BBA 473 Strategic Planning and Policy Analysis

1. BBA 473 Strategic Planning and Policy Analysis

2. Course Objective • To look at an organization from the CEO’s perspective and to understand the necessity of leadership and entrepreneurship in an organization. The organizations strengths, weaknesses, opportunities and threats must be analyzed in order to formulate a strategic plan of action, goals, and controls to meet those goals.

3. Course Outcomes • Develop the student’s capacity to think strategically about a company, its business position, and how it can gain sustainable competitive advantage. • Build skills in conducting strategic analysis in a variety of industries, especially to provide the student with a stronger understanding of competitive challenges.

4. Course Outcomes • Give students hands on experience in crafting business strategy, reasoning carefully about strategic options, using what-if analysis to evaluate alternatives, and making strategic decisions. • Improve student’s ability to manage the organizational process by which strategies get formed and executed.

5. Course Outcomes • Integrate the knowledge gained in earlier core courses in the business school curriculum. • Develop powers of managerial judgment and improve ability to create results oriented action plans. • Elevate importance of ethical principles, personal and company values.

6. What is Strategic Management?

7. “If you don’t know where you’re going, you’re liable to wind up someplace else!” -- Yogi Berra

8. “Plans are nothing;planning is everything!” -- Dwight D. Eisenhower

9. What do we mean by strategy? • Strategy is grounded in the array of competitive moves and business approaches management depends on to produce successful performance. • Strategy is management’s game plan for strengthening the organization’s position, pleasing customers, and achieving performance targets.

10. Without a strategy,managers have: No thought-out course to follow No roadmap to manage by No action program to produce the intended result

11. Good strategy andgood strategy executionare the most trustworthy signsof good management.

12. Three FundamentalStrategic Questions • Where are we currently? • Where do we want to be in the future? • How will we get there?

13. Strategic planning is a “disciplined effort to produce fundamental decisions and actions that shape and guide what an organization is,what it does, andwhy it does it.”

14. Benefits of Strategic Planning • Increased effectiveness • Increased efficiency • Improved understanding and better learning • Better decision making • Enhanced organizational capabilities • Improved communications and public relations • Increased political support

15. What does a company’sstrategy consist of? Company strategies concern: • How to satisfy customers • Broad or narrow product line? • Amount of customer service provided? • How to grow the business • Concentrate on a single business strategy? • Diversify into related or unrelated industries? • Expand globally?

16. How to respond to changing industry and market conditions • How best to capitalize on new opportunities • How to manage each functional piece of the business • How to achieve strategic and financial objectives

17. Strategic Competitiveness Achieved when a firm successfully formulates and implements a value-creating strategy Sustained Competitive Advantage Occurs when a firm develops a strategy that competitors are not simultaneously implementing Provides benefits which current and potential competitors are unable to duplicate Above-Average Returns Returns in excess of what an investor expects to earn from other investments with similar risk

18. Commitments Decisions Actions The Strategic Management Process Involves the full set of: which are required for firms to achieve: Strategic Competitiveness Sustained Competitive Advantage Above-Average Returns

19. Components ofStrategic Management Process • Recognizing and evaluating external and internal environment. • Development of strategic mission. • Strategy Formulation • Strategy Implementation • Evaluation of performance

20. Fundamental nature of competition is changing The pace of change is relentless.... and increasing • Rapid technological changes • Rapid technology diffusions Traditional industry boundaries are blurring, such as... • Dramatic changes in information and communication technologies • Computers • Telecommunications • Increasing importance of knowledge 21st Century Competitive Landscape

21. Traditional sources of competitive advantage no longer guarantee success The global economy is changing • People, goods, services and ideas move freely across geographic boundaries • New opportunities emerge in multiple global markets • Markets and industries become more internationalized New keys to success include: • Flexibility • Innovation • Speed • Integration 21st Century Competitive Landscape

22. Capital Market Firm Stock market/Investors Debt suppliers/Banks Product Market Organizational Primary Customers Suppliers Employees Managers Non-Managers Stakeholders: Groups who are affected by a firm’s performance and who have claims on its wealth The firm must maintain performance at an adequate level in order to maintain the participation of key stakeholders

23. Stakeholder Involvement Two issues affect the extent of stakeholder involvement in the firm Capital Market Organizational 1 How do you divide the returns to keep stakeholders involved? Product Market

24. Stakeholder Involvement Two issues affect the extent of stakeholder involvement in the firm Capital Market Organizational 2 How do you increase the returns so everyone has more to share? Product Market

25. Components of the General Environment Economic Demographic Sociocultural Industry Environment Competitive Environment Political/Legal Global Technological

26. General Environment • Demographic Segment • Population size • Age structure • Geographic distribution • Ethnic mix • Income distribution

27. General Environment • Economic segment • Inflation rates • Interest rates • Trade deficits or surpluses • Budget deficits or surpluses • Personal savings rate • Business savings rates • Gross domestic product

28. Political/Legal Segment General Environment • Antitrust laws • Taxation laws • Deregulation philosophies • Labor training laws • Educational philosophies and policies

29. Sociocultural segment General Environment • Women in the workplace • Workforce diversity • Attitudes about quality of worklife • Concerns about environment • Shifts in work and career preferences • Shifts in product and service preferences

30. General Environment • Technological Segment • Product innovations • Applications of knowledge • Focus of private and government-supported R&D expenditures • New communication technologies

31. Global Segment General Environment • Important political events • Critical global markets • Newly industrialize countries • Different cultural and institutional attributes

32. External Environmental Analysis A continuous process which includes • Scanning: Identifying early signals of environmental changes and trends • Monitoring: Detecting meaning through ongoing observations of environmental changes and trends • Forecasting: Developing projections of anticipated outcomes based on monitored changes and trends • Assessing: Determining the timing and importance of environmental changes and trends for firms’ strategies and their management

33. Industry Environment • A set of factors that directly influences a company and its competitive actions and responses. • Interaction among these factors determine an industry’s profit potential. • Threat of new entrants • Power of suppliers • Power of buyers • Product substitutes • Intensity of rivalry

34. Porter’s Five Forces Model of Competition Rivalry Among Competing Firms in Industry Threat of New Entrants Threat of New Entrants Bargaining Power of Suppliers Bargaining Power of Buyers Threat of Substitute Products

35. Intense rivalry often plays out in the following ways: Jockeying for strategic position Using price competition Staging advertising battles Increasing consumer warranties or service Making new product introductions Occurs when a firm is pressured or sees an opportunity Price competition often leaves the entire industry worse off Advertising battles may increase total industry demand, but may be costly to smaller competitors Rivalry Among Existing Competitors

36. Numerous or equally balanced competitors Slow growth industry High fixed costs High storage costs Lack of differentiation or switching costs Capacity added in large increments Diverse competitors High strategic stakes High exit barriers Rivalry Among Existing Competitors Cutthroatcompetition is more likely to occur when:

37. Industry Environment Competitive Environment Competitor Analysis The follow-up to Industry Analysis is effective analysis of a firm’s Competitors

38. Assumptions What assumptions do our competitors hold about the future of industry and themselves? Response Current Strategy What will our competitors do in the future? Does our current strategy support changes in the competitive environment? Where do we have a competitive advantage? Future Objectives How will this change our relationship with our competition? How do our goals compare to our competitors’ goals? Capabilities How do our capabilities compare to our competitors? Competitor Analysis

39. Chapter 2 External Environment What the Firm Might Do Sustainable Competitive Advantage Chapter 3 Internal Environment What the Firm Can Do

40. Challenge of Internal Analysis • How do we effectively manage current core competencies while simultaneously developing new ones? • How do we assemble bundles of resources, capabilities and core competencies to create value for customers? • How do we learn to change rapidly?

41. Financial * Physical * Human Resources * Organizational * Technological * Innovation * Reputation * Resources What a firm Has... What a firm has to work with: its assets, including its people and the value of its brand name Tangible Resources Resources represent inputs into a firm’s production process... such as capital equipment, skills of employees, brand names, finances and talented managers Intangible Resources “Some genius invented the Oreo. We’re just living off the inheritance.” F. Ross Johnson, Former President & CEO, RJR Nabisco

42. Capabilities What a firm Does... Capabilities represent: the firm’s capacity or ability to integrate individual firm resources to achieve a desired objective. Capabilities develop over time as a result of complex interactions that take advantage of the interrelationships between a firm’s tangible and intangible resources that are based on the development, transmission and exchange or sharing of information and knowledge as carried out by the firm's employees. Capabilities become important when they are combined in unique combinations which create core competencies which havestrategic value and can lead tocompetitive advantage.

43. Core Competencies What a firm Does... Valuable Rare Costly to Imitate Nonsubstitutable that is Strategically Valuable For a strategic capability to be a Core Competency, it must be:

44. Core Competencies What a firm Does... that is Strategically Valuable Core Competencies must be: Valuable Capabilities that either help a firm to exploit opportunities to create value for customers or to neutralize threats in the environment Rare Capabilities that are possessed by few, if any, current or potential competitors Costly to Imitate Capabilities that other firms cannot develop easily, usually due to unique historical conditions, causal ambiguity or social complexity Nonsubstitutable Capabilities that do not have strategic equivalents, such as firm-specific knowledge or trust-based relationships