Daily Quotes

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Daily Quotes

• Plans are only good intentions unless they
  immediately degenerate into hard work.
• Like so many brilliant people, he believes that
  ideas move mountains. But bulldozers move
  mountains ideas show where the bulldozers should
  go to work. This planner will have to learn that
  the work does not stop when the plan is
  completed.
• Peter Drucker

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Chapter 1 Introduction to Strategic Management

• By Adam D. Bailey

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Announcements

• Next class Airline Strategy Session 1
• Decision One is due before class on Wednesday
• Team One to present Current Event One on
  Wednesday
• Airline Quiz on Thursday

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Agenda

• Chapter 1 Introduction to Strategic Management

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Current Event

• Sneaker companies are trying to get customers to
  pay more for their shoes by introducing new
  technology that will cost between 100 and 250
  per pair.
• They hope to offset the recent trend of
  purchasing classic or simple sneakers that has
  cut into company profits.
• "Reebok, Adidas, Nike Aim to Bring Back the
  100-Plus Sneaker," The Wall Street Journal,
  Nov.10, 2004, pp.D1, D5.

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Strategic Management

• The ongoing process companies use to form a
  vision, analyze their external environment and
  their internal environment, and select one or
  more strategies to use to create value for
  customers and other stakeholders, especially
  shareholders (Ireland, Hoskisson Hitt, 2006,
  p. 6).

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Strategic Management The Process (Ireland,
Hoskisson Hitt, 2006, p. 8)
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The Key Aspects of Strategic Management

• Strategic management is
• Performance oriented
• Ongoing in nature
• Dynamic rather than static
• Oriented to the present and the future
• Concerned with conditions both outside and inside
  the firm
• Concerned with performing well and satisfying
  stakeholders (Ireland, Hoskisson Hitt, 2006,
  p. 9).

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Best Buy

• highly competitive business of consumer
  electronics.
• New competitors are appearing from many different
  sources, including companies that sell directly
  to the customer such as Dell and discounters such
  as Wal-Mart.
• strategy of customer centricity in which it has
  developed five prototypical customers.

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The Components of Strategic Management

• Vision
• Contains at least two componentsa mission that
  describes (the core information about the
  organization) and the picture of the firm as
  it hopes to exist in a future time period
• Mission
• Defines the firms core intent and the business
  or businesses in which it intends to operate
• Strategy
• An action plan designed to move an organization
  toward achievement of its vision (Ireland,
  Hoskisson Hitt, 2006, pp. 6, 7).

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Vision Statement Examples(Ireland, Hoskisson
Hitt, 2006, p. 10).

• McDonalds
• To give each customer, every time, an experience
  that sets new standards in value, service,
  friendliness, and quality.
• NASDAQ
• To build the worlds first truly global
  securities market . . . A worldwide market of
  markets built on a worldwide network of networks
  . . . linking pools of liquidity and connecting
  investors from all over the world . . . assuring
  the best possible price for securities at the
  lowest possible cost.
• Petsmart
• To be the premier organization in nurturing and
  enriching the bond between people and animals.
• Wachovia
• Wachovias vision is to be the best, most trusted
  and admired financial services company.

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Mission Statement Examples(Ireland, Hoskisson
Hitt, 2006, p. 10).

• Bristol-Myers Squibb
• Our mission is to extend and enhance human life
  by providing the highest-quality pharmaceuticals
  and health care products.
• GlaxoSmithKline
• GSKs mission is to improve the quality of human
  life by enabling people to do more, feel better
  and live longer.
• Merck
• The mission of Merck is to provide society with
  superior products and services by developing
  innovations and solutions that improve the
  quality of life and satisfy customer needs, and
  to provide employees with meaningful work and
  advancement opportunities, and investors with a
  superior rate of return.
• Wipro
• The mission is to be a full-service, global
  outsourcing company.

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Analyzing Environments

• After we have a vision, we need to analyze the
  environment.
• External Environment
• Internal Environment

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The Industrial Organizational Model (I/O)

• Used to analyze the external environment and
  identify opportunities and threats
• Opportunities
• conditions in the firms external environment
  that may help the firm reach its vision
  (Ireland, Hoskisson Hitt, 2006, p. 11).
• Threats
• conditions in the firms external environment
  that may prevent the firm from reaching its
  vision (Ireland, Hoskisson Hitt, 2006, p. 11).

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How the External Environment Affects Organizations

• A Lack of control over economic conditions
  reduces available strategic options (Ireland,
  Hoskisson Hitt, 2006, p. 11).

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Airline Industry

• Fuel costs
• Delta bankruptcy
• UA time in bankruptcy

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Analyzing the External Environment with the I/O
Model(Ireland, Hoskisson Hitt, 2006, p. 14).
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Levi Strauss
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Home Construction Industry

• Mortgage Rates

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NetFlix Online Rentals

• The founders concept of an all-you-can-rent
  online movie service was triggered by his
  examination of the external environment. He
  concluded that People love to rent movies, they
  hate late fees, and they like the Net.
• The strategy was implemented using resources
  available to the company. Now strong competition
  to NetFlix is emerging from Wal-Mart and
  Blockbuster.

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The RBV Analyzing the internal environment

• The RBV model suggests that effective management
  of the firms operations creates resources and
  capabilities that are unique to that firm
  (Ireland, Hoskisson Hitt, 2006, p. 14).

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The Internal Environment

• Strengths
• Resources and capabilities that allow the firm
  to complete important tasks (Ireland, Hoskisson
  Hitt, 2006, p. 7).
• Resources
• The tangible and intangible assets held by the
  firm (Ireland, Hoskisson Hitt, 2006, p. 7).
• Capabilities
• Result when the firm integrates several
  different resources to complete a task or a
  series of related tasks (Ireland, Hoskisson
  Hitt, 2006, p. 7).

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The Internal Environment

• Core Competencies
• Capabilities the firm emphasizes and performs
  especially well while pursuing its vision
  (Ireland, Hoskisson Hitt, 2006, p. 8).
• Distinctive Competencies
• Core competencies that differ from those held by
  competitors (Ireland, Hoskisson Hitt, 2006, p.
  8).

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Competitive Advantage

• When the firms core competencies allow it to
  create value for customers by performing a key
  activity better than competitors or when a
  distinctive competence allows it to perform an
  activity that creates value for customers that
  competitors cant perform (Ireland, Hoskisson
  Hitt, 2006, p. 9).

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Examples

• Best Buy inventory management
• Microsoft knowledge of employees
• 3M knowledge of scientists and scientific
  equipment
• Dell distribution system
• Vuitton

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Analyzing the Internal Environment with the RBV
Model (Ireland, Hoskisson Hitt, 2006, p. 14).
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Types of Strategies

• A firms strategy should deliver a unique mix of
  value to customers.
• Strategies include
• business-level strategies
• multi-product strategies
• international strategies
• Strategies allow a firm to enter new markets
  through
• mergers and acquisitions
• alliances
• new ventures

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Stakeholders

• Individuals and groups with an interest in a
  firms performance and an ability to influence
  its actions.
• Each stakeholder wants the firm in which it has
  an interest to satisfy its needs.
• Well-managed stakeholder relationships may
  provide a competitive advantage.
• Firms and stakeholders have relationships because
  they need each other.
• Managing relationships between the firm and its
  stakeholders is difficultsatisfying one
  stakeholders needs may come at the expense of
  another.

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Three Types of Stakeholders
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Strategic Leaders

• Strategic Leaders
• Individuals who make certain that actions are
  being taken that will lead to their firms
  success.
• Top-level managers concentrate on the big
  picture to envision their firms future and the
  strategies necessary to achieve that vision.
• A firms board of directors holds the CEO and the
  top management team responsible for effective
  strategic management.

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Organizational Culture

• The set of values and beliefs that are shared
  throughout the firm.
• Values reflect what is important.
• Beliefs refer to how things should be done.
• The most effective organizational culture lets
  people know they are appreciated. This can
  motivate excellent performance.
• Strategic management is increasingly
  decentralized, moving decisions down to people
  who are closest to the action.
• The final responsibility for effective strategic
  management rests with the firms strategic
  leaders.

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Your Career

• Your vision
• Analyze external environment (identify
  opportunities and threats)
• Analyze internal environment (strengths,
  weaknesses, likes, dislikes)
• Stakeholders (those who will be affected by your
  choices)
• Identify two or more strategies (what you will
  do, given what you learned in the above steps)