1

Introduction to Strategic Management

BUS496Strategic Management & PolicyProf. Steven E. Phelan

2

Exercise

In groups of 3 to 5 answer:What is the difference between… Planning & strategy A business plan, corporate plan, &

strategic plan Strategy & tactics A goal & an objective A vision & a mission

3

Comparison: military and corporate strategy

Military Fight to win Zero-sum-game:

cooperation extremely difficult if at all possible

Discrete with limited timeframe

Corporate Compete to

win/gain Positive-sum-game

likely: cooperation not easy but very likely

Continuous

4

Key issues of strategic management Why do some organizations succeed while others

fail? How do I make my firm succeed? What is strategy?

An action a company takes to attain one or more of its goals (textbook)

An action a company takes to attain superior performance (textbook)

An action taken to increase the firm’s (perceived?) value to its present or future owners (in a for-profit enterprise)

How do these definitions differ? Why should managers care about the last definition?

5

Firm-Specific Performance and Profitability Competitive advantage

A firm’s profitability is greater than the average profitability for all firms in its industry

Sustained competitive advantage A firm maintains competitive advantage for a

number of years Business model

Management’s model of how strategy will allow the company to gain competitive advantage and achieve superior profitability

6

What is the strategic management process?

The process by which managers choose, implement, and adapt a set of strategies for the enterprise to pursue its vision.

Distinguish between strategic (what to do?), tactical (how and when to do it?) and operational (do it now!) decisions.

7

Define Vision/Mission and Set Top-Level GoalsDefine Vision/Mission and Set Top-Level Goals

External Analysis of Opportunities and ThreatsExternal Analysis of Opportunities and Threats

Internal Analysis of Strengths and WeaknessesInternal Analysis of Strengths and Weaknesses

Selection of Appropriate StrategiesSelection of Appropriate Strategies

Implementation of Chosen StrategiesImplementation of Chosen Strategies

Basic Planning Model

Basic Strategic Planning ModelBasic Strategic Planning Model

8

Levels of Strategic Management

9

Strengths and Weaknesses Opportunities and Threats

(SWOT Analysis)

Strategic ChoiceStrategic ChoiceBusinessBusiness

FunctionalFunctionalGlobalGlobal

CorporateCorporate

SWOT and Strategic Choice

10

The Mission or Vision What the company is trying to achieve over

the medium to long term The Boeing Company in 2016:

“People working together as a global enterprise for aerospace leadership”

Microsoft: “To empower people through great software,

any time, any place, on any device”

11

Values How managers and employees should

conduct themselves Organizational culture

The set of values, norms, and standards that control how employees work to achieve an organization’s mission and goals

Often seen as a source of competitive advantage In high-performing organizations, values

respect the interests of key organizational stakeholders.

12

Values at Nucor “Management is obligated to manage Nucor in

such a way that employees will have the opportunity to earn according to their productivity.”

“Employees should be able to feel confident that if they do their jobs properly, they will have a job tomorrow.”

“Employees have the right to be treated fairly and must believe that they will be.”

“Employees must have an avenue of appeal when they believe they are being treated unfairly.”

13

Strategic Leadership

Vision, eloquence, and consistency Commitment to the vision

Being well informed Willingness to

delegate and empower Astute use of power

Emotional intelligence

14

Intended and Emergent Strategies

15

Strategy as an Emergent Process Strategy making in an unpredictable world

Creates the necessity for flexible strategic approaches.

Strategy making by lower-level managers Strategy evolves through autonomous action.

Serendipity and strategy Accidental discoveries and happenstances can

have dramatic effects on strategic direction. Intended and emergent strategies

Realized strategies are combinations of intended and emergent strategies.

16

Different processes…

17

Strategic Planning in Practice

Planning under uncertainty Scenario planning for dynamic environmental

change Ivory tower planning

Lack of contact with operational realities The importance of involving operating managers Procedural justice in the decision-making process

Engagement, explanation, and clarity of expectations Planning for the present: Strategic Intent

Recognition of the static nature of the strategic fit model

Strategic intent in focusing the organization on winning by achieving stretch goals

18

Improving Strategic Decision Making Cognitive biases systematically influence

the rationality of decision makers.

19

Groupthink and Strategic Decisions Pitfalls of groupthink

Failing to question underlying assumptions.

Coalescing around a single person or policy.

Filtering out conflicting information. Developing after-the-fact rationalizations. Having an emotional (nonobjective)

commitment to an action.

20

Techniques for Improving Decision Making

Two decision-making processesthat counteractcognitive biases and groupthink.

21

Exercises

Design a planning system for an internet role-playing company

Yahoo Case