MAN 4720 Strategic Management Week 3 Mission Strategy Dr Marshall Schminke Spring 2010 These slides are intended to be a su by jle31578

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									          MAN 4720:
    Strategic Management
   Week 3: Mission & Strategy

                  Dr. Marshall Schminke
                       Spring, 2010



These slides are intended to be a supplement to your class notes, not a replacement for them.
                             For specific references, etc., see me.
         Last time:
   Lecture
       Introduction to the course & strategic process
       Introduction to the Capstone team
       A brief tour of the syllabus
       Q: Why are we here?
       Elephants and roadmaps
   Labs
       Introduction to the lab groups
       Begin to form teams
       Better understanding of coming attractions
    Today - Week 3: Mission &
    Strategy
   Lecture
       Mission and strategy
   Labs
       Finalize team formation
       Q&A regarding projects
       Hands-on exercise related to strategy
       How to find information (see the reference
        folks!)
The do’s and don’ts
of strategic analysis
      Strategic analysis made EZ:
   Outlined in the syllabus…
   But a brief tour on the notes to reiterate
    some of those points
   Be sure to look closely, and talk to your
    instructors if unclear
   You really want to get this right
        Strategic analysis made EZ:
   Mission
   SWOT
   Issues and problems
       Especially, sustainable competitive advantage
        (SCA)
   Strategies
   Fallout
      Strategic analysis made EZ:
   We’ll be refining that a little as we go
   But for now, think in those terms as you
    look to Case 1, Case 2, and The Great
    Capstone Case Competition
        Strategic analysis made EZ:
   Mission           Case 1: Industry Analysis
   SWOT
   Issues and problems
       Sustainable competitive advantage
   Strategies
   Fallout               Case 2: Strategic Audit of specific firm
  The first question is:

What are we doing here?
All firms have strategy. The only decision is
whether you manage it, or simply back into it…




    What are we doing here?
    What are we doing here?
   Strategic management
   Strategic planning & implementation
   Integration across functional areas
     What is strategy?     (Porter, HBR, 1996)

   “A company can outperform its rivals only
    if it can establish a difference it can
    preserve”
        What is strategy?           (Porter, HBR, 1996)

   It fell out of style
       Hypercompetition rules
       Positioning is too static
       Everything is “copy-able”
   But it shouldn’t have
       Management tools have often taken the place
        of strategy
       Operational effectiveness is important, but it
        isn’t strategy
In the end, strategy is all
about prioritizing…
       That’s strategy…
That’s what we are doing here
        In your labs:
   Form consulting group teams
   Commissioned for two strategic analyses
       An industry analysis
       A company-specific strategic analysis
   On your own, become fluent with using
    the Wall Street Journal
   All this builds toward the Great Capstone
    Case Competition…
     Where we are going:
   Mission
   Internal analysis
   External analysis (industry analysis)
Topic: Mission
Some definitions
   Some terminology:
       Mission vs. vision
       Goals and objectives
       Strategies and tactics
       Some definitions
   Mission vs. vision: Current vs. future.
   Goals vs. objectives: Both are targets.
    Goals are general (#1 airline in America).
    Objectives are specific, measurable, dated
    (20% increase in sales by 2010).
   Strategies vs. tactics: Both are actions.
    Strategies are general (horizontal
    diversification). Tactics are specific
    (training policies, debt structures).
      Books by and about Jack Welch
   Winning (2010)
   Jacked Up (2007)
   What Made Jack Welch JACK WELCH (2007)
   Jack Welch and The 4 E's of Leadership (2005)
   Jack Welch on Leadership (2004)
   Jack Welch & The G.E. Way (2004)
   The Welch Way (2003)
   Jack: Straight from the Gut (2003)
   29 Leadership Secrets from Jack Welch (2002)
   The Jack Welch Lexicon of Leadership (2001)
   Get Better or Get Beaten (2001)
   The GE Way Fieldbook (1999)
    Strategic Mission
   Who are we and what do we do?
   Thoughts from Jack Welch at GE:
   (Note the “get out” theme. Fits with
    Good to Great.)
   If they can do it, anyone can
        Mission:
   Differentiate mission statement (later
    on) from strategic mission (this)
   Who we are, what we do, where we
    do it, strategic posture
       Price/quality
       Breadth/focus
       Growth/retrenchment
   It’s the corporate fingerprint: What
    makes us unique?
The basic strategic posture:
           Low Cost   Differentiation


   Broad




                                        Growth
   Focus
The basic strategic posture:
           Low Cost   Differentiation


   Broad




   Focus                       Retrenchment
                                 Stability
                              Growth
The basic strategic posture:
                 Low Cost        Differentiation

           Pretty simple for cost vs. differentiation
   Broad




   Focus                                  Retrenchment
                                             Stability
                                          Growth
The basic strategic posture:
         Low Cost   Differentiation



                      MaxJet



                       Silverjet


                      Eos
The basic strategic posture:
           Low Cost   Differentiation


   Broad



                            And for growth

   Focus                       Retrenchment
                                 Stability
                              Growth
  The basic strategic posture:
                 Low Cost   Differentiation


      Broad

Much more challenging
 for this dimension

       Focus                         Retrenchment
                                       Stability
                                    Growth
            Strategic focus in the airline
            industry
   Market types
       Major hubs vs. resort vs. international vs. small towns
   Market location
       In and around Florida, entire Southeast, U.S.,
        international
   Most common measure: Fleet diversity
       {sum [Pi (ln Pi)]} where P is the proportion of planes of
        each type i, & i represents possible types of planes
        (757, MD80, etc.). 1 type = 0.
       Data from Official Airline Guide (U.S. ed.), FAA, NTSB
The basic strategic posture:
           Low Cost   Differentiation


   Broad


                      X
   Focus
     The key question regarding
     mission is…



   What business are we really in?
    What business are we really in?
   George Will: “Starbuck’s coffee is not
    that much better than everyone else’s
    coffee, so what is Starbucks really
    selling?”
        (See Virginia Postrel’s (2004) The
         Substance of Style: How the Rise of
         Aesthetic Value is Remaking Commerce,
         Culture, and Consciousness)
           What business are we in?
   What business is United Airlines in?
   Who are its main competitors in that
    business?
   What are its strengths and weaknesses
    relative to those competitors?
   What if we take a different view of that?
    What if the answer is different?
       The competitors are different!
       The substitutes are different!
         What business are we in?
   What business is United Airlines in?
   Who are its main competitors in that business?
   What are its strengths and weaknesses relative to
    those competitors?
   What if we take a different view of that? What if
    the answer is different? The competitors are
    different! The substitutes are different!
   You can’t do a single step of strategic
    analysis or planning until you know the
    answer to this question!
      What business are we really in?
   What business is United (UAL) in?




    http://www.youtube.com/watch?v=nU5DasW5nUY&feature=related

          http://www.youtube.com/watch?v=B9vWCKlseus
      What business are we really in?
   Who are its main competitors in those
    businesses?

http://www.youtube.com/watch?v=8fmz4jkRxqo&feature=PlayList&p=9D8BD338D148BB9A&index=2

              http://www.youtube.com/watch?v=FK2ankGTdpc&feature=related

                     http://www.youtube.com/watch?v=MPP5bwyUdag
     What business are we really in?
   Who are its main competitors in those
    businesses?
   What are its strengths and weaknesses
    relative to them?
   Lots of examples: Andre Heineger and
    Rolex
   Another easy example:
    Consider McDonald’s…
   What business are they really in?
   What do they sell?
   What do they really sell?
Corporate Mission

How we view what business we’re in can
determine how competitive we are.

Corollary: When making a decision about
what business we’re in, we should consider
where we would be most competitive.
                                      A tool for
  Corporate Mission                    analysis

         HIGH



Hall, W. K. 1980. Survival strategies in a hostile
Environment. Harvard Business Review, 58: 75+.




          LOW
                 LOW                         HIGH
   Corporate Mission
         HIGH

                        Zone of
                        Competitive
   Relative             Battle
Differentiation
                                Danger
                                 Zone


          LOW
                  LOW                     HIGH
                          Relative Cost
   Corporate Mission
         HIGH                    Power Alley



   Relative       Power Alley
Differentiation




          LOW
                  LOW                           HIGH
                                Relative Cost
   Corporate Mission
         HIGH G of
               E


   Relative
Differentiation



                                        Death
          LOW                           Valley

                  LOW                    HIGH
                        Relative Cost
   Corporate Mission
         HIGH G of                 Power Alley
               E
                                Zone of
                                Competitive
   Relative       Power Alley   Battle
Differentiation
                                        Danger
                                         Zone
                                                  Death
          LOW                                     Valley

                  LOW                              HIGH
                                  Relative Cost
   Corporate Mission
         HIGH G of                 Power Alley
               E
                                Zone of
                                Competitive
   Relative       Power Alley   Battle
Differentiation
                                        Danger
                                         Zone
                                                  Death
          LOW                                     Valley

                  LOW                              HIGH
                                  Relative Cost
   Current relative cost continuum:
         HIGH



   Relative
Differentiation


                  Chery QQ3Y                     Bugatti
                   Maruti 800                    Veyron
          LOW       ($5000)                     ($1.7m)

                  LOW                            HIGH
                                Relative Cost
   Potential relative cost continuum:
         HIGH



   Relative
Differentiation


                    Tata  Chery QQ3Y          Bugatti
                   Nano    Maruti 800         Veyron
          LOW     ($2500)   ($5000)          ($1.7m)

                  LOW                         HIGH
                             Relative Cost
   Potential relative cost continuum:
         HIGH



   Relative
Differentiation


                    Tata  Chery QQ3Y          Bugatti
                   Nano    Maruti 800         Veyron
          LOW     ($2500)   ($5000)          ($1.7m)

                  LOW                         HIGH
                             Relative Cost
   Potential relative cost continuum:
         HIGH



   Relative
Differentiation


                             From power alley
                             to danger zone,
          LOW                just like that!

                  LOW                       HIGH
                        Relative Cost
  Relative cost continuum is pretty
  straightforward:
         HIGH



   Relative
Differentiation




          LOW
                  LOW                   HIGH
                        Relative Cost
  But what constitutes
  differentiation?
         HIGH



   Relative
Differentiation




          LOW
                  LOW                   HIGH
                        Relative Cost
              Weights by scores and sum…
                Factor                 Weight       Score       Total
Reliability                             .30     x    3      =   .90
Quality index                           .30          4          1.20
Cabin service                           .05          5          .25
Market coverage (% of markets in        .15          3          .45
which firm has at least 1 round trip
per day)
Marketing impact (total                 .20          5          1.00
advertising and promotional
budget)
              Weights by scores and sum…
                Factor                  Weight   Score   Total
Reliability                              .30      3      .90
Quality index                            .30      4      1.20
Cabin service                            .05      5      .25
Market coverage (% of markets in         .15      3      .45
which firm has at least 1 round trip
per day)
Marketing impact (total                  .20      5      1.00
advertising and promotional
budget)
                                Total                    3.80
    (usually in the 1.5 to 4.5 range)
       Plot on vertical axis

 Air Schminke = 3.8

   Air Gresock = 3.4
       Relative
    Differentiation

Air Priesemuth = 2.9


   Air Nichols = 2.3
                       LOW                   HIGH
                             Relative Cost
       Do this for all companies:

 Air Schminke = 3.8

   Air Gresock = 3.4
       Relative                               Use the
    Differentiation                          entire axis!

Air Priesemuth = 2.9


   Air Nichols = 2.3
                       LOW                      HIGH
                             Relative Cost
Do this for all companies:



                                Do the same for
                               cost (rank order,
                                  entire axis)




        LOW                        HIGH
               Relative Cost
Do this for all companies:




          AN      AP       AS      AG
          7.2¢   9.1¢     11.3¢   13.5¢
                 Relative Cost
       Do this for all companies:

 Air Schminke = 3.8

   Air Gresock = 3.4
       Relative
    Differentiation

Air Priesemuth = 2.9


   Air Nichols = 2.3    AN      AP       AS      AG
                        7.2¢
                       LOW     9.1¢     11.3¢   13.5¢
                                                HIGH
                               Relative Cost
       Do this for all companies:

 Air Schminke = 3.8                  AS

   Air Gresock = 3.4                        AG

       Relative
    Differentiation

Air Priesemuth = 2.9         AP


   Air Nichols = 2.3   AN
                       AN    AP       AS    AG
                            Relative Cost
Are these…




       RyanAir    SW       US     United
         7.2¢    9.1¢     11.3¢   13.5¢
                 Relative Cost
     Mission statements:
   Strategic (above)
   Public (next)
     Public mission statements:
   Mission statements are useful
   They are for the real world, too
   They should be 25 words or less
   They should help me make decisions
    about what’s most important, how I
    should spend my time, what’s
    rewarded
     A bad one:
The business objectives of Household
 International are established within the
 framework of our corporate mission:
   We will be a premier financial services
    organization meeting the needs of
    individuals and companies through
    consumer banking, consumer finance,
    commercial finance, insurance,
    investments, and related services
     It continues:
   We will treat our customers with dignity
    and respect as we deliver the best
    service in the industry. We will develop
    and maintain long term relationships
    with our customers by offering a broad
    line of high quality products and
    services which meet their needs. We
    will be vigorous, innovative, and a
    leading participant in the markets we
    serve.
     It continues:
   We view our employees as our greatest
    resource and will provide every
    opportunity for them to achieve their
    hopes, goals, and career aspirations.
    We will encourage our employees to be
    involved in the civic affairs of their
    communities.
     It continues:
   We will be exemplary corporate citizens,
    always conducting ourselves in an
    ethical and honest manner
   We will accomplish these goals while
    providing our shareholders with a
    superior return on their investment
     It continues:
   We will be exemplary corporate citizens,
    always conducting ourselves in an
    ethical and honest manner
   We will accomplish these goals while
    providing our shareholders with a
    superior return on their investment
     A great one:
   Chrysler
        A great one:
   “The mission of Chrysler Corporation
    is to build cars and trucks that people
    will want to buy, will enjoy driving,
    and will want to buy again”
   That’s beautiful:
       Design
       Value
       Safety
       Reliability
     Another:
   “We help people trade practically
    anything on earth”
     The keys to all of this are:
   What business are we really in?
   Who are our competitors there?
   How do we stack up against them?
   If the news is good, great. If not…
   Do we stack up better in some other
    business…(even though our product may
    not change)?
   And…it’s dynamic, not static: You can (and
    will) move around, even if you don’t
    change a thing!

								
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