Lecture Outline

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Lecture Outline
MAN 6721 Strategic Management
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Class 1
Course Overview Introduction to Strategic
Management Thursday, October 18, 2007
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Defining Strategy
Definition 1 A strategy is a theory about how to
gain competitive advantages. A good strategy is a
strategy that actually generates such
advantages. Definition 2 Strategic management is
the process of specifying an organizations
objectives, developing policies and plans to
achieve these objectives, and allocating
resources so as to implement the plans.
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Strategy Leads to Action
New enterprise leaders use strategy to get ready
to go into action. They know their number one
competitor and have chosen how they will position
themselves against that competitor. They have
prepared for a tough fight. They have lined up
specific resources ready to use they have a map
telling them the path to get to the goal, where
along the way they expect to fight marketing
battles, and a calendar of their planned actions.
They do not blindly run out to fight and see
what will happen, figuring out what to do after
competitors make their countermoves.
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What is Competitive Advantage?

• Competitive Advantage
• Every firm should have one or more unique forms
  of competitive advantage
• A firms competitive advantage comes from its
  ability to perform activities more distinctively
  or more effectively than its rivals
• A competitive advantage gives a firm an edge over
  its rivals

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Nature of Competitive Advantage?

• How to Create a Competitive (or Unfair) Advantage
• There must be something different about a firms
  offerings vis-à-vis competition's offerings.
• Oyster Bay Story
• If all firms strategies were the same, no firm
  would have a competitive advantage.
• Competitive advantage is the result of doing
  something different an/or better than
  competitors.
• Jack Welch Its All in the Sauce

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Illustration of Strategy as a Mechanism of
Preparedness and Action
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Examples of What Strategy Might Be All About(1
of 2)

• Superior products
• As in the case of Upper Crust Pizza
• Superior service
• As in the case of Gary Drug
• Superior customer knowledge
• As in the case of Google
• Superior partners
• Partners can add power to an enterprise
  (Google/SeatGuru)

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Examples of What Strategy Might Be All About(2
of 2)

• Superior strategy
• What are the clever things a firm does to
  outmaneuver the competition (as in the case of
  Dell Computer)
• Superior process
• Captured through a head start or early mover
  advantage, as in the case of Luminetx
• Superior culture
• What makes a company a great place to work in the
  eyes of its employees (as in the case of
  Southwest Airlines)

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CD Baby Case
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Central Questions that Strategic Managers Must
Address
Do we have a coherent theory for obtaining a
competitive advantage? (Segway example)
What is happening in our industry? (Dogster,
Seagate)
Do we have unique capabilities that makes it
hard for our competitors to copy us? (LA Gear)
What is our competition going to do? (Apple
IPhone example)
Can We Execute our Strategy? (Planet Hollywood
example)
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Apply These Questions to CD Babys Current
Strategy
Do we have a coherent theory for obtaining a
competitive advantage?
What is happening in our industry?
Do we have unique capabilities that makes it
hard for our competitors to copy us?
What is our competition going to do?
How should we respond?
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Apply These Questions to Luminetxs Current
Strategy
Do we have a coherent theory for obtaining a
competitive advantage?
What is happening in our industry?
Do we have unique capabilities that makes it
hard for our competitors to copy us?
What is our competition going to do?
How should we respond?
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Strategy is Like a Game of Chess
Strategy is somewhat like a game of chess, and is
all about positioning your own pieces to gain
advantage.
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Strategic Management Process
External Analysis
Strategic Choice
Strategy Implementation
Competitive Advantage
Mission
Objectives
Internal Analysis
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A Firms Mission or Mantra

• Mission
• A firms mission is its long-term purpose.
• Missions define both what a firm aspires to be in
  the long run and what it wants to avoid in the
  meantime.
• Missions are often written down in the form of
  mission statements.
• Mantra
• A very short expression that captures the essence
  of what a company is all about.

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Examples of Mission Statements(1 of 3)
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Examples of Mission Statements(2 of 3)
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Examples of Mission Statements(3 of 3)
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Examples of Corporate Mantras

• Google
• Dont be evil (The Search)
• Nike
• Authentic athletic performance
• Starbucks
• Rewarding everyday moments
• Disney
• Fun family entertainment

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In-Class Exercise
Company
Real Mission Statement
Hypothetical Mantra
Wendys
The mission of Wendys is to deliver superior
quality products and services for our customers
and communities through leadership innovation and
partnerships.
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In-Class Exercise
Company
Hypothetical Mantra
Luminetx
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Strategic Management Process(Reminder)
External Analysis
Strategic Choice
Strategy Implementation
Competitive Advantage
Mission
Objectives
Internal Analysis
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Objectives

• Objectives
• Specific measurable targets a firm can use to
  evaluate the extent to which it is realizing its
  mission.
• High Quality Objectives
• Are tightly connected to elements of a firms
  mission and are relatively easy to measure and
  track over time.
• Low Quality Objectives
• Either do not exist or are not connected to
  elements of a firms mission, are not
  quantitative, and are difficult to measure or
  difficult to track over time.

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Making Well Informed Strategic Choices
External Analysis
Strategic Choice
Strategy Implementation
Competitive Advantage
Mission
Objectives
Internal Analysis
Armed with a mission, objectives, and completed
external and internal analyses, a firm is ready
to make its strategic choices.
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Advantages of Engaging in the Strategic
Management Process(1 of 4)

• Provides a Sense of Purpose for a Firm
• A strategic plan includes a mission statement or
  a corporate mantra. The sentiments represented
  in these statements provide a sense of purpose
  for a firm.
• Johnson Johnson Example
• Three things that motivate employees the most
• Group cohesion

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Advantages of Engaging in the Strategic
Management Process(2 of 4)

• Aids In Decision Making
• Having a strategic plan enables the leaders of a
  firm to ensure that day-to-day decisions fit with
  the long-term interests of the organization.
• Does the decision push us further towards meeting
  our objectives or further away from them?

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Advantages of Engaging in the Strategic
Management Process(3 of 4)

• Brings Everyone in the Company Together
• Having a strategic plan encourages everyone in a
  company to work together to achieve common aims.
• Army of one

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Advantages of Engaging in the Strategic
Management Process(4 of 4)

• Focus On Forward Thinking
• The planning function forces managers to think
  ahead and consider resource needs and potential
  opportunities or threats that the organization
  may face in the future.

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Goal Having A Unique Strategy
If you have the same strategy as your competitors
Your strategy is a wash
If the strategy is different but is easily copied
It provides only a temporary advantage
If the strategy is different but is hard to copy
It is strong and sustainable
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Outcome Of Having A Unique Strategy
Companies that forge a unique way of doing
business gain lower costs, higher prices, or
both. While their competitors increasingly
resemble each other and are forced to compete on
price, strategically positioned companies avoid
the bloodbath by following the beat of a
different drummer.
Philip Kotler
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Distinctive Competencies and Competitive
Terrain(1 of 2)

• Distinctive Competence
• Special capabilities, skills, technologies, or
  resources that enable a firm to distinguish
  itself from its rivals and create competitive
  advantage.
• Ideally, a firms competence or skill is so
  distinctive that others will not be able to copy
  it easily.

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Distinctive Competencies and Competitive
Terrain(2 of 2)

• Competitive Terrain
• Refers to the environmental setting in which a
  firm competes.
• Firms typically have different possible terrains
  in which to compete.

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Putting it Together Essence of Strategy
Strengths and distinctive competencies
Competitive advantage over rivals competing on
the same terrain
Match in a unique way
Leads to
Terrain (Business environment you choose)
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Barriers to Strategic Management

• Demands on Managers Time
• Ambiguous and Uncertain Operating Environment
• Resistance to Change