BUS 189 STRATEGIC MANAGEMENT

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BUS 189STRATEGIC MANAGEMENT

• CHAPTER 1, 8TH EDITION
• HILL JONES, STRATEGIC MANAGEMENT
• DR. MARK FRUIN
• FALL 2009

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INTRO BEFORE CHAPTER 1

• REVIEW
• VALUE ADDING ACTIVITY SEQUENCE/STREAM
• INDUSTRIES SECTORS
• FIRMS FIRM BOUNDARIES
• VALUE CHAINS
• STRATEGY STACK
• ENVIRONMENTS SHAPE FIRMS, EXCEPT IN SPECIAL
  CASES, WHICH ARE?
• WHAT IS STRATEGY
• 2.5 MODELS OF STRATEGY

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WHY DO SOME FIRMS SUCCEED WHILE OTHERS FAIL?

• STRATEGIES HAVE MAJOR IMPACTS ON PERFORMANCE (THE
  HYPOTHESIS)
• A STRATEGY IS A SET OF RELATED ACTIONS THAT
  MANAGERS TAKE TO INCREASE THEIR COMPANYS
  PERFORMANCE (p. 3)
• STRATEGIC LEADERSHIP (p. 3) INCLUDES
• STRATEGY FORMULATION
• STRATEGY IMPLEMENTATION
• STRATEGY ASSESSMENT (not on p. 3)
• STRATEGY RE-FORMULATION IMPLEMENTATION (not
  p.3)
• IF A FIRMS STRATEGIES RESULT IN SUPERIOR
  PERFORMANCE, IT IS SAID TO HAVE A COMPETITIVE
  ADVANTAGE

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TERMS

• STRATEGIC LEADERSHIP
• STRATEGY-MAKING PROCESS
• STRATEGY FORMULATION
• STRATEGY IMPLEMENTATION
• STRATEGY MEASURING, MONITORING MANAGEMENT (not
  in textbook)

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MEASURING PERFORMANCE

• MAXIMIZING SHAREHOLDER VALUE
• FIRST, SHAREHOLDERS PROVIDE RISK CAPITAL
  MANAGERS PURSUE STRATEGIES AS THEIR AGENTS
• SECOND, SHAREHOLDERS ARE OWNERS, AND OWNERS HAVE
  PROPERTY RIGHTS
• MEASURING PROFITABILITY
• RETURN ON INVESTED CAPITAL
• SHORT-TERM OR LONG-TERM?
• PROFIT GROWTH
• INCREASE IN NET PROFITS OVER TIME
• PROFITABILITY AND PROFIT GROWTH ARE KEY MEASURES
  OF STRATEGY PERFORMANCE

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PROFITABILITY

• PROFITABILITY IS THE MOST COMMON MEASURE OF
  STRATEGIC SUCCESS
• PROFITABILITY MEASURES RETURNS ON INVESTED
  CAPITAL
• PROFIT USUALLY MEANS BEFORE-TAX PROFITS
• INVESTED CAPITAL STOCKHOLDERS EQUITY DEBT
  (LIABILITIES)

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MORE TERMS

• SUSTAINABLE COMPETITIVE ADVANTAGE
• A COMPETITIVE ADVANTAGE IN A PARTICULAR LINE OF
  BUSINESS THAT LASTS LASTS
• STRATEGY HOW ENABLE A BUSINESS MODEL
• BUSINESS MODEL
• HOW DO WE MAKE MONEY
• SELECT CUSTOMERS
• PRODUCT OFFERINGS (DEFINE DIFFERENTIATE)
• CREATE VALUE
• ORGANIZE ACTIVITIES
• CONFIGURE RESOURCES

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CHOICE OF INDUSTRY

• IN ADDITION TO BUSINESS MODEL AND ASSOCIATED
  STRATEGIES, CHOICE OF INDUSTRY IS HUGE
• INDUSTRIES VARY SIGNIFICANTLY IN TERMS OF GROWTH
  RATES AVE PROFITS
• TYPICAL LOW PROFIT INDUSTRY?
• WHY ARE PROFITS LOW IN RETAIL?
• TYPICAL HIGH PROFIT INDUSTRY?
• WHY ARE PROFITS HIGH IN COMPUTER SOFTWARE?
• A FIRMS SUCCESS DEPENDS ON
• IN WHICH INDUSTRY/IES DOES IT COMPETE?
• WHICH STRATEGIES IT PURSUES IN INDUSTRY

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STRATEGY STACK LEVELS OF STRATEGIC MANAGEMENT

• FUNCTIONAL LEVEL
• BUSINESS FUNCTIONS COMPANYWIDE
• BUSINESS LEVEL
• OR BU/DIVISIONAL MANAGEMENT
• INCLUDES BOTH PRODUCT-LEVEL AND INDUSTRY-LEVEL
  STRATEGIES
• CORPORATE LEVEL
• CEO, BOARDS, AND CORPORATE STAFF

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STRATEGY-MAKING PROCESS

• FORMAL PROCESS HAS 5 STEPS
• SELECT FIRM MISSION GOALS
• ANALYZE EXTERNAL ENVIRONMENT
• ANALYZE INTERNAL ENVRIRONMENT
• SELECT STRATEGIES BASED ON ANALYSES
• IMPLEMENT STRATEGIES

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VISION, MISSION GOALS

• VISION IS LONG-TERM
• MISSION IS MID-TERM
• GOALS ARE SHORT-TERM
• RECOGNIZE THAT THESE TARGETS ARE INFLUENCED BY
• EXTERNAL ENVIRONMENT (NATIONAL CULTURE
  INSTITUTIONS)
• CORPORATE GOVERNANCE MODELS
• INTERNAL ENVIRONMENT (ORG. CULTURE)

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FIGURE 1.5 on p. 12

• LAYS OUT THE PLAN FOR THE BOOK AND THE COURSE
• CHAPTERS 1-3 ARE INTERRELATED WE GO THROUGH THEM
  QUICKLY
• SEE NEW SYLLABUS TODAYS HANDOUT
• CHAPTERS 4-12 ARE THE BEEF OF THE COURSE

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GOALS

• PRECISE MEASURABLE
• ADDRESS KEY/CRITICAL ISSUES
• CHALLENGING BUT REALISTIC
• SPECIFY TIME PERIODS WITHIN WHICH GOALS ARE
  REALIZED OR, AT LEAST, MEASURED
• STRETCH GOALS AS OPPOSED TO GOALS THAT DO NOT
  REQUIRE MUCH EFFORT

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SWOT ANALYSIS

• STRENGTHS
• WEAKNESSES
• OPPORTUNITIES
• STRENGTHS
• GIVE DIRECTION TO SELECTION IMPLEMENTATION OF
  STRATEGIES
• BUT ITS ONLY A START

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STRATEGY AS EMERGENT PROCESS

• STRATEGIC PLANNING IMPLEMENTATION ARE ONGOING,
  NEVER ENDING
• CONFLICT WITH FORMAL PLANNING PROCESSES?
• UNCERTAINTY MEANS FLEXIBILITY ADAPTABILITY ARE
  KEY
• LOWER LEVEL ORGANIZATIONAL MEMBERS, MORE NUMEROUS
  THAN ANY, ARE THE KEY TO STRATEGIC SUCCESS
• AUTONOMOUS ACTIONS
• UNPLANNED RESPONSES TO UNFORESEEN CIRCUMSTANCES
• HONDA FORTUITOUS CIRCUMSTANCES (LUCK), 22-24

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TO COPE WITH UNCERTAINTY

• STRATEGY AS SCENARIO PLANNING
• STRATEGY AND DECENTRALIZATION
• CHAN KIM RENEE MAUBORGNES PROCEDURAL JUSTICE
  (DISTRIBUTIVE JUSTICE)
• STRATEGIC INTENT
• PRAHALAD AND HAMELS NOTION
• AMBITIOUS GOALS HELD BY THE ORGANIZATIONAL
  MAJORITY

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STRATEGIC DECISION MAKING

• COGNITIVE BIASES
• PRIOR HYPOTHESIS BIAS
• ESCALATING COMMITMENT
• REASONING BY ANALOGY
• REPRESENTATIVENESS
• ILLUSION OF CONTROL (HUBRIS)
• GROUPTHINK
• DEVILS ADVOCACY
• DIALECTIC INQUIRY
• ANALOGOUS PAST INITIATIVES

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STRATEGIC LEADERSHIP

• VISION, ELOQUENCE CONSISTENCY
• ARTICULATION OF BUSINESS MODEL
• COMMITMENT
• BEING WELL INFORMED
• WILLINGNESS TO DELEGATE/EMPOWER
• ASTUTE USE OF POWER (OVER RESOURCES)
• EMOTIONAL INTELLIGENCE
• SELF-AWARE, SELF-REGULATE, EMPATHY, SOCIAL
  SKILLS, MOTIVATION BEYOND MONEY

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APPENDIX TO CHAPT. 1ENTERPRISE VALUATION

• ROIC
• ROIC NOPLAT/IC
• NOPLAT ?
• IC ?
• GROWTH RATE OF PROFITS
• INCREASE IN NET OPERATING PROFITS OVER A TIME
  PERIOD, USUALLY YEAR-BY-YEAR