BA 469 Strategic Management and Business Policy

1. BA 469Strategic Management and Business Policy

2. Focus: General Management of an organization An organization is “a system of consciously coordinated activities or forces of two or more persons.”

3. 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

4. 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

5. 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

6. 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.

7. 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.

8. The Strategic Management Process Chapter 1

9. 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

10. 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.

11. Why do some organizations succeed while others fail? • Depends of strategy or set of • Actions managers take to achieve one or more of an organization’s goals • Strategic management process • The process by which managers choose a set of strategies that will allow a company to achieve superior performance

12. Superior Performance and Competitive Advantage • Profitability • A measure of a company’s return on its invested capital • Superior performance • One company’s profitability relative to that of other companies in the same or similar business or industry

13. Firm-Specific Performance and Profitability • Competitive advantage • A firm’s 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 • Management’s model of how strategy will allow the company to gain competitive advantage and achieve superior profitability

14. Industry Structure and Profitability Return on Invested Capital in Selected Industries, 1997-2001 Data Source: Value Line Investment Survey

15. 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

16. 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,

17. Levels of Strategic Management

18. 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 organization’s resources be best employed to support business strategy?

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

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

21. 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

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

23. Internal Analysis • Resources • tangible • intangible • Capabilities

24. 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

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

26. 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 day’s work - - focus

27. 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

28. 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

29. 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)

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

31. Strategic Management Process • Not an exact science • Dealing with • Uncertainty • Scope • Personal judgment • Focus on process

32. ExercisesStrategy in Action • 1.1 and 1.2: Microsoft – we can assume that some sort of planning went into Microsoft’s original Internet strategy prior to 1994. How could they miss the Internet then? • 1.4: Duke Energy – explain Duke’s planning process using Scenarios.