Strategic Management Exam 1

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What is Strategic Management

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-Examines how actions and events involving top executives (such as Steve Jobs), firms (Apple), and industries (the tablet market) influence a firm's success or failure
-need formal tools and creativity

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The five things that make up strategy are...

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1. Plan
2. Ploy
3. Pattern
4. Position
5. Perspective
-1,2, & 3 are about the firms actions
-4 is how they compete in the industry
-5 is how the top management team understands their competition

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Plan

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-a carefully crafted set of steps that a firm intends to follow in order to be successful
-created to guid firms future
-plan is inportant to individuals too
-ex: Ikea has a plan of furniture you put together yourself and it has given them an advantage

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Ploy

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-a specific move designed to outwit or trick competitors
-a pizzeria owner in Pennsylvania once tried to sabotage his competitors by placing mice in their shops
-companies using misdirection to get their competitors to think their focusing somewhere else than what their really focusing on so competitors don't know what your really doing
-ex: Louisiana w/ the Mississippi River put a low bridge so ships can't go up past Baton Rouge

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Pattern

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-the degree of consistency in a firm's strategic actions
-apple always responds to competitive challenges by innovating
-firms understanding what they do well and focusing on it
-Ex: Kmart doing great and starting to open a home depot competitor and office supply store, etc. and then they started failing

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Position

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-a firm's place in the industry relative to its competitors
-Old Navy offers fashionable clothes at competitive prices-they are owned by the same corporation as the Gap and Banana Republic and each brand is positioned at a different priving level
-Ex: Winn-Dixie did great going after middle to high income, but then failed when they changed to low income

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Perspective

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--how executives interpret the competitive landscape around them
-in 1990's Jeff Bezos viewed the internet as a sales channel and began selling books online which becam Amazon.com and is a dominant retailer

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What are the five Strategies

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1. Intended Strategies
2. Emergent Strategies
3. Realized Strategies
4. Deliberate Strategy
5. Non-realized strategy

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Intended Strategies

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-strategy that an organization hopes to execute
-David McConnell aspired to be a writer, when his books weren't selling he decided to give out perfume as a gimmick

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Emergent Strategies

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-unplanned strategy that arises in response to unexpected opportunities and challenges
-the perfumes McConnell gave out with his books were popular, inspiring the foundation of the California Perfume Company

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Realized Strategies

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-the strategy that an oranization actually follow
-They are a product of both intended and realized strategies
-the McConnell company changed its name to Avon in 1939, and its direct marketing system remained popular for decades. Avon is now availabe online and in retail outlets worldwide

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Deliberate Strategy

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-the parts of the intended strategy that an organization continues to pursue over time

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Non-realized Strategy

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-the parts of the intended strategy that are abandoned

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History of Strategic Management

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-500 B.C.
-Sun Tzu's "The Art of War": a classic handbook on military strategy with numerous business applicaitons
-the idea "to win without fighting is best"-this approached used by Gap when they decided to create their own stores rather than competing for shelf space for their clothing within traditional department stores

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QUOTE:
All men can see these tactics whereby I conquer, but what none can see is the strategy out of which victory is evolved

Back 15

Quote

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QUTOE:
Opportunities multiply as they are seized

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quote

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QUOTE:
Pretend inferiority and encourage his arrogance

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quote

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QUOTE:
THat general is skillful in attack whose opponent does not know hwat to defend; and he is skillful in defense whose opponent does not know what to attack

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quote

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QUOTE:
For to win one hundred victories in one hundred battles is not the acme of skill. To subdue the enemy without fighting is the acme of skill

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quote

Front 20

QUOTE:
Tactics without strategy is the noise beore defeat. Strategy without tactics is the slowest route to victory

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quote

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History of Strategic Managment-1909

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Ford first produces its classic Model T.

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History of Strategic Management-1911

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Frederick W. Taylor publishes "The principles of Scientific Management"

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History of Strategic Management-1912

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The precursosr to the modern strategic management course was created at HArvard Business School under the title of "business policy"

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History of Strategic Management-1925

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A&W Root Beer becomes America's first franchies restaurant chain

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HOSM-1959

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the Ford Foundation recommends taht business school curricula incude a 'capstone' course that integrates knowledge across business fields in order to help solve complex business problems

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HOSM-1962

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1. Alfred Chandler published "Strategy and Structure: Chapers in the History of the Industrial Enterprise"
2. Sam Walton opens the first Wal-Mart in Arkansas. Relying on a strategy that emphasized low prices and high levels of customer service

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HOSM-1980

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"The strategic Managment Journal" is created

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HOSM-1995

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The launch of Amazon.com by founder JEff Bezos is perhaps the pivotal event in creating internet-based commerce

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HOSM-2001

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Enron Corporation declares bankruptcy after a series of disclosures reveal that the firm's stellar performance had been a product of fraud and corruption

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HOSM-2005

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Thomas Friedman's book "The World is FLat: A Brief History of the Twenty-First Century" suggests that many advantages that firms in developed countries like the U.S. take for granted are disapperaing

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HOSM-2010

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Wal-Mart becomes the largest company in the world

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Strategic Management Process

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-building a careful understanding of how the WORLD is changing and the knowlede of how those changes might affect a particular firm
-understanding strategy and performance
-environmental and internal scanning
-strategy formulation
-strategy implementation

Front 33

Michael Porter

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teaches at Harvard business school and made SWOT analysis

Front 34

Generic Strategies

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a general way of positioning a firm's business level strategy within an industry
-focusing on generic strategies allows executives to to concentrate on the core elements of firms' business-level strategies
-the most popular set of generic strategies is based on the work of Professor Michael Porter of the Harvard Business School

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two competitve dimensions of generic strategies

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-they are the keys to businesss-level strategy
-1. sources of competitive advantage- gain an edge on rivals by keeping costs down or offer something unique in the market
2. scope of operations-target customers in general or seek to attract just a segment of customers

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the four generic business-level strategies emerge from the competitve dimesions decisions:

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1. Cost Leadership
2. Differentiation
3. Focused cost leadership
4. Focused differentiation

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Cost Leadership

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-offers product or servies with acceptable quality and features to a broad set of customers at a low price
-economies of scale: exist when the costs of offering goods and services decreases as the firm is able to sell more items-expenses are distributed across a greater number of items
-advanatage: make profit bc of marginal cost so low and bc do same thing over and over, but if need to change things your in trouble
-ex: McDonalds bc they meet a basic level of quality and strategy is to mass product hamburgers and fries to serve as many customers as possible with an assembly line type set-up with no variations

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Differentiation

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-attempts to convince customers to pay a premium price for its good or services by providing unique and desirable features
-using a differntiating strategy means that a firm is competing based on uniquesness, rather than price
-its success depends on offering unique features and communicating the value of these features to potential customers
-big with big name brands
-Ex: Chick-fil-A bc their focus is to serve a large market segment and differentiate themselves from other fast food by using high quality ingredients with a restricted menu of no beef or pork

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Focused cost leadership

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-focused, but cheap
-involve targeting a relatively narrow nich of potential customers and requires competing based on price to target a narrow market
-price sensitive
-Ex: Claire's bc it's nationwide chain selling cheap jewelry and accessories and targets women and girls under age of 20

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Focused differentiation

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-focused AND the best
-involves targeting a relatively narrow niche of potential customers and requires offering unique features that fulfill the demands of a narrow market
-like boutiques in downtown Auburn or Harley Davidson
-want to be absolute best at one things
-risk: if your product goes out, you have nothing to sell, so leverage econ. of scale to lower risk
-Ex: Photoshop bc not many people need photo editing, so charge high prices to their small number of customers

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Best-cost

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a business-level strategy followed by firms that charge relatively low prices and offer substantial differentiation
-difficult to execute-creating unique features and communicating to customers why these features are useful generally raises a firm's cost of doing business
-one route toward a best-cost strategy is for a firm to adopt a business model whose fixed costs and overhead are very low relative to the costs that competitores are absorbing
-ex: Chick-fil-A using real chicken, but still in fast food industry

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Stuck in the middle

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-a situation where a business level strategy does not offer features that are unique enough to convince customers to buy its offerings
-its prices are too high to effectively compete on based on price
-lack a clear market or competitive pricing
-firms become stuckin the middle not bc executives fail to arrive a well-defined strategy, but bc firms are simply outmaneuvered by their rivals

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Vision

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what the organization aspries to become in the future
-vision is the trunk of the tree (foundation), the branches are the mission (their more specific) and the most important is the fruit on the tree which is profits( and profits AREN'T in mission)

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The importance of a Vision

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1. a key tool for inspiring the people in an organization
2. Well-constructed visions clearly articulate an organization's aspirations and can give an organization an edge over its rivals
3. Massively inspiring-should inspire you toward an end goal
4. Evoke passion
5. over arching
6. long-term-don't want to accomplish it in just three years
7. fundamental statement-about who you want to be and what you want to be know for

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College of Business Vision

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The College of Business is dedicated to producing highly-desired graduates and generating knowledge that drives business thought and practice.

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Are there profits in the mission?

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NOOOOOO

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Mission Statement

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states the reasons for an organization's existence
-well-written mission statements effedtively capture an organization's identity
-answers the fundamental question of "Who are we?"
-reflects on the organization's past and present
-states why the organizationexists and what role it plays in the society
-mission is more specific than vision and goals (which should be very specific) stem form mission

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SMART goals

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S=Specific
M=Measurable
A=Aggresive
R=Realistic
T=Time-bound

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"S"pecific

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Cok is seeking to improve its water efficiency by a specific amount - 20%. In contrast, goas such as "do your best" are vague, making it difficult to decide if a goal is actually reached

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"M"easurable

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Water efficiency can be calculated, so Coke is able to track its progess relative to its 20% target. If progess is slow, more resources can be devoted to achieving the goal

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"A"ggressive

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a series of research studies have established that performance is strongest when goals are challenging but attainable. Reaching a 20% improvement will require aggressive work by Coke, but the goal can be reached

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"R"ealistic

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If Coke's water efficiency goal was 95% improvement, Coke employees would probably react with surprise. Reaching a goal must be feasible in order for employees to embrace it. Unrealistice goals make most people give up. And basing goals on impossible cliches, such as "give 110%" creates confusion

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"T"ime-bound

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Coke is seeking to achieve its 20% improvements by 2012. Some univerisities, such as Texas Tech University, provide incentives, including prefered scheduling for students who sign contracts agreeing to graduate on a gour-year schedule. Deadlines such as these are motivating and they create accountability

Front 54

Organizationl Performance

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how well an organization is doing at reaching its vision, mission, and goals
-a multidimensional concept
-vital asect of strategic management
-assists executives in knowing how well their organizations are performing

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Performance measure

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a metric along which organizations can be gauged
-used by executives to examine measures such as profits, stock price, and sales
-helps understand how well an organization is competing in the market

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perfromace referent

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bench mark used to make sense of an organization's standing along a performance measure

Front 57

Balanced Scorecard

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an approach to assessing performance that targets managers' attention on four areas:
1. financial - "How do we look to shareholders?"
2. Customer - "How do customers see us?"
3. internal business process - "What must we excel at?"
4. learning and growth - "Can we continue to improve and create value?"
-helps managers resist the temptation to fixate on financial measures, and instead monitor a diverse set of important measures

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Triple bottom line

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provides a tool to help executives focus on performance targets beyond profits along
-emphasizes the tree Ps:
1.People (social concerns)
2. Planet (environmental ocncerns)
3. Profits (economic concerns)

Front 59

CEO as Celebrity

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Advantages:
-serves as an intangible asset for CEO's firm - may increase opportunities available to the firm
-hiring or developing a celebrity CEO may increase stock price, enhace a firm's image, and improve the morale of employees and other stakeholders
Disadvantage:
-magnifies any gaps between actual and expected firm performance
-faces larger and more lasting reputation ersoion if their performance and behavior is inconsistent with their celebrity image

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Types of CEOs

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1. Scoundrels
2. Silent Killers
3. Icons
4. Hidden Gems

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Scoundrel CEOs

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in early 2000s several high prfile CEOs played central roles in ethical scandals. One was Enron CEO Kenneth Lay, who in 2006 was convicted of crimes related to croporate abuse adn accounting fraud. He later committed suicide

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Silent Killer CEOs

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these unknown CEOs can be just as harmful to their firms as celebrity scoundrels. Harding Lawrence, former CEO of now defuct airline Braniff International, made a major blunder by expanind the airline too quickly. Lawrence was fired before the firm plnged into bankruptcy. By the time Braniff disappeared into history, Lawrence's poor decisions were largely forgotten

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Icon CEOs

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a rare combo of style and substance leads these CEOs to become household names. The "Oracle of Omaha" Warren Buffet has advised presidents, and the yearly letters he writes to his shareholders are a sinfluential as any report created by the Federal Reserve and other financial institutions

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Hidden Gem CEOs

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These CEOs perfrom their jobs admirable, but they lack fame. Many prefer to avoid the spotlight, but they are known all too well by their wary competitiors. Anne Mulcahy, CEO of Xerox, is a hidden gem whose avoidance of media attention may stem from her humble roots as a copier salesperson

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Five Entrepreneurial Orientations

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1. Autonomy
2. Competitive Aggressiveness
3. Innovativesness
4. Proactiveness
5. Risk Taking

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Autonomy

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the tendency to bring forth ideas and see them through to completion
-Microsoft's values statement notes "We take on big challenges, and prid ourselves on seeing them through." For ex, Microsoft embraced a huge challenge when developing and launching its Xbox gaming system to compete with market leaders Nintendo and Sony

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Competitive Aggressiveness

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the tendency to intensely and directly challenge rivals rather than trying to avoid competition
-One of Nike's past mission statements - "To experience the emotion of compeition, winning, and crushing competitors" - highleight is aggressiveness

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Innovativeness

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-the tendency to pursue novel ideas, creative processes, and experimentation
-3M has built its business around its mission statement: to solve unsolved problems innovatively. 3M employes over 7,000 researchers and it was awarded nearly 600 patenets in 2010. 3M's innovativeness has led it to develop thousands of products (such as Post-it notes and scotch tape) that are sold in almost 200 countries

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Proactiveness

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-the tendency to anticipate and act on future opportunities rather than rely soledly on existing products and services
-proactive communications inc. lives up to its name by focusing on emerging and unusual opportunities. The firm embraces contracts in was zonex and natural disaster areas that are often avoided by other telecommunications firms

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Risk Taking

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-the tendency to take bold actions rather than being cautious
-Richard Branson's laurching of Virgin Galactic - a company that plans to offer suborbital spaceflights to commercial passengers - relects his love of high-risk, hight-reward ventures