Strategic Management

1. Strategic Management

2. Strategic Management Model • Scanning • Where are we now? • Strategy Formulation • Where do we want to be? • Strategy Implementation • How do we get there? • Measurement/Performance • How do we measure our progress?

3. Strategic Management Model • Strategy Formulation • Where do we want to be? • Vision • Mission • Values • Goals • Objectives

4. VISION Vision without Action is a Daydream Action without Vision is a Nightmare • Not Optional • Stretch – 30+ Years • 8-10 Words in length • Future State • Brief and Memorable

5. VISION (Continued) • Inspiring and Challenging • Descriptive of the Ideal

6. Vision Examples • “Light the Fire Within” • “A Safer Future for All Communities” • “See the Mountains – Breathe Freely” • To Be the Happiest Place on Earth • To Be the World’s Best Quick Service Restaurant

7. Vision Levels of People • Some people never see it. (Wanderers) • Some people see it but never pursue it on their own. (Followers) • Some people see it and pursue it. (Achievers) • Some people see it and pursue it and help others see it. (Leaders) John Maxwell, Developing The Leader Within You, 1993.

8. VISION EXERCISE

9. Mission Statement In the absence of a clearly defined direction one is forced to concentrate on confusion that will ultimately consume you.

10. MISSION • What is our purpose? • Describes current state • Timeline is 3-5 Years • Builds on our distinctive competencies • Tends to focus on Core Business • 30-35 Words in length

11. Mission Examples • “To Lead All Communities in Disaster Preparedness, Mitigation, and Recovery by Maximizing Assistance and Support.” • “Caltrans Improves Mobility Across California.” • To produce superior financial returns for our shareholders as we serve our customers with the highest quality transportation, logistics, and e-commerce.

12. MISSION EXERCISE

13. Corporate Governance • What is it? • Codes of Governance • Role of the Board of Directors • Role of Top Management Team • Executive Compensation

14. Corporate Governance • System by which a firm’s owners control its affairs. • Does it work?

15. Codes of Governance • The Cadbury Code: 1992 • Sarbanes-Oxley Act: 2002 • Public Company Accounting Oversight Board • “Triple bottom line” • Four major issues: • Ownership structure and influence • Fianacial Stakeholder rights and relations • Financial transparency and information disclosure • Board structure and processes (audit)

16. Role of the Board of Directors • Monitor • Evaluate and influence • Initiate and determine • Organization of Board • Insiders versus outsiders • CEO/chair position • Committees’ Effectiveness

17. Role of Top Management Team • Who is the TMT? • Executive Leadership and Strategic Vision • Articulates strategic vision for corporation • Sets the model for others to identify and follow • Communicates high performance standards and builds confidence in followers’ abilities to meet standards • Managing strategic planning process

18. Executive Compensation • Incentive alignment • Executive Ownership • Incentive compensation • Salary • Bonus • Stock Options • LT Bonus

19. VALUES • Guiding Principles • Help establish Culture • Part of Preserving the Core • Core Ideology

20. Value Examples • CHP PRIDE • HP WAY • J & J Credo • “Build the Spirit of the Place”

21. Ethical Awareness Model • Organizational Ethics • Individual Ethics • Personal Values

22. VALUES EXERCISE

23. Strategic Management Model • Scanning: • Where are we now? • Macro Analysis (STEP, PESTEL, ETC.) • Industry Analysis – Competitive Intelligence • SWOT Analysis • Internal versus External Elements

24. Why Scan? • To know your position in the environment • To respond effectively to constant change • To see the organization as a whole • To avoid surprises • To survive • To lay the foundation for strategic issues

25. SCANNING: Key Environmental Variables • Macro Environment: STEP, PESTEL • Task Environment: Industry • Internal Environment: Focal Organization

26. Socio-Cultural Variables • Lifestyle Changes • Career Expectations • Regional Shifts in Population • Life Expectancies • More women in workforce • Greater concern for fitness • Postponement of family formation • Increase in temporary workers

27. Technological Variables • Total Federal Spending for R&D • Total Industry Spending for R&D • Focus of Technological Efforts • Patent Protection • Wireless Communications • Nanotechnology • Productivity Improvements • Genetic engineering

28. Economic Variables • GDP Trends • Interest Rates • Money Supply • Inflation Rates • Unemployment Levels • Wage/Price Controls • Energy Availability & Cost • Disposable & Discretionary Income

29. Political-Legal Variables • Antitrust Regulations • Tort Reform • Environmental Protection Laws • Taxation at local, state, federal levels • Hiring and Promotion Laws • Americans Disabilities Act of 1990 • Sarbanes-Oxley Act of 2002

30. Demographic Variables • Aging Population • Rising affluence • Changes in Ethnic Composition • Geographic distribution of population • Disparities in income levels

31. Global Variables • Increasing Global Trade • Currency Exchange Rates • Emergence of Indian and Chinese Economies • Trade agreements (NAFTA, EU, ASEAN) • Creation WTO

32. STEP EXERCISE • Socio-Cultural • Technological • Economic • Politico-Legal

33. Industry Analysis • 6 Forces Analysis • Industry Competitors • Suppliers/Vendors • Customers/Clients • Potential New Entrants • Substitutes • Other Stakeholders • Role of Complementors

34. New Entrants and Entry Barriers • Absolute cost advantages • Access to inputs • Government policy • Economies of scale • Capital requirements • Brand identity • Switching costs • Access to distribution • Proprietary products

35. Buyer Power (Channel and End Consumer) • Buyer volume and information • Brand identity • Price sensitivity • Threat of backward integration • Product differentiation • Substitutes

36. Supplier Power • Supplier concentration • Differentiation of inputs • Switching costs • Threat of forward integration • Cost relative to total purchases in industry

37. Substitutes • Switching costs • Buyer inclination to substitute • Variety of substitutes • Price-performance tradeoff of substitutes • Necessity for product or service

38. Degree of Rivalry • Exit barriers • Industry concentration • Fixed costs • Industry growth • Intermittent overcapacity • Switching costs • Brand identity • Diversity of rivals • Corporate stakes

39. Other Stakeholders • Employees • Unions • Government • Trade and Professional Associations • Other Direct Influencers

40. Role of Complementors • Number of complements • Relative value added • Difficulty of engaging complements • Buyer perception of complements • Complement exclusivity • Tend to increase profits by increasing demand for an industry’s products

41. 6 FORCES EXERCISE

42. Competitive Profile Analysis • Identify Key Competitive Factors • Identify key Competitors

43. COMPETITIVE PROFILE EXERCISE

44. Industry Foresight Customer Needs Unarticulated Articulated Customer Served UnservedTypes Unexploited Opportunities

45. Internal Environment • Internal Profile Analysis • SWOT Analysis

46. Internal Profile Analysis • Identify Key Core Functions • Identify Key Measures for Core Functions • Build Matrix

47. SWOT Analysis • Internal Environment • Strengths • Weaknesses • External Environment • Opportunities • Threats

48. SWOT EXERCISE

49. Strategic Management Model • Strategy Formulation • Where do we want to be? • Vision • Mission • Values • Goals • Objectives

50. GOAL • Supports the Mission • Deals with One Issue or Item of Focus • Reflects a primary activity or strategic direction • Describes the “To Be” State • “BHAG” • Encompasses a long period, i.e. at least 3 years