1 introduction to strategy 2-a

Strategic
Management
An Introduction to Strategy

2
Learning Outline
 What is strategic management?
 Why is strategic management
important?
 Who is involved with strategic
management?
 Strategic management today

3
A definition of strategy
 Goal-directed decisions and actions in
which capabilities and resources are
matched with the opportunities and
threats in the environment.

4
Military influences in strategy
 “Strategos” referred to a general in
command of an army
 The art of the general
 By 450 B.C. it came to mean managerial skill
 By 330 B.C. it referred to the skill of employing forces
to overcome positions to create a system of global
governance
 Carl von Clausewitz “tactics…(involve) the
use of armed forces in the engagement,
strategy (is) the use of engagements for the
object of war” 1838 On War

5
Academic influences in strategy
 1911 Scientific management (Taylor) – Still in place
today (UPS), some consider it micromanaging
 HBS requires a class in Business Policy in 1912
 Adam Smith’s “invisible hand” (the market) gives way to
Alfred Sloan (GM CEO from 1923-1946) concept of the
“visible hand”—middle manager
 Chester Bernard influential book “The Executive” argues
that managers should pay attention to “strategic factors”
 Ronald Coase’s 1937 article “why firms exist” (Nobel
Prize in economics) and Joseph Schumpter’s concept of
“disruptive technologies” written in 1942 bring in
organizational economics
 Max Weber warns against bureaucratic organizations but
sees a shift toward this way of organizing

6
Recent influences in strategy
 1960s (Strategy and structure; Corporate
Strategy)
• 1963 Harvard business conference leads to
SWOT analysis
• BCG founded in 1963 “strategy boutique”
• Created the portfolio analysis
• Stars, dogs, cash cows, question marks
 1980s (Porter’s 5 forces)
 1990s (Resource based view of the firm)

7
Strategy vs. Strategic
Management
 Strategy
 A series of goal-
directed decisions
and actions
matching an
organization’s
skills and
resources with the
opportunities and
threats in its
environment
 Strategic
management
 Analyze current
situation
 Develop
appropriate
strategies
 Put strategies into
action
 Evaluate, modify,
or change
strategy

8
Strategy vs. Strategic
Management
 Strategy involves
 Organization’s
goals
 Goal-oriented
action
 Related decisions
and actions
 Internal strengths
 External
opportunities and
threats
 Strategic
management
 Planning
 Organizing
 Implementing
 Controlling

9
Basics of Strategic
Management
 Four aspects that set strategic
management apart
Interdisciplinary
• Capstone of the Business degree
External focus
• Competition
Internal focus
Future direction

10
Strategic Management
Process
Analyzing
Current
Situation
Deciding
on
Strategies
Putting
Strategies
in Action
Evaluating and
Changing
Strategies
Situation
Analysis
Strategy
Formulation
Strategy
Implementation
Strategy
Evaluation
Chapter 2 Chapter 3
Chapter 4
External
Analysis
Internal
Analysis
Chapter 5 Chapter 6
Chapter 7
Functional Competitive
Corporate

11
Process
 Situation Analysis
 Scanning & evaluating context
 Internal and External environments
 Strategy formulation
 Functional
 Competitive
 Corporate strategies

12
Levels of strategy
Competitive:
How are we going to compete in
our chosen business(es)?
Functional
What resources and capabilities do
we have to support the corporate and
competitive strategies?
Corporate
What direction are we going and
what business(es) are we in or do we
want to be in?

13
Process
 Strategy implementation
Process of putting strategies into
action
Consider implementation at each level
 Strategy evaluation
Was the strategy effective?
“Close the loop”

14
Who does strategy?
 The Role of the Board of Directors
 Elected representatives of the company’s stockholders
 Legally obligated to represent and protect stockholder’s
 The Role of Top Management
 Responsible for decisions and action of every employee
 Providing effective leadership
 Other Organizational Employees
 Implement— put the strategies into action and monitor
performance
 Evaluate—do the actual evaluations and take necessary
actions

15
The Role of the Board of
Directors
 Review and approve strategic goals and plans
 Review and approve organization's financial
standards and policies
 Approve an organizational philosophy
 Monitor organizational performance and
regularly review performance results
 Select, evaluate, and compensate top-level
managers
 Develop management succession plans
 Monitor relations with shareholders and other
key stakeholders

16
Concept of Strategic Intent
A company exhibits strategic
intent when it relentlessly
pursues an ambitious strategic
objective and concentrates its
competitive actions and energies
on achieving that objective!

17
Lessons about change: Built
to last
 Understand why superior companies
are better than peer companies which
are better than most companies
$1 invested in stock market in 1926
yields
• $420 in all other companies
• $960 in peer companies
• $6360 in superior (visionary) companies

18
Who are these companies
 Visionary
 3M
 Boeing
 GE
 IBM
 Motorola
 Nordstrom
 P&G
 Sony
 Wal-mart
 Peer companies
 Norton
 McDonnell Douglass
 Westinghouse
 Burroughs
 Zenith
 Melville
 Colgate
 Kenwood
 Ames

19
So what did they find?
 Great companies had BHAG
Big Hairy Audacious Goals
 What ever your values are “stick with
it”
 Deal with the AND, not the OR
 Seek Alignment (internally)

20
Characteristics of Strategic
Intent
 Indicates firm’s intent to stake out a
particular position over the long-term
 Involves establishing a BHAG - ”big, hairy,
audacious goal”
 Signals relentless commitment to winning

21
Example of BHAG
General Electric
• All businesses are held to a standard of
being #1 or #2 in their industries as well
as achieving good business results
John F. Kennedy
• Put a man on the moon and return safely
by the end of the decade

22
Crafting a Strategy
 An organization’s strategy deals with
 How to make the strategic vision a reality
and achieve target objectives
 The game plan for
• Pleasing customers
• Conducting operations
• Building a sustainable competitive advantage

23
Take Aways
 Strategy has become more important
• Information, technology, globalization
 Key ideas in the strategy making process
 Mission (who are we)
 Vision (where do we want to go)
 Strategic intent / BHAG (major goal)
 Strategy (specific plan at different levels)
 Ethics (code of conduct or values)
 Linkage & communication are important
 Avoid mission creep!

24
Take Aways
 Where strategy came from
 Strategic Management Process
 Who does strategy?

1 introduction to strategy 2-a

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1 introduction to strategy 2-a