BA 469 Strategic Management and Business Policy

Introductions

• Name • Major • What do you want/hope/wish to be doing 5 years from now and where?

Focus: General Management of an organization

An organization is “a system of consciously coordinated activities or forces of two or more persons.”

General management perspective • Strategic decisions: strategy comes from “strategos,” used in ancient times to refer to administrator of conquered reqions, therefore whole “enterprise” • Beyond functional areas: for example, a company’s policy on what type of customers to go after affects marketing, production, finance, etc.

• Long-term implications

Learning Outcomes

• Knowledge of strategic management tools and concepts • Diagnose strategic situations (as described in cases) using these tools and concepts • “Manage” a business in a simulated computer environment.

• Contribute to class and small group discussions

To Measure Achievement of Learning Outcomes • Quizzes - 400 points – Will be based on concepts covered in chapter assigned for the week and readings, but may refer to previously assigned cases, etc.

– 7-8 quizzes, short essay questions • Case briefs (4) – 300 points • Simulation game – 225 points • Participation – 75 points

Simulation Game

• Beaver Republic Game • Two reports – 200 points – Proposal to Invest (PIN) – 100 points – Post Audit Report (PAR) – 100 points • Just playing the game – 25 points • If the game is suspended, a case report will be substituted for PAR. You keep the 25 points for just trying to play.

Requirements

• Case briefs and reports are due beginning of class (see schedule) • Chapter outlines will be posted, and will be used as background to lecture and discussion. • Deliverables for Simulation Game – PIN – PAR – Decisions

Requirements

• Read Chapters and Cases before coming to class • Read assigned articles (if this becomes necessary) • BECOME AN ACTIVE MEMBER OF THE CLASS • House rules: – Informal, but remember why we are in class – Keep distractions to a minimum – Speak up (clarification, disagreement, etc.)

The Strategic Management Process

Chapter 1

The Strategic Management Process • Corporate mission and goal • Analyze external environment - - identify opportunities and threats • Analyze internal environment - - identify strengths and weaknesses • Formulate strategy • Implement strategy

Strategic Management and You

• Where do you intend to be 5 years from now?

– At least most of you had some idea • Product of an internal assessment – what are my strengths, preferences,etc.

• Most students, non-students for that matter usually do not assess external environment • Strategy – university degree (some will talk about a masters degree), funding, etc.

Why do some organizations succeed while others fail?

• Depends on strategy or set of – Actions managers take to achieve one or more of an organization’s goals • Strategic management process – The process by which managers choose a set of strategies that will allow a company to achieve superior performance

Superior Performance and Competitive Advantage

• Profitability – A measure of a company’s return on its invested capital • Superior performance – One company’s profitability relative to that of other companies in the same or similar business or industry

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

Industry Structure and Profitability

Return on Invested Capital in Selected Industries, 1997-2001 Data Source: Value Line Investment Survey

Performance in Nonprofit Enterprises

• Government agencies, universities, charities – Are not in business “to make a profit” – Should use their resources efficiently and effectively – Set performance goals unique to the organization – Set strategies to achieve goals and compete with other nonprofits for scarce resources

Strategic Managers

• General managers – Responsible for overall company performance or divisional performance • Functional managers – Responsible for supervising a particular task or operation – Example – head of accounting or marketing, chief financial officer,

Levels of Strategic Management

Key Question for Each Level

• Corporate Strategy – what business(es) should the organization be in?

• Business Strategy – how should the organization compete?

• Functional Strategy – how should the organization’s resources be best employed to support business strategy?

Reality Check: What do managers do?

• Phone calls, meetings, run around from place to place . . • Minor decisions -- Mr. so and so gets to use the office in the basement • Major decisions - - lets launch, abort • All in a day’s work - - focus

Reality Check: Can managers predict the future?

• National economy - - Where will interest rates be next month? Will economic growth be 2.5% or 2.75%? Does it matter?

• Industry performance • Actions of competition • Actual capabilities and performance of internal resources, i.e. your people

Emergent vis Intended Strategy

• Honda story is a classic; also consider Toys ‘R’ Us • Scenario planning to cover possibilities, find, if possible, unknown unknowns • Listen to field people • Balance commitment to goal and realities of a changing situation • Serendipity (unintended, accidental, sometimes wonderful discoveries)

Cognitive Biases

• Prior hypothesis - - rules of thumb, deeply held beliefs • Escalating commitments • Reasoning by analogy • Representativeness

Strategic Management Process

• Not an exact science • Dealing with – Uncertainty – Scope • Personal judgment • Focus on process

Exercises Strategy in Action • 1.1 and 1.2: Microsoft – we can assume that some sort of planning went into Microsoft’s original Internet strategy prior to 1994. How could they miss the Internet then?

• 1.4: Duke Energy – explain Duke’s planning process using Scenarios.