BUSI 4940.001 Summer 5 Week 1

Class 1: Welcome to our class!

• A tough, challenging course • But so is management…and LIFE!

• Identify and address strategic issues• Ambiguous, complex real-world issues

• “Choice”, not solutions and answers

• Five broad objectives:• Think – integrate; open; synthesis• Process – organized analysis & argument• Tools - mechanics• Communication – written/verbal• Teams – leverage for benefit; handle diversity

• Not everyone wants to get into Management

General Overview

• Name• Major• Something interesting -some suggestions----

• about your work e.g. “I’m a bungee-jumping cord tester…”• About your family/home e.g. “I have 3 pet iguanas and 1

kangaroo” • About your hobbies/interests e.g. “I invented the internet.”

SyllabusBlackboard LearnClickers – set up/test

CHANNEL 61

I’ve used clickers beforeA. Yes

B. NoC. What’s a clicker?

YesNo

What’s

a click

er?

0%0%0%

I aspire to a management

careerA. YesB. NoC. Not sure yet

YesNo

Not sure

yet

0%0%0%

Definition A concrete expression of how an organization intends to

compete and win in the marketplace

Strategy expressed in terms of

Goals

Product Focus and Market Focus

Value Proposition

Core Activities

What is Strategy?

Note the rising levels of risk, investment, uncertainty of implications, and time-frames as you move down the list below . . .

Choosing a cereal for breakfast

Making a withdrawal at the ATM

Purchasing an iPad

Purchasing a car

Sun-bathing

Getting an education

Being Strategic

They involve major investments

They have long-term implications, often in multiple areas

They often involve high levels of risk/uncertainty

The Nature of Strategic Actions

Remember that any action can be viewed as being strategic, depending on your frame of reference.

In the business context, your challenge is to think like the CEO, President or, General Manager of the organization, not as a VP of a functional area like Finance Marketing, Human Capital, etc. . . . ., and delineate those actions that are truly “strategic” from those that are “functional.”

The Nature of Strategic Actions

https://www.youtube.com/watch?v=Q96pCI8aOQQ

Which of these actions typically involve “strategic” decisions

for an organization? Altering the products/services offered by the organization Altering the markets serviced by the organization Altering the way the organization creates value for its

customers Streamlining customer-service procedures Increasing the size of the sales-force Improving payment terms with buyers. Switching to a different ERP-platform provider Hiring a new marketing manager

On Being Strategic . . .

Which of these actions typically involve “strategic” decisions

for an organization? Altering the products/services offered by the organization Altering the markets serviced by the organization Altering the way the organization creates value for its

customers Streamlining customer-service procedures Increasing the size of the sales-force Improving payment terms with buyers. Switching to a different ERP-platform provider Hiring a new marketing manager

On Being Strategic . . .

After just three years, Winchester Pizzas has franchise stores in nine southern states and master franchisees lined up in six more. Is targeting new stores in the rest of the US strategic?

A. YesB. No

YesNo

0%0%

30

Barty Crouch’s Custom Computers has done well simply by word of mouth and a great Internet presence. But Barty Crouch Sr. feels increased awareness will grow the firm. Is shifting resources for a doubling of advertising strategic?

A. YesB. No

YesNo

0%0%

30

In the late 1970s Cadillac suffered due to demand for smaller, more economical cars. Leveraging a GM (Chevy) platform, they introduced the Cimarron, a smaller, “Cadillac” model. Was that strategic?

A. YesB. No

YesNo

0%0%

30

Strategic actions are not made in a vacuum

Competitors; Customers; Suppliers; Institutions; Innovators;

Technology

No industry is completely stable

Most industries face considerable change

Strategic Actions in a Dynamic Environment

Adapt .. Adapt . . Adaptor CHANGE CHANGE CHANGE

Drivers of Organizational Change in the Firm’s External Environment

1. Environmental Dynamics The increasingly turbulent environment

2. Environmental Scope and Munificence

Globalization of products and markets

3. Environmental Uncertainty and Risk

Political/Social/Economic/Technological

Adapt .. Adapt . . Adaptor CHANGE CHANGE CHANGE

Drivers of Organizational Change From Inside the Firm

1. Mission, Vision & Goals Instigated by the organization’s stakeholders. . . .

2. Strategy of the firm

Instigated by the organization’s top management . . .

3. Organizational Capabilities Structure, processes and leadership.

Effective business management IS NOT largely a matter of common sense.

Effective business management IS a result of effective data collection, data interpretation, and the use of conceptual frameworks to diagnose and monitor activities in the firm and in its environment. (Allan Tudehope)

Managers and strategists are information processors

Job of the General Manager:MANAGING CHANGE

Internal Environment

The Criterion of Consistency Consistency (“fit”) between the firm and its environment

Strategy as the critical linking variable

Managing Organizational Change

BusinessCapabilities

External Environment

Strategy

BC S E

THE DIAMOND-E FRAMEWORK

ManagementPreferences

Organization

Resources

STRATEGY Environment

Business capabilities

Fit Between Environment, Strategy, and Business Capabilities

Strategy•Goals•Product/Market Focus•Value Proposition•Core Activities

We begin by understanding the

ENVIRONMENT in which the firm competes

ExternalEnvironment• Key Survival Factors• Drivers of Change

BusinessCapabilities• Resources• Management Preferences• Organizing Processes

What is it? A process for achieving consistency between the firm and its

environment

You will be required to use the skills acquired in your undergraduate business foundation courses

Accounting, Decision Sciences, Finance, Information Systems, HR/OB, Management, Economics, and Marketing

The Strategic Business Integration (SBI) Process

At each process stage, you will have tools and concepts to apply

Each phase has been converted to a template with questions and steps to follow

Primary phases involve Collecting as much relevant data as

possible Organizing the data and analyzing the

data Drawing conclusions or

recommendations

Tools and Templates

A Pictorial Representation of What’s Covered in the Course

SBIParts 1A & 1B

SBIPart 2A

SBIPart 2B

SBIPart 3A

SBIPart 3B

Analyze the External

Environment of the Firm

Analyze the Strategy of the

Firm

Analyze the Capabilities of

the Firm

Identify Strategic Gaps

Develop New Strategy

Identify Required Capabilities

Changes

1. Prepare Complementary Functional Plans

2. Develop an implementation Plan

Assess Financial Viability

It has three sequential parts:Part-1: Analyze the environment(A) and status of

the firm (B)

Deconstruct and understand the business landscape and the specific firm within that context

Part-2: Assess strategic fit (A) and formulate new strategy (B)

Assess E-S-BC fit issues and propose possible changes

Part-3: Develop an implementation plan (A)and confirm

financial viability of the proposal (B) Details of the implementation plan

Details of expected results

The SBI Process: A Carefully Orchestrated Exercise in Deconstruction and Reconstruction of

Information

Part-1 Part-3Part-2

P.E.S.T.

• Political, Economic, Social, and Technological Forces

• The BROAD environment • Influence multiple industries• Influence all firms in an industry ‘equally’• Great indicators of what is BECOMING more influential….’early warning signals’

• May be ‘Rules of the game’• Broad effects on demand, values, market needs

Five Forces

Industry specificDifferent forces that affect profitability / opportunity for

profitabilityPorter – a competition for economic value – Substitute or Rival?

Substitute – same or similar function (met need) BUT via a different means (Pizza delivery v Frozen Pizza)

Rival – same met need via same/similar function and means (Bing v. Google) Market Commonality; Resource Similarity (Chen, 1996)

Still dependent on how you define the industry

THE FIVE FORCES MODEL (Porter article – determinants/indicators of force)

POTENTIALENTRANTS

SUPPLIERPOWER

INDUSTRY RIVALRY

BUYERPOWER

SUBSTITUTEPRODUCTS

Primary Entry Barriers:• Economies of Scale• Product Differentiation• Capital Requirements• Switching Costs• Cost Disadvantages Independent of Scale• Government Policy

Power of Substitutes driven by• The relative price and performance of

substitutes• Switching costs• Buyers propensity to substitute

Determinants of Buyer Power Include• The relative concentration of buyers and sellers• The volume of purchases• The relative switching costs of buyers and sellers• Ability of buyers to backward integrate• The buyers price sensitivity

Determinants of Supplier Power Include• Relative concentration• Presence of substitutes• Relative switching costs• Relative threat of integration• Importance of the supplies• Differentiation of the supplies

Determinants of Rivalry Include• Industry Growth• The number and balance of rivals• Differentiation• Percentage of fixed costs• Brand identity and product

differences• Exit barriers and corporate stakes

SBI-1(A): Understand Your Industry

What is the average performance – growth, profitability, etc.?

What are the KEY SURVIVAL FACTORS demanded?

What are the DRIVERS OF CHANGE?

What will the industry look like in the future?

This requires research and analysis!

Key Success Factors (KSFs)

Based on the powerful forces you have identified, what MUST a firm do minimally well to survive in this industry?

Think ‘above’ the given/obvious ‘survival factors’ to identify KEY factors

Prioritize them by how they relate to the most powerful forces affecting the industry

Key Success Factors (KSFs)-EXAMPLES

• Efficiencies Through E-Commerce/Technology • Reliable Delivery • Strong Service • Solid Sales and Support Staff

Drivers of Change (DOC)

What trends from your PEST analysis are changing the nature of the environment?

What forces of industry profitability are changing or may change in the near future?

Prioritize these based on the scope and magnitude of their effect on firm performance and survival

Drivers of Change (DOC)-EXAMPLES

Increasing globalization of the industry; Changes in who buys the products and how they use it. Exit of major firms/”big players” Growing buyer for preferences a more standardized product instead of

strongly differentiated products Changing societal concerns, attitudes, and lifestyles

Industry Attractiveness

Based on current status (size, growth, profits, etc.), and on your knowledge of forces and trends, how attractive is this industry now? (Not how difficult is it to get into…just how attractive is it)

Now, consider the trends you are aware of…how attractive (same, more, less) will the industry be in five years?

Viable Strategic Orientations

Based on all you know about the industry, what combinations of

product focus, market focus, and value proposition do you conclude

are most viable for survival and success in this industry?

Alternatively, which strategic orientations do you think are ‘bad

ideas’ here?

Conducting and Communicating an Environmental Analysis

Industry researchPatterns/clues – drill into possible KSFs/DOCGather facts; document sources; verify if canCover each component thoroughly

P.E.S.T. and all 5 forces Identify, list, describe, cause/effect, etc.

Synthesize - Analyze - PrioritizeDon’t report data – Argue your conclusions then give the data

that supports them

Next class June 4: Do syllabus quiz on-line Online “Terms and Definitions” assignment

Between classes June 6: Team preferences due via email REMEMBER:

TEAMS of 7/8– Choice and/or Assignment 1 of each: MKTG, FIN, ACCTG, Risk/Ins/FinServ

Subsequent Class June 9: Read Textbook: Ch. 2. Submit individual assignment Part 1 at 6 PM (2 hard copies)

You should also review the Blackboard supplemental reading on Evaluating the Environment

There will be GRADED clicker questions on the readings next class! Please come prepared!

For Next Few Classes….