Mgmt 478

1. Mgmt 478 Strategic Planning and Strategy Formulation Fall 2005

2. Strategic Planning • First step to develop strategic thinking • Allows organizations to understand its own direction and purpose and main variables that influence strategy • It provides a framework to formulate and control strategies

3. The BIG picture

4. Strategic Planning Process  Mission  Objectives  Environmental Analysis  Internal Analysis  Strategy Formulation  Control

5. Mission and Vision Provide direction to the business and includes values, culture, and relation to stakeholders Objectives Need to be clear, specific, and measurable Long and short-term External Analysis Determine impact of external variables on firms’ strategy and performance

6. Internal Analysis Identifies strengths and weaknesses to determine how they can lead to sustainable competitive advantage Strategy Formulation Series of fits’ determination that include SWOT analysis to formulate strategies Control Prevents, compares, and corrects strategic performance according to objectives established

7. Chapter 2 External Environment Strategic Intent Inputs Strategic Strategic Mission Chapter 3 Internal Environment Strategy Formulation Strategy Implementation Chapter 4 Chapter 5 Chapter 6 Chapter 10 Chapter 11 Business-Level Competitive Corporate-Level Corporate Structure Strategy Dynamics Strategy Governance & Control Strategic Actions Chapter 8 Chapter 7 Chapter 9 Chapter 12 Chapter 13 Entrepreneurship & Innovation International Acquisitions & Cooperative Strategic Strategy Restructuring Strategies Leadership Strategic Strategic Outcomes Competitiveness Above Average Feedback Returns The Strategic Management Process

8. Strategic Planning Process Vision Mission Objectives SWOT Analysis Control Feedback External Environment

9. Mission and Vision • Inspiring statement designed to motivate firm’s stakeholders to agree with top management objectives • Indicates direction and purpose of firm, its main business, unique culture, and relation to employees, stakeholders, and community

10. Sounds Familiar ? • VISIONThe Iowa State University College of Business aims to become a nationally significant professional school with a nationally prominent faculty providing unique disciplinary and interdisciplinary focuses reflecting the science and technology strengths of Iowa State University, and to be recognized among the top ten Colleges of Business in land-grant universities in the United States

11. COB’s Mission To prepare tomorrow's business leaders through educational experiences that link theory with practice and reflect the multi-disciplinary demands of a business world that is increasingly global, technologically-oriented, and diverse. These challenging educational experiences result from the discovery activities by the College’s faculty, a challenging learning environment, state-of-the-art technology, and faculty, staff, and students engaged on campus and with the business community.

12. ISU - Strategic plan Vision: • Create, share, and apply knowledge to make Iowa and world a better place

13. Microsoft mission • To enable people and businesses throughout the world to realize their full potential • The tenets central to accomplishing our mission stem from our core company values: Broad Customer Connection, A Global, Inclusive Approach, Excellence, Trustworthy Computing, Great People with Great Values, Enabling People to Do New Things

14. Starbucks mission • Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow.

15. Starbucks mission • The following six guiding principles will help us measure the appropriateness of our decisions:Provide a great work environment and treat each other with respect and dignity.Embrace diversity as an essential component in the way we do business.Apply the highest standards of excellence to the purchasing, roasting and fresh delivery of our coffee.Develop enthusiastically satisfied customers all of the time.Contribute positively to our communities and our environment.Recognize that profitability is essential to our future success

16. Environmental mission statement • Starbucks is committed to a role of environmental leadership in all facets of our business • We fulfill this mission by a commitment to: Understanding of environmental issues and sharing information with our partners. Developing innovative and flexible solutions to bring about change. Striving to buy, sell and use environmentally friendly products. Recognizing that fiscal responsibility is essential to our environmental future. Instilling environmental responsibility as a corporate value. Measuring and monitoring our progress for each project. Encouraging all partners to share in our mission.

17. Mission Objectives

18. Mission Objectives Vision

19. Objectives • Need to be clear, specific, and measurable • “To be the best in the market” • To increase market share by 5% in the following 2 years

20. Environmental Analysis • Determines impact of direct and indirect external variables that impact the institution (Threats & Opportunities) • Direct Variables: Customers, Financial Institutions, Personnel Offer, Competition • Indirect Variables: Economic, Political, Demographic, International

21. Internal Analysis • Determines firm’ s Strengths and Weaknesses and their impact on strategy • It includes analysis of resources, competencies, and competitive advantages

22. Strategy Formulation Generic Strategies • Cost • Differentiation • Focus

23. External and Internal Analysis -5 + 5  Variable  Variable Variable 

24. SWOT Analysis Weaknesses Strengths Threats Strategy Strategy Strategy Strategy Opportunities Strategy

25. Strategic Measures Market Share Sales Productivity Quality Turnover Innovation !!! Accounting Measures Stock price ROA ROE ROI ROS Free cash flow Evaluation

26. Calendar driven Early consensus on right answer Adjust data to fit “right answer” Over commitment of resources Analysis: preferred choice-confirming analysis Strategic choices Array of viable alternatives Verification assumptions Prioritize projects allocate resources From multiple options to analysis to choice Problems with Strategic Planning

27. See future as linear extrapolation Lack of focus to develop alternatives Focus on planning versus implementation Abandonment Incomplete/erroneous strategy implementation Analyze trends, contingencies Realistic assessment of resources, simplicity Problem-solving tracking systems Meeting structures for frequent review Continuous communication and reinforcement Problems with Strategic Planning

28. Lack of motivation to implement Misalignment personal & organizational goals Misalignment competencies & strategy Unique focus on strategy, overlooking fit Inertia Paralysis because outcome is a plan Alignment personal and organizational goals Tie incentives to performance Invest in employee learning & development Fit strategy-structure-processes-culture A priori establishment of accountabilities Produce a direction and an agenda Problems with Strategic Planning

29. Strategic Planning can also be applied to individuals Personal Example

30. My Mission • I want to be happy, wealthy, and successful in every endeavor I undertake in my whole life

31. Developing a Personal Mission Values • Love, Equity, Kaizen Culture • Respect, Solidarity, Enjoyment

32. To pay Graduate School for my two Children “anywhere” To have $ 1 M for retirement Stable and joyful family Publications in Top Journals Be in top 10 percent among College teachers Defining values Successful Wealthy

33. External Analysis - 5 + 5 US Competition   Complexity   Standards  Internationalization   Latin America 

34. Internal Analysis Ideas Analysis Review Data Writing Submit cc cc Core Competencies

35. Using Functional Analysis Operations Marketing Finance Personnel Defects rate Complains Market share Image ROA Stock Price Turnover Training Physical Professional Financial Spiritual Workout Dietary Position/Degree Promotion Salary Savings Religion Meditation

36. Internal Analysis + 5 - 5 Idea generation  Literature Review   Working habits Writing  Analysis 

37. SWOT Analysis Weaknesses Writing / Analysis Strengths Generation Ideas Learn to write Joint Ventures Outsource Data Collection Copy Editor Threats US Competition/ Complexity Apply new ideas in Latin America Opportunities Internationalization Research & Teach in Latin America

38. Mgmt 478 Strategic Management and Strategic Competitiveness Chapter I

39. The Challenge • Firms achieve strategic competitiveness when they develop and learn how to implement a value-creating strategy • Firms satisfy all of its stakeholders obtaining returns in excess of what investors expect to earn from other investments with similar levels of risk

40. Free movement of factors in one huge, single market Spread of economic innovations Result is increased competition Shorter product cycles because of increasing rates of technological changes and diffusion Different forms of competition because of changes in IT Knowledge prevails 21stCentury Landscape Globalization Technology

41. Knowledge • A firm’s survival depends on the ability to capture intelligence, transform it into usable knowledge, and diffuse it rapidly throughout the company

42. The External Environment Resources An Attractive Industry Capability Strategy Formulation Competitive Advantage Assets and Skills An Attractive Industry Strategy Implementation Strategy Implementation Superior Returns Superior Returns Alternative Models of Superior Returns Industrial Organization Model Resource-BasedModel

43. I/O Model of Superior Returns The Industrial Organization model suggests that above-average returns for any firm are largely determined by characteristics outside the firm. This model largely focuses on industry structure or attractiveness of the external environment rather than internal characteristics of the firm.

44. I/O Model of Above-Average Returns Underlying Assumptions • Environment determines strategies • Firms control similar resources • Resources are mobile across firms • Rational managers • Five forces Model

45. The External Environment Analysis An Attractive Industry Profitable industry Strategy Formulation Fit industry-strategy Assets and Skills Develop or acquire Strategy Implementation Use firm’s strengths Superior Returns Maintain strategy Alternative Models of Superior Returns Industrial Organization Model Actions required

46. TheResource-Basedmodel suggests that above-average returns for any firm are largely determined by characteristicsinsidethe firm. This model focuses on developing or obtaining valuable resources and capabilities which are difficult or impossible for rivals to imitate. Resource-Based Model of Superior Returns

47. Underlying Assumptions Resource-basedmodel • Internal environment more influential • Firms acquire different resources and unique capabilities • Resources not highly mobile • Combination / integration resources form Competitive Advantages • Resources integratively perform tasks to develop capabilities

48. Relative to rivals Resources That outperform Capabilities How to create Competitive Advantage Locate industry An Attractive Industry Exploits resources Strategy Implementation Maintain strategy Superior Returns Alternative Models of Superior Returns Resource-BasedModel Actions required

49. Competitive Advantage • Resources and capabilities have the potential to be the basis for competitive advantage when they are valuable, rare, costly to imitate, and nonsubstitutable. When these criteria are met, resources and capabilities become core competencies

50. Strategic Intent • Strategic intent suggests how resources, capabilities, and core competencies will be leveraged to achieve desired outcomes in the competitive environment.