Strategy
Pre Reading Comment – Pages 136- 144
Book has a brief discussion of strategy topics. The discussion of purposes of goal setting does
miss the critical issue of helping the organization respond to changes in the
environment. We will discuss that in
class.
Lecture Notes
Lecture
Summary
The key components of this
lecture are:
Strategic Planning As A
Coordinating Function
Organizations need to have
direction, a common focus that the organization’s resources are focused on
achieving. Without this, organizations
find themselves working at cross purposes, feeling adrift without direction.
It can be argued that
for-profit organizations are in the business on generating as much profit as
possible. However organizations need
more detail than “make money” and there are often other objectives as well. Strategy needs to answer other questions:
While many terms can be used
to define the levels of strategy in an organization, debate over the “right”
terms to use is often non-productive.
What is essential is that organizations have a coordinated set of plans
that starts with the highest level objectives of the organization and works its
way down to provide direction throughout the organization.
These plans vary both in the
their duration (long versus short run) and in their breadth (affecting the
entire organization versus being focused on the activities of only a part of
the organization)
A typical set of strategy
components would include:
Mission Statement – the ongoing purpose of the organization
(Apple Computer – to bring the best personal; computing
products and
support
to students, educators, designers, scientists, engineers, business persons and
consumers in over 140 countries around the world.)
Vision Statement Or Strategic Objective – where the organization wants to be in
the future
(Citigroup – To attain 1 billion customers worldwide)
(Coke – To put a Coke within reach of every person on the
planet)
(UW Oshkosh
business professionals)
Activity1:
Develop a draft mission and vision statement for your business plan
Strategic Goals Or Strategies – Long-term goals that are derived from the
organization’s
mission/vision statements and that take into account the organizational and
operating environment
(Significantly expand our marketing by internet)
Operational Plans – the details of how resources will be allocated to achieve the
strategic goals
Performance Appraisal – how individual performance will be evaluated to
some
extent based on achievement of strategic plans
Values Statements - identification of ethical beliefs that are important to the
organization
and that provide boundaries on acceptable ways to achieve strategic objectives. While the previous items can be viewed as a
hierarchy – moving to increasing levels of specificity, the value statement is
outside this hierarchy – it is a constraint on how everything is done.
For
example: Walden Papers – a local manufacture of wall coverings for the
pre-manufactured homes industry – “We will do what we say we will do.”
What
does that mean – how would it influence the behavior of those in the
organization?
For example J.M. Smucker Company
has the following value statement regarding how it will treat its people. “We will be fair with our employees and
maintain an environment that encourages personal responsibility within the
company and the community. In return we
expect our employees to be responsible for not only their individual jobs but
for the company as a whole.”
The key is that each level
of strategic planning should support the level above it. In the end result, it is decisions about how
to, and how not to, allocate resources that need to be coordinated to achieve a
common objective.
Activity 2: In your groups think back to group projects
that you have worked on.
These group projects could
be anything from a school project to a sports team, work or family
activity. Have any of the group members
engaged in behavior that you concerned to be ethically fuzzy or frustrating to
you? Generate a set of
Environmental And
Organizational Analysis
Organizations do not
operate, and they can not plan in a vacuum.
They need to be aware of the external environment they operate in and
how their internal dynamics influence the choice of strategic directions. A common approach to an analysis of these factors
is SWOT analysis.
SWOT Analysis – Identification of the strengths weaknesses, opportunities and threats
that face an organization.
Strengths – factors internal to the organization that
will help the
organization achieve strategic objectives
Weaknesses - factors internal to the organization that
will impede the
organization achieve strategic objectives
Opportunities - factors external to the organization that
will help the
organization achieve strategic objectives
Threats - factors external to the organization that will
impede the
organization achieve strategic objectives
This type of analysis helps
an organization to evaluate what strategic objectives it is well situated to
achieve. For example: having a highly trained
creative yet expensive labor force would indicate the organization is better
positioned to be a high quality provider.
Being a low cost provider would be more of a struggle.
Be careful in performing and
utilizing a SWOT analysis – it is not enough for a group of individuals to
gather and speculate regarding the SWOT.
It is usually necessary to engage in data collection and research in
order to get well grounded information.
Overconfidence – we know
that we tend to be over confident in those areas where we lack expertise. So if you get managers together to speculate
on environmental threats – when they lack good information on these threats
they will “guess” that they know more than they do.
Activity 3:
Perform a SWOT analysis for your company.
How confident are you that you fully understand all the strengths,
weaknesses, opportunities and threats your company faces? What more could you do to be sure of these
factors?
Porter’s Five Forces
Harvard Business professor
Michael Porter describes five forces that determine the competitiveness – and
therefore the potential to make “economic profit” – for a company. Companies try to avoid focusing on industries
with lower potential for economic profit.
Activity 4:
Apply Porter’s five forces to operating a pizza delivery business. Is there much opportunity for economic profit
in this industry? Why? Identify an industry that would seem to be in a good
position regarding Porter’s five forces
Strategy Formulation
Based on an assessment of
the organizational and operating environment the company can develop its
strategic strategies
There are many generic
competitive strategies
As conditions change the
desirability of a particular strategy are likely to change. For example: the development of quality
digital cameras made Kodak’s strategy of being a producer of high quality, best
cost, producer of camera film a untenable strategy.
In order to thrive in the
long run organizations need to be regularly scanning their environment and
adjusting their strategy to fit the changes.
Activity 5: What is the strategy of your company? What is the strategy of your main
competitors? Why do you think your
strategy will be successful? Assume you
will have to get a loan or take on a partner to finance this business. How can you convince these people that your
strategy will be successful?
Summary of Beyond the Book – expectations for the
final
You should understand: