copyright 2005 prentice hall1 bus 411 day 1. copyright 2005 prentice hall ch 1 -2 agenda class roll...
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Copyright 2005 Prentice Hall Ch 1 -2
Agenda
Class roll call Instructor Introduction Syllabus review Instructor’s Educational Philosophy Web Resources General Information about class WebCT accounts A quick look at the Strategic Management Process
Model
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Instructor
Tony Gauvin Assistant Professor of E-Commerce 216 Nadeau Hall (207) 834-7519 or Extension 7519 [email protected] WebCT
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Instructional Philosophy
Out-Come based education Would rather discuss than lecture
Requires student preparation Hate grading assignments
Especially LATE assignments Use class interaction, assignments, quizzes
and Case Study Reports to determine if outcomes are met.
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Web Resources
WebCT http://webct.umfk.maine.edu
Strategic Management Club Online http://www.strategyclub.com
Prentice Hallhttp://wps.prenhall.com/bp_david_sm_10
Instructor’s Web Sitehttp://perleybrook.umfk.maine.edu
Strategic Management Society (SMS)http://www.smsweb.org/
Strategic Management At Wharton http://knowledge.wharton.upenn.edu/index.cfm?fa=viewCat&CID=7
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BUS 411 Survival Primer
Read Material BEFORE the class discussion Conclusion & Key Terms at EOC Issues for Review at EOC Experiential Exercises
Check WebCT Often Use the additional resources identified in syllabus ASK questions about what you didn’t understand in readings DON’T do homework at last minute. REVEIW lectures and notes Seek HELP if you are having difficulties OFFER feedback and suggestions to the instructor in a constructive
manner Student Study Groups are STONGLY Encouraged
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What is Strategy?
http://www.google.com/search?hl=en&lr=&rls=GGLG,GGLG:2005-42,GGLG:en&oi=defmore&defl=en&q=define:strategy
How is this applied to business?? What do you need to know to be able to think
strategically? What is tactical?
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Differences?
Executive Administrator Manager Supervisor Foreman Employee Who is responsible for Strategic Planning? Who has greater rewards/risk?
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Strategic Management Process Model
Develop Mission and Vision Statements
Chap 2
Measure and Evaluate
PerformanceChap 9
Implement StrategiesManagement Issues
Chap 7
Generate, Evaluate and Select Strageies
Chap 6
Implement StrategiesMarketing, Finance, accounting, R&D,
MIS issuesChap 8
Perfrom External Audit
Chap 3
Establish Long-termObjectives
Chap 5
Perform Internal Audit
Chap 4
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Thoughts
If we know where we are and something about how we got there, we might see where we are tending – and if the outcomes which lie naturally in our course are unacceptable, to make timely changes
- Abraham Lincoln
Without a strategy, an organization is like a ship without a rubber, going around in circles. It’s like a tramp it has no place to go.
- Joel Ross and Michael Kami
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For Next Class
Get familiar with all the resources Textbook WebCT WebSites
Read Chapter One and Krispy Kreme Case study
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Agenda
Review of last Class Questions?
Discuss the Nature of Strategic Management Describe the strategic-management process. Explain the need for integrating analysis and intuition in strategic
management. Define and give examples of key terms in strategic management. Discuss the nature of strategy formulation, implementation, and evaluation
activities. Describe the benefits of good strategic management. Explain why good ethics is good business in strategic management. Explain the advantages and disadvantages of entering global markets. Discuss how a firm may achieve sustained competitive advantage. Explain ISO 9000, 14000, and 14001 Discuss the relevance of Sun Tzu’s The Art of War to strategic management.
Assignment #1
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Chapter 1 The Nature of Strategic Management
Strategic Management: Concepts & Cases
11th Edition
Fred David
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Themes in the Text
•Global Considerations – impact virtually all strategic decisions
•E-commerce – vital strategic management tool
•Natural environment – important strategic issue
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Art & science of formulating, implementing, and evaluating, cross-functional decisions that enable an organization to achieve its objectives
Strategic Management – Defined
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Strategic Management
In essence, the strategic plan is a company’s game plan
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Strategic Management achieves a firm’s success through integration ––
Management
MIS
Production/OperationsFinance/Accounting
Marketing
Research & Development
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Vision & Mission
Strategy Formulation
External Opportunities & Threats
Internal Strengths & Weaknesses
Long-Term Objectives
Alternative Strategies
Strategy Selection
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Issues in Strategy Formulation
New business opportunitiesBusinesses to abandonAllocation of resourcesExpansion or diversificationInternational marketsMergers or joint venturesAvoidance of hostile takeover
New business opportunitiesBusinesses to abandonAllocation of resourcesExpansion or diversificationInternational marketsMergers or joint venturesAvoidance of hostile takeover
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Strategy Implementation
Annual Objectives
Policies
Employee Motivation
Resource Allocation
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Strategy Implementation
Action Stage of Strategic Management –
Most difficult stageMobilization of employees & managersInterpersonal skills criticalConsensus on goal pursuit
Action Stage of Strategic Management –
Most difficult stageMobilization of employees & managersInterpersonal skills criticalConsensus on goal pursuit
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Strategy Evaluation
Internal Review
External Review
Performance Metrics
Corrective Actions
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Strategy Evaluation
Final Stage of Strategic Management
Subject to future modificationToday’s success no guarantee of future successNew & different problemsComplacency leads to demise
Final Stage of Strategic Management
Subject to future modificationToday’s success no guarantee of future successNew & different problemsComplacency leads to demise
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Peter Drucker: -- Think through the overall mission of a business. Ask the key question: “What is our Business?”
Prime Task of Strategic Management
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The strategic management process attempts to organize quantitative and qualitative information under conditions of uncertainty
Integrating Intuition and Analysis
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Intuition is based on: Past experiences Judgment Feelings
Integrating Intuition and Analysis
Intuition is useful for decision making in: Conditions of great uncertainty Conditions with little precedent
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Involve Management at all levels
Intuition & Judgment
Influence all Analyses
Integrating Intuition & Analysis
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Analytical Thinking
Integrating Intuition & Analysis
Intuitive Thinking
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Advice from Gen. Colin PowellPart I: "Use the formula P=40 to 70, in which
P stands for the probability of success and the numbers indicate the percentage of information acquired.“
Part II: "Once the information is in the 40 to 70 range, go with your gut."
---Colin Powell (former US Sectary of State) http://www.blaisdell.com/powell/
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Organizations must monitor events On-going process Internal and external events Timely changes
Adapting to Change
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“Anything that a firm does especially well compared to rival firms”
Strategic Management is Gaining and Maintaining Competitive Advantage
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1. Adapting to change in external trends, internal capabilities and resources
Achieving Sustained Competitive Advantage
2. Effectively formulating, implementing & evaluating strategies
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Rate & magnitude of change increasing dramatically
Adapting to Change
E-commerce
Demographics
Technology
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Effective Adaptation
Adapting to Change
Requires long-term focus
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What kind of business should we become?
Are we in the right fields Are there new competitors? What strategies should we
pursue? How are our customers
changing?
Adapting to Change – Key Strategic Management Questions
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It's Not the Big That Eat the Small ... It's the Fast That Eat the Slow”
http://www.amazon.com/Its-That-Small-Its-Fast-Slow/dp/0066620546
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Key Terms
Various Job Titles:
•Chief Executive Officer (CEO)•Chief Strategy Officer (CSO)•President•Owner•Board Chair•Executive Director
Strategists – Firm’s success/failure
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Vision Statement –What do we want to become?
Mission Statement –What is our business?
Key Terms
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Largely beyond the control of a single organization
Key Terms
Opportunities and Threats (External)
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Opportunities & Threats (External)
Key Terms
Analysis of Trends:
• Economic
• Social
• Cultural
• Demographic/Environmental
• Political, Legal, Governmental
• Technological
• Competitors
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Process of conducting research and gathering and assimilating external information
Key Terms Opportunities & Threats
Environmental Scanning (Industry Analysis)
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Basic Tenet of Strategic Management
Key Terms Opportunities & Threats
Strategy Formulation
Take advantage of External Opportunities
Take advantage of External Opportunities
Avoid/minimize impact ofExternal Threats
Avoid/minimize impact ofExternal Threats
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Controllable activities performed especially well or poorly
Key Terms
Strengths & Weaknesses (Internal)
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Strengths & Weaknesses (Internal)
Key Terms
Typically located in functional areas of the firm
• Management
• Marketing
• Finance/Accounting
• Production/Operations
• Research & Development
• Computer Information Systems
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Assessing the Internal Environment
Key Terms Strengths & Weaknesses
Internal Factors
Performance Metrics
Financial Ratios
Industry Averages
Survey Data
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SWOT Analysis
More Information http://www.quickmba.com/strategy/swot/
Source: http://www.gslis.utexas.edu/~l3871sio/handout/swot.gif
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Mission-driven pursuit of specified results more than one year out
Key Terms
Long-term Objectives
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Long-term Objectives
Key Terms
Essential for ensuring the firm’s success
• Provide direction
• Aid in evaluation
• Create synergy
• Focus coordination
• Basis for planning, motivating, and controlling
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Means by which long-term objectives are achieved
Key Terms
Strategies
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Strategies
Key Terms
Some Examples
• Geographic expansion
• Diversification
• Acquisition
• Market penetration
• Retrenchment
• Liquidation
• Joint venture
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Short-term milestones that firms must achieve to attain long-term objectives
Key Terms
Annual Objectives
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Means by which annual objectives will be achieved
Key Terms
Policies
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Dynamic & Continuous More formal in larger organizations
Strategic Management Model
Strategic Management Process
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ExternalAudit
Chapter 3
InternalAudit
Chapter 4
Long-TermObjectives
Chapter 5
Generate,Evaluate,
SelectStrategies
Chapter 6
ImplementStrategies:
Mgmt Issues
Chapter 7
ImplementStrategies:Marketing,Fin/Acct,R&D, CISChapter 8
Measure &Evaluate
Performance
Chapter 9
Vision &
Mission
Chapter 2
Comprehensive strategic management model
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1. Identify Existing --
Strategic Management Model
• Vision
• Mission
• Objectives
• Strategies
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2. Audit external environment3. Audit internal environment4. Establish long-term objectives5. Generate, evaluate & select
strategies6. Implement selected strategies7. Measure & evaluate performance
Strategic Management Model
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Benefits of Strategic Management
• Proactive in shaping firm’s future
• Initiate and influence firm’s activities
• Formulate better strategies
•Systematic, logical, rational
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Benefits of Strategic Management
Financial Benefits
• Improvement in sales
• Improvement in profitability
• Productivity improvement
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Benefits of Strategic Management
Non-Financial Benefits
• Improved understanding of competitors strategies
• Enhanced awareness of threats
• Reduced resistance to change
• Enhanced problem-prevention capabilities
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Benefits of Strategic Management (Greenley)
1. Identification of Opportunities
2. Objective view of management problems
3. Improved coordination & control
4. Minimizes adverse conditions & changes
5. Decisions that better support objectives
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Benefits of Strategic Management (Greenley – cont’d)
6. Effective allocation of time & resources
7. Internal communication among personnel
8. Integration of individual behaviors
9. Clarify individual responsibilities
10. Encourage forward thinking
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Benefits of Strategic Management (Greenley – cont’d)
11. Encourages favorable attitude toward change
12. Provides discipline and formality to the management of the business
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Why Some Firms Do No Strategic Planning
Poor reward structures
Fire-fighting
Waste of time
Too expensive
Laziness
Content with success
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Why Some Firms Do No Strategic Planning
Fear of failure
Overconfidence
Prior bad experience
Self-interest
Fear of the unknown
Suspicion
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Principles of conduct within organizations that guide decision making and behavior
Business Ethics & Strategic Management
Business Ethics defined –
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Prerequisite for good strategic management
Business Ethics & Strategic Management
Good business ethics –
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Provides basis on which policies can be devised to guide daily behavior and decisions in the workplace
Business Ethics & Strategic Management
Code of business ethics –
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Misleading advertising Misleading labeling Harm to the environment Insider trading Dumping flawed products on foreign markets Poor product or service safety Padding expense accounts
Business Ethics & Strategic Management
Business practices always considered unethical –
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ISO 9000 focuses on quality control > 1.5 million companies incorporate ISO
Natural Environment Perspective
ISO used to gain strategic advantage
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Voluntary standards ISO 14001 standard for Environmental
Management System Firms minimize harmful effects on
environment
Natural Environment Perspective
ISO 14000 standards
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Parent company Host country
The Nature of Global Competition
International/multinational corporations
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Cultural differences Norms Values Work ethic
The Nature of Global Competition
Strategy implementation may be difficult
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Advantages of International Operations
Absorb excess capacity
Reduce unit costs
Spread risk over wider markets
Low-cost production facilities
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Advantages of International Operations (cont’d)
Less intense competition
Lower taxes
Economies of scale
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Sun Tzu and the Art of Business The Six Principles from
Sun Tzu and the Art of Business: Six Principles for Managers Mark McNeilly (Oxford Press University - 1996)
Capture your market without destroying it "Generally in war, the best policy is to take a state intact; to ruin it is inferior to this....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."
Avoid your competitor's strength, and attack their weakness "Now an army may be likened to water, for just as flowing water avoids the heights and hastens to
the lowlands, so an army avoids strength and strikes weakness." Use foreknowledge and deception to maximize the power of business intelligence.
"Know the enemy and know yourself; in a hundred battles you will never be in peril." Use speed and preparation to swiftly overcome the competition.
"To rely on rustics and not prepare is the greatest of crimes; to be prepared beforehand for any contingency is the greatest of virtues."
Use alliances and strategic control points in the industry to "shape" your opponents and make them conform to your will. "Therefore, those skilled in war bring the enemy to the field of battle and are not brought there by
him." Develop your character as a leader to maximize the potential of your employees.
"When one treats people with benevolence, justice and righteousness, and reposes confidence in them, the army will be united in mind and all will be happy to serve their leaders."
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Assignment #1 Prepare a two to three page paper (not less than 500 and not
more than 1000 words) that covers the listed requirements. Turn in a well formatted typed document. You may also e-mail the document to me. Prepare Mission and Vision statements for yourself (25 %) Carefully articulate your career objectives (25 %) Perform a SWOT analysis of your current situation as it relates to
you desired career objectives (25 %) Develop a strategic plan (less than a page!) that takes you from
your current situation to your desired career objectives (25 %) This assignment is due Friday 26, January at 9:30 AM Resources
http://humanresources.about.com/cs/strategicplanning1/a/strategicplan.htm http://change.monster.com/articles/swot/ http://www.mindtools.com/pages/article/newTMC_05_1.htm http://www.work911.com/planningmaster/