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Strategic Management

Learn the Canoe Theory and how it applies to strategic management. Understand the importance of preserving the core, stimulating progress, and implementing the features of successful strategic management. Explore the concepts of vision, mission, corporate governance, and executive compensation.

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Strategic Management

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  1. Strategic Management GM 105 Dr. Lindle Hatton

  2. CANOE THEORY • Think of your organization as a long canoe • The canoe has a destination • Everyone in the canoe has a seat and paddle • Everyone is expected to paddle • Those who won’t paddle have to get out of the canoe • Those who prevent others from paddling have to re-adjust or get out of the canoe • There are no passengers in the canoe • The canoe theory understands crisis • The canoe theory says you have the right to be happy

  3. CANOE THEORY

  4. BUILT TO LAST Preserve the Core Stimulate Progress

  5. GOOD TO GREAT • Level 5 Leadership • First Who…Then What • Confront the Brutal Facts • The Hedgehog Concept • A Culture of Discipline • Technology Accelerators • The Flywheel and The Doom Loop

  6. Private versus Public Organizations • Purpose • Goals • Financing • Decision-Making • Key Stakeholders

  7. Strategic Management Versus Strategic Planning

  8. Features of Successful Strategic Management • Has support of organization’s executive officer. • Is user friendly. • Is participatory, not left to planners. • Is flexible. • Leads to resources decisions. • Engages and motivates all staff. • Is fresh and continuous, not static and stale.

  9. Features (Continued) • Is Proactive • Not a Quick Fix • Part of Quality Management • Payoffs Increase over Time

  10. Lessons Learned About Strategic Planning • Plans must be tailored to organization. • No one size ‘fits’ all. • Time to complete takes longer – expect 50% more than planned. • Process needs a shepherd. • Visionaries needed at beginning and detail types thereafter.

  11. Why Managers Don’t Plan • Time Consuming • High Demands • Not Rewarded • Executives Don’t Support It • Too Risky

  12. Strategic Management Model • Scanning • Where are we now? • Strategy Formulation • Where do we want to be? • Strategy Implementation • How do we get there? • Measurement/Performance • How do we measure our progress?

  13. Strategic Management Model • Strategy Formulation • Where do we want to be? • Vision • Mission • Values • Goals • Objectives

  14. VISION Vision without Action is a Daydream Action without Vision is a Nightmare • Not Optional • Stretch – 30+ Years • 8-10 Words in length • Future State • Brief and Memorable

  15. VISION (Continued) • Inspiring and Challenging • Descriptive of the Ideal

  16. Vision Examples • “Light the Fire Within” • “A Safer Future for All Communities” • “See the Mountains – Breathe Freely” • To Be the Happiest Place on Earth • To Be the World’s Best Quick Service Restaurant

  17. Vision Levels of People • Some people never see it. (Wanderers) • Some people see it but never pursue it on their own. (Followers) • Some people see it and pursue it. (Achievers) • Some people see it and pursue it and help others see it. (Leaders) John Maxwell, Developing The Leader Within You, 1993.

  18. VISION EXERCISE

  19. Mission Statement In the absence of a clearly defined direction one is forced to concentrate on confusion that will ultimately consume you.

  20. MISSION • What is our purpose? • Describes current state • Timeline is 3-5 Years • Builds on our distinctive competencies • Tends to focus on Core Business • 30-35 Words in length

  21. Mission Examples • “To Lead All Communities in Disaster Preparedness, Mitigation, and Recovery by Maximizing Assistance and Support.” • “Caltrans Improves Mobility Across California.” • To produce superior financial returns for our shareholders as we serve our customers with the highest quality transportation, logistics, and e-commerce.

  22. MISSION EXERCISE

  23. Corporate Governance • What is it? • Codes of Governance • Role of the Board of Directors • Role of Top Management Team • Executive Compensation

  24. Corporate Governance • System by which a firm’s owners control its affairs. • Does it work?

  25. Codes of Governance • The Cadbury Code: 1992 • Sarbanes-Oxley Act: 2002 • Public Company Accounting Oversight Board • “Triple bottom line” • Four major issues: • Ownership structure and influence • Fianacial Stakeholder rights and relations • Financial transparency and information disclosure • Board structure and processes (audit)

  26. Role of the Board of Directors • Monitor • Evaluate and influence • Initiate and determine • Organization of Board • Insiders versus outsiders • CEO/chair position • Committees’ Effectiveness

  27. Role of Top Management Team • Who is the TMT? • Executive Leadership and Strategic Vision • Articulates strategic vision for corporation • Sets the model for others to identify and follow • Communicates high performance standards and builds confidence in followers’ abilities to meet standards • Managing strategic planning process

  28. Executive Compensation • Incentive alignment • Executive Ownership • Incentive compensation • Salary • Bonus • Stock Options • LT Bonus

  29. VALUES • Guiding Principles • Help establish Culture • Part of Preserving the Core • Core Ideology

  30. Value Examples • CHP PRIDE • HP WAY • J & J Credo • “Build the Spirit of the Place”

  31. Ethical Awareness Model • Organizational Ethics • Individual Ethics • Personal Values

  32. VALUES EXERCISE

  33. Strategic Management Model • Scanning: • Where are we now? • Macro Analysis (STEP, PESTEL, ETC.) • Industry Analysis – Competitive Intelligence • SWOT Analysis • Internal versus External Elements

  34. Why Scan? • To know your position in the environment • To respond effectively to constant change • To see the organization as a whole • To avoid surprises • To survive • To lay the foundation for strategic issues

  35. SCANNING: Key Environmental Variables • Macro Environment: STEP, PESTEL • Task Environment: Industry • Internal Environment: Focal Organization

  36. Socio-Cultural Variables • Lifestyle Changes • Career Expectations • Regional Shifts in Population • Life Expectancies • More women in workforce • Greater concern for fitness • Postponement of family formation • Increase in temporary workers

  37. Technological Variables • Total Federal Spending for R&D • Total Industry Spending for R&D • Focus of Technological Efforts • Patent Protection • Wireless Communications • Nanotechnology • Productivity Improvements • Genetic engineering

  38. Economic Variables • GDP Trends • Interest Rates • Money Supply • Inflation Rates • Unemployment Levels • Wage/Price Controls • Energy Availability & Cost • Disposable & Discretionary Income

  39. Political-Legal Variables • Antitrust Regulations • Tort Reform • Environmental Protection Laws • Taxation at local, state, federal levels • Hiring and Promotion Laws • Americans Disabilities Act of 1990 • Sarbanes-Oxley Act of 2002

  40. Demographic Variables • Aging Population • Rising affluence • Changes in Ethnic Composition • Geographic distribution of population • Disparities in income levels

  41. Global Variables • Increasing Global Trade • Currency Exchange Rates • Emergence of Indian and Chinese Economies • Trade agreements (NAFTA, EU, ASEAN) • Creation WTO

  42. STEP EXERCISE • Socio-Cultural • Technological • Economic • Politico-Legal

  43. Industry Analysis • 6 Forces Analysis • Industry Competitors • Suppliers/Vendors • Customers/Clients • Potential New Entrants • Substitutes • Other Stakeholders • Role of Complementors

  44. New Entrants and Entry Barriers • Absolute cost advantages • Access to inputs • Government policy • Economies of scale • Capital requirements • Brand identity • Switching costs • Access to distribution • Proprietary products

  45. Buyer Power (Channel and End Consumer) • Buyer volume and information • Brand identity • Price sensitivity • Threat of backward integration • Product differentiation • Substitutes

  46. Supplier Power • Supplier concentration • Differentiation of inputs • Switching costs • Threat of forward integration • Cost relative to total purchases in industry

  47. Substitutes • Switching costs • Buyer inclination to substitute • Variety of substitutes • Price-performance tradeoff of substitutes • Necessity for product or service

  48. Degree of Rivalry • Exit barriers • Industry concentration • Fixed costs • Industry growth • Intermittent overcapacity • Switching costs • Brand identity • Diversity of rivals • Corporate stakes

  49. Other Stakeholders • Employees • Unions • Government • Trade and Professional Associations • Other Direct Influencers

  50. Role of Complementors • Number of complements • Relative value added • Difficulty of engaging complements • Buyer perception of complements • Complement exclusivity • Tend to increase profits by increasing demand for an industry’s products

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