BUS 189 STRATEGIC MANAGEMENTWHY DO SOME FIRMS SUCCEED WHILE OTHERS FAIL?TERMSMEASURING PERFORMANCEPROFITABILITYMORE TERMSCHOICE OF INDUSTRYSTRATEGY STACK = LEVEL OF STRATEGIC MANAGEMENTSTRATEGY-MAKING PROCESSVISION, MISSION & GOALSGOALSSWOT ANALYSISSTRATEGY AS EMERGENT PROCESSTO COPE WITH UNCERTAINTYSTRATEGIC DECISION MAKINGSTRATEGIC LEADERSHIPBUS 189STRATEGIC MANAGEMENTHILL & JONESCHAPTER 1, 9TH EDITIONDR. MARK FRUIN2-7-2012WHY DO SOME FIRMS SUCCEED WHILE OTHERS FAIL?•STRATEGIES HAVE MAJOR IMPACTS ON PERFORMANCE (THE HYPOTHESIS)•A STRATEGY IS A SET OF RELATED ACTIONS THAT MANAGERS TAKE TO INCREASE THEIR COMPANY’S PERFORMANCE (p. 3)–STRATEGIC LEADERSHIP (p. 3) INCLUDES•STRATEGY FORMULATION•STRATEGY IMPLEMENTATION•STRATEGY ASSESSMENT (not on p. 3)•STRATEGY RE-FORMULATION & IMPLEMENTATION (not p.3)•IF A FIRM’S STRATEGIES RESULT IN SUPERIOR PERFORMANCE, IT IS SAID TO HAVE A COMPETITIVE ADVANTAGETERMS•STRATEGIC LEADERSHIP•STRATEGY-MAKING PROCESS•STRATEGY FORMULATION•STRATEGY IMPLEMENTATION•STRATEGY MEASURING, MONITORING & MANAGEMENTMEASURING PERFORMANCE•MAXIMIZING SHAREHOLDER VALUE–FIRST, SHAREHOLDERS PROVIDE RISK CAPITAL; MANAGERS PURSUE STRATEGIES–SECOND, SHAREHOLDERS ARE OWNERS•MEASURING PROFITABILITY–RETURN ON INVESTED CAPITAL–SHORT-TERM OR LONG-TERM?•PROFIT GROWTH–INCREASE IN NET PROFITS OVER TIMEPROFITABILITY•PROFITABILITY IS THE MOST COMMON MEASURE OF STRATEGIC SUCCESS•PROFITABILITY MEASURES RETURNS ON INVESTED CAPITAL•PROFIT USUALLY MEANS BEFORE-TAX PROFITS•CAPITAL = STOCKHOLDERS’ EQUITY + DEBT (LIABILITIES)MORE TERMS•SUSTAINABLE COMPETITIVE ADVANTAGE–VRIND MODEL•VALUABLE•RARE•HARD TO IMITATE/INIMITABLE•DURABLE•STRATEGY = HOW TO ENABLE A BUS MODEL–HOW TO CREATE AN ORGANIZATION ABLE TO DO THINGS WELL, REPEATEDLY AND OFTEN?•BUSINESS MODEL–HOW DO WE MAKE MONEY?•SELECT CUSTOMERS•PRODUCT OFFERINGS•CREATE VALUE•ORGANIZE ACTIVITIES•CONFIGURE RESOURCESCHOICE OF INDUSTRY •IN ADDITION TO BUSINESS MODEL AND ASSOCIATED STRATEGIES, CHOICE OF INDUSTRY IS HUGE–INDUSTRIES VARY WIDELY IN TERMS OF GROWTH RATES & AVERAGE PROFITS–A FIRM’S SUCCESS DEPENDS ON•IN WHICH INDUSTRY/IES DOES IT COMPETE?•WHICH STRATEGIES IT PURSUESSTRATEGY STACK = LEVEL OF STRATEGIC MANAGEMENT•FUNCTIONAL LEVEL–BUSINESS FUNCTIONS COMPANYWIDE•BUSINESS LEVEL–DIVISIONAL MANAGEMENT IN MULTI- DIVISIONAL FIRM–BUS. STRATEGY = INDUSTRY, PRODUCT & PLATFORM STRATEGY•CORPORATE LEVEL–CEO, BOARDS, AND CORPORATE STAFF–MANAGING DIFFERENT BUSINESSES WITHIN SAME FIRM; SHARING RESOURCESSTRATEGY-MAKING PROCESS•FORMAL PROCESS HAS 5 STEPS–SELECT FIRM MISSION & GOALS–ANALYZE EXTERNAL ENVIRONMENT–ANALYZE INTERNAL ENVRIRONMENT–SELECT STRATEGIES BASED ON ANALYSES–IMPLEMENT STRATEGIES–SIMILAR BUT NOT IDENTICAL TO SWOT (COMING UP IN A FEW SLIDES)VISION, MISSION & GOALS•VISION IS LONG-TERM•MISSION IS MID-TERM•GOALS ARE SHORT-TERM•RECOGNIZE THAT THESE (VISION, MISSION & GOALS) ARE INFLUENCED BY –EXTERNAL ENVIRONMENT (NATIONAL CULTURE & INSTITUTIONS)–CORPORATE GOVERNANCE MODELS–INTERNAL ENVIRONMENT (ORG. CULTURE)GOALS•PRECISE & MEASURABLE•ADDRESS KEY/CRITICAL ISSUES•CHALLENGING BUT REALISTIC•SPECIFY TIME PERIODS WITHIN WHICH GOALS ARE REALIZED OR, AT LEAST, MEASURED•STRETCH GOALS AS OPPOSED TO GOALS EASILY REALIZED W/O MUCH EFFORTSWOT ANALYSIS•STRENGTHS•WEAKNESSES•OPPORTUNITIES•STRENGTHS•GIVES DIRECTION TO SELECTION & IMPLEMENTATION OF STRATEGIESSTRATEGY AS EMERGENT PROCESS•STRATEGIC PLANNING & IMPLEMENTATION ARE ONGOING, NEVER ENDING•UNCERTAINTY MEANS FLEXIBILITY & ADAPTABILITY ARE KEY•LOWER LEVEL ORGANIZATIONAL MEMBERS, MORE NUMEROUS THAN ANY, ARE THE KEY TO STRATEGIC SUCCESS–AUTONOMOUS ACTIONS–UNPLANNED RESPONSES TO UNFORESEEN CIRCUMSTANCES–HONDA & FORTUITOUS CIRCUMSTANCES (LUCK), 24-25TO COPE WITH UNCERTAINTY•STRATEGY AS SCENARIO PLANNING•STRATEGY AND DECENTRALIZATION–CHAN KIM & RENEE MAUBORGNE’S PROCEDURAL JUSTICE (DISTRIBUTIVE JUSTICE)•STRATEGIC INTENT–PRAHALAD AND HAMEL’S NOTION–AMBITIOUS GOALS HELD BY THE ORGANIZATIONAL MAJORITYSTRATEGIC DECISION MAKING•COGNITIVE BIASES–PRIOR HYPOTHESIS BIAS–ESCALATING COMMITMENT–REASONING BY ANALOGY–REPRESENTATIVENESS–ILLUSION OF CONTROL (HUBRIS)•GROUPTHINK–DEVIL’S ADVOCACY–DIALECTIC INQUIRY–ANALOGOUS PAST INITIATIVESSTRATEGIC LEADERSHIP•VISION, ELOQUENCE & CONSISTENCY•ARTICULATION OF BUSINESS MODEL•COMMITMENT•BEING WELL INFORMED•WILLINGNESS TO DELEGATE/EMPOWER•ASTUTE USE OF POWER (OVER RESOURCES)•EMOTIONAL INTELLIGENCE–SELF-AWARE, SELF-REGULATE, EMPATHY, SOCIAL SKILLS, MOTIVATION BEYOND