Advanced Strategic Management

Prof Xiaobo WU School of Management Zhejiang University xbwu@zju.edu.cn

Without a strategy the organization is like a ship without a rudder, going around in circles.
Quote

Joel Ross and Michael Kami

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The traditional thinking in China We may know that there are five essentials for victory:
He will win who knows when to fight and when not to fight. He will win who knows how to handle both superior and interior forces He will win who knows whose army is animated by the same spirit throughout all its ranks. He will win who, prepared himself, waits to take the enemy unprepared. He will win who has military capability and is not interfered with by the sovereign.
----Sun Wu (The art of war)
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Cheshire Puss, she [Alice] began... would you please tell me which way I ought to go from here? That depends on where you want to get to, said the cat. Lewis Carroll How can you lead if you dont know where you are going? George Newman The Conference Board My job is to make sure the company has a strategy and that everybody follows it. Kenneth H. Olsen Former CEO, Digital Equipment Corporation A strategy is a commitment to undertake one set of actions rather than another. Sharon M. Oster Professor, Yale University
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Course Schedule Overview

Session 1 Session 2 Session 3 Session 4 Session 5 Session 6 Session 7 Session 8 Session 9 Session 10 Final Exam The Nature of Strategic Management Vision & Mission Statements The External Environment The Internal Environment Business-Level Strategy Corporate-Level Strategy Strategy Analysis & Choice Strategy Implementation Strategy Review, Evaluation, & Control Final Presentation & Course Conclusion 8:30am 12:00pm, February 25 1:30pm 4:30pm, February 25 8:30am 12:00pm, March 4 1:30pm 4:30pm, March 4 8:30am 12:00pm, March 10 8:30am 12:00pm, March 18 8:30am 12:00pm, March 25 8:30am 12:00pm, April 1 8:30am 12:00pm, April 8 8:30am 12:00pm, April 15 8:30am 12:00pm, April 22

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Grading and Assessment Criteria

Presentation and report
Good collaboration among team members Thorough and in-depth analysis Clear, concise and convincing writing style (report) Presentation skills (presentation)

40

Class participation
Presence in classes Listening to the comments of others

10

Active in expressing constructive opinions in discussion

Final examination
Clear, concise and convincing writing style Right understanding of concepts

50

Thorough and in-depth analysis of related questions, deploying related theory

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Lets know each other

Where are you from? Why you are here? What would you do in 2020?

Suggested Readings
Books
M. A. Hitt, R. D. Ireland, and R. E. Hoskisson. Strategic Management: Competitiveness and Globalization, Concepts and Cases (8th Edition). South-Western College Pub. 2008 A. A. Thompson and A. J. Strickland. Strategic Management: Concepts and Cases (12th Edition). The McGraw-Hill Companies, Inc. 2008 D. Besanko, D. Remove, M. Shanley, and S. Schaefer. Economics of Strategy (5th Edition). John Wiley & Sons, Inc. 2009 H. Mintzberg. Strategy Safari: The Complete Guide Through the Wilds of Strategic Management (2nd Revised Edition). FT Press. 2008
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Suggested Readings
M. E. Porter. Competitive Strategy: Techniques for Analyzing Industries and Competitors. Free Press. 1998 M. E. Porter. Competitive Advantage: Creating and Sustaining Superior Performance. Free Press. 1998 M. E. Porter. The Competitive Advantage of Nations. Free Press. 1998 R. Burgelman, C. Christensen, and S. Wheelwright. Strategic Management of Technology and Innovation (5th Edition). McGrawHill/Irwin. 2008 G. Hamel, C. K. Prahalad, H. Thomas, and D. ONeal. Strategic Flexibility: Managing in a Turbulent Environment. Wiley. 1999 A. Campbell and K. S. Luchs. Strategic Synergy (2nd Edition). Intl Thomson Business Press. 1998
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Suggested Readings
Journals
Harvard Business Review Strategic Management Journal Sloan Management Review California Management Review Management Science Journal of Management Academy of Management Journal RAND Journal of Economics McKinsey Quarterly
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Session 1

THE NATURE OF STRATEGIC MANAGEMENT

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Outline
What is Strategic Management? The Strategic-Management Model Stages of Strategic Management Key Terms in Strategic Management Benefits of Strategic Management Guidelines for Effective Strategic Management
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The Evolution Of Strategic Management

1950s
Term strategic planning originates

1960s 1970s
Strategic planning very popular
Widely viewed as panacea for problems

1980s
Strategic planning cast aside
Planning models did not yield higher returns

1990s2000
Revival of strategic planning
Widely practiced in business world

Michael Poter s Talk

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What is Strategic Management?

Definition of strategic management
Strategic management can be defined as the art and science of formulating, implementing, and evaluating cross-functional decisions that enable an organization to achieve its objectives.

The purpose of strategic management

The purpose of strategic management is to exploit and create new and different opportunities for tomorrow; long-range planning, in contrast, tries to optimize for tomorrow the trends of today.

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What is Strategic Management? Integrating intuition and analysis in decision making

The strategic-management can be described as an objective, logical, systematic approach for making major decisions in an organization. Yet intuition is essential for making good strategic decisions, particularly for making decisions in situations of great uncertainty or little precedent.

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The Nature Of Strategic Management

Art and science of formulating, implementing, and evaluating cross-functional decisions that enable an organization to achieve its objectives.. As this definition implies, SM focuses on integrating management, marketing, finance/accounting, production/operations, research and development, and computer information systems to:
achieve organizational success.

A Local Case

The strategy of a private company in Hangzhou, China

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The Strategic-Management Model

A Comprehensive Strategic-Management Model

The framework is a widely accepted, comprehensive model of the strategic-management process. The strategic-management process is dynamic and continuous. The strategic-management process is not as cleanly divided and neatly performed in practice as the strategic-management model suggests. Involvement and commitment from mangers and employees is essential to successful strategicmanagement.
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A Comprehensive StrategicManagement Model

Perform External Audit (Session 3)

Develop Vision and Mission Statement (Session 2)

Establish Long-Term Objectives (Session 5, 6)

Generate, Evaluate, and Select Strategies (Session 7)

Implement Strategies (Session 8)

Measure and Evaluate Performance (Session 9)

Perform Internal Audit (Session 4)

Strategy Formulation

Strategy Implementation

Strategy Evaluation

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Stages of Strategic Management The process consists of three stages

Strategy formulation
Strategy formulation includes developing a vision and mission, identifying an organizations external opportunities and threats, determining internal strengths and weaknesses, establishing long-term objectives, generating alternative strategies, and choosing particular strategies to pursue

Strategy Formulation

Strategy Implementation

Strategy Evaluation

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Stages of Strategic Management

Strategy implementation

Strategy implementation requires a firm establish annual objectives, devise policies, motivate employees, and allocate resources so that formulated strategies can be executed. Implementing strategy means mobilizing employees and managers to put formulated strategies into action. Successful strategy implementation hinges upon managers ability to motivate employees, which is more an art than a science.
Strategy Formulation Strategy Implementation Strategy Evaluation

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Stages of Strategic Management

Strategy evaluation

Strategy evaluation is the final stage in strategic management. Three fundamental strategy-evaluation activities

reviewing external and internal factors that are the bases for current strategies measuring performance taking corrective actions

Strategy Formulation

Strategy Implementation

Strategy Evaluation

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Adapting to Change
The only constant is change
In todays business environment, more than in any preceding era, the only constant is change.
E-commerce Globalization Economic recession Merger mania

Manage change
Successful organizations effectively manage change. The strategists should continually monitor internal and external events and trends so that timely changes can be made as needed.
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The emphasis of strategic management The emphasis of strategic management should be put on the four basic, educational themes.
First, the tasks of general management in leading the overall enterprise, in contrast to the tasks of a specialist manager Second, the strategic management as a key function and responsibility of the line general manager, not as a staff planning activity. Third, the general managers ability to manage the process by which an organization both formulates and implements its strategy. Finally, the responsibility of a general manager to multiple constituencies with conflicting needs and goals, and the management of that organization so as to achieve both economic and social-ethical goals.

The Five Tasks Of Strategic Management

1. Developing a strategic vision and business mission

A well-conceived strategic vision prepares a company for the future, establishes long-term direction, and indicates the companys intent to stake out a particular business position.

2. Setting objectives.
Objectives are yardsticks for tracking an organizations performance and progress. Companies need both financial objectives and strategic objectives.

The Five Tasks Of Strategic Management

3. Crafting a strategy to achieve the desired results.

An organizations strategy consists of the actions and business approaches Good strategy-making is more outside-in than inside-out A companys strategy is dynamic, emerging in bits and pieces A companys strategy is both proactive (intended) and reactive (adaptive).

The Five Tasks Of Strategic Management

4. Implementing and executing the chosen strategy efficiently and effectively. 5. Evaluating performance, reviewing new developments, and initiating corrective adjustments in long-term direction. A companys mission, objectives, strategy, and approach to implementation are never final; evaluating performance, reviewing changes in the surrounding environment, and making adjustments are normal and necessary parts of the strategic management process.

Who Performs The Five Tasks Of Strategic Management: Strategic Decision Makers

Modes Of Strategy Formulation

Entrepreneurial Mode.
Strategy is made by one powerful individual. The focus is on opportunities. Problems are secondary. Strategy is guided by the founders own vision of direction and is exemplified by large, bold decisions.

Adaptive Mode.
Sometimes referred to as muddling through, this strategy-formulation mode is characterized by reactive solutions to existing problems, rather than a proactive search for new opportunities.

Planning Mode.
Analysts assume major responsibilities for strategy-formulation. Strategic planning includes both the proactive search for new opportunities and the reactive solution of existing problems. Systematic comprehensive analysis is used for the development of strategies.

Corporate Board Directors Continuum: The degree of involvement in strategic management (from low passive to high active) is as follows:
Phantom:
Never knows what to do, if anything; no degree of involvement.

Rubber Stamp:
Permits officers to make all decisions. It votes as the officers recommend on action issues. Minimal Review: Formally reviews selected issues that officers bring to its attention.

Nominal Participation:
Involved to a limited degree in the performance or review of selected key decisions, indicators, or programs of management.

Active Participation:
Approves, questions, and makes final decisions on mission, strategy, policies, and objectives. Has active board committees. Performs fiscal and management audits.

Catalyst:
Takes the leading role in establishing and modifying the mission, objectives, strategy, and policies. It has a very active strategy committee.

Top Management (1/2)

Top Management, especially the CEO (chief executive officer), is responsible to the board of directors for the overall management of the corporation. It is tasked with getting things accomplished through and with others, in order to meet the corporate objectives. All top managers are people who see the business as a whole, who can balance the present needs of the business against the needs of the future, and who can make final and effective decisions.

Top Management (2/2)

The CEO must successfully handle three responsibilities crucial to the effective strategic management of the corporation:
1. fulfill ten interrelated key roles 2. provide executive leadership 3. initiate and manage strategic planning process

Key Terms in Strategic Management

Competitive advantage Strategists External opportunities and threats Long-term objectives Annual objectives
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Sustained competitive advantage Vision and mission Internal strengths and weaknesses Strategies Polices
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Key Terms in Strategic Management Competitive Advantage

Strategic management is all about gaining and maintaining competitive advantage. Competitive advantage can be defined as anything that a firm does especially well compared to rival firms. When a firm can do something that rival firms cannot do, or owns something that rival firms desire, that can represent a competitive advantage.
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Key Terms in Strategic Management Sustained Competitive Advantage

Normally, a firm can sustain a competitive advantage for only a certain period due to rival firms imitating and undermining that advantage. Thus it is not adequate to simply obtain competitive advantage. A firm must strive to achieve sustained competitive advantage by
(1) continually adapting to changes in external trends and events and internal capabilities, competencies, and resources; and by (2) effectively formulating, implementing, and evaluating strategies that capitalize upon those factors.
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Key Terms in Strategic Management Strategists

Strategists are the individuals who are most responsible for the success or failure of an organization. Strategists have various job titles, such as chief executive officer, president, owner, chair of the board, executive director, chancellor, dean, or entrepreneur.

Jak Welch
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Bill Gates

Steve Paul Jobs

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LIU Chuanzhi

REN Zhengfei
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Key Terms in Strategic Management Vision and Mission Statements

Vision statement answers the question, What do we want to become? Developing a vision statement is the first step in strategic planning. Mission statements are enduring statements of purpose that distinguish one business from other similar firms. A mission statement identifies the scope of a firms operations in product and market terms. It answers the question: What is our business?

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Key Terms in Strategic Management External Opportunities and Threats

External opportunities and external threats refer to economic, social, cultural, demographic, environmental, political, legal, governmental, technological, and competitive trends and events that could significantly benefit or harm an organization in the future. They are largely beyond the control of a single organization. A basic tenet of strategic management is that firms need to formulate strategies to take advantage of external opportunities and to avoid or reduce the external threats.
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Key Terms in Strategic Management Internal Strengths and Weaknesses

Internal strengths and internal weaknesses are an organizations controllable activities that are

performed especially well or poorly.

Organizations strive to pursue strategies that capitalize internal strengths and eliminate internal

weaknesses.

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Key Terms in Strategic Management

Long-Term Objectives
Objectives can be defined as specific results that an organization seeks to achieve in pursuing its basic mission. Long-term means more than one year.

Strategies
Strategies are the means by which long-term objectives will be achieved.
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Key Terms in Strategic Management

Annual Objectives
Annual objectives are short-term milestones that organizations must achieve to reach long-term objectives.

Policies
Policies are the means by which annual objectives will be achieved.

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Benefits of Strategic Management

Control its own destiny
Strategic management allows an organization to be more proactive than reactive in shaping its own future; it allows an organization to influence (rather than just respond to) activitiesand thus to exert control over its own destiny.

Financial benefits
Organizations using strategic-management concepts are generally more profitable and successful.

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Benefits of Strategic Management Other benefits

Enhanced awareness of external threats Improved understanding of competitors strategies Increased employee productivity Reduced resistance to change Clearer understanding of performance-reward relationships ?
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Guidelines for Effective Strategic Management Some fundamental guidelines

Change comes through implementation and evaluation, not through the plan. Keep the strategic-management process as simple and non-routine as possible. Strategic management must be self-reflective learning process. Effective strategic management is open-mindedness. Most organizations can afford to purse only a few corporate-level strategies at any given time.

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Thanks