1 Introduction To Strategy 4n6b3v

Strategic Management An Introduction to Strategy By : Dr. Hadi Supratikta, MM

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 

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Goal-directed decisions and actions in which capabilities and resources are matched with the opportunities and threats in the environment.

Military influences in strategy  

“Strategos” referred to a general in command of an army The art of the general  

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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

Academic influences in strategy   

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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

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

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1980s (Porter’s 5 forces) 1990s (Resource based view of the firm)

Why is strategic management important?   

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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  A series

of goaldirected decisions and actions matching an organization’s skills and resources with the opportunities and threats in its environment 9

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Strategic management  Analyze

current

situation  Develop appropriate strategies  Put strategies into action  Evaluate, modify, or change strategy

Strategy vs. Strategic Management 

Strategy involves  Organization’s

goals  Goal-oriented action  Related decisions and actions  Internal strengths  External opportunities and threats 10

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Strategic management  Planning  Organizing  Implementing  Controlling

Basics of Strategic Management 

Four aspects that set strategic management apart  Interdisciplinary

• Capstone of the Business degree  External

focus

• Competition  Internal

focus  Future direction 11

Strategic Management Process Analyzing Current Situation

Deciding on Strategies

Putting Strategies in Action

Evaluating and Changing Strategies

Situation Analysis

Strategy Formulation

Strategy Implementation

Strategy Evaluation

External Analysis Chapter 2 Chapter 3 Internal Analysis Chapter 4 12

Functional Chapter 5

Competitive Chapter 6

Corporate Chapter 7

Strategic Management Process 

Situation Analysis  Scanning

& evaluating context  Internal and External environments 

Strategy formulation  Functional  Competitive  Corporate

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strategies

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 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” 15

Who does strategy? 

The Role of the Board of Directors  

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The Role of Top Management  

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Elected representatives of the company’s stockholders Legally obligated to represent and protect stockholder’s 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 16

The Role of the Board of Directors       

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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

Who is on the board of directors? 

Chairman of the board  Chief

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President  Chief

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Executive officer (CEO) Operating officer (COO)

Other C’s  Chief

Financial officer  Chief Information officer  

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Inside board Outside board

The Role of Top Management Determining Organizational Purpose or Vision Exploiting and Maintaining Core Competencies

Establishing Appropriately Balanced Controls

Effective Strategic Leadership Emphasizing Ethical Decisions and Practices 19

Developing Human Capital Creating and Sustaining Strong Organizational Culture

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 21

Characteristics of a Mission Statement  

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Defines current business activities Highlights boundaries of current business Conveys   

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Who we are, What we do, and Where we are now

Characteristics of a Mission Statement 

Company specific, not generic —so as to give a company its own identity

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A company’s mission is not to make a profit !

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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. 24

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. 25

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. 26

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) 27

Characteristics of a Strategic Vision 

Charts a company’s future strategic course

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Defines the business makeup for 5 years (or more)

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Specifies future technologyproduct-customer focus 28

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

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Reduces risk of rudderless decision-making

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Conveys organizational purpose and identity

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Keeps direction-related actions of lowerlevel managers on common path

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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

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 Boeing

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 GE  IBM  Motorola  Nordstrom

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 P&G

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 Sony

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 Wal-mart 33

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Norton McDonnell Douglass Westinghouse Burroughs Zenith Melville Colgate Kenwood Ames

So what did they find?  Great

Big

companies had BHAG 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

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Involves establishing a BHAG - ”big, hairy, audacious goal”

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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

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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! 38

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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