Fall05 bhchap1

Class #2:The Tools of Strategic Analysis: 

Class #2: The Tools of Strategic Analysis Analyzing and Writing Case Analysis Group Assignments Chapter 1 Review

Analyzing and writing a case study: 

Analyzing and writing a case study Read case study and relevant chapter carefully Read questions for the case (posted online) Reread the case and make notes that are relevant to the question Reread the chapter and identify and note the concepts that you will use in your case write up Think about how chapter concepts are supported (or not) by case facts

Analyzing……..: 

Analyzing…….. Cases cover a wide range of issues and problems. For individual assignments, can use case discussion questions as a guide for identifying key issues Write-ups should present your evaluation rather than repeating case facts Assertions must be supported by case information Other issues 2 Page limit – creative/informative use of space Writing style, clarity, spelling

Team “Leads”: Cases: 

Team “Leads”: Cases GROUP #1 – Roadway Express: 9/21 GROUP #2 – Harlequin Enterprises: 9/28 GROUP #3 – Apple iTunes: 10/3 GROUP #4 – JetBlue: 10/17 GROUP #5 – Levi’s: 10/24 GROUP #6 – eBay: 11/7 GROUP #7 – “easy” Business: 11/16 GROUP #8 – HP-Compaq: 12/7

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Chapter 1

Multiple Definitions: 

Multiple Definitions Strategy can be thought of as: Plans - A consciously intended course of action (guidelines, documents, etc) Ploys - Short-term tactics or maneuvers to outwit competitors Patterns - Set of actions that suggest direction (can be intended or emergent) Positions – The space occupied within an environment (e.g. market share, niches) Perspectives – A way of perceiving the world that unites individuals in an organization

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1984 Profits: $242 Million Theme Park Operations: 77 percent of profits Consumer Products: 22 percent of profits Filmed Entertainment: 1 percent of profits

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Hired Michael Eisner - 1984 1. Increased admission prices at theme parks 1984 - $186 m 1989 - $787 m 2. Focused on movie studios (character development) 1984 - $2.42 m 1994 - $845 m Diversified into television (ABC), hotels, retail stores, sport team, cruise line, publishing, consumer products, licensing, etc. (Huey & McGowan, 1995) Walt Disney Company Market Cap: 1984 = $2 billion 1994 = $28 billion

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Definition of Strategy Strategy: A firm’s theory about how to gain competitive advantage Eisner’s theory may have been: People will pay a premium price for extraordinary entertainment. We have the necessary resources to create extraordinary entertainment. Therefore, let’s redeploy our resources in a different way and offer something extraordinary to people.

Defining Strategy: 

Defining Strategy So, what is strategy? Creation of a unique and valuable position Making trade-offs in competing –choosing what to do and what not to do Creating fit among a company’s activities – doing many things well and integrating among them

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Mission Objectives External Analysis Internal Analysis Strategic Choice Strategy Implementation Competitive Advantage The Strategic Management Process

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The Strategic Management Process Objectives External Analysis Internal Analysis Strategic Choice Strategy Implementation Competitive Advantage Mission

Stakeholders and strategy: 

Stakeholders and strategy Source: HBR Campbell

Mission Statement: 

Mission Statement Defines organization’s long term purpose Cultural glue that enables an organization to function as a collective entity Source: HBR

Does your company have a mission?: 

Does your company have a mission? Which best describes the mission where you work? Employee focused 0.8% Risk-taking 2.5% Product/service-focused 21.5% Customer-focused 28.4% Mission? What mission? 46.5% Source: Fun with meaningless numbers dept, Dallas Morning News

Mission Statements: 

Mission Statements It is our business to enthusiastically simplify interdependent benefits and assertively supply virtual intellectual capital for 100% customer satisfaction Mission Statement Generator at http://www.dilbert.com/comics/dilbert/games/career/bin/ms.cgi Create your own mission statement To boldly go where no man has gone before Star Trek Source: NYTimes, www.dilbertzone.com

Turning Mission to Action: 

Turning Mission to Action Awareness Ford’s “Quality is Job One” Understanding Hewlett-Packard “The HP Way” Oakland Raiders “Just Win!” Commitment High quality objectives Precise and measurable the things a firm needs to ‘do’ to achieve its mission should influence other elements in the strategic management process Source: Harvard Business Review, Collins

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The Strategic Management Process External and Internal Analysis External Analysis Systematic Examination of the Environment Internal Analysis • interest rates • demographics • social trends • technology • human resources (knowledge) • manufacturing abilities • technology

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The Strategic Management Process Strategic Choice • positioning a business • which businesses? Example: Black & Decker

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The Strategic Management Process Strategy Implementation • how strategies are carried out • who will do what • organizational structure and control • who reports to whom • how does the firm hire, promote, pay, etc. A Strategy Is Only As Good As Its Implementation

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The Strategic Management Process Competitive Advantage Definition: the ability to create more economic value than competitors • all other elements of the strategic management process are aimed at achieving competitive advantage Mission Objectives External Analysis Internal Analysis Strategic Choice Strategy Implementation Competitive Advantage

Competitive advantage: 

Competitive advantage Economic value: Perceived benefits – costs Different sources of competitive advantage Greater perceived benefits Lower costs

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Competitive Advantage Temporary & Sustainable • competition limits the duration of competitive advantage in most cases • profits attract competition • competitive advantage typically results in high profits Therefore, • most competitive advantage is temporary • competitors imitate the advantage or offer something better

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Competitive Advantage Temporary & Sustainable Some competitive advantages are sustainable if: • competitors are unable to imitate the source of advantage • no one conceives of a better offering Of course, • in time, even sustainable competitive advantage may be lost

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Competitive Advantage Competitive Advantage Disadvantage Parity Advantage Below Normal Normal Above Normal Economic Returns • exceeding expectations • meeting expectations • failing expectations

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Competitive Advantage Measuring Competitive Advantage Superior Economic Performance Is Viewed as Evidence of Competitive Advantage • it is rather easy to see the evidence of competitive advantage • measuring the source of the advantage per se is typically impossible • it’s difficult to ‘measure’ technology

Intended and Emergent Strategies: 

Intended and Emergent Strategies Intended Strategies Design school Strategy as a formal, structured process Role of top management Emergent strategy Process school Strategy as an evolving process, responsive to realities Role of lower level managers

Strategy Formation: 

Strategy Formation Intended Unrealized Deliberate Realized Emergent Source : Mintzberg

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What about International / Global Strategies? Consistent Logic • important questions remain the same, but the answers may be different • a firm would still ask about social trends, but social trends may be moving in different directions in different markets • culture and infrastructure differences must be taken into account throughout the strategic management process

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The Strategic Management Process Summary This course is not about mere survival, it is about thriving—achieving competitive advantage • the strategic management process helps managers achieve competitive advantage • competitive advantage depends on differences • strategy is about discovering and exploiting these differences

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The Strategic Management Process Applying Strategy to Your Career • a solid understanding of strategy concepts will help set you apart from other job candidates • you can use the process to identify and exploit difference between you and others • you can use the process to determine if you want to stay with a company