Strategic

Management
An Introduction to Strategy
Learning Outline

 What is strategic management?

 Why is strategic management
important?
 Who is involved with strategic
management?
 Strategic management today

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A definition of strategy

 Goal-directed decisions and actions in

which capabilities and resources are
matched with the opportunities and
threats in the environment.

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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

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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

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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)

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 Why is strategic management
important?

 Gives everyone a role

 Makes a difference in performance levels
 Provides systematic approach to
uncertainties
 Coordinates and focuses employees

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Why Strategy?

 To change, an organization needs

 Burning Platform
 Vision
 Leadership
 Strategic Management
 Political Management

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

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 Strategy vs. Strategic
Management
 Strategy involves  Strategic
 Organization’s management
goals  Planning
 Goal-oriented
 Organizing
action
 Related decisions  Implementing

and actions  Controlling

 Internal strengths
 External
opportunities and
threats

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

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 Strategic Management
Process
Analyzing Deciding Putting Evaluating and
Current on Strategies Changing
Situation Strategies in Action Strategies
Situation Strategy Strategy Strategy
Analysis Formulation Implementation Evaluation

Externa
l FunctionalCompetitive
Chapte Chapter
Analysi 3
r2 Chapter 5Chapter 6
s
Interna
l Corporate
Chapter
Analysi 4 Chapter 7
s
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Strategic Management
Process
 Situation Analysis
 Scanning & evaluating context
 Internal and External environments

 Strategy formulation
 Functional
 Competitive
 Corporate strategies

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 Levels of strategy
Corporate
What direction are we going and
what business(es) are we in or do we
want to be in?

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?

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Strategic Management
Process
 Strategy implementation
 Process of putting strategies into
action
 Consider implementation at each level

 Strategy evaluation
 Was the strategy effective?
 “Close the loop”

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 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

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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

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Who is on the board of
directors?
 Chairman of the board
 Chief Executive officer (CEO)
 President
 Chief Operating officer (COO)
 Other C’s
 Chief Financial officer
 Chief Information officer
 Inside board members
 Outside board members

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 The Role of Top
Management
Determining
Organizational
Purpose or Vision

Establishing Exploiting and

Appropriately Maintaining
Balanced Controls Core Competencies

Effective
Strategic
Leadership
Developing
Emphasizing Human Capital
Ethical Decisions
and Practices Creating and
Sustaining Strong
Organizational Culture
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Strategic Management
Principle

Effective strategy-making
begins with a vision of where
the organization needs to
head!

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Elements of a Strategic Vision

Use the mission statement as a

starting point

Develop a strategic vision that

spells out a course to pursue

Communicate the vision in a

clear and exciting manner
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 Characteristics of a
Mission Statement
 Defines current business activities
 Highlights boundaries of current
business
 Conveys
 Who we are,
 What we do, and
 Where we are now

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 Characteristics of a
Mission Statement
 Company specific, not generic —so
as to give a company its own identity
 A company’s mission is not to
make a profit !
 The real mission is always—“What
will we do to make a profit?”

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 Examples of Missions

Microsoft
Corporation

Empower people through great

software anytime, anyplace,
and on any device.
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 Examples of Missions

Otis Elevator

Our mission is to provide any

customer a means of moving people
and things up, down, and sideways
over short distances with higher
reliability than any similar enterprise in
the world.
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 Examples of Mission

American Red Cross

The mission of the American Red Cross is

to improve the quality of human life; to
enhance self-reliance and concern for
others; and to help people avoid, prepare
for, and cope with emergencies.
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 Ritz-Carlton Hotels

The Ritz-Carlton Hotel is a place where the

genuine care and comfort of our guests is our
highest mission.
We pledge to provide the finest personal
service and facilities for our guests who will
always enjoy a warm, relaxed yet refined
ambiance. The Ritz-Carlton experience enlivens
the senses, instills well-being, and fulfills even
the unexpressed wishes and needs of our
guests (vision)
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 Characteristics of a
Strategic Vision
 Charts a company’s future
strategic course
 Defines the business makeup for 5
years (or more)
 Specifies future technology-
product-customer focus

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 Communicating the Vision

 An exciting, inspirational vision

 Challenges and motivates workforce
 Arouses strong sense of organizational
purpose
 Induces employee buy-in
 Galvanizes people to live the business

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 Value of a Well-Conceived
Strategic Vision and Mission

 Crystallizes long-term direction

 Reduces risk of rudderless
decision-making
 Conveys organizational
purpose and identity
 Keeps direction-related actions of lower-
level managers on common path
 Helps organization prepare for the future

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 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!

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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

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

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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)

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 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

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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

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 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

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 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!
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Take Aways

 Where strategy came from

 Strategic Management Process

 Who does strategy

 Next week
 Read Airline Simulation Book (1-35)
 Bring Laptop

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