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Thompson and Strckland.PPT
1.
Screen graphics created
by: Jana F. Kuzmicki, Indiana University Southeast STRATEGIC MANAGEMENT: Concepts and Cases Arthur A. Thompson, Jr. & A. J. Strickland, III Tenth Edition The University of Alabama
2.
2 © The McGraw-Hill
Companies, Inc., 1998 Irwin/McGraw-Hill THE STRATEGIC MANAGEMENT PROCESS CHAPTER 1 Screen graphics created by: Jana F. Kuzmicki, PhD, Indiana University Southeast
3.
“Without a strategy
the organization is like a ship without a rudder, going around in circles.” Joel Ross and Michael Kami © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill “Quote”
4.
4 © The McGraw-Hill
Companies, Inc., 1998 Irwin/McGraw-Hill 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
5.
5 © The McGraw-Hill
Companies, Inc., 1998 Irwin/McGraw-Hill 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?
6.
6 © The McGraw-Hill
Companies, Inc., 1998 Irwin/McGraw-Hill 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
7.
7 © The McGraw-Hill
Companies, Inc., 1998 Irwin/McGraw-Hill 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
8.
8 © The McGraw-Hill
Companies, Inc., 1998 Irwin/McGraw-Hill Strategic Management Concept Competent execution of a well- conceived strategy is a proven recipe for organizational success and the best test of managerial excellence!
9.
9 © The McGraw-Hill
Companies, Inc., 1998 Irwin/McGraw-Hill Craft a Strategy to Achieve Objectives Set Objectives Develop a Strategic Vision & Mission Implement & Execute Strategy Evaluate & Make Corrections Improve/ Change Revise as Needed Revise as Needed Improve/ Change Recycle as Needed Task 1 Task 2 Task 3 Task 4 Task 5 The Five Tasks of Strategic Management
10.
10 © The McGraw-Hill
Companies, Inc., 1998 Irwin/McGraw-Hill 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
11.
11 © The McGraw-Hill
Companies, Inc., 1998 Irwin/McGraw-Hill 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
12.
12 © The McGraw-Hill
Companies, Inc., 1998 Irwin/McGraw-Hill 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
13.
13 © The McGraw-Hill
Companies, Inc., 1998 Irwin/McGraw-Hill Examples: Mission and Vision 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.
14.
14 © The McGraw-Hill
Companies, Inc., 1998 Irwin/McGraw-Hill Examples: Mission and Vision Statements Otis Elevator Our 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 Corporation One vision drives everything we do: A computer on every desk and in every home using great software as an empowering tool.
15.
15 © The McGraw-Hill
Companies, Inc., 1998 Irwin/McGraw-Hill Examples: Mission and Vision Statements Avis Rent-a-Car Our business is renting cars. Our mission is total customer satisfaction. American Red Cross The 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.
16.
16 © The McGraw-Hill
Companies, Inc., 1998 Irwin/McGraw-Hill Examples: Mission and Vision 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.
17.
17 © The McGraw-Hill
Companies, Inc., 1998 Irwin/McGraw-Hill Examples: Mission and Vision 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.
18.
18 © The McGraw-Hill
Companies, Inc., 1998 Irwin/McGraw-Hill Examples: Mission and Vision 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 Computer To be the leading supplier of PCs and PC servers in all customer segments.
19.
19 © The McGraw-Hill
Companies, Inc., 1998 Irwin/McGraw-Hill Examples: Mission and Vision Statements Long John Silver’s To 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 Squibb The 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.
20.
20 © The McGraw-Hill
Companies, Inc., 1998 Irwin/McGraw-Hill 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
21.
21 © The McGraw-Hill
Companies, Inc., 1998 Irwin/McGraw-Hill 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 $
22.
22 © The McGraw-Hill
Companies, Inc., 1998 Irwin/McGraw-Hill 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
23.
23 © The McGraw-Hill
Companies, Inc., 1998 Irwin/McGraw-Hill 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
24.
24 © The McGraw-Hill
Companies, Inc., 1998 Irwin/McGraw-Hill 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.
25.
25 © The McGraw-Hill
Companies, Inc., 1998 Irwin/McGraw-Hill Example: McCormick’s Corporate 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.
26.
26 © The McGraw-Hill
Companies, Inc., 1998 Irwin/McGraw-Hill Examples: Strategic and Financial 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.
27.
27 © The McGraw-Hill
Companies, Inc., 1998 Irwin/McGraw-Hill Example: Strategic and Financial 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.
28.
28 © The McGraw-Hill
Companies, Inc., 1998 Irwin/McGraw-Hill Examples: Strategic and Financial 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.
29.
29 © The McGraw-Hill
Companies, Inc., 1998 Irwin/McGraw-Hill Example: Strategic and Financial Objectives General Electric To 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.
30.
30 © The McGraw-Hill
Companies, Inc., 1998 Irwin/McGraw-Hill Examples: Strategic and Financial 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 Squibb To 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.
31.
31 © The McGraw-Hill
Companies, Inc., 1998 Irwin/McGraw-Hill 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 and Financial Objectives
32.
32 © The McGraw-Hill
Companies, Inc., 1998 Irwin/McGraw-Hill 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
33.
33 © The McGraw-Hill
Companies, Inc., 1998 Irwin/McGraw-Hill 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
34.
34 © The McGraw-Hill
Companies, Inc., 1998 Irwin/McGraw-Hill Strategy Is Both Planned and Reactive to Changing Circumstances Actual Strategy Planned (or Intended) Strategy Adaptive Reactions
35.
35 © The McGraw-Hill
Companies, Inc., 1998 Irwin/McGraw-Hill The Hows That Define 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 . . .
36.
36 © The McGraw-Hill
Companies, Inc., 1998 Irwin/McGraw-Hill Understanding Company Strategy -- What to Look For Pattern of Actions That Define Strategy Actions to Strengthen Resources & Capabilities Diversification Responses to Changing Conditions Offensive Moves to Gain Edge Changes in Product Line, Quality, or Service Geographic Coverage Forward or Backward Integration, Collaboration How Functional Activities Are Managed Defensive Moves Pursuing New Opportunities
37.
37 © The McGraw-Hill
Companies, Inc., 1998 Irwin/McGraw-Hill 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
38.
38 © The McGraw-Hill
Companies, Inc., 1998 Irwin/McGraw-Hill Core Elements of McDonald’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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39 © The McGraw-Hill
Companies, Inc., 1998 Irwin/McGraw-Hill Crafting Strategy Is an Exercise 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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Companies, Inc., 1998 Irwin/McGraw-Hill Characteristics of Entrepreneurial 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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Companies, Inc., 1998 Irwin/McGraw-Hill 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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Companies, Inc., 1998 Irwin/McGraw-Hill 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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Companies, Inc., 1998 Irwin/McGraw-Hill 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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Companies, Inc., 1998 Irwin/McGraw-Hill Strategy implementation is an internal, operations-driven activity involving organizing, budgeting, motivating, culture-building, supervising, and leading to “make the strategy work” as intended! Strategy Implementation
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Companies, Inc., 1998 Irwin/McGraw-Hill What Does Strategy Implementation 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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Companies, Inc., 1998 Irwin/McGraw-Hill 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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Companies, Inc., 1998 Irwin/McGraw-Hill 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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Companies, Inc., 1998 Irwin/McGraw-Hill 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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Companies, Inc., 1998 Irwin/McGraw-Hill Who Performs the Five Strategic Management Tasks? Senior Corporate Level Executives Subsidiary Business Unit Managers Functional Area Managers Operating Managers
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Companies, Inc., 1998 Irwin/McGraw-Hill 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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Companies, Inc., 1998 Irwin/McGraw-Hill 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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Companies, Inc., 1998 Irwin/McGraw-Hill Why Planners Should Not Be 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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Companies, Inc., 1998 Irwin/McGraw-Hill 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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Companies, Inc., 1998 Irwin/McGraw-Hill Strategic Role of a Board 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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Companies, Inc., 1998 Irwin/McGraw-Hill 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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Companies, Inc., 1998 Irwin/McGraw-Hill Benefits of Strategic Approach 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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Companies, Inc., 1998 Irwin/McGraw-Hill 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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Companies, Inc., 1998 Irwin/McGraw-Hill 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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Companies, Inc., 1998 Irwin/McGraw-Hill 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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Companies, Inc., 1998 Irwin/McGraw-Hill 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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Companies, Inc., 1998 Irwin/McGraw-Hill 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
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