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Today: The Concept of Strategy

Administrative issues:Class count: add/drop

Seating chart

Current Events

How to be Successful at Case Write-ups

Assign Case #1: Wal-mart Stores, Inc.

WEBSITE: www.sba.pdx.edu/faculty/stephens/ss.html

NotecardsName

Phone Number

E-mail Address

Major & Class Standing

Career or Personal Interest(s)

Work Experience (industry, length of time)

Business Strategy and Policy

Fundamental Concepts in Strategic Thinking

Modeling your Thought

Model of Strategic ManagementAnalysis/Scanning

External Analysis (Chapter 3)

Internal Analysis (Chapter 4)

Strategy Implementation

Organizing (Chapter 8)

Staffing

(Chapter 9)

Strategy Formulation

Business Level (Chapter 5)

Corporate Level (Chapter 6)

Functional Level (Chapter 7)

Evaluation & Control

Metrics (Chapter 10)

Strategic Management Process

Strategic Inputs: Internal and External Scanning

Strategic Actions: Formulation and implementation

of strategy

Strategic Outcomes: Above, at or below average

returns

Intro to Strategic Management

From Organizational Vision to Tactical Steps

Define the Organization:

Vision

Mission Statement

Understand the Operating Environment

External Environment (Threats and Opportunities)

Internal Conditions (Strengths and Weaknesses)

Determine Strategic Alternatives

Formulate Strategy (long term)

Implement Strategy through Tactics (short term)

Role of Strategy Business - Link Between Strategy, Resources, & Organization

Position

Resources& Capabilities

Organization

Strategy: Levels and Dynamics

Corporate: general perspective towards growth and management of various business units, product lines, functional areas

Business: Strategic Business Units (SBUs), focus on improvement of competitive position of products and services

Functional: focus on marketing, R & D, etc. to achieve SBU and overall corporate objectives.

The Levels of Strategy

R& D

H R

Finance

Production

M ktg/Sales

D iv ision A

R& D

H R

Finance

Production

M ktg/Sales

D iv ision B

R& D

H R

Finance

Production

M ktg/Sales

D ivis ion C

C orpora teH eadquarte rs

CorporateDetermining the Portfolio

Businesses

Business Units/Divisions – Positioning within the Industry

Functional – Operational and Marketing

Strategies, etc.

Path to Realized Strategy

Deliberate Strategy Emergent Strategy

Realized Strategy

Intended Strategy

Unrealized

Strategy

Phases of Strategy Development

Phase 1 – Basic Financial Planning: operational control

Phase 2 – Forecast-based Planning: plan for growth

Phase 3 – External Oriented Planning: respond to markets and competitors

Phase 4 – Strategic Management: seek sustainable competitive advantage

Initiation of StrategyTriggering Events

Performance Gap

OwnershipThreat

InterventionNew CEO

What makes a decision strategic?

Rare – Have no precedent

Consequential – Commitment of resources

Directive - Cascade of precedents

How Did Strategy Develop?

Harvard in the 1960’sHow do the problems of the general manager differ from those of functional managers?How do we look at the business from a holistic perspective?How do we look at the relationship between the business and its competitive environment?How do managers exercise leadership and manage the process of strategic change?

Our Definition of Strategy

Strategy is the set of policies and plans relating the different functional areas of a business to each other and the whole firm to its competitive environment.

In this context, the objective of strategy is to create a sustainable competitive advantage for the firm.

Strategy Relates A Business To Itself and Its Environment

Mktg. Oper.

Strategy

Finance

Acctg. H.R.

Competitive Environment

GovernmentRegulation

Technology

IndustryEnvironment

National/Int’l Economies

OtherCompetitors

RelatedIndustries

Natural Competition

Evolutionary vs. revolutionary

Natural competition is expedient in interaction but slow to alter species’ behavior

Strategic competition is deliberate and reasoned but consequences may be radical

Fundamental inhibitions:Failure

Rivals’ response or anticipation

Modes of Strategic Thinking(Mintzberg and Quinn)

Entrepreneurial

Adaptive

Planning

Logical incrementalism

How did you get your textbook?University bookstore

www.amazon.com

www.bn.com

www.half.com

www. borders.com

Question: How to describe their business models?

Target customer; Competitive edge;

Strategy is always around us!!!

Corporate Governance and Social Responsibility

Organization and Roles

Defining the Corporation

What is a corporation?

Relationships within corporate governance

How does a corporation function?

Corporate Governance

In a Corporation:

Shareholders share in profits without operating responsibilities

Management operates company without providing the funds

Board of directors approves decisions that will affect long run performance.

Corporate Governance is . . .the relationship between these three parties.

Role of Board of Directors

Setting corporate strategy

Hiring/firing CEO & top management

Controlling, monitoring and supervising top management

Reviewing and approving use of resources

Representing stakeholder interests

What is the idea of “due care”?

Corporate Governance

Board of Directors

Inside Directors - employees (or alumni) of firm

Outside Directors - not employees of firm

Greater Objectivity(for Outside) vs.Greater Competence (for Inside)

Corporate Governance

Interlocking Directorates

Direct: two firms share a director

Indirect: two directors from different firms sit on board of third firm

Benefits: Knowledge about external (competitive, regulatory) trends.

Corporate Governance

Responsibilities of Top Management:

The CEO:

Articulates the strategic vision

Acts as a role model

Communicates performance standards

Friedman’s View of Social Responsibility

Fundamentally subversive doctrine

Corporation’s single goal is to increase profits

Four Responsibilities of Business(Carroll)

Economic (must do)

Legal (have to do)

Ethical (should do)

Discretionary (might do)Social responsibilities

Can making enough profit to cover future costs be considered a social responsibility of a firm?

Class Discussion

From the article by Meyer in Directorship:What are the pros and cons to requiring stock ownership by executives? What about setting a minimum ownership level?

What are the pros and cons to using stock ownership for recruitment purposes?

Next Time: Wal-Mart Case

Historically, what has been Wal-Mart’s “strategy”?How has that strategy created a competitive advantage for Wal-mart?What competitive issues currently face Wal-mart?What is the best strategic direction for Wal-mart? Why?

Next Time: Environmental Scanning

Current Events

Read Chapter 3: Environmental Scanning

Porter’s Five Forces (handout in class)

Analyze Wal-mart Case

Teams Chosen

Assign Case #2: RCA Records

WEBSITE: www.sba.pdx.edu/faculty/stephens/ss.html