.Part 1 Strategy Analysis

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LO 2-1 Explain the role of vision, mission, and values in the strategic management process.LO 2-2 Describe and evaluate the role of strategic intent in achieving long-term goals.LO 2-3Distinguish between customer-oriented and product-oriented missions and identify strategic implications.LO 2-4Critically evaluate the relationship between mission statements and competitive advantage.LO 2-5Explain why anchoring a firm in ethical values is essential for long-term success.LO 2-6Compare and contrast strategic planning, scenario planning, and strategy as planned emergence, and discuss strategic implications.

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Chapter Case 2 Teach For America: Inspiring Future LeadersTFA Mission: Eliminate educational inequalityStarted by an undergraduate student, Wendy KoppInspiring mission Provide a meaningful service option for bright young peopleMake teaching to the neediest high prestige Over 45,000 applicants for 4,500 jobsTFA Video

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Teach For America Inspiring OthersWhat are the key issues in the opening case?How was TFA able to successfully recruit? Established an inspiring missionAppealing to the target demographicClear communication of the goals of the organizationThe program is highly selectiveWould TFA have succeeded as a for-profit firm?

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Vision, Mission, and ValuesWhat are visionary organizations? Begin with the end in mindSimilar to designing & building a home Frank Lloyd WrightVision what to ultimately accomplish? Mission what is the firm about? Values how to accomplish goals?

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Teach For America: Vision, Mission, and ValuesVisionEXHIBIT 2.1One day, all children in this nation will have the opportunity to attain an excellent education.MissionEliminate educational inequality by enlisting our nations most promising future leaders in the effort.ValuesRelentless pursuit of results.Sense of possibility.Disciplined thought.Respect and humility.Integrity.

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Vision, Mission, and ValuesWhat is forming strategic intent?

Staking out a desired leadership position in the long term that far exceeds a company's current situation

Often used in Japanese corporate settingsCanon will "beat Xerox"

Effective use of stretch goalsCompetitive advantage for tomorrow

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1*STRATEGY HIGHLIGHT 2.1Winning Through StrategicIntent: The Pocketable RadioSmall Japanese Company after WWII, founded by Masura IbukaInvented an electric rice cookerWanted to license the transistor from Bell Labs in U.S.Japanese Government & Bell Labs both said NOPersisted with request Finally,1953 got transistor.Beat Bell Labs to pocket-sized radio1957 Launched worlds FIRST pocket radio1958 Changed company name to.

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LO 2-1 Explain the role of vision, mission, and values in the strategic management process.LO 2-2 Describe and evaluate the role of strategic intent in achieving long- term goals.LO 2-3Distinguish between customer-oriented and product-oriented missions and identify strategic implications.LO 2-4Critically evaluate the relationship between mission statements and competitive advantage.LO 2-5Explain why anchoring a firm in ethical values is essential for long-term success.LO 2-6Compare and contrast strategic planning, scenario planning, and strategy as planned emergence, and discuss strategic implications.

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Vision, Mission, and ValuesCustomer-Oriented MissionsDefine the firm in terms of solutions for customersDisney: "Make People Happy"Enhanced strategic flexibility NOT the same as listening to customers

Product-Oriented MissionsDefine the firm in terms of products or servicesU.S. Railroads: "Safest North American railroad Missed the opportunity to move into delivery before UPS & Federal Express

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Defining the Business: The Starting Point of StrategyExample: Fall of the Railroads

They let others take customers away from them because they assumed themselves to be in the railroad business rather than in the transportation business. The reason they defined their industry wrong was because they were railroad oriented instead of transport oriented; they were product oriented instead of customer oriented.

Theodore Levitt Market Myopia

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Mission Statements andCompetitive AdvantageDo mission statements help gain and sustain competitive advantage? Results are inconclusiveNeed strategic commitments to succeed (e.g., Boeing Dreamliner)Positive associations Visionary firms, like MerckNegative associations Better World BooksNo associations Intel

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LO 2-1Explain the role of vision, mission, and values in the strategic management process.LO 2-2Describe and evaluate the role of strategic intent in achieving long-term goals.LO 2-3Distinguish between customer-oriented and product-oriented missions and identify strategic implications.LO 2-4Critically evaluate the relationship between mission statements and competitive advantage.LO 2-5 Explain why anchoring a firm in ethical values is essential for long-term success.LO 2-6Compare and contrast strategic planning, scenario planning, and strategy as planned emergence, and discuss strategic implications.

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Living the ValuesEthical standards and norms that govern behavior.

McKesson (health care) ICAREShared principles a framework for daily interactions

Dark side of valuesBernard MadoffPonzi scheme estimated at $65 billion in fraudEnronOne of the largest bankruptcies in U.S. historyOver 50,000 jobs lost (Enron and Arthur Andersen)

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LO 2-1Explain the role of vision, mission, and values in the strategic management process.LO 2-2Describe and evaluate the role of strategic intent in achieving long-term goals.LO 2-3Distinguish between customer-oriented and product-oriented missions and identify strategic implications.LO 2-4Critically evaluate the relationship between mission statements and competitive advantage.LO 2-5 Explain why anchoring a firm in ethical values is essential for long term success.LO 2-6Compare and contrast strategic planning, scenario planning, and strategy as planned emergence, and discuss strategic implications.

2013 by The McGraw-Hill Companies, Inc. All rights reserved.

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The Evolution of Strategic Management

DOMINANTTHEME

MAINISSUES

CONCEPTS&TECHNIQUES

IMPLEMENT-ATION

1950s1960sEarly-mid Late1970sLate 1980s Late 1990s1970s early 1980searly 1990s early 2000s

BudgetaryCorporateCorporate Analysis ofQuest for Strategicplanning &planningstrategy industry &competitive innovationcontrol competitionadvantage The New EconomyFinancial controlPlanning growthDiversifica- PositioningCompetitive Innovation & ionadvantage knowledge

BudgetingForecasting &Portfolio Analysis ofResource Dynamic project appraisalinvestmentplanning. industry &analysis. sources of planningSynergy competitionCase advantagemarket competences Knowledgeshare management cooperation

Emphasis onRise ofDiversifi- Industry/market Restructuring Virtual orga-financialcorporate planningcation. selectivity. BPR. nization.managementdepartmentsQuest for Active asset Refocusing Alliances & formalglobal management Outsourcing Quest forplanningmarket share critical mass

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Strategy as Strategic Planning Top-down rational planningDefine mission, vision, and goal (strategic intent)External analysis of opportunities and threatsInternal analysis of strengths and weaknessesCreate strategic fit through SWOTFormulate appropriate strategyImplement chosen strategyMonitor performance and modify if necessary

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Identify current mission and strategic goals

Conduct competitive analysis:strengthsweaknessopportunitythreats

Develop specific strategies:corporatebusinessfunctional

carry out strategic plans

maintain strategic control

assess organisational factors

assess environmental factors

Strategy implementation

Strategy formulation

*Fundamental Question of the Choice of Goals: Planning for what Purpose(s)?Profitability (net profits)Efficiency (low costs)Market ShareGrowth (e.g., increase in total assets, sales, etc)Shareholder Wealth (dividends plus stock price appreciation)Utilization of Resources (e.g., ROE, ROI)ReputationContribution to Stakeholders (e.g., employees, society)Survival (avoid bankruptcy)

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Strategy as Scenario Planning Scenario planning Envision different "what-if" plansGenerates a dominant plan Must implement the most probable option Keeps other scenarios in the event of changes "Arab Spring" impact on the oil industry?Good example of the AFI frameworkScenario planning at Shell

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EXHIBIT 2.2 Scenario Planning in the AFI Strategy Framework

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1*STRATEGY HIGHLIGHT 2.2Shells Future ScenariosPetroleum industry use of scenario planningShell made right move in the 1960s Again in the 1980s Communism might fall in Soviet UnionNow projecting 20% energy from renewables by 2025

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Strategy as Planned EmergenceStrategic InitiativeGoogle 50% of the firm's new products come from the "20% rule" (one day a week on own ideas) Enron Wind investment by GE

Mintzberg Planned Emergence

Strategy can come from top or bottom: Some intended strategies drop off in the processAllows for new emerging ideas to become realizedResource allocation process Serendipity can have dramatic effects

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Strategic Initiatives and SerendipityJapan Railways

Constructing a bullet train through the mountains north of Tokyo, which required many tunnels

Persistent flooding

Complex engineering plans to drain the water

Maintenance worker suggested that the fresh water off the mountains should not be drained, but rather should be bottled

1,000 vending machines on 1,000 railroad platforms in and around Tokyo, and home delivery of water, juices, and coffee followed.

The employees proposal had turned this bottom-up strategy into a multi-million dollar business.

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EXHIBIT 2.3Mintzbergs Planning Framework

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Strategy Making : Design or Process?

Strategy as Design

Planning andrational choice

INTENDEDSTRATEGY

Many decision makersresponding to multitude ofexternal and internal forces

REALIZED STRATEGY

EMERGENT STRATEGY

Strategy as Process

Mintzbergs Critique of Formal Strategic Planning:The fallacy of prediction the future is unknownThe fallacy of detachment -- impossible to divorce formulation from implementationThe fallacy of formalization --inhibits flexibility, spontaneity, intuition and learning.

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1*STRATEGY HIGHLIGHT 2.3Its Not What We Do!StarbucksAutonomous action of mid-level managerTenacity and persistence of a store manager in Southern CaliforniaRisk of failurePossible career-limiting actionOrganization must be willing to accept new ideasFrappuccino was born! Contributing 20% of the $11billion in revenues for Starbucks in 2010.

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BARTOL, MANAGEMENT: A PACIFIC RIM FOCUS 3E McGraw-Hill Australia 2001

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Managers as decision makers Assumptions of the Rational Model

Rationaldecisionmaking

An optimal decision is possible

All relevant information is available

All relevant information is understandable

All alternatives are known

All possible outcomes known

The rational model virtually ignores the high time constraints that most mangers face. Without the constant pressure to act either immediately or very soon, managers would have the luxury of being able to gather all relevant information, to understand that information, be sure that all alternatives are known, and perhaps to calculate all possible outcomes.

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BARTOL, MANAGEMENT: A PACIFIC RIM FOCUS 3E McGraw-Hill Australia 2001

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Managers as decision makers Satisficing

Satisficingdecisionmaking

Time constraints

Limited ability to understand all factors

Inadequate baseof information

Limited memory ofdecision-makers

Poor perception of factors to be considered in decision process

The satisficing model of decision making is instantly perceived by most mangers as being the most realistic. Time constraints are increasingly obvious in the modern workplace, and the wider marketplace.Making sense of all factors is a hurdle for most managers, none of them can be capable in every decisions circumstance.The market often contrives to limit available information for decision makers (consider deciding to buy new software. None of the vendors offer to identify deficiencies in their products, it is most often the purchaser who has to sort that out).Decision makers not only tend to make many decisions to cope with the immediate future, but equally they tend to retain memory of their most recent decision events.The factors that should have primacy in the making of a decision often dont become apparent until after the decision is made. Consider again a major software purchase. The purchase price of software support may not be seen as much of a factor until the software is in use, and users realise the very high levels of support needed for its use.

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Improving Strategic Decision-Making

EscalatingCommitment

Representa-tiveness

Copyright

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Symptoms of Groupthink and How to Prevent It

SymptomsIllusion of invulnerabilityBelief in the inherent morality of the groupStereotyped views of members of opposing groupsApplication of pressure to members who express doubts about the groups shared allusions or question the validity of arguments proposedPractice of self-censorshipAppointment of mindguards

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Using Conflict-Inducing Decision-Making Techniques in Case Analysis

Use conflict-inducing decision-making techniques to help prevent groupthink and lead to better decisions.

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Two Conflict-Inducing Decision-Making Processes

Adapted from Exhibit 14.4 Two Conflict-Inducing Decision-Making Processes

LO 2-1Explain the role of vision, mission, and values in the strategic management process.A vision captures an organizations aspirations. An effective vision inspires members of the organization.A mission statement describes what an organization actually does and why it does it.Values define the ethical standards and norms that should govern the behavior of individuals within the firm.Success is created twice: first analyzing a mental model and second formulating and implementing a strategy to make a vision a reality.LO 2-2Describe and evaluate the role of strategic intent in achieving long-term goals.Strategic intent finds its expression in stretch goals that exceed the firms existing resources and capabilities by a large margin.Effective use of strategic intent creates at all levels of the organization an obsession with winning that can help companies ascend to global leadership.

Take-Away Concepts

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Take-Away Concepts LO 2-3Distinguish between customer-oriented and product-oriented missions and identify strategic implications.Customer-oriented missions define businesses providing solutions to customer needs. Product-oriented missions define a business in terms of a good or service provided.Customer-oriented missions provide managers with more strategic flexibility than product-oriented missions.LO 2-4Critically evaluate the relationship between mission statements and competitive advantage.Mission statements can help a firm achieve superior performance, but mission statements by themselves do not directly affect firm performance.To be effective, mission statements need to be backed up by hard-to-reverse/irreversible commitments.

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Take-Away Concepts LO 2-5Explain why anchoring a firm in ethical values is essential for long-term success.Ethical core values enable employees to make day-to-day decisions that are guided by correct principles.Values are guardrails to keep a company on track for competitive advantage.LO 2-6Compare and contrast strategic planning, scenario planning, and strategy as planned emergence, and discuss strategic implications.Top-down strategic (long-range) planning works reasonably well when the environment does not change much.In scenario planning, managers envision different what-if scenarios and prepare contingency plans that can be called upon when necessary.Strategic initiatives can be the result of top-down planning by executives or can emerge through a bottom-up process from deep within the organization.A firms realized strategy is generally a combination of its top-down intended strategy and bottom-up emergent strategy, resulting in planned emergence.

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***INSTRUCTOR: The textbook DVD has a video of TFA founder Wendy Kopp. A shorter video is embedded in the TFA video label at the bottom of this slide. Run the slide show and click on this area of the slide to bring up the video if your classroom has Internet access.

The URL link is also below: http://ecorner.stanford.edu/authorMaterialInfo.html?mid=2599 *INSTRUCTOR: An Interactive activity on President John F. Kennedy's call for manned flights to the moon is available online through McGraw-Hill Connect on this section of the text.

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*INSTRUCTOR: An Interactive video activity with the CEO of McKesson is available online through McGraw-Hill Connect on this section of the text. It is available as an auto-graded homework assignment if desired.

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INSTRUCTOR: An Interactive activity is available online through McGraw-Hill Connect on this section of the text. **INSTRUCTOR: An Interactive activity is available online through McGraw-Hill Connect on this section of the text.

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