonal skills critical Action Stage of Strategic Management Mobilization of employees & managers Most difficult stage Interpersonal skills critical

16. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -16 Strategy Evaluation Internal Review External Review Performance Measurement Corrective Action

17. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -17 Peter Drucker: Think through the overall mission of a business. Ask the key question: “What is our Business?” Prime Task of Strategic Management

18. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -18 The strategic management process attempts to organize quantitative and qualitative information under conditions of uncertainty Integrating Intuition & Analysis

19. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -19 Intuition is based on:  Past experiences  Judgment  Feelings Integrating Intuition & Analysis Intuition is useful for decision making in conditions of:  Great uncertainty  Little precedent  Highly interrelated variables  Several plausible alternatives

20. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -20 Involve management at all levels Intuition & Judgment Influence all analyses Integrating Intuition & Analysis

21. Ch 1 -21 Advice from Gen. Colin Powell Part I: "Use the formula P = 40 to 70, in which P stands for the probability of success and the numbers indicate the percentage of information acquired.“ Part II: "Once the information is in the 40 to 70 range, go with your gut." --- Colin Powell (former US Sectary of State) http://www.blaisdell.com/powell/ http://www.blaisdell.com/powell/

22. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -22 Organizations should continually monitor internal and external events and trends so that timely changes can be made as needed Adapting to Change

23. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -23 Key Terms in Strategic Management Competitive advantage Strategists Vision and mission statements External opportunities and threats Internal strengths and weaknesses Long-term objectives Strategies Annual objectives Policies

24. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -24 Anything that a firm does especially well compared to rival firms Strategic Management is Gaining and Maintaining Competitive Advantage

25. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -25 1. Continually adapting to changes in external trends and events and internal capabilities, competencies, and resources Achieving Sustained Competitive Advantage 2. Effectively formulating, implementing, and evaluating strategies that capitalize on those factors

26. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -26 Strategists Gather Information Analyze Information Organize Information

27. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -27 Vision Statement – What do we want to become? Mission Statement – What is our business? Vision and Mission Statements

28. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -28 External Opportunities and Threats Analysis of Trends  Economic  Social  Cultural  Demographic/Environmental  Political, Legal, Governmental  Technological  Competitors

29. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -29 Basic Tenet of Strategic Management External Opportunities and Threats Strategy Formulation Take advantage of External Opportunities Take advantage of External Opportunities Avoid/minimize impact of External Threats Avoid/minimize impact of External Threats

30. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -30  Controllable activities performed especially well or poorly  Determined relative to competitors Internal Strengths and Weaknesses

31. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -31 Typically located in functional areas of the firm  Management  Marketing  Finance/Accounting  Production/Operations  Research & Development  Management Information Systems Internal Strengths and Weaknesses

32. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -32 Assessing the Internal Environment Internal Strengths and Weaknesses Internal Factors Performance Measures Ratios Industry Averages Survey Data

33. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -33  Specific results that an organization seeks to achieve in pursuing its basic mission  Long-term means more than one year Long-Term Objectives

34. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -34 Long-Term Objectives Essential for ensuring the firm’s success  Provide direction  Aid in evaluation  Create synergy  Reveal priorities  Focus coordination  Provide basis for planning, organizing, motivating, and controlling

35. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -35 Means by which long-term objectives are achieved Strategies

36. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -36 Strategies Examples  Geographic expansion  Diversification  Acquisition  Product development  Market penetration  Retrenchment  Divestiture  Liquidation  Joint venture

37. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -37 Sample Strategies Table 1-1  Best Buy  Levi Strauss  New York Times Company

38. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -38 Short-term milestones that firms must achieve to reach long-term objectives Annual Objectives

39. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -39 Means by which annual objectives will be achieved Policies

40. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -40

41. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -41  Strategic Management Process  Dynamic & continuous  More formal in larger organizations Strategic Management Model

42. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -42 Strategic Management Communication is a key to successful strategic management

43. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -43 Benefits of Strategic Management

44. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -44 Benefits of Strategic Management Nonfinancial Benefits  Enhanced awareness of threats  Improved understanding of competitors’ strategies  Increased employee productivity  Reduced resistance to change  Clearer understanding of performance-reward relationship  Enhanced problem-prevention capabilities

45. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -45 Why Some Firms Do No Strategic Planning Lack of knowledge of strategic planning Poor reward structures Fire fighting Waste of time Too expensive Laziness Content with success

46. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -46 Why Some Firms Do No Strategic Planning (continued) Fear of failure Overconfidence Prior bad experience Self-interest Fear of the unknown Honest difference of opinion Suspicion

47. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -47 Pitfalls in Strategic Planning Strategic planning is an involved, intricate, and complex process that takes an organization into uncharted territory

48. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -48 Effective Strategic Planning is: A people process more than a paper process A learning process Words supported by numbers Simple and nonroutine Varying assignments, team membership, meeting formats, and planning calendars Challenging assumptions underlying corporate strategy

49. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -49 Effective Strategic Planning continued Welcomes bad news Requires open-mindedness and a spirit of inquiry Is not a bureaucratic mechanism Is not ritualistic or stilted Is not too formal, predictable, or rigid Does not contain jargon or arcane language

50. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -50 Effective Strategic Planning continued Is not a formal system for control Does not disregard qualitative information Is not controlled by “technicians” Does not pursue too many strategies at once Continually strengthens the “good ethics is good business” policy

51. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -51 Comparing Business and Military Strategy Strategic planning started in the military Similarity  Both business and military organizations must adapt to change and constantly improve Difference  Business strategy assumes competition  Military strategy assumes conflict

52. Copyright 2005 Prentice Hall Ch 1 -52 Sun Tzu and the Art of Business The Six Principles from Sun Tzu and the Art of Business: Six Principles for Managers  Mark McNeilly (Oxford Press University - 1996) Capture your market without destroying it  "Generally in war, the best policy is to take a state intact; to ruin it is inferior to this....For to win one hundred victories in one hundred battles is not the acme of skill. To subdue the enemy without fighting is the acme of skill." Avoid your competitor's strength, and attack their weakness  "Now an army may be likened to water, for just as flowing water avoids the heights and hastens to the lowlands, so an army avoids strength and strikes weakness." Use foreknowledge and deception to maximize the power of business intelligence.  "Know the enemy and know yourself; in a hundred battles you will never be in peril." Use speed and preparation to swiftly overcome the competition.  "To rely on rustics and not prepare is the greatest of crimes; to be prepared beforehand for any contingency is the greatest of virtues." Use alliances and strategic control points in the industry to "shape" your opponents and make them conform to your will.  "Therefore, those skilled in war bring the enemy to the field of battle and are not brought there by him." Develop your character as a leader to maximize the potential of your employees.  "When one treats people with benevolence, justice and righteousness, and reposes confidence in them, the army will be united in mind and all will be happy to serve their leaders."

53. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -53 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.