Strategy and the Strategic Management Process

1. Strategy and the StrategicManagement Process Learning Objectives: To understand the concept of strategy and the strategic management process, competitive advantage, and other key terms used throughout this course

2. Many Definitions of Strategic Management …consists of the analysis, decisions and actions an organization undertakes to create and sustain competitive advantage… Dess, Lumpkin & Taylor …should develop and exploit valuable, rare and costly-to-imitate resources, leading to sustained competitive advantage and above normal performance… Barney, 1991 …A firm’s theory about how to gain competitive advantage… Barney, 2006

3. The Strategic Management Process

4. The Mission Statement …a firm’s long-term purpose… • Typical components: • Primary market or technology • Goals: growth, profitability, survival • Basic beliefs, company philosophy • Public image, self-concept • Customers • Quality • Examples:

5. Nike’s Mission Statement “To bring inspiration and innovation to every athlete in the world.”

6. Southwest Airline’s Mission Statement “The mission of Southwest Airlines is dedication to the highest quality of customer service delivered with a sense of warmth, friendliness, individual pride, and company spirit”.

7. Geisinger’s Mission Statement “Enhancing quality of life through an integrated health service organization based on a balanced program of patient care, education, research and community service.”

8. UNLV’s Mission Statement The University of Nevada, Las Vegas, located in the vibrant and dynamic city of Las Vegas and surrounded by the Mojave Desert, is emerging as a premier urban university. UNLV’s development embraces the traditional values of higher education adapted for the global community of the 21st century. The university increasingly will concentrate its resources on programs that are student centered, demonstrably excellent, and responsive to the needs of the local and regional community. UNLV promotes an environment that encourages the full personal and professional development of those it serves and of those who serve the university. UNLV assists students in meeting the intellectual and ethical challenges of responsible citizenship and a full and productive life through opportunities to acquire the knowledge and common experiences that enhance critical thinking, leadership skills, aesthetic sensitivity, and social integrity. The university provides traditional and professional academic programs for a diverse student body and encourages innovative and interdisciplinary approaches to teaching, learning, and scholarship. Recognizing the individuality of each student, UNLV simultaneously engenders collegial relationships and a sense of community among its members. UNLV embraces the interdependence of quality instruction, scholarly pursuits, and substantive involvements in campus and community life. The university offers artistic, cultural, and technical resources and opportunities to the broadest possible community. It promotes research programs and creative activities by students and faculty that respond to the needs of an urban community in a desert environment. UNLV is committed to developing a synergy between professional and liberal studies, between undergraduate education and graduate programs, and between superior teaching and meaningful research. UNLV increasingly is a dynamic resource for, and partner with, the community that it serves.

9. Benefits of Having a Mission Statement • Unanimity of purpose • Employee motivation • Culture / focal identity • Allocating resources Vision statement = mission statement? Improved performance? Are there disadvantages of vision and mission statements? Why don’t all companies have vision and mission statements? Do you know your company’s vision/mission statement?

10. Setting Objectives • Purpose of setting Objectives is to: • convert mission into performance targets • create yardsticks to track performance • establish goals that require stretch • push firm to be inventive, focused • Criteria for strategic objectives: • Specific • Measurable • Appropriate • Realistic • Timely • Financial and strategic objectives

11. Financial Objectives …objectives that relate to improving firm’s financial performance… • Examples • increase ROI from 15% to 20% • maintain AA bond rating • increase earnings growth from 10% to 15% Other examples of financial objectives?

12. Strategic Objectives …objectives that consider improvement in competitiveness or market position… • Examples • Increase market share from 15% to 18% • Surpass rivals on customer service • Achieve lower cost than competitors • Achieve technological superiority Other examples of strategic objectives?

13. External and Internal Analysis Systematic Examination of the Environment Internal Analysis External Analysis • human resources (knowledge) • interest rates • demographics • manufacturing abilities • social trends • technology • financial strength

14. Internal Analysis External Analysis Strategic Choice Corporate Level Business Level Strategic Choice Gain advantage in market or industry Determine which businesses to be in

15. Strategy Implementation … determines how strategies are carried out; who will do what, when … Three tools to implement strategy: • Organizational structure • Management control systems • Compensation policies

16. What is Competitive Advantage ? … the ability to create more economic value than competitors … • There must be something different between a firm’s offerings and it’s competitors • If all firm’ strategies were the same, there would be no competitive advantages • Competitive advantage results from doing something different or better than competitors

17. Two Generic Types of Competitive Advantage • Preference for the firm’s output (differentiation) • people choose the firm’s output over others’ • people are willing to pay a premium Examples ? • Cost advantage vs. competitors (cost leadership) • lower costs of production/distribution Examples ?

18. Competitive Advantage

19. Measuring Competitive Advantage • Accounting performance / financial ratios • Profitability • Liquidity • Leverage • Activity • Economic measures • Comparing firm’ returns to WACC

20. Strategic Management and Social Responsibility …corporate social responsibility is the expectation that firms will proactively attempt to improve the overall welfare of society… Is this a reasonable expectation? How can we best hold businesses accountable? Have we (US firms) gotten better or worse?