BA 469 Strategic Management and Business Policy

Focus: General Management of an organization

An organization is a system of consciously coordinated activities or forces of two or more persons.

Learning Outcomes
Knowledge of strategic management tools and concepts Diagnose strategic situations (as described in cases) using these tools and concepts Contribute to class and small group discussions of these tools, concepts, and the strategic situations

To Measure Achievement of Learning Outcomes

Quizzes 40% of total grade
Usually when chapters are assigned Total of 8: 2 required, 5 of other 6 counted

Case reports (2) and case briefs (4) - 50% of total grade Participation in class discussions 10% of total grade

Requirements
Read Chapters and Cases (when no report is due) before coming to class Read assigned articles (will be posted in public folder) BECOME AN ACTIVE MEMBER OF THE CLASS

Requirements
Case briefs and reports are due beginning of class (see schedule) Chapter outlines will be posted, but may be used as background to lecture. Reading material will be added to create awareness of external issues affecting business.

Case Reports
State the major problem or issue Justification based on
Case facts As interpreted through an appropriate application of tools and concepts

Recommendations that
Address the problem or issue Are based on realities faced by organization

Justification for recommendation Note: do not summarize or merely restate case information.

The Strategic Management Process

Chapter 1

The Strategic Management Process

Corporate mission and goal Analyze external environment - - identify opportunities and threats Analyze internal environment - - identify strengths and weaknesses Formulate strategy Implement strategy

Strategic Management and You

Where do you intend to be 5 years from now?
At least most of you had some idea

Product of an internal assessment what are my strengths, preferences,etc. Most students, non-students for that matter usually do not assess external environment Strategy university degree (some will talk about a masters degree), funding, etc.

Why do some organizations succeed while others fail?

Depends of strategy or set of
Actions managers take to achieve one or more of an organizations goals

Strategic management process

The process by which managers choose a set of strategies that will allow a company to achieve superior performance

Superior Performance and Competitive Advantage

Profitability
A measure of a companys return on its invested capital

Superior performance
One companys profitability relative to that of other companies in the same or similar business or industry

Firm-Specific Performance and Profitability

Competitive advantage
A firms profitability is greater than the average profitability for all firms in its industry

Sustained competitive advantage

A firm maintains competitive advantage for a number of years

Business model
Managements model of how strategy will allow the company to gain competitive advantage and achieve superior profitability

Industry Structure and Profitability

Return on Invested Capital in Selected Industries, 1997-2001

Data Source: Value Line Investment Survey

Performance in Nonprofit Enterprises

Government agencies, universities, charities
Are not in business to make a profit Should use their resources efficiently and effectively Set performance goals unique to the organization Set strategies to achieve goals and compete with other nonprofits for scarce resources

Strategic Managers
General managers
Responsible for overall company performance or divisional performance

Functional managers
Responsible for supervising a particular task or operation Example head of accounting or marketing, chief financial officer,

Levels of Strategic Management

Key Question for Each Level

Corporate Strategy what business(es) should the organization be in? Business Strategy how should the organization compete? Functional Strategy how should the organizations resources be best employed to support business strategy?

Mission
What is our business? Who are we as an organization in relation to . . . (Fig 1.4, p.12)
Customer Needs met How satisfied

Values
What should guide how we conduct our business? Go about our work? Broad, all encompassing rules, for example
Integrity Service Empowering

Goals (and Objectives)

Precise and measurable
not always easy to achieve

Address crucial issue(s)

may be targeted at a particular priority

Challenging but realistic - - stretch factor Specify a time period - ok to set targets for a distant past, but need immediate targets to measure progress

External Analysis
Industry National International and Global Interaction between industry and the national and global environment

Internal Analysis
Resources
tangible intangible

Capabilities

Strategy Formulation
Addresses outcome of external and internal analysis Intent, a plan as to what our organization will be Defines functional areas within the organization to focus on

Implementation
How do we go about pursuing our intent? Who - - people How - - who does what, structure, etc. With what - - resources required

Reality Check: What do managers do?

Phone calls, meetings, run around from place to place . . Minor decisions -- Mr. so and so gets to use the office in the basement Major decisions - - lets launch, abort All in a days work - - focus

Reality Check: Can managers predict the future?

National economy - - Where will interest rates be next month? Will economic growth be 2.5% or 2.75%? Does it matter? Industry performance Actions of competition Actual capabilities and performance of internal resources, i.e. your people

Budget Variances:
Provides idea of how targets can be off Revenues volume and price per unit variance
Volume - - predict actual units sold Price - - anticipate price in the next year

Cost volume and cost per unit variance

estimate unit cost of production
labor, raw materials, machine time, etc.

administration or overhead component

Emergent vis Intended Strategy

Honda story is a classic; also consider Toys R Us Scenario planning to cover possibilities, find, if possible, unknown unknowns Listen to field people Balance commitment to goal and realities of a changing situation Serendipity (unintended, accidental, sometimes wonderful discoveries)

Cognitive Biases
Prior hypothesis - - rules of thumb, deeply held beliefs Escalating commitments Reasoning by analogy Representativeness

Strategic Management Process

Not an exact science Dealing with
Uncertainty Scope

Personal judgment Focus on process

Exercises Strategy in Action

1.1 and 1.2: Microsoft we can assume that some sort of planning went into Microsofts original Internet strategy prior to 1994. How could they miss the Internet then? 1.4: Duke Energy explain Dukes planning process using Scenarios.