Team 1Chris Athens

Ben BakerChris Bolinger

Josh CarverJordan Guenther

Justin TurnerJeff Ward

Strategy: A View from the Top

Chapter 1 – What Is Strategy?

What is “strategy”?

• According to the Random House Unabridged Dictionary, strategy is a plan, method, or series of maneuvers or stratagems for obtaining a specific goal or result.

•A business strategy is more difficult to accurately and thoroughly define. Chapter 1 helps clarify the aspects and uses of business strategies in today’s world.

Key Points

• The Definition of Strategy

•What is a business strategy

•Reasons for a business strategy

• Strategy Formulation Process

•Steps of forming a business strategy

•Planning

• Evaluating Strategic Options

•Criteria

•Value

Definition of Strategy

•Business strategy is very difficult to express in a single sentence definition.

•Experts agree that there are principal dimensions of business strategies

•Strategy is about positioning an organization to have a competitive advantage by making choices about:

•which industries to participate in

•what products/services to offer

•how to allocate corporate resources

• Primary goal – create value for shareholders and other stakeholders by providing customer value.

Do business strategies make a difference?

• Disney has survived economic changes since 1922 by having sound a business strategy. Over the years, Disney has incorporated a human capital perspective into their business strategy.

•On 1/12/2009, The Wall Street Journal reported that Disney has filed a permit to open a resort in Shanghai.

Do business strategies make a difference? (continued)

•Dell also understand the importance of utilizing business strategies because of the constant changing technology industry.

•On 1/2/2009, The Wall Street Journal reported that Dell would now be taking advantage of human capital by letting to chief administrators go and promoting from within.

Business Strategy Evolution

•Over the last 50 years, business strategies have evolved from industrial economics perspective to a resource-based perspective and then finally to a human and intellectual perspective.

•industrial economics perspective focused on positioning a company within the environmental constraints.

•resource-based perspective focused on creating value through the resources that the company currently possessed.

Business Strategy Evolution (continued)

•Human and intellectual capital perspective focuses on having the right people and knowledge. This is an extension of the resource-based perspective, but put more focus on the people and knowledge. This perspective incorporates all personnel throughout the company and supply-chain.

Strategy vs. Tactics Competitive Strength

Tactics-Quality-Time Oriented Completion-Outsourcing -Efforts to “Enhance Competitiveness”

Example: Car Industries -Can easily be imitated

Strategy vs. Tactics (cont.) Strategy’s

-doing things to stand out-preserve meaningful differences-setting yourself apart-leadership

Example: (from Good to Great)Walgreen's vs. EckerdWells Fargo vs. Bank of America

Strategy Forces Trade-Offs Deliver Value

-Example: Dell- low cost, direct sales Competing companies now must choose how to

do business Unique Competitive Positioning

-the “essence of strategy”

-create barriers to imitation

-Example: Southwest Airlines

Focus On Creating Value Strategy

-create value for:

Shareholders, Partners, Suppliers, Employees and Community

BY: Satisfying needs and wants of customer better than anyone else

Subject to change

-Knowledge, Competition

Strategy Creates Options Strategy Formulation

-Long term vision

-While maintaining flexibility

-Adopting to change

Learning

-Environment

-Rivals

Strategy: An Ecosystem Perspective Charles Schwab, eBay, and Wal-Mart are all good

examples of companies that use ecosystem strategies to plan and influence the outcomes of their own networks.

These companies all rely greatly on outside partners, suppliers, customers, and investors. They help achieve the focus companies success and sustained performance. (they succeed and fail as a collective whole)

Technology is the connective tissue that allows the ecosystem to function.

A technical infrastructure is needed for information sharing, collaboration, and integrated systems within for smooth error free transactions

Ecosystem = Supply Chain

The two forms of Strategic Alignment (1) Strategic Capability Gaps

(2) Maintaining Strategic Focus

Strategy as Alignment Strategic capability gaps- are substantive disparities in

competences , skills and resources between customer demands and what the organization can deliver.

Ways to solve this are by developing better technologies, creating faster delivery mechanisms, adopting a stronger branding , and building a stronger distribution network.

Maintaining Strategic Focus- you must find ways to successfully execute a companies chosen strategy, to make sure “what is said” , “is in fact done”.

Communicating objectives clearly, allocating the necessary resources, and creating proper incentives for effective alignment are all good ways to maintain the strategic focus

Is All Strategy Planned? The best laid out plans don’t always result in the

intended manner. The realized strategy can differ sometimes from

the intended strategy.

“It is good to plan, but you need to be able to role with the flow.” Chuck Ward

Three Different Levels of Strategy1. Corporate Strategy- is concerned with what kind of

businesses a firm should compete in and how the overall portfolio of businesses should be managed.

2. Business Strategy- is concerned with deciding what product or service to offer, how to manufacture or create it, and how to take it to the market place.

3. Functional Strategy- typically involves marketing, human resources, or technology.

All three are a part of Strategic Management and theories.

Stakeholders RoleStakeholders play an intricate role in creating

value for the customers. They are suppliers, partners, and even competitors. A misstep in the management of your stakeholders can set a companies progress for years.

Ownership Stake- shareholders, directors Economic Stake- creditors, employees,

customer, suppliers Social Stake- regulatory agencies, charities,

local community, activity groups.

Vision and Mission Vision Statement: Represents senior

management’s long-range goals for the organization

Mission Statement: Documents the purpose for an organization’s existence

Vision Statements Most successful companies focus on relatively

few activities and do them well Ex: McDonalds is successful precisely because it

sticks to hamburgers

Successful companies achieve their leadership position by adopting a vision far greater than their resource base and competencies would allow

Vision Statements A vision statement should provide both strategic

guidance and motivational focus. A good vision has the following characteristics:

Clear but not so constraining that it inhabits initiative Meets the legitimate interests and values of all

stockholders Must be feasable

Mission Statements Companies around the world are adopting

formal statements of corporate values as the core of their mission statement

A recent survey by consultants Booz Allen Hamilton, Inc. of companies showed:

89% had a written corporate values statement 90% specified ethical conduct as a key guiding principle 81% believed their management practices encouraged

ethical behavior

Mission Statements “We believe our first responsibility is to the Doctors,

nurses, and patients, to the mothers and fathers and all who use out products and services....” -Johnsons and Johnson’s mission statement

The usefulness of a carefully crafted mission statement is illustrated by the history of Johnson and Johnson for more than 50 years

Credo- a statement of fundamental beliefs about how the company defines its corporate responsibilities

Strategic Intent An executive summary of the strategic goals a

company has adopted and a motivational message

A statement of strategic intent can do more than paint a vision of the future when properly articulated; It signals the desire to win

Stretch Stretch reflects the recognition that successful

strategies are built as much around what can be as around what is

Every company must create a fit between its resources and its opportunities

The question is over what time frame? Too short a time frame encourages a focus on fit

rather than stretch Too long a time frame creates an unacceptable

degree of uncertainty and threatens to turn stretch objectives into unrealistic goals

Strategy and the Nonprofit sector The sector has grown to over 1 million

organizations Though Nonprofit companies aren’t structured

around profit, they also experience problems in their environment that could lead to future problems.

A strategy is important towards measuring the Nonprofit organizations, which include 3 performance standards.

1) Mobilization2) Effectiveness3) Progress

Mobilization and Effectiveness Mobilization

Measuring the success of mobilizing the necessary resources. Examples

Fund-raising performance Membership growth Market share

Effectiveness Evaluating the effectiveness of the company’s people doing their

job Examples

Number of people served by a program offered Number of projects the organization completes

Progress The toughest of the performance standards

implemented by Nonprofit organizations. For-profit organizations measure progress

through Shareholder value Profitability Return on Investment (ROI)

Nonprofit organizations usually have broad missions and are difficult to measure For instance, the Girl Scouts have the mission of helping young

girls reach their full potential as citizens? How Can This Be Measured?

Measuring Progress McKinsey and Co. researched and found 3 options

1) Define a narrow mission statement to measure progress directly

Goodwill Industries measured how many people their training program brought out of poverty and into the working world.

2) Perform research of the activities to see if they prove true to the mission

Jump$tart Coalition performed research to see how many poor children going into kindergarten were better prepared than other kids once the program was complete

3) Set “micro-level” goals so success is achieved on a broader scale

Chesapeake Bay Foundation set 9 indicator’s of the bay’s health, collected the data, and set specific targets for future years.

Easily understood by the public and donors

The Strategy Formulation Process Constructing a strategy is organized around 3 questions

1) Where are we now? What is our mission? What is-long term vision? Who are our stakeholders?

2) Where do we go? (Drives the company forward) At the business level

What segment? Large or Small Partner with another company or not? Value-added or Low-cost solutions for customers?

Corporate Level Shaping the company’s portfolio Making process adjustments

3) How do we get there? Bridging the gap between current capabilities and what is needed for

success “Strategic Alignment” of core competences, market needs, and success

factors in order to IMPLEMENT THE NEW STRATEGY.

Strategy and Planning Most companies employ some form of strategic

planning due to:

1. The need to cope with an increasingly complex range of issues

2. The speed which the competitive environment is changing

A formal system ensures that the required amount of time and resources are correctly allocated

The Planning Cycle The planning process is organized in terms of a

planning cycle.

• This cycle begins with a review at the corporate level of the overall competitive environment.

• Next, divisions and business units are asked to update their long-term strategies and to indicate how these strategies fit with the company’s goals.

The Planning Cycle (Cont.)• Third, divisional and business unit plans are

reviewed, adjusted, coordinated, and integrated.

• Finally, detailed operating plans are developed at the divisional/business unit level, and final approvals are obtained from corporate headquarters.

Evaluating Strategic Options The ultimate test of any strategy is whether it

produces a competitive advantage with above-average returns.

Strategy evaluation should focus on a firm’s future competitiveness and ask: Whether long-term objectives are appropriate Whether strategies chosen to attain such objectives

are consistent and achievable Whether these strategies are likely to produce a

sustainable competitive advantage

Shareholder Value The shareholder value approach (SVA) to

strategy evaluation holds that the value of the corporation is determined by the discounted future cash flows it is likely to generate.

Value is created when companies invest capital at returns that exceed the cost of that capital.

Shareholder Value (Cont.) The use of shareholder value as the principal

yardstick for evaluating alternative strategy proposals is somewhat misleading.

Besides implementation problems, there are issues of transparency in the relationship between shareholder value on the one hand and the positioning for sustained competitive advantage on the other.

References

Areddy, J., Sanders, P. (2009, January 12). Disney's Shanghai Park Plan Advances. The Wall Street Journal, Business. Retrieved from:

http://online.wsj.com/article/SB123152852355168823.html

Charny, B., Scheck, J., (2009, January 2). Dell Elevates Insiders in Strategy Change. The Wall Stree Journal, Business. Retrieved from:

http://online.wsj.com/article/SB123085290510747525.html?mod=googlenews_wsj

The Walt Disney Company. (2009). Stock History. Retrieved from:

http://www.nrel.gov/learning/re_biofuels.html