MGT 409-302 Lecture 1-7/11/11 Strategy Concept

How do Firms Develop a Strategy? Three ongoing processes: Analysis (strategy analysis) Decisions (strategy formulation) Actions (strategy implementation) - The analysis of strategic goals (vision, mission, and strategic objectives) along with the analysis of the internal and external environment of the organization; - Make strategic decisions based on What industries should we compete in? How should we compete in those industries? - Take the necessary actions to implement their strategies. It requires to allocate resources and to design the organization What is Strategy? - Strategy takes the form of a pattern or theme that is reflected in the various decisions and actions that are taken by a firm over time What is Strategic Management? - Strategic Management consists of the analyses, decisions, and actions an organization undertakes in order to create and sustain competitive advantages. - Key attributes/ Characteristics of SM: 1) Provides purposes and directions or goals and objectives 2) Satisfies multiple stakeholders in decision making. 3) Needs to focus on short-term and long-term perspectives 4) Recognizes trade-offs between efficiency (doing things right) and effectiveness (doing the right thing), make it difficult o Stakeholders are individuals, groups, and organizations who have a stake in the success of the organization, such as owners, employees, customers, suppliers, and the community. What Drives Strategy? Organizational goals = Hierarchy of goals 1. Vision - is massively inspiring, overarching, and long term PROVIDES DIRECTION slogan that grabs attention 1) Should specify focus 2) Should be easy to communicate 3) Should link all decisions 2. Mission-encompasses both the purpose of the company as well as the basis of competition and competitive advantage. SPECIFIES PURPOSE - Two mission statements: a. to produce superior financial returns for our shareholders as we serve our customers with the highest quality transportation, logistics, and e-commerce. B. to be the very best in the business - Should focus on 1) Who are we? 2) What do we do? 3) Why are we here? 3. Objectives- are used to operationalize the mission statement and that are specific and cover a well-defined time frame REPRESENT PERFORMANCE TARGETS 1) Measurable/ Quantifiable, at least one indicator to measure progress 2) Specify target, know what needs to be accomplished 3) Appropriate/ Comprehensive, be consistent with the vision and mission

4) Realistic, an achievable target 5) Timely, time frame for achieving the objective Why is Strategy Useful? - Allows a firm to create Sustainable Advantage!!! 1) Helps to deal with competition 2) Helps to create and offer some unique attributes 3) Helps to maintain and sustain these attributes over time Strategy as Different Concept: 1. Strategy as a Meditative Concept o Strategy allows a firm to align its organizational strengths with environmental opportunities 2. Strategy as an Integrative Concept o Strategy allows a firm to pull together its decisions and actions across different areas 3. Strategy as a Dynamic Concept o Strategy allows a firm to adapt to environmental shifts and to organizational changes

MGT 409-302 Lecture 2-7/12/11 Industry Analysis

What Constitutes a Study of the External Environment? - An analysis of the external environment focuses on the conditions that face all of the firms within a given industry - IT IS NOT SPECIFIC TO ANY SINGLE FIRM What are the Levels of the External Environment? 1. General Environment- focus on the FUTURE! 2. Competitive Environment- Focus on predicting the dynamics of competitors Actions, Responses and Intentions!! How does a Firm Assess the General Environment? - A firm makes an assessment of the general environment by examining trends that may affect the sales or profitability of an overall industry How are Trends Studied? - Trends are examined in various categories/ General Environment: segments and elements: 1) Demographic: population size, age structure, geographic & income distribution 2) Economic: inflation rates, interest rates 3) Political/Legal: laws and policies 4) Sociocultural: women in the workforce, workforce diversity, attitudes about the quality of work life 5) Technological: product innovations, applications of knowledge 6) Global: important political event, newly industrialized countries, critical global markets, different culture and institutional attributes How Does a Firm Assess the Competitive Environment? - A firm makes an assessment of its competitive environment by examining specific aspects of its industry. - These aspects can be analyzed by use of the Five Forces Model What is the Five Forces Analysis? - This framework uses five basic competitive forces in order to ascertain the overall attractiveness or profitability of an industry - THIS ANALYSIS IS NOT USUALLY CARRIED OUT FOR ANY SINGLE FIRM, BUT FOR ALL OF THE FIRMS THAT COMPETE WITHIN THE INDUSTRY Components of the External Environmental Analysis: 1) Scanning Identifying early signals of environmental changes and trends

2) Monitoring Detecting meaning through ongoing observations of environmental changes and trends 3) Forecasting Developing projections of anticipated outcomes based on monitored changes and trends 4) Assessing Determining the timing and importance of environmental changes and trends for firms strategies and their management What Makes an Industry Attractive? - An industry is considered to be most attractive if all of the five forces are determined to be low - Attractive industry may be considered as: - High entry barriers - Suppliers and buyers have weak positions - Few threats from substitute products - Moderate rivalry among competitors

MGT 409-302 Lecture 2-7/13/11 Industry Dynamics

How do Firms Define their Industry? - Industries are generally defined on the basis of the product or service that they offer - Industries can be defined quite broadly or quite narrowly o Broader definitions can be more useful for a general analysis o Narrower definitions can be more useful for a competitive analysis How do Firms identify their Competition? - Firms learn to differentiate between their competitors on the basis of strategic groups What are Strategic Groups? - A set of firms emphasizing similar strategic dimensions and using similar strategies o Internal competition between strategic group firms is greater than between firms outside that strategic group. o There is more heterogeneity in the performance of firms within strategic groups. Similar market positions Similar products Similar strategic actions o Strategic Dimensions 1) Extent of technological leadership 2) Product quality 3) Pricing Policies 4) Distribution channels 5) Customer service What is the Significance of Strategic Groups? - Firms within the same strategic group follow a similar strategy 1) Similar products or services: Offer products or services that are closest in their features or attributes 2) Same customers:Target the same set of customers 3) More attention to competitors: Firms learn to pay more attention to competitors within its strategic group 4) Different conditions: Firms in each strategic group may face slightly different industry conditions