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A tough, challenging course But so is management…and LIFE! Identify and address strategic issues...
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Transcript of A tough, challenging course But so is management…and LIFE! Identify and address strategic issues...
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….