POLICY vs STRATEGY

1. POLICY vs STRATEGY POLICY STUDIES • INTERNAL FOCUS • EMPHASIZES EFFICIENCY OF OPERATIONS STRATEGIC STUDIES • EXTERNAL FOCUS • EMPHASIZES ADAPTING TO A CHANGING ENVIRONMENT “SEAT-OF-THE-PANTS” MANAGEMENT = Intuitive Management We must move away from intuitive approaches as: THE ORGANIZATION BECOMES LARGER… THE LAYERS OF MANAGEMENT INCREASE… THE ENVIRONMENT BECOMES MORE COMPLEX.

2. THE FOUR PHASES OF STRATEGIC PLANNING 1--BASIC FINANCIAL PLANNING (Budgeting) • Seek better control by emphasizing the meeting of budgets • Focus is internal 2--FORECAST-BASED PLANNING • Plan for growth by trying to predict the future beyond next year • Predicting and forecasting the environment 3--EXTERNALLY-ORIENTED (Strategic) PLANNING • Responding and reacting to market shifts and competitor actions • Environmental reaction 4--STRATEGIC MANAGEMENT • Developing a competitive advantage which creates your future • Environmental proaction

3. STRATEGIC PLANNING Any organization that doesn’t plan for the future isn’t likely to have one. Planning without action is futile, but action without planning is fatal. STRATEGIC PLANNING • FORCES MANAGERS TO THINK ANALYTICALLY • FOCUSES ATTENTION ON THE FUTURE OF THE FIRM • INCREASES UNDERSTANDING OF THE ENVIRONMENT • DEVELOPS ABILITY AND OUTLOOK OF MANAGERS • IS A BASIS FOR PERFORMANCE EVALUATION AND ASSESSMENT Three most highly rated benefits: • CLEARER SENSE OF THE STRATEGIC VISION OF THE FIRM • SHARPER FOCUS ON WHAT IS STRATEGICALLY IMPORTANT • IMPROVES UNDERSTANDING OF THE CHANGING ENVIRONMENT

4. TRIGGERING EVENTS FOR STRATEGIC CHANGE • SIGNIFICANT PERFORMANCE GAPS • CHANGES IN OWNERSHIP • CHANGES IN LEADERSHIP—A NEW CEO • INTERVENTION BY A SIGNIFICANT EXTERNAL ENTITY • STRATEGIC INFLECTION POINT IN GENERAL, ANY CHANGES, CRISES, OR DEVIATIONS FRO THE EXPECTED OR STATUS QUO

5. THE BASIC MODEL OF STRATEGIC MANAGEMENT 1--ENVIRONMENTAL SCANNING • EXTERNAL ENVIRONMENT • Opportunities and Threats • INTERNAL ORGANIZATION • Strengths and Weaknesses 2--STRATEGY FORMULATION • DEVELOPING A MISSION/VISION • Who are we? What is our business? Where are we headed? • SETTING OBJECTIVES • Financial Objectives – Earnings, ROA, Cash Flow • Strategic Position Objectives – Market Share, Customer Service, Competitive Position • CRAFTING STRATEGIES • How to achieve the targeted results?…What is our strategic plan? • Corporate, Business-level, Functional 3--STRATEGY IMPLEMENTATION • ESTABLISHING PROGRAMS, BUDGETS, AND PROCEDURES • ASSIGNMENTS • Who does what by when? 4--EVALUATION AND CONTROL • MONITORING, REVIEW, AND INTERVENTION • When should we intervene?

6. THREE STRATEGIC LEVELS CORPORATE-LEVEL STRATEGIES Are long-term investment strategies Is the corporate mission/vision well-served by continuing in this business? Seek a favorable portfolio of business activities for the corporation GROWTH STABILITY RETRENCHMENT BUSINESS-LEVEL (Divisional) STRATEGIES Are competitive strategies for each business segment the company operates in How to improve the relative market position of each product/service line? Emphasize development of a competitive advantage for each business line COST LEADERSHIP DIFFERENTIATION FOCUS FUNCTIONAL-LEVEL (Departmental) STRATEGIES Are departmental strategies that focus on resource utilization and efficiency Develop efficiency plans that are in harmony with higher-level objectives

7. TESTS FOR A WINNING STRATEGYTHOMPSON & STRICKLAND GOODNESS-OF-FIT HOW WELL IS THIS STRATEGY MATCHED TO THE ORGANIZATION’S CAPABILITIES AND ASPIRATIONS? COMPETITIVE ADVANTAGE DOES THIS STRATEGY LEAD TO A SUSTAINABLE COMPETITIVE ADVANTAGE? DOES THIS STRATEGY STRENGTHEN OUR COMPETITIVE POSITION? PERFORMANCE IS PROFITABILITY ENHANCED? ARE LONG-TERM GAINS REALIZED IN STRATEGIC-POSITION AND IN FINANCIAL AREAS?

8. FIVE CRITICAL STRATEGIC QUESTIONSHAMBRICK & FREDERICKSON ARENAS: WHERE WILL WE BE ACTIVE? …WHICH AREAS? VEHICLES: HOW WILL WE GET THERE? DIFFERENTIATORS: HOW WILL WE WIN IN THE MARKETPLACE? STAGING: HOW FAST CAN WE DO IT… AND IN WHAT SEQUENCE? ECONOMIC LOGIC: WHAT RETURN CAN WE EXPECT… AND WHEN WILL WE GET IT?

9. IMPLEMENTATION FINDING A GOOD “FIT” BETWEEN STRATEGY AND …. -- ORGANIZATIONAL CAPABILITIES -- THE REWARD STRUCTURE -- INTERNAL POLICIES AND PROCEDURES -- THE ORGANIZATION’S CULTURE

10. WE IMPLEMENT STRATEGY BY: -- BUILDING AN ORGANIZATION (STRUCTURE) CAPABLE OF SUCCESSFULLY SUPPORTING AND CARRYING OUT THE STRATEGY -- DEVELOPING BUDGETS THAT STEER RESOURCES INTO CRITICAL INTERNAL ACTIVITIES -- MOTIVATING PEOPLE TO PURSUE TARGETED OBJECTIVES ENERGETICALLY -- TYING REWARDS TO ACHIEVEMENT OF TARGETED RESULTS -- CREATING A WORK ENVIRONMENT CONDUCIVE TO SUCCESSFUL IMPLEMENTATION OF STRATEGY -- INSTALLING STRATEGY-SUPPORTIVE POLICIES AND PROCEDURES -- DEVELOPING AN INFORMATION REPORTING SYSTEM TO TRACK PROGRESS AND MONITOR PERFORMANCE -- EXERTING INTERNAL LEADERSHIP TO DRIVE IMPLEMENTATION FORWARD

11. MYTHS OF CORPORATE PLANNINGACKOFF 81 MOST CORPORATE PLANNING IS LIKE A RITUAL RAIN DANCE, IT HAS NO EFFECT ON THE WEATHER THAT FOLLOWS, BUT IT MAKES THOSE WHO ENGAGE IN IT FEEL THAT THEY ARE IN CONTROL. MOST DISCUSSIONS OF THE ROLE OF MODELS IN PLANNING ARE DIRECTED AT IMPROVING THE DANCING, NOT THE WEATHER. IMPLICATIONS: DON’T FOCUS EXCLUSIVELY ON THE PROCESS… KEEP AN EYE ON RESULTS! IS THERE PROOF THAT THINGS ARE IMPROVING?