BA 469

Strategic Management and

Business Policy
Focus: General Management
of an organization
An organization is “a system of
consciously coordinated activities
or forces of two or more persons.”
 Learning Outcomes
• Knowledge of strategic management tools
and concepts
• Diagnose strategic situations (as
described in cases) using these tools and
concepts
• Contribute to class and small group
discussions of these tools, concepts, and
the strategic situations
 To Measure Achievement of
Learning Outcomes
• Quizzes 40% of total grade
– Usually when chapters are assigned
– Total of 8: 2 required, 5 of other 6 counted
• Case reports (2) and case briefs (4) - 50%
of total grade
• Participation in class discussions – 10% of
total grade
 Requirements
• Read Chapters and Cases (when no
report is due) before coming to class
• Read assigned articles (will be posted in
public folder)
• BECOME AN ACTIVE MEMBER OF THE
CLASS
 Requirements
• Case briefs and reports are due beginning
of class (see schedule)
• Chapter outlines will be posted, but may
be used as background to lecture.
• Reading material will be added to create
awareness of external issues affecting
business.
 Case Reports
• State the major problem or issue
• Justification based on
• Case facts
• As interpreted through an appropriate application of tools and
concepts
• Recommendations that
• Address the problem or issue
• Are based on realities faced by organization
• Justification for recommendation
• Note: do not summarize or merely restate case
information.
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 of 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?
 Mission
• What is our business? Who are we as an
organization in relation to . . . (Fig 1.4,
p.12)
– Customer
– Needs met
– How satisfied
 Values
• What should guide how we conduct our
business? Go about our work?
• Broad, all encompassing “rules,” for
example
– Integrity
– Service
– Empowering
 Goals (and Objectives)
• Precise and measurable
– not always easy to achieve
• Address crucial issue(s)
– may be targeted at a particular priority
• Challenging but realistic - - stretch factor
• Specify a time period - -
– ok to set targets for a distant past, but
– need immediate targets to measure progress
 External Analysis
• Industry
• National
• International and Global
• Interaction between industry and the
national and global environment
 Internal Analysis
• Resources
– tangible
– intangible
• Capabilities
 Strategy Formulation
• Addresses outcome of external and
internal analysis
• Intent, a plan as to what our organization
will be
• Defines functional areas within the
organization to focus on
 Implementation
• How do we go about pursuing our intent?
• Who - - people
• How - - who does what, structure, etc.
• With what - - resources required
 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
 Budget Variances:
Provides idea of how targets can be off
• Revenues – volume and price per unit
variance
– Volume - - predict actual units sold
– Price - - anticipate price in the next year
• Cost – volume and cost per unit variance
– estimate unit cost of production
• labor, raw materials, machine time, etc.
– administration or overhead component
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.