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Today: The Concept of Strategy
Administrative issues:Class count: add/drop
Seating chart
Current Events
How to be Successful at Case Write-ups
Assign Case #1: Wal-mart Stores, Inc.
WEBSITE: www.sba.pdx.edu/faculty/stephens/ss.html
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NotecardsName
Phone Number
E-mail Address
Major & Class Standing
Career or Personal Interest(s)
Work Experience (industry, length of time)
Business Strategy and Policy
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Fundamental Concepts in Strategic Thinking
Modeling your Thought
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Model of Strategic ManagementAnalysis/Scanning
External Analysis (Chapter 3)
Internal Analysis (Chapter 4)
Strategy Implementation
Organizing (Chapter 8)
Staffing
(Chapter 9)
Strategy Formulation
Business Level (Chapter 5)
Corporate Level (Chapter 6)
Functional Level (Chapter 7)
Evaluation & Control
Metrics (Chapter 10)
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Strategic Management Process
Strategic Inputs: Internal and External Scanning
Strategic Actions: Formulation and implementation
of strategy
Strategic Outcomes: Above, at or below average
returns
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Intro to Strategic Management
From Organizational Vision to Tactical Steps
Define the Organization:
Vision
Mission Statement
Understand the Operating Environment
External Environment (Threats and Opportunities)
Internal Conditions (Strengths and Weaknesses)
Determine Strategic Alternatives
Formulate Strategy (long term)
Implement Strategy through Tactics (short term)
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Role of Strategy Business - Link Between Strategy, Resources, & Organization
Position
Resources& Capabilities
Organization
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Strategy: Levels and Dynamics
Corporate: general perspective towards growth and management of various business units, product lines, functional areas
Business: Strategic Business Units (SBUs), focus on improvement of competitive position of products and services
Functional: focus on marketing, R & D, etc. to achieve SBU and overall corporate objectives.
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The Levels of Strategy
R& D
H R
Finance
Production
M ktg/Sales
D iv ision A
R& D
H R
Finance
Production
M ktg/Sales
D iv ision B
R& D
H R
Finance
Production
M ktg/Sales
D ivis ion C
C orpora teH eadquarte rs
CorporateDetermining the Portfolio
Businesses
Business Units/Divisions – Positioning within the Industry
Functional – Operational and Marketing
Strategies, etc.
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Path to Realized Strategy
Deliberate Strategy Emergent Strategy
Realized Strategy
Intended Strategy
Unrealized
Strategy
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Phases of Strategy Development
Phase 1 – Basic Financial Planning: operational control
Phase 2 – Forecast-based Planning: plan for growth
Phase 3 – External Oriented Planning: respond to markets and competitors
Phase 4 – Strategic Management: seek sustainable competitive advantage
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Initiation of StrategyTriggering Events
Performance Gap
OwnershipThreat
InterventionNew CEO
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What makes a decision strategic?
Rare – Have no precedent
Consequential – Commitment of resources
Directive - Cascade of precedents
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How Did Strategy Develop?
Harvard in the 1960’sHow do the problems of the general manager differ from those of functional managers?How do we look at the business from a holistic perspective?How do we look at the relationship between the business and its competitive environment?How do managers exercise leadership and manage the process of strategic change?
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Our Definition of Strategy
Strategy is the set of policies and plans relating the different functional areas of a business to each other and the whole firm to its competitive environment.
In this context, the objective of strategy is to create a sustainable competitive advantage for the firm.
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Strategy Relates A Business To Itself and Its Environment
Mktg. Oper.
Strategy
Finance
Acctg. H.R.
Competitive Environment
GovernmentRegulation
Technology
IndustryEnvironment
National/Int’l Economies
OtherCompetitors
RelatedIndustries
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Natural Competition
Evolutionary vs. revolutionary
Natural competition is expedient in interaction but slow to alter species’ behavior
Strategic competition is deliberate and reasoned but consequences may be radical
Fundamental inhibitions:Failure
Rivals’ response or anticipation
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Modes of Strategic Thinking(Mintzberg and Quinn)
Entrepreneurial
Adaptive
Planning
Logical incrementalism
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How did you get your textbook?University bookstore
www.amazon.com
www.bn.com
www.half.com
www. borders.com
Question: How to describe their business models?
Target customer; Competitive edge;
Strategy is always around us!!!
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Corporate Governance and Social Responsibility
Organization and Roles
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Defining the Corporation
What is a corporation?
Relationships within corporate governance
How does a corporation function?
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Corporate Governance
In a Corporation:
Shareholders share in profits without operating responsibilities
Management operates company without providing the funds
Board of directors approves decisions that will affect long run performance.
Corporate Governance is . . .the relationship between these three parties.
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Role of Board of Directors
Setting corporate strategy
Hiring/firing CEO & top management
Controlling, monitoring and supervising top management
Reviewing and approving use of resources
Representing stakeholder interests
What is the idea of “due care”?
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Corporate Governance
Board of Directors
Inside Directors - employees (or alumni) of firm
Outside Directors - not employees of firm
Greater Objectivity(for Outside) vs.Greater Competence (for Inside)
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Corporate Governance
Interlocking Directorates
Direct: two firms share a director
Indirect: two directors from different firms sit on board of third firm
Benefits: Knowledge about external (competitive, regulatory) trends.
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Corporate Governance
Responsibilities of Top Management:
The CEO:
Articulates the strategic vision
Acts as a role model
Communicates performance standards
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Friedman’s View of Social Responsibility
Fundamentally subversive doctrine
Corporation’s single goal is to increase profits
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Four Responsibilities of Business(Carroll)
Economic (must do)
Legal (have to do)
Ethical (should do)
Discretionary (might do)Social responsibilities
Can making enough profit to cover future costs be considered a social responsibility of a firm?
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Class Discussion
From the article by Meyer in Directorship:What are the pros and cons to requiring stock ownership by executives? What about setting a minimum ownership level?
What are the pros and cons to using stock ownership for recruitment purposes?
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Next Time: Wal-Mart Case
Historically, what has been Wal-Mart’s “strategy”?How has that strategy created a competitive advantage for Wal-mart?What competitive issues currently face Wal-mart?What is the best strategic direction for Wal-mart? Why?
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Next Time: Environmental Scanning
Current Events
Read Chapter 3: Environmental Scanning
Porter’s Five Forces (handout in class)
Analyze Wal-mart Case
Teams Chosen
Assign Case #2: RCA Records
WEBSITE: www.sba.pdx.edu/faculty/stephens/ss.html