screen graphics created by: jana f. kuzmicki, indiana university southeast strategic management:...
TRANSCRIPT
Screen graphics created by:Jana F. Kuzmicki, Indiana University Southeast
STRATEGIC MANAGEMENT:STRATEGIC MANAGEMENT:Concepts and CasesConcepts and Cases
Arthur A. Thompson, Jr. &A. J. Strickland, III
Tenth Edition
The University of Alabama
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© The McGraw-Hill Companies, Inc., 1998
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THE STRATEGIC THE STRATEGIC MANAGEMENT MANAGEMENT
PROCESSPROCESS
CHAPTER 1
Screen graphics created by:Jana F. Kuzmicki, PhD, Indiana University Southeast
“Without a strategy the
organization is like a ship without
a rudder, going around in circles.”
Joel Ross and Michael Kami
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“Quote”
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Chapter Outline
Five Tasks of Strategic Management Developing a Strategic Vision and Mission Setting Objectives Crafting a Strategy Implementing the Strategy Evaluating Performance and Initiating
Corrective Adjustments Why Strategic Management Is a Process Who Performs the Tasks of Strategy? Benefits of “Managing Strategically” Terms to Remember
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Thinking Strategically:The Three Big Strategic Questions
1. Where are we now -- what is our situation?
2. Where do we want to go?
Business(es) we want to be in and market positions we want to stake out
Buyer needs and groups we want to serve
Outcomes we want to achieve
3. How will we get there?
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What Is Strategy?
Competitive moves and business approaches management employs in running a company
Management’s “game plan” to Please customers Position a company in its chosen market Compete successfully Achieve good business performance
Concept
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Why Are Strategies Needed ?
To proactively shape how a company’s business will be conducted
To mold the independent actions and decisions of managers and employees into a coordinated, companywide game plan
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Strategic Management Concept
Competent execution of a well-
conceived strategy is a proven
recipe for organizational
success and the best test of
managerial excellence!
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Craft aStrategy
to AchieveObjectives
SetObjectives
Develop aStrategic
Vision& Mission
Implement& ExecuteStrategy
Evaluate & Make
Corrections
Improve/Change
Revise asNeeded
Revise asNeeded
Improve/Change
Recycleas Needed
Task 1 Task 2 Task 3 Task 4 Task 5
The Five Tasksof Strategic Management
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Developing a Vision and Mission
Begins with thinking strategically about The firm’s future business makeup Where to take the firm
The task is to Create a roadmap of a company’s future Decide what future business position to
stake out Provide long-term direction Give the firm a strong identity
The First Task of Strategic Management
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Missions vs. Strategic Visions
A mission statement focuses on current business activities Business(es)
company is in now
Customer needs currently being served
A strategic vision concerns a firm’s future business path The kind of
company it is trying to become
Customer needs to be satisfied in the future
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Developing a Strategic Vision
A strategic vision is a roadmap of a company’s future -- Direction it is headed Business position it
intends to stake out Capabilities it plans to
develop Customer needs it
intends to serve
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Examples: Mission andVision Statements
McDonald’s Corporation
McDonald’s vision is to dominate the global foodservice industry. Global dominance means setting the performance standard for customer satisfaction while increasing market share and profitability through our Convenience,
Value, and Execution Strategies.
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Examples: Mission andVision Statements
Otis ElevatorOur mission is to provide any customer a means
of moving people and things up, down, and sideways over short distances with higher
reliability than any similar enterprise in the world.
Microsoft CorporationOne vision drives everything we do: A computer
on every desk and in every home using great software as an empowering tool.
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Examples: Mission andVision Statements
Avis Rent-a-CarOur business is renting cars. Our mission is total
customer satisfaction.
American Red CrossThe mission of the American Red Cross is to
improve the quality of human life; to enhance self-reliance and concern for others; and to help
people avoid, prepare for, and cope with emergencies.
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Examples: Mission andVision Statements
The Body Shop
We aim to achieve commercial success by meeting our customers’ needs through the provision of high
quality, good value products with exceptional service and relevant information which enables customers to
make informed and responsible choices.
Eastman Kodak
We are in the picture business.
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Examples: Mission andVision Statements
Ritz-Carlton Hotels
The Ritz-Carlton Hotel is a place where the genuine care and comfort of our
guests is our highest mission.
We pledge to provide the finest personal service and facilities for our guests who will always enjoy
a warm, relaxed yet refined ambiance.
The Ritz-Carlton experiences enlivens the senses, instills well-being, and fulfills even the unexpressed wishes and needs of our guests.
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Examples: Mission andVision Statements
Intel
Intel supplies the computing industry with chips, boards, systems, and software. Intel’s products are
used as “building blocks” to create advanced computing systems for PC users. Intel’s mission is to be the preeminent building block supplier to the
new computing industry worldwide.
Compaq ComputerTo be the leading supplier of PCs and PC
servers in all customer segments.
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Examples: Mission andVision Statements
Long John Silver’sTo be America’s best quick service restaurant chain.
We will provide each guest great tasting, healthful, reasonably priced fish, seafood, and chicken in a
fast, friendly manner on every visit.
Bristol-Myers SquibbThe mission is to extend and enhance human
life by providing the highest quality health and personal care products. We intend to be the
preeminent global diversified health and personal care company.
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Setting Objectives
Establishing OBJECTIVES
Converts vision into specific
performance targets
Creates yardsticks to track performance
Pushes firm to be inventive and focused
Helps prevent coasting and complacency if
targets require stretch
The Second Task of Strategic Management
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Types of Objectives Required
Outcomes focused on improving a firm’s
financial performance
Outcomes focused on improving a firm’s competitiveness and its long-term business position
Financial Objectives Strategic Objectives
$
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Examples: Financial Objectives
Grow earnings per share 15% annually Boost annual return on investment (or EVA) from
15% to 20% Increase annual dividends per share
to stockholders by 5% each year Strive for stock price appreciation
equal to or above the S&P 500 average Maintain a positive cash flow Achieve and maintain a AA bond rating
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Examples: Strategic Objectives
Increase firm’s market share Overtake key rivals on quality or customer
service or product performance Attain lower overall costs than rivals Boost firm’s reputation with customers Attain stronger foothold in international markets Achieve technological superiority Become leader in new product introductions Capture attractive growth opportunities
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Example: Nike’s Corporate Objectives
Protect and improve Nike’s position as the number one athletic brand in America.
Build a strong momentum in growing fitness market. Intensify the company’s effort to develop products that
women need and want. Explore the market for products specifically designed
for the requirements of maturing Americans. Direct and manage the company’s international
business as it continues to develop. Continue the drive for increased margins through
proper inventory management and fewer, better products.
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Example: McCormick’sCorporate Objectives
Dispose of those parts of our businesses which cannot generate adequate returns or do not fit with our business strategy.
Achieve a 20% return on equity. Achieve net sales growth rate of 10% per year. Maintain an average earnings per share growth
rate of 15% per year. Maintain total debt to total capital at 40% or less. Pay out 25% to 35% of net income in dividends.
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Examples: Strategic andFinancial Objectives
Banc One Corporation
To be one of the top three banking companies in terms of market share in all
significant markets we serve.
Domino’s Pizza
To safely deliver a hot, quality pizza in 30 minutes or less at a fair price
and a reasonable profit.
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Example: Strategic andFinancial Objectives
Ford Motor Company To satisfy our customers by providing
Quality cars and trucks, Developing new products, Reducing the time it takes to bring new
vehicles to market, Improving the efficiency of all our plants &
processes, and Building on our teamwork with employees,
unions, dealers, and suppliers.
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Examples: Strategic andFinancial Objectives
Exxon
To provide shareholders a secure investment with a superior return.
Alcan Aluminum
To be the lowest-cost producer of aluminum and to outperform the average return on equity of the
Standard and Poor’s industrial stock index.
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Example: Strategic andFinancial Objectives
General ElectricTo become the most competitive enterprise in the world by being number one or number two in market share in every business the company
is in. To achieve an average of 10 inventory turns and a corporate operating profit margin
of 16% by 1998.
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Examples: Strategic andFinancial Objectives
Atlas Corporation
To become a low-cost, medium-size gold producer, producing in excess of
125,000 ounces of gold a year and building gold reserves of 1,500,000 ounces.
Bristol-Myers SquibbTo focus globally on those businesses in health and personal care where we can
be number one or number two through delivering superior value to the customer.
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3M Corp.
Annual growth in earnings per share of 10% or better, on average
A return on stockholders’ equity of 20-25%
A return on capital employed of 27% or better
Have at least 30% of sales come from products introduced in the past four years
Examples: Strategic andFinancial Objectives
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Crafting a Strategy
Strategy involves determining whether to Concentrate on a single business or several
businesses (diversification) Cater to a broad range of customers or focus
on a particular niche Develop a wide or narrow product line Pursue a competitive advantage based on
Low cost or Product superiority or Unique organizational capabilities
The Third Task of Strategic Management
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Involves deciding how to Respond to changing
buyer preferences Outcompete rivals Respond to new
market conditions Grow the business
over the long-term Achieve performance
targets
Our strategy will be . . .
Crafting a Strategy
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Strategy Is Both Planned Planned andand Reactive Reactive to Changing Circumstances
ActualStrategy
Planned (or Intended)Strategy
AdaptiveReactions
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The Hows ThatDefine a Firm's Strategy
How to grow the business How to please customers How to outcompete rivals How to respond to changing market
conditions How to manage each functional piece of the
business and develop needed organizational capabilities
How to achieve strategic and financial objectives
Strategy is HOW to . . .
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Understanding Company Strategy -- What to Look For
Patternof Actions
That DefineStrategy
Actions to Strengthen Resources & Capabilities
DiversificationResponses toChanging Conditions
Offensive Moves to Gain Edge
Changes in Product Line,Quality, or Service
GeographicCoverage
Forward orBackward Integration,
Collaboration
How Functional Activities Are
Managed
Defensive Moves
Pursuing New Opportunities
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Strategy Example: McDonald’s
Strategic priorities Continued growth Providing exceptional customer care Remaining an efficient and quality
producer Offering high value and
good-tasting products Effectively marketing McDonald’s brand
on a global scale
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Core Elements ofMcDonald’s Strategy
Add 2500 restaurants annually Promote frequent customer visits via attractive menu
items, low-price specials, and Extra Value Meals Be highly selective in granting franchises Locate on sites offering convenience to customers
and profitable growth potential Focus on limited menu and consistent quality Careful attention to store efficiency Extensive advertising and use of Mc prefix Hire courteous personnel; pay an equitable wage;
provide good training
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Crafting Strategy Is anExercise in Entrepreneurship
Strategy-making is a market-driven and customer-driven activity that involves Risk-taking and venturesomeness Innovation and business creativity Keen eye for spotting market
opportunities Keen observation of customer
needs Choosing among alternatives
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Characteristics ofEntrepreneurial Managers
Boldly pursue new strategic opportunities
Emphasize out-innovating the competition
Lead the way to improve firm performance
Willing to be a first-mover and take risks
Respond quickly and opportunistically
to new developments
Devise trail blazing strategies
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Why Do Strategies Evolve?
There is always an ongoing need to react to Shifting market conditions Fresh moves of competitors New technologies Evolving customer preferences Political and regulatory changes New windows of opportunity The crisis of the moment
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What Is a Strategic Plan?
Where firm is headed -- Strategic vision and business mission
Action approaches to achieve targeted results -- A comprehensive strategy
Short and long term performance targets --Strategic and financial objectives
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Implementing Strategy
Creating fits between way things are done and what it takes for effective strategy execution
Getting the organization to execute strategy proficiently and efficiently
Producing excellent results in a timely manner
The Fourth Task of Strategic Management
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Strategy implementation is aninternal, operations-driven activityinvolving organizing, budgeting,
motivating, culture-building,supervising, and leading to
“make the strategy work”as intended!
Strategy implementation is aninternal, operations-driven activityinvolving organizing, budgeting,
motivating, culture-building,supervising, and leading to
“make the strategy work”as intended!
Strategy Implementation
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What Does StrategyImplementation Include?
Building a capable organization Allocating resources to strategy-critical activities Establishing strategy-supportive policies Motivating people to pursue objectives Tying rewards to achievement of results Creating a strategy-supportive corporate culture Installing needed information, communication, and
operating systems Instituting best practices for continuous
improvement Exerting strategic leadership
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Evaluating Performance
The tasks of strategy are not a one-time only exercise Times and conditions change Events unfold
Better ways to do things emerge
New managers with different ideas take over
The Fifth Task of Strategic Management
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Evaluating Performance
Corrective adjustments
Alter long-term direction
Redefine the business
Raise or lower performance objectives
Modify the strategy
Improve strategy execution
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Characteristics of the Strategic Management Process
Need to perform tasks never goes away
Boundaries among tasks are blurry
Strategizing is not isolated from other managerial activities
Time required comes in lumps and spurts
The big challenge is to get the best strategy-supportive performance from employees, perfect current strategy, and improve strategy execution
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Who Performs the FiveStrategic Management Tasks?
Senior Corporate Level Executives
Subsidiary Business Unit Managers
Functional Area Managers
Operating Managers
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Strategizing: An Individual or Group Responsibility?
Teams are increasingly used because Strategic issues cut across departmental
lines Ideas of people with different backgrounds
can be tapped into More people will have an ownership stake in
the strategy
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Role of Strategic Planners
Gather necessary information Provide support in revising strategic plans Coordinate review and approval process Crystallize strategic issues to be
addressed Conduct studies of industry and
competitive conditions Establish an annual review cycle Develop strategy performance
assessments
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Why Planners Should NotBe Strategy Makers
Managers may toss tough decisions to planners
Planners know less about company’s situation
Difficult to fix accountability for poor results
Managers have no “buy in” to strategy
Strategic planning may be viewed as an unproductive “bureaucratic” activity
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Strategic Management Principle
Strategy-making is a job for
line managers, not a staff of
planners -- doers should be the
strategy-makers!
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Strategic Role of aBoard of Directors
Continuously audit validity of a company’s long-term direction and strategy
Evaluate strategic leadership skills of the CEO and candidates to succeed the CEO
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Strategic Management Principle
A board of director’s role in the
strategic management process is to
critically appraise and ultimately
approve strategic action plans, but
rarely, if ever, to develop the details!
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Benefits of StrategicApproach to Managing
Guides entire firm regarding “what it is we are trying to do and to achieve”
Lowers management’s threshold to change
Provides basis for evaluating competing budget requests
Unifies numerous strategy-related decisions
Creates a proactive atmosphere
Enhances long-range performance
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Recap of Important Terms
A view of an organization’s future direction and business course; a guiding concept for what the organization is trying to do and to become.
Represents management’s customized answer to the question “what is our business and what will it be.” A mission statement broadly outlines the organization’s future direction and serves as a guiding concept for what the organization is to do and to become.
Strategic Vision
Organization Mission
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Recap of Important Terms
Organization’s targets for achievement; both short and long range objectives are needed.
Financial performance targets a company wants to achieve.
Targets relating to strengthening a company’s overall market position and competitive viability.
Performance Objectives
Financial Objectives
Strategic Objectives
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Recap of Important Terms
Achievement levels to be reached within the next three to five years.
Near-term performance targets; they establish the pace for achieving the long-range objectives.
Long-Range Objectives
Short-Range Objectives
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Recap of Important Terms
Managerial action plan for achieving organizational objectives; strategy is mirrored in the pattern of moves and approaches devised by management to produce the desired performance. Strategy is the how of pursuing an organization’s mission and reaching target objectives.
Statement outlining an organization’s mission and future direction, near-term and long-term performance targets, and strategy, in light of organization’s external and internal situation.
Strategy
Strategic Plan
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Recap of Important Terms
Includes the full range of managerial activities associated with putting the chosen strategy into place, supervising its pursuit, and achieving the targeted results.
Strategy Implementation