© 2004 Mark H. Hansen 1

Why Strategy?

Business Management 499Strategic Management

© 2004 Mark H. Hansen 2

What is Strategy?

1984 Profits: $242 Million

Theme Park Operations: 77 percent of profits

Consumer Products: 22 percent of profits

Filmed Entertainment: 1 percent of profits

Walt Disney Company

© 2004 Mark H. Hansen 3

Walt Disney Company

Hired Michael Eisner - 1984

What is Strategy?

1. Increased admission prices at theme parks1984 - $186 m 1989 - $787 m

2. Focused on movie studios (character development)1984 - $2.42 m 1994 - $845 m

3. Diversified into television (ABC), hotels, retail stores, sport team,cruise line, publishing, consumer products, licensing, etc.1984 - market cap. $2 billion 1994 - market cap. $28 billion

(Huey, 1995)

© 2004 Mark H. Hansen 4

Strategy is the active management of firm resourcesin the pursuit of economic rents.

What is Strategy?

Thus, our study here is concerned with achieving competitiveadvantage, not merely survival. Advantage implies that few, if any,other firms can or do hold the same position in the market.

Therefore, our focus will not be on managing the average firm.Our focus will be on managing a firm to rise above the average.

© 2004 Mark H. Hansen 5

The Call from Industry

The ability to handle intangible and/or subjective strategy-typeconcepts is what sets apart individuals in this business (investmentbanking). -- Alan Folkman, Marriott School NAC.

Why Strategy?

The functional disciplines are necessary just to get in the door,recruiters take excellent accounting, finance, and marketing skillsas a given.

Graduates are expected to be expert in a functional area and able toto appreciate the strategic implications of managerial action

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What is Strategy?

Academic History

Management was usually taught by retired executives who impartedthe wisdom of experience and the rules of thumb well into the 1960’s

Business disciplines evolved principally from either economics (finance)or psychology (OB & marketing)

Strategic management is a young discipline (first Ph.D.’s were grantedin the late 1980’s)

The Business Policy and Strategy Division is now the largest divisionof the Academy of Management

© 2004 Mark H. Hansen 7

Why Strategy?

Differences Between Accounting, Finance, Marketing, Operations, Organizational Behavior--and Strategy?

Functional Discipline vs. Enterprise Management

Answering Questions Right vs. Answering (Asking) the Right Questions

An Objective Answer vs. Possibility of Multiple “Right Answers””

Responding Based on Rules vs. Responding Based on Principles & Concepts

Managers must be able to deal with ambiguity

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What will this class do for you?

• Inform decisions in all areas of your life

- Personal, family, church, & civic relationships

• Prepare you to make the jump from analyst, staff level,sales, etc. to manager

• Make you a better analyst, accountant, salesperson, etc.