STRATEGIC
MANAGEMENT AND
SOCIAL RESPONSIBILITY
POWER POINT SET 4:
MISCELLANEOUS
ROLE OF THE CEO
•
•
•
•
•
•
•
Strategist
Mentor
Visionary
Guru
Futurist
Champion
Leader
AGENDA OF RESPONSIBILITIES
Individuals (IT)
Pre-Course - Bio & Picture
Intro to Strategic Audit
MINI CASE(s) As Assigned (S, S√, S√√)
MIDI CASE - MID Term Exam (Letter Grade)
Template
Feedback
Team Member Rating
Constructive Comments [Peer Eval] - Maxi Case
Optional:
Strategic Plan -- Career Plan
AGENDA OF RESPONSIBILITIES (Cont’d)
PARTICIPATION
TEAM
(IT)
Form Teams – Roles
Weekly - Chapter Questions
With key issues/answers email to Lead Discussion
(Per Schedule)
Maxi Case – Choice of company (approval)
Prepare Report – Strategic Plan Template
Present Strategic Plan
MISC – Team Assignment – Micro Cases
(B) MIDI Case: One (1), five (5) page
(approximately), individually written case
analysis (business plan) that must include:
1. Your mission for the future of the organization.
2. Your future objectives for the organization.
3. Your analysis and quantitative forecast of
industry and company.
4. Your strategic decisions, i.e., actions, with
results, to accomplish objectives.
5. A three (3) year pro forma income statement.
6. Your participation in class discussion and case
debrief.
TEAM STRATEGIC PLAN
MAXI: A STRATEGIC PLAN that
incorporates two efforts:
Effort 1: A 25 Page Written Report
(Approximately)
Effort 2:
Team Discussion/Presentation
Effort 1: A 25 Page Written Report
The following must be included in the strategic plan report:
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•
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•
•
•
•
•
•
Future mission and objectives decided by you.
Analysis and forecast of social, technical, economic, and political forces with
attention to global aspects.
Analysis of industry history and quantitative industry forecast on a global
and domestic basis.
Illustration and source of a share analysis.
Evaluation of alternative strategies.
Decision on strategic course showing basis and actions, with results, required
to achieve indicated performance goals on each major strategic action
Organizational process changes with schedules and budgets
Pro-forma financial statements, I.e., cash flows balance sheets, and income
statements to show impact of decision in the short-term, intermediate-term
and long-term for a minimum of 5 years.
Sufficient research, quantitative analysis, style, and organization to meet
business planning standards.
Typed, doubled spaced, table of contents, number pages, exhibits, and
indicate sources.
Effort 2: Team Discussion/Presentation
• Each team must run a one (1) hour maximum discussion or
presentation of the case.
• The presenting team also indicates its role and audience
role, both f which must be internal to the organization.
• For intelligent participation in the team case discussions
and to help in the selection of the third individual case,
each team must provide one copy of each of the following
materials to every class member and the instructor:
Strategic Audit and Decision Making:
A Structure
• Context - Environmental/Industry
• SLEPT (Social, Legal, Economic, Political,
Technological) Forecast(s)
– Company
– Industry
– History - Now/Future
• Mission - All Stakeholders
– Internal, Transactional, Influencers, Vision, Core Values, etc.
• Objectives (Qualitative, Quantitative)
– Drucker Model (8) (E) - Below
STRUCTURE, CONT’D
PERFORMANCE - Design/Audit
System View
(A) ADAPTIVE - 3 Questions
What is Business?
What will business be? [as is]
What should business be?
(E) EFFECTIVENESS (Drucker 8)
Market
Human Resources
Innovation Financial Resources
Profit
Material Resources
Societal
Productivity
(e) Efficiency
Cost (versus)
Quality
Time
Scope/Quantity
SYSTEM VIEW (CONT’D)
Global Dimensions (MACROECONOMICS - Global;
Clusters/Culture; Comparative Advantages, etc)
SWOT
Internal
S - Strengths
W - Weakness
[Core Competence]
External O - Opportunity
T - Threat
PORTER’S ANALYSIS (Link to O.T.)
National / Global
Barriers to Entry
Government Action
Rivalry Among Competitors
Barriers to Exit
Power of Suppliers
Power of Buyers
Availability of Substitutes
CONCLUSION: Attractive?
STRATEGY FORMULATION
13 Strategic Options - Clusters
1.
2.
3.
4.
5.
6.
7.
8.
Market Penetration
Market Development
Product Development
Backward Integration
Forward Integration
Horizontal Integration
Horizontal Diversification
Vertical Diversification
9. Concentric Diversification
10. Conglomerate
11. Cooperative (Joint
Venture) Strategic Alliance
12. Defensive - Retrenchment
- Divestiture
- Liquidation
13. Do Nothing
Strategy Implementation and Control
MIS System
Corporate Leadership/Culture
RE: Ongoing Process
MGMT 450
STRATEGIC AUDIT FORMAT
General Economy
CONTEXT
History
You
Now
All Stakeholders
MISSION
Priorities
OBJECTIVES
(Personal|Professional)
QUAL
Quant
(SUCCESS)
ACTION(S)
3Q’s
(A)
e/E
Future
Formulation
IMPLEMENTATION
APPRAISAL
TOOLS
TECHNIQUES
B\C
RELEVANT
ETC
BEPOINT
ISSUES
RECOMMENDATIONS
PRIORITIES
Evaluation
Control
S
W
O
T
PORTER
EVALUATION
CONTROL
REFORMULATION
(REVISIT Model)
DELPHI FORCASTING
Q1.
Q2.
Q3.
Q4.
Estimate rate of inflation in the United States during next 12
months.
________%
Estimate rate of unemployment in the United States during
next 12 months.
________%
Estimate prime rate for corporations in the United States
during next 12 months.
________%
Consumer confidence index in the United States during next
12 months.
Use scale 1 to 10, with 10 highest
________%
Strategic Management
Information Knowledge vs. System
10%
90%
Organization
Level
Planning Strategic
External
Information
40%
It
=
Ik
90%
60%
+
Is
10%
Control
Internal
Information
Tactical
Operational
Tech
Perf.
Strategic Management
Organ. Vs Information/Skills
Organ.
Level
Skills
Conceptual
Behavioral
65
30
30
40
It
5
Technical
5
30
=
30
Strategic
Ik
+
65
Is
Tactical
Operational
Tech
Perf.
Strategic Management
Forecasting
Types of Forecasting Models:
 Judgmental Models
 Qualitative Methods, eg Analogy
Time Series Models
 Quantitative Methods, eg Straight Line
Causal Models - Cause & Effect
 Regression - Correlation, etc
Forecasting Models
Judgmental Models (Expert Opinion)
 Survey(s), sales force, customers
 Historical analogy, eg. multiple outlets
 Market Research
 Surveys, tests, observations
 Simple, sophisticated
 Delphi methods - panels of ‘experts’
Time Series Models
 Trends vs. Turning Points
Causal Models
 Linear, multiple regression
 Sophisticated - data needed
Global Models
Corporate Governance
Firm Executive
Management
Issues:
Plan – Control
Authority
Responsibility(s)
Information Flow
Board of Directors:
Keiretsu
Euro-Interlocking Directors
Government – Mercantilism
Socialist – State Capitalism
Stakeholders:
Shareholders
Financial Institutions:
Banks, Insurance Co., etc.
Government
Community
Unions – Employees
Customers
Suppliers
etc.
Joe Smith and Outsourcing
Joe Smith started the day early having set his alarm clock (MADE
IN JAPAN) for 6 a.m. While his coffeepot (MADE IN CHINA)
was perking, he shaved with his electric razor (MADE IN HONG
KONG). He put on a dress shirt (MADE IN SRI LANKA),
designer jeans (MADE IN SINGAPORE) and tennis shoes
(MADE IN KOREA). After cooking his breakfast in his new
electric skillet (MADE IN INDIA) he sat down with his calculator
(MADE IN MEXICO) to see how much he could spend today.
After setting his watch (MADE IN TAIWAN) to the radio (MADE
IN INDIA) he got in his car (MADE IN GERMANY) and
continued his search for a good paying AMERICAN JOB. At the
end of yet another discouraging and fruitless day, Joe decided to
relax for a while. He put on his sandals (MADE IN BRAZIL)
poured himself a glass of wine (MADE IN FRANCE) and turned
on his TV (MADE IN INDONESIA), and then wondered why he
can’t find a good paying job in……AMERICA…..
Management Strategy
Responsibilities
The Pyramid of
Corporate Social
Responsibility
Philanthropic
Be a good
Corporate citizen
Contribute resources to the
Community; improve quality of life
Ethical
Be ethical
Obligation to do what is right, just and fair
avoid harm
Legal
Obey the Law
Law is society’s codification of right and wrong
Play by the rules of the game.
Economic
Be profitable
The foundation upon which all others rest
Triad Leadership @ Drexel
• CQ (Conceptual Quotient)
• TQ (Technical Quotient)
• EQ (Emotional Quotient)
Peer Relations
(Team-building)
Politics
(Power-management)
Personal Insight
(Self-awareness)
EQ
Connectivity
(IT/Internet use)
Puzzle
TQ
Security
Opportunity
(company- and/
Industry-specific)
CQ
Performance
Persona
Porter’s Five Competitive Forces
Barriers to Entry
Absolute cost advantage
- Proprietary learning
curve
- Access to inputs
- Government policy
- Economies of scale
- Capital requirements
- Brand identity
- Switching costs
- Access to distribution
- Expected retaliation
- Proprietary products
Supplier Power
- Supplier concentration
- Importance of volume to supplier
- Differentiation of inputs
- Impact of inputs on cost or differentiation
- Switching costs of firms in the industry
- Presence of substitute inputs
- Threat of forward integration
- Cost relative to total purchases in
industry
Rivalry
Buyer Power
- Bargaining leverage
- Buyer volume
- Buyer information
- Brand identity
- Price sensitivity
- Threat of backward integration
- Product differentiation
- Buyer concentration vs industry
- Substitutes available
- Buyers’ incentives
Threat of Substitutes
- Switching costs
- Buyer propensity to
substitute
- Relative price performance
of substitutes
Degree of Rivalry
-Exit barriers
- Industry concentration ratio
- Fixed costs/Value added
- Industry growth
- Intermittent overcapacity
- Product differences
- Switching costs
- Brand identity
- Diversity of rivals
- Corporate stakes
MGMT 450 Strategy and Business Policy
Internal Assessment of Firms
Four Characteristics: Resources – Capabilities
Important in Sustaining Competitive Advantage
DURABILITY – Rate at which firms underlying resources and capabilities depreciate or
become obsolete
TRANSPARENCY – Speed with which other firms can understand the relationship of
resources and capabilities supporting a successful firm’s strategy. Capability that requires a
complex pattern of various resources and is more difficult to comprehend than a capability
based on a single key resource.
TRANSFERABILITY – Ability of competitors to gather the resources necessary to support
a competitive challenge. (e.g. Duplicating the primary source of Rocky Mountain spring
water may be difficult. Also brand names may be impossible to transfer with out purchase
or a license.)
REPLICABILITY – Ability of competitors to use resources and capabilities to duplicate a
firm’s success. (e.g. brand manager from P&G competitor may fail to identify least visible
coordination mechanisms or fail to note behaviors of another company’s brand manager may
conflict with company’s culture.)
Alternative Strategies Defined and Exemplified
STRATEGY
DEFINITION
EXAMPLE
Forward
Integration
Gaining ownership or increased
control over distributors or retailers
Tandy Corporation opens new
Radio Shack stores.
Backward
Integration
Seeking ownership or increased
control of a firm’s suppliers.
K-Mart requires suppliers to sell
its goods on consignment.
Horizontal
Integration
Seeking ownership or increased
control over competitors
Merck, the world largest drug
company, acquires Medco
Containment Services, the nation’s
largest marketer of discount
prescription drugs
Market
Penetration
Seeking increased market share for
present products or services in present
markets through greater marketing
efforts
Walt Disney pays Nancy Kerrigan
$1 million for appearances.
Market
Development
Introducing present product or
services into new geographic area
Corning Inc. becomes one of
Russia’s first major suppliers of
optical fiber.
Alternative Strategies Defined and Exemplified
STRATEGY
DEFINITION
EXAMPLE
Product
Development
Seeking increased sales by improving
present products or services or
developing new ones.
Rayovac develops an alkaline
battery recharger.
Concentric
Diversification
Adding new, but related, products or
services
Sonoco Products Company, a
maker of industrial packages,
acquires Engraph Inc., a maker of
consumer packages.
Conglomerate
Diversification
Adding new, unrelated products or
services.
Seagram acquires 13.1 percent of
Time Warner.
Horizontal
Diversification
Adding new, unrelated products or
services for present customers.
Stratus Computer, a maker of fault
tolerant computers, acquires
Shared Financial Systems, a
software maker.
Alternative Strategies Defined and Exemplified
STRATEGY
DEFINITION
EXAMPLE
Joint Venture
Two or more sponsoring firms
forming a separate organization for
cooperative purposes.
Home Shopping Network and
Sumitomo offer television
shopping in Japan.
Retrenchment
Regrouping through cost and asset
reduction to reverse declining sales
and profits.
U.S. Surgical declares bankruptcy.
Selling a division or part of an
organization
Ryder System, a truck-leasing
company divests its aviation
business.
Selling all of a company’s assets, in
parts, for their tangible worth.
The Bank of Credit and
Commerce International (BCCI)
liquidates.
Divestiture
Liquidation
Location Analysis
COST FACTORS
1.
Power
2.
Labor
3.
Material
4.
Taxes
5.
Water
6.
Insurance
7.
Transportation
Total Composite Site Cost
QUANTITATIVE FACTORS IN LOCATION ANALYSIS
1.
Labor Supply
2.
Union Activity
3.
Labor Skills Available
4.
Community Attitudes Towards Company Activities
5.
Local Transportation Facilities
6.
Recreation
7.
Community Growth Potential
8.
Universities, Colleges and Research Centers
9.
Community Tax Status
Point Rating Scale of Noncost Factors (Sample)
Research Climate (Sufficient Educational Facilities and Research organizations to attract
Personnel)
Points
No schools or laboratories exist
0
A few low-quality facilities exist
50
Good industrial laboratories exist, but no educational facilities
100
Good educational laboratories exist, but no industrial facilities
150
Good educational and industrial facilities exist
200
Excellent facilities and future possibilities
250
Production Labor Pool (Availability of Semi-Skilled Production Workers)
Unavailable
0
Available in limited numbers at premium wages
20
Available in sufficient numbers for the present but not for the future
40
Available in sufficient numbers for the present and the future
60
An abundance of extremely skilled labor
80
Community Attitudes (Desire for and acceptance of the company’s actitivities)
Violently opposed to company’s activities
0
Will accept grudgingly
25
Cooperative
50
Cooperative and helpful to a high degree
75
Developing Enterprise Strategy
Industry Structure and Environmental Opportunities*
Industry Structure
Opportunities
Fragmented Industry
Consolidation:
-Discovery of new economies of scale
-Altering ownership structure
Emerging Industry
First Mover Advantages:
-Technological leadership
-Preemption of strategically valuable assets
-Creation of customer-switching costs
Mature Industry
Product Refinement:
Investment in service quality
Process Innovation
Declining Industry
Leadership Strategy
Niche Strategy
Divestment Strategy
Developing Enterprise Strategy
Industry Structure and Environmental Opportunities*
Industry Structure
Opportunities
International
Industry
Multinational Opportunities
Global Opportunities
Transnational opportunities
Network Industry
First-mover advantages
“Winner-takes-all” Strategies
Hyper competitive
Industry
Flexibility
Proactive disruption
Empty core industry
Collusion
Government regulation
Significant product differentiation
Demand management
* Gaining and Sustaining Competitive Advantage by Jay B Barney - 2004
Executive Management Triangle
Strategy – Technology - Organization
STRATEGY
FORMULATION/IMPLEMENTATION
Investment Portfolio
Strategic Alternative
Risk vs. Return
Resource Allocation
PERFORMANCE EVALUATION
TECHNOLOGY CHANGE
PROCESS – Inbound Logistics
Operations
PRODUCT – Admin. Operations
R&D
Outbound Logistics
Marketing, Sales
Distribution Service
ORGANIZATION
ALTERNATIVE STRUCTURES
Business Unit/Product
Geography/Place
Customer
Function
Span
21 CENTURY DYNAMICS
Global/Multi-Govt’al Societal
Core Competence
Staffing-Culture
Value Chain
ALTERNATIVES
Outsource
Joint Venture
Strategic Alliances
Licensing
Etc.
Organization Design
Strategic Alternatives
Executive
Strategic Level
Primary
Product
Place
Tactical Level
Business Unit
Customer
Function
Secondary
(Matrix)
Technical
Performance
Level
Tertiary
Span of Management
Management – Union Relations
Phases/Processes
PHASE I – LEGISLATIVE
(THE LAW OF THE LAND)
COLLECTIVE
BARGAINING
Dispute Resolution
Warfare
Cooling – Off
Fact Finding
Conciliation
Mediation
Arbitration
PHASE III –
JUDICIAL
(PROTEST &
APPEAL)
Dispute Resolution
Grievance Procedure
Arbitration
Warfare
MANAGEMENT
UNION
CONTRACT
5 Major Sections
PHASE II –
EXECUTIVE
(ADMINISTRATIVE
INITIATIVE)
Strategic Alliance Model
Figure 1a. The Impact of Strategic Alliance on the Creation of Low Cost Distinct Competencies.
Lower R & D Cost
Technology Licensing
Lower Distribution Cost
Marketing Licensing
Access to Distribution Channels
Qualified Licensing
Higher Barriers to Entry
Cross-Licensing
Low Cost Access to Technology
Joint-Sourcing
Lower Cost of supply
Operating Efficiency
-Lower Cost of
Operations
-Higher Quality
Products
-Lower Prices
-Economies of Scale
-Broader Markets
Low Cost
Distinct
Competencies
Strategic Alliance Model - 2
Figure 1b. The Impact of Strategic Alliance on the Creation of Differentiation Distinct Competencies.
Access to New Technology
Technology Joint Venture
Access to Marketing Expertise
Marketing Joint Venture
Higher Barriers to Entry
Increased Knowledge
Patent Pool
Control Entries to the Markets
Access to R & D
-Quality Product
-Brand Name
Recognition
-Broader Markets
Differentiation
Distinct
Competencies
Table 1: The Proposed Strategic Alliances - Alternatives
Strategy
Definition
Technology/Product
Licensing
Agreement to use technology and/r products
Marketing Licensing
Agreement to use marketing
Qualified Licensing
License to use a particular product and/r technology
in a particular market
Cross-Contracting
Establishing a new entity by two or more parent
firms in order to achieve a special objective, such as
development campaigns for new products
Technology Joint
Venture
Establishing a new entity by two or more parent
firms in order to achieve a special objective, such as
development campaigns for new products
Marketing Joint
Ventures
Establishing a new entity by two or more parent
firms in order to achieve a special objective, such as
development of new technologies
Patent Pool
Sharing key patents for technology and/or products
Joint Sourcing
Ordering the necessary supply material collectively
E Information Hub Model
Financial
Institutions
Manufacturers
Subcontract
Manufacturers
Distributors
Information
Hub
Retailers
Consumer
Suppliers
Logistics
Providers
Supply Chain Integration Dimensions
Dimension
Elements
Benefits
Information
Integration
• Information Sharing & Transparency
• Direct & Real Time Accessibility
• Reduced Bullwhip Effect
• Early Problem Detection
• Faster Response
• Trust Building
Synchronized
Planning
• Collaborative Planning, Forecasting &
Replenishment
• Joint Design
• Reduced Bullwhip Effect
• Lower Cost
• Optimized Capacity Utilization
• Improved Service
Workflow
Coordination
• Coordinated Production, Planning &
Operations, Procurement, Order Processing,
Engineering Change & Design.
• Integrated, Automated Business Processes
• Efficiency & Accuracy Gains
• Fast Response
• Improved Service
• Earlier Time to Market
• Expanded Network
New Business
Models
• Virtual Resources
• Logistics Restructuring
• Mass Customization
• New Services
• Click-and-Mortar Models
• Better Asset Utilization
• Higher Efficiency
• Penetrative New Market
• Create New Products
Information Distortion and The Bullwhip Effect
Increasing Order Variability Up the Supply Chain
?
Customers
Retailers
Wholesalers
Manufacturers
Suppliers
Business Life Cycle - Starbucks
Sales
Start-up
Growth
Maturity
Decline Time
Corporate Culture
Cool Green
Hot Red
True Blue
Dull Gray
Respects autonomy &
integrity of others and
requires the same from
others
Strong and ambitious
Mutually supportive,
friendly interpersonal
relationships
Concerned with
procedures
Lack of controls
Dictatorship
Interpersonal Process
Bureaucratic
Employees can be trusted
to do what they should
without oversight
2 Standards: what they
achieve; how well
orders are followed
Decisions should be made
by groups, not individuals
Just follow the book and
you won’t be fired
People like to do their
own thing without
depending on others
Employee’s task is to
listen to the boss an
obey thoroughly
Concerned with group’s
assessment re: quality of
interpersonal process
Organization run on the
basis of rules
Characterized by creative
activity
Assertive and
Directive
People Oriented
Precision and Continuity
Determine personal goals
and action plans
Boss sets the goals
Promotions based on
‘getting along’ and
understanding ‘our way’
of doing things
Seniority, compliance with
procedures, budget
management
Entrepreneurial
Market driven
Secure Marketplace
Established, Traditional
Independence
Opportunity
Consideration
Secure
Country Clusters
U.S.
Far East
1) Individualism
High
Low
2) Power Distance
Near Low
Near High
3) Uncertainty Avoidance
Near Low
Low
4) Masculinity
Near High
High
5) Long Term Orientation
Low
High
1)
2)
3)
4)
5)
Americans focus on working as individuals where as the Far East cultures place a high
importance on collectivism and stress teamwork.
The U.S. is not as willing as the Far East to accept hierarchical or uneven distribution of
power. Americans expect closer relationships between superiors and subordinates than the
Eastern cultures.
Both Clusters have little emphasis on structure and security. The cultures’ tendency to let
time ‘have its way’ is a willingness to accept risk.
The high Masculinity dimension reflects a stress on independence and masculine traits and
less on interdependence and gender equality.
Americans live more for today (short-term), and find less respect for age and place more
emphasis on formal written contracts. The Far East emphasizes long-term values;
persistence and respect for age & tradition.