3 Basic Parts of Strategy: Analysis, Formulation, and Implementation

MGT 409 – Exam 1 Review

• 3 basic parts of strategy: Analysis, formulation, and implementation
• Strategy: anything you can do to gain advantage over competition

• Romantic view of leadership: CEO is responsible for success/failure (Steve Jobs)
• External control leadership: Co’s are controlled by mkt forces, best CEO can do is anticipate and prepare for them

• Strategic management: analyses, decisions, and actions taken to create/sustain a competitive advantage

• Biggest problem is sustaining competitive advantage. Things care copied/imitated and eventually all ground breaking tech is industry standand.

• Ambidextrous behaviors: balance between getting most out of current product/services and developing new ones → doing current tasks and looking for new opportunities simultaneously
• Strategic Planning → from VISION to TASK
• Key to effective management is to MANAGE – requires managers who are able to think, plan, analyze, and decide
• Efficiency vs. effectiveness: interest of management and owners aren’t always the same; the more closely you supervise management team, the more it costs and less efficient they will be.
• Strategic direction: (Hierarchy of Goals – Top down)

• Vision: inspiring, overarching, long-term, passion driven, statement of co’s values, aspirations, and goals.’
• Mission: more specific than vision, purpose of co., basis of competition and competitive advantages, focuses on means by which firm will compete
• Strategic Objectives: most specific, operationalize mission statement, guidance on how org will move to higher goals (mission/vision), cover more defined time frame

• NEED TO BE SMART: Specific, Measurable, Appropriate, Realistic, Timely

Corporate Governance: relationship between

• Stockholders: Owners
• Management: headed by CEO
• Board of directors: elected by shareholders (representatives of owners)

• ensure interest/motives of mgt are aligned with the owners

Stakeholders: anyone who will be affected by the success, failure, or continued operation of the firm

• Not just management, owners, employees → suppliers, custo’s, competitors, neighbors, community, politicians etc. → crowdsourcing can effect even more people (kickstarter)
• Views of stakeholder management:

• Zero sum: stakeholders compete for attention and resources of org./ gain of one is loss to another
• Symbiosis: stakeholders dependent on one another (mutually beneficial)

Chapter 2:

• Forecasting → 3 Functions:

• External Scanning: predicting changes in firms environment, changes already underway, then working out possible responses
• External Monitoring: tracking trends, sequences of related activities, and organized programs
• Competitive Intelligence: tracking/understand industry, monitoring competition, identify emerging threats/opportunities

• Collected through public industry sources. Alerts management of threats

• Not always successful: managers can be overwhelmed with amount of info/miss something critical

• General Environment:

• Demographics
• Sociocultural measures
• Legal/political issues
• Technological
• Economic
• International

Models for analyzing eternal environment:

• SWOT Analysis: sum up general environment, industry conditions, and firm resources/needs

• Strengths: what are we good at
• Weaknesses: where do we need help
• Opportunities: where can we expand
• Threats: where are we vunerable

• Porters 5 Forces: Michael Porter, Harvard. Zero-sum condition

• Threat of new entrants
• Threat of substitutes
• Power of suppliers
• Power of buyers
• Rivalry amongst existing firms

• Strategic Groups: Cluster of firms that share similar strategies and activities

• No 2 firms exactly alike/completely different
• In industry firms will utilize similar strategies → results in same actions (direct competition) Ex. Mercedes, Audi, BMW  or  Meijer, WalMart, Super Target

• Forward Integration: Firm buys something closer to customer (Hammer manufacturer buys hardware store that sells hammers)
• Backward Integration: Firm buys something closer to supplier (Hammer manufacturer buys steel mill that supplies steel)

Chapter 3:

Internal Analysis:

Value Chain: All add value or reduce costs → all work collaboratively to do so → 2 activities, 9 category

• Primary activities:

• Inbound Logistics, operations, outbound logistics, marketing & sales, Service

• Support activities:

• General admin, HR management, technology development (R&D), procurement (purchasing/supply chain relations/vendor relations)

Resource Based View (RBV):

• Tangible Asset: all physical and financial assets used to create value for custo (includes patent)
• Intangible Assets: routines, practices, knowledge, experience, reputation, and HR accumulated over time → employee skills/abilities, reputations, brand name etc.
• Organizational Capabilities: skills the firm can use to provide superior product/service value (customer service)
• Firm resources:

• Valuable: does the resource add value?
• Rare: does everybody have?
• Difficult to imitate: unique or hard to make?
• Difficult to substitute: is there an equivalent?

4 Balanced Scorecard Analysis:

• Customer perspective: quality, service, performance
• Internal business perspective: capabilities, skills, issues
• Innovation and learning perspective: increasing efficiency, adding value, etc
• Financial perspective:  profitability, growth, asset turnover

• Limitations: lack of clear strategy, limited executive sponsorship, too much emphasis on financial measures, poor data on actual performance, inconsistent terminology

Chapter 4:

• Knowledge economy:

• Knowledge based labor makes 50% of GDP in industrialized countries

• 3 Intellectual Assets:

• Human Capital: individual knowledge/capabilities, experience of employees
• Social Captial: network of relationships that people have throughout firm
• Knowledge: Tactic: can’t be recorded or spread (shared only with consent and participation of the individual) / Explicit: write down, record, and transmit to someone else (reusable, replicated, widely distributed)

• 3 major aspects of human capital: Attracting, developing, retaining -→ all required for success

• Attracting HC: hire for attitude, train for skill – scan pools for candidates, referrals
• Developing HC: train and develop on all levels, encourage widespread involvement, monitor progress/development, *employee buy-in is critical – 360 degree relationship
• Retaining HC: avoid transfer of valuable/sensitive info outside of firm (promote firms values, loyalty strategies. Challenging/stimulating work environment, financial/non-financial rewards

• Diversity: enhances human capital. Adds viewpoints, different opinions and expertise to firm
• Social Capital:

• Benefit: Workers often more loyal to colleagues and profession than employer. can help attract and retain talent, help connect firm to social networks
• Downside: people in groups/cliques tend to go with opinions of groups. Cost of financial resources (time employees spend networking). Management has to be committed too social networking too

• Leveraging Human Capital with Technology

• Sharing info allows us to: conserve resources, develop new products/services, new opportunities
• We can use tech to record & share info: email etc.
• Improves speed, efficiency, connections with customers and suppliers