1. Strategic Management An Introduction to Strategy

2. 2 Learning Outline What is strategic management? Why is strategic management important? Who is involved with strategic management? Strategic management today 3. 3 A definition of strategy Goal-directed decisions and actions in which capabilities and resources are matched with the opportunities and threats in the environment. 4. 4 Military influences in strategy Strategos referred to a general in command of an army The art of the general By 450 B.C. it came to mean managerial skill By 330 B.C. it referred to the skill of employing forces to overcome positions to create a system of global governance Carl von Clausewitz tactics(involve) the use of armed forces in the engagement, strategy (is) the use of engagements for the object of war 1838 On War 5. 5 Academic influences in strategy 1911 Scientific management (Taylor) Still in place today (UPS), some consider it micromanaging HBS requires a class in Business Policy in 1912 Adam Smiths invisible hand (the market) gives way to Alfred Sloan (GM CEO from 1923-1946) concept of the visible handmiddle manager Chester Bernard influential book The Executive argues that managers should pay attention to strategic factors Ronald Coases 1937 article why firms exist (Nobel Prize in economics) and Joseph Schumpters concept of disruptive technologies written in 1942 bring in organizational economics Max Weber warns against bureaucratic organizations but sees a shift toward this way of organizing 6. 6 Recent influences in strategy 1960s (Strategy and structure; Corporate Strategy) 1963 Harvard business conference leads to SWOT analysis BCG founded in 1963 strategy boutique Created the portfolio analysis Stars, dogs, cash cows, question marks 1980s (Porters 5 forces) 1990s (Resource based view of the firm) 7. 7 Strategy vs. Strategic Management Strategy A series of goal- directed decisions and actions matching an organizations skills and resources with the opportunities and threats in its environment Strategic management Analyze current situation Develop appropriate strategies Put strategies into action Evaluate, modify, or change strategy 8. 8 Strategy vs. Strategic Management Strategy involves Organizations goals Goal-oriented action Related decisions and actions Internal strengths External opportunities and threats Strategic management Planning Organizing Implementing Controlling 9. 9 Basics of Strategic Management Four aspects that set strategic management apart Interdisciplinary Capstone of the Business degree External focus Competition Internal focus Future direction 10. 10 Strategic Management Process Analyzing Current Situation Deciding on Strategies Putting Strategies in Action Evaluating and Changing Strategies Situation Analysis Strategy Formulation Strategy Implementation Strategy Evaluation Chapter 2 Chapter 3 Chapter 4 External Analysis Internal Analysis Chapter 5 Chapter 6 Chapter 7 Functional Competitive Corporate 11. 11 Strategic Management Process Situation Analysis Scanning & evaluating context Internal and External environments Strategy formulation Functional Competitive Corporate strategies 12. 12 Levels of strategy Competitive: How are we going to compete in our chosen business(es)? Functional What resources and capabilities do we have to support the corporate and competitive strategies? Corporate What direction are we going and what business(es) are we in or do we want to be in? 13. 13 Strategic Management Process Strategy implementation Process of putting strategies into action Consider implementation at each level Strategy evaluation Was the strategy effective? Close the loop 14. 14 Who does strategy? The Role of the Board of Directors Elected representatives of the companys stockholders Legally obligated to represent and protect stockholders The Role of Top Management Responsible for decisions and action of every employee Providing effective leadership Other Organizational Employees Implement put the strategies into action and monitor performance Evaluatedo the actual evaluations and take necessary actions 15. 15 The Role of the Board of Directors Review and approve strategic goals and plans Review and approve organization's financial standards and policies Approve an organizational philosophy Monitor organizational performance and regularly review performance results Select, evaluate, and compensate top-level managers Develop management succession plans Monitor relations with shareholders and other key stakeholders 16. 16 Concept of Strategic Intent A company exhibits strategic intent when it relentlessly pursues an ambitious strategic objective and concentrates its competitive actions and energies on achieving that objective! 17. 17 Lessons about change: Built to last Understand why superior companies are better than peer companies which are better than most companies $1 invested in stock market in 1926 yields $420 in all other companies $960 in peer companies $6360 in superior (visionary) companies 18. 18 Who are these companies Visionary 3M Boeing GE IBM Motorola Nordstrom P&G Sony Wal-mart Peer companies Norton McDonnell Douglass Westinghouse Burroughs Zenith Melville Colgate Kenwood Ames 19. 19 So what did they find? Great companies had BHAG Big Hairy Audacious Goals What ever your values are stick with it Deal with the AND, not the OR Seek Alignment (internally) 20. 20 Characteristics of Strategic Intent Indicates firms intent to stake out a particular position over the long-term Involves establishing a BHAG - big, hairy, audacious goal Signals relentless commitment to winning 21. 21 Example of BHAG General Electric All businesses are held to a standard of being #1 or #2 in their industries as well as achieving good business results John F. Kennedy Put a man on the moon and return safely by the end of the decade 22. 22 Crafting a Strategy An organizations strategy deals with How to make the strategic vision a reality and achieve target objectives The game plan for Pleasing customers Conducting operations Building a sustainable competitive advantage 23. 23 Take Aways Strategy has become more important Information, technology, globalization Key ideas in the strategy making process Mission (who are we) Vision (where do we want to go) Strategic intent / BHAG (major goal) Strategy (specific plan at different levels) Ethics (code of conduct or values) Linkage & communication are important Avoid mission creep! 24. 24 Take Aways Where strategy came from Strategic Management Process Who does strategy? 25. The end 25