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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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