• A tough, challenging course
• But so is management…and LIFE!
• Identify and address strategic issues
• Ambiguous, complex real-world issues
• “Choice”, not solutions and answers
• Five broad objectives:
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Think – integrate; open; synthesis
Process – organized analysis & argument
Tools - mechanics
Communication – written/verbal
Teams – leverage for benefit; handle diversity
• Not everyone wants to get into Management
• Name
• Major
• Something interesting -some suggestions---• about your work e.g.
“I’m a bungee-jumping cord tester…”
• About your family/home e.g. “I have 3 pet iguanas and 1
kangaroo”
• About your hobbies/interests e.g. “I invented the internet.”
Syllabus
Blackboard Learn
Clickers – set up/test
 CHANNEL 61
Yes
No
What’s a clicker?
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Not sure yet
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 Definition
 A concrete expression of how an organization intends to
compete and win in the marketplace
 Strategy expressed in terms of
 Goals
 Product Focus and Market Focus
 Value Proposition
 Core Activities
 Note the rising levels of risk, investment, uncertainty of implications, and timeframes as you move down the list below . . .
 Choosing a cereal for breakfast
 Making a withdrawal at the ATM
 Purchasing an iPad
 Purchasing a car
 Sun-bathing
 Getting an education
 They involve major investments
 They have long-term implications, often in multiple areas
 They often involve high levels of risk/uncertainty
Remember that any action can be viewed
as being strategic, depending on your
frame of reference.
In the business context, your challenge is
to think like the CEO, President or,
General Manager of the organization, not
as a VP of a functional area like Finance
Marketing, Human Capital, etc. . . . ., and
delineate those actions that are truly
“strategic” from those that are
“functional.”
 https://www.youtube.com/watch?v=Q96pCI8aOQQ
 Which of these actions typically involve “strategic” decisions
for an organization?
 Altering the products/services offered by the organization
 Altering the markets serviced by the organization
 Altering the way the organization creates value for its
customers
 Streamlining customer-service procedures
 Increasing the size of the sales-force
 Improving payment terms with buyers.
 Switching to a different ERP-platform provider
 Hiring a new marketing manager
 Which of these actions typically involve “strategic” decisions
for an organization?
 Altering the products/services offered by the organization
 Altering the markets serviced by the organization
 Altering the way the organization creates value for its
customers
 Streamlining customer-service procedures
 Increasing the size of the sales-force
 Improving payment terms with buyers.
 Switching to a different ERP-platform provider
 Hiring a new marketing manager
After just three years, Winchester Pizzas has
franchise stores in nine southern states and
master franchisees lined up in six more. Is
targeting new stores in the rest of the US
strategic?
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No
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B.
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Barty Crouch’s Custom Computers has done well simply
by word of mouth and a great Internet presence. But Barty
Crouch Sr. feels increased awareness will grow the firm. Is
shifting resources for a doubling of advertising strategic?
Yes
No
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 Strategic actions are not made in a vacuum
 Competitors; Customers; Suppliers; Institutions; Innovators;
Technology
 No industry is completely stable
 Most industries face considerable change
Adapt . .
or
Drivers of Organizational Change in the
Firm’s External Environment
1.
Environmental
Dynamics
2. Environmental
Scope and
Munificence
3.
Environmental
Uncertainty
and Risk
The increasingly turbulent environment
Globalization of products and markets
Political/Social/Economic/Technological
Adapt .. Adapt
. . Adapt
or CHANGE CHANGE CHANGE
Drivers of Organizational Change From Inside
the Firm
1.
Mission, Vision &
Goals
Instigated by the organization’s stakeholders. . . .
2.
Strategy of the
firm
Instigated by the organization’s top
management . . .
3.
Organizational
Capabilities
Structure, processes and leadership.
Effective business management IS NOT largely a
matter of common sense.
Effective business management IS a result of
effective data collection, data interpretation, and
the use of conceptual frameworks to diagnose
and monitor activities in the firm and in its
environment. (Allan Tudehope)
Managers and strategists are information
processors
 The Criterion of Consistency
 Consistency (“fit”) between the firm and its environment
 Strategy as the critical linking variable
Internal Environment
Business
Capabilities
BC
Strategy

S

External
Environment
E
Management
Preferences
Organization
STRATEGY
Resources
Business capabilities
Environment
Business
Capabilities
• Resources
• Management Preferences
• Organizing Processes
Strategy
•Goals
•Product/Market Focus
•Value Proposition
•Core Activities
External
Environment
• Key Survival Factors
• Drivers of Change
We begin by
understanding the
ENVIRONMENT in which
the firm competes
 What is it?
 A process for achieving consistency between the firm and its
environment
 You will be required to use the skills acquired in your undergraduate
business foundation courses
 Accounting, Decision Sciences, Finance, Information Systems,
HR/OB, Management, Economics, and Marketing
 At each process stage, you will
have tools and concepts to apply
 Each phase has been converted to
a template with questions and
steps to follow
 Primary phases involve
 Collecting as much relevant data as
possible
 Organizing the data and analyzing the
data
 Drawing conclusions or
recommendations
SBI
Parts 1A & 1B
Analyze the
External
Environment of
the Firm
Analyze the
Strategy of the
Firm
Analyze the
Capabilities of
the Firm
SBI
Part 2A
Identify Strategic
Gaps
SBI
Part 2B
Develop New
Strategy
SBI
Part 3A
1. Prepare Complementary Functional
Plans
2. Develop an implementation Plan
SBI
Part 3B
Assess Financial
Viability
Identify Required
Capabilities
Changes
It has three sequential parts:
Part-1: Analyze the environment(A) and status of the firm (B)
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Deconstruct and understand the business landscape
and the specific firm within that context
Part-2: Assess strategic fit (A) and formulate new strategy (B)
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Assess E-S-BC fit issues and propose possible changes
Part-3: Develop an implementation plan (A)and confirm
financial viability of the proposal (B)
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Details of the implementation plan
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Details of expected results
Part-1
Part-2
Part-3
• Political, Economic, Social, and Technological
Forces
• The BROAD environment
• Influence multiple industries
• Influence all firms in an industry ‘equally’
• Great indicators of what is BECOMING more
influential….’early warning signals’
• May be ‘Rules of the game’
• Broad effects on demand, values, market needs
 Industry specific
 Different forces that affect profitability / opportunity for
profitability
 Porter – a competition for economic value –
 Substitute or Rival?
 Substitute – same or similar function (met need) BUT via a different
means (Pizza delivery v Frozen Pizza)
 Rival – same met need via same/similar function and means (Bing v.
Google)
 Market Commonality; Resource Similarity (Chen, 1996)
 Still dependent on how you define the industry
Primary Entry Barriers:
Determinants of Rivalry Include
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POTENTIAL
ENTRANTS
Industry Growth
The number and balance of rivals
Differentiation
Percentage of fixed costs
Brand identity and product
differences
Exit barriers and corporate stakes
SUPPLIER
POWER
Relative concentration
Presence of substitutes
Relative switching costs
Relative threat of integration
Importance of the supplies
Differentiation of the supplies
Economies of Scale
Product Differentiation
Capital Requirements
Switching Costs
Cost Disadvantages Independent of Scale
Government Policy
INDUSTRY
RIVALRY
BUYER
POWER
Determinants of Buyer Power Include
Determinants of Supplier Power Include
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SUBSTITUTE
PRODUCTS
The relative concentration of buyers and sellers
The volume of purchases
The relative switching costs of buyers and sellers
Ability of buyers to backward integrate
The buyers price sensitivity
Power of Substitutes driven by
• The relative price and performance of
substitutes
• Switching costs
• Buyers propensity to substitute
What is the average performance – growth, profitability,
etc.?
What are the KEY SURVIVAL FACTORS demanded?
What are the DRIVERS OF CHANGE?
What will the industry look like in the future?
This requires research and analysis!
 Based on the powerful forces you have identified, what
MUST a firm do minimally well to survive in this industry?
 Think ‘above’ the given/obvious ‘survival factors’ to identify
KEY factors
 Prioritize them by how they relate to the most powerful
forces affecting the industry
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Efficiencies Through E-Commerce/Technology
Reliable Delivery
Strong Service
Solid Sales and Support Staff
 What trends from your PEST analysis are changing the nature of the
environment?
 What forces of industry profitability are changing or may change in
the near future?
 Prioritize these based on the scope and magnitude of their effect on
firm performance and survival
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Increasing globalization of the industry;
Changes in who buys the products and how they use it.
Exit of major firms/”big players”
Growing buyer for preferences a more standardized product instead of
strongly differentiated products
 Changing societal concerns, attitudes, and lifestyles
 Based on current status (size, growth, profits, etc.), and on your
knowledge of forces and trends, how attractive is this industry now?
(Not how difficult is it to get into…just how attractive is it)
 Now, consider the trends you are aware of…how attractive (same,
more, less) will the industry be in five years?
 Based on all you know about the industry, what combinations of
product focus, market focus, and value proposition do you conclude
are most viable for survival and success in this industry?
 Alternatively, which strategic orientations do you think are ‘bad
ideas’ here?
 Industry research
 Patterns/clues – drill into possible KSFs/DOC
 Gather facts; document sources; verify if can
 Cover each component thoroughly
 P.E.S.T. and all 5 forces
 Identify, list, describe, cause/effect, etc.
 Synthesize - Analyze - Prioritize
 Don’t report data – Argue your conclusions then give the data
that supports them
 Next class June 4:
 Do syllabus quiz on-line
 Online “Terms and Definitions” assignment
 Between classes June 6:
 Team preferences due via email
 REMEMBER:
 TEAMS of 7/8– Choice and/or Assignment
 1 of each: MKTG, FIN, ACCTG, Risk/Ins/FinServ
 Subsequent Class June 9:
 Read Textbook: Ch. 2.
 Submit individual assignment Part 1 at 6 PM (2 hard copies)
 You should also review the Blackboard
supplemental reading on Evaluating the
Environment
 There will be GRADED clicker questions on the
readings next class! Please come prepared!