Strategic Dr.

Ariff Juhari

Management
3 Credit Hours

Issues:
Competitiveness of Nations
Reputation of Companies
Social Responsibilities
 Microsoft Case
- $60 billion in profits and 90,000 employees in 190
countries, but with problems.
- Disappointing Windows versions for the past 8 years, the

failure of the Zune media player, Windows OS’s, Surface

Tablets, Nokia and others.
- Surface took a $900million write off, while Apple’s iPad

made $25 billion…BILLION!

- When the iPhone was first introduced, Microsoft’s CEO at

the time laughed, was later forced to resign, which

actually brought Microsoft’s stocks to go up 7.3 percent.
- Exception of the Xbox, which accounts for 14 percent of

Microsoft’s total revenues, and the loyalty of corporate IT

managers to Microsoft-based servers and PCs, and, of
course, MSOffice.
- What do you think the future holds for Microsoft?
 Strategic Management

❖ “Today’s peacock is tomorrow’s

feather duster” - Arthur
Martinez (Former Chairman,
Sears)
 Fortune 500
Of the 500 companies that first appeared in the Fortune
500 list in 1955, only 62 stayed.

Many of the companies grew from nothing to become one

of the most powerful forces in business, i.e. Intel, Apple,
Google…
 Fallen Stars?
❖ Nokia?
❖ Between 1996 and 2001, revenues increased fivefold.
❖ World’s largest mobile manufacturer in 1998.
❖ When the iPhone was introduced, Nokia market share
dropped 45% in less than 3 years.
❖ Blackberry?
❖ The first smartphone fast became not-as-smart-as-iPhone
smartphone.
❖ Can they recover?
Romantic view of
leadership
situations in which the leader is the key
force determining the organization’s
success - or lack thereof

What could be problems that come with

this perspective?

Carly Fiorina was fired from HP, stocks

went up, in reverse, when her successor,
Mark Hurd resigned, stocks dramatically
went down.
External control
view of leadership
situations in which external forces -
where the leader has limited influence -
determine the organization’s success
Eg.
Financial meltdown of 2008, Merrill Lynch, a
once proud firm, had to be bought over.
In 2010, volcanic eruption in Iceland
disrupted air traffic and major airlines lost
$1.7 billion
In 2011, Japan suffered from earthquake and
tsunami, and stocks crashed
 Defining Strategic Management
❖ Strategy - the analyses, decisions and actions that enable a
firm to succeed.
❖ Competitive advantage - a firm’s resources and capabilities
that enable it to overcome the competitive forces in its
industry(ies).
❖ Operational effectiveness – performing similar activities
better than rivals.
❖ Strategic Management - the analyses, decisions, and actions
an organization undertakes in order to create and sustain
competitive advantages.
Four Key Attributes of Strategic Management

Directs the organisation toward Includes multiple stakeholders

overall goals and objectives in decision making

Needs to incorporate short-term Recognizes trade-offs between

and long-term perspectives efficiency and effectiveness
 Key Attribute #1

❖ Directs the organisation toward overall goals and effectiveness

❖ focus on what is best for the company as a whole.
❖ what might look “rational” for one functional area, may not
be in the best interest of another functional area.
 Key Attribute #2

❖ Includes multiple stakeholders

in decision making
❖ Stakeholders are those
individuals, groups, and
organisations who have a
stake in the success of the
company - investors,
employees, customers,
suppliers and the
community
 Key Attribute #3

❖ Needs to incorporate short-term and long-term perspectives

❖ managers are to maintain both a vision for the future as well as a focus on its
present operating needs.
❖ E.g. If there was a sudden slide in revenue, would you cut R&D to reverse
and smooth out revenue?
Key Attribute #4
Involves the recognition of trade-offs
between effectiveness and efficiency.

Ambidexterity - aligning resources to

take advantage of existing product
markets as well as proactively exploring
new opportunities
 Intended vs. Realized Strategies

❖ Intended Strategy - strategy in which organisational decisions are

determined only by analysis
❖ Realized Strategy - strategy in which organisational decisions are
determined by both analysis and unforeseen environmental
developments, unanticipated resource constraints, and/or changes in
managerial preferences
 Strategic Management Process

❖ Made up of three general aspects:

❖ Strategic Analysis - Study of firms’ external and internal
environments, and their fit with organisational vision and goals
❖ Strategic Formulation - Decisions made by firms regarding
investments, commitments, and other aspects of operations that
create and sustain competitive advantage
❖ Strategy Implementation - actions made by firms that carry out
the formatted strategy, including strategic controls,
organisational design, and leadership
 Strategic Analysis
❖ Consists of “advanced work” that must be done in order to
effectively formulate and implement strategies.
❖ Analyzing Organizational Goals and Objectives (Chap. 1) - A
firm’s vision, mission, and strategic objectives
❖ Analyzing the External Environment of the Firm (Chap. 2) -
monitoring and scanning the external environment (e.g.
competitors, markets, customers, etc.)
 Strategic Analysis (con’t)

❖ Assessing the Internal Environment of the Firm (Chap. 3) -

Analyzing the strength and relationships among
organizational activities (e.g. operations, marketing and sales,
and human resources) to uncover sources for competitive
advantage.
❖ Assessing a Firm’s Intellectual Assets (Chap. 4) - The
knowledge worker and a firm’s other intellectual assets (e.g.
patents, trademarks) are increasingly important. A growing
interest lies in how technology help enhance collaboration
among employees and storing of knowledge for effective and
efficient decision making.
 Strategy Formulation
❖ Developed in several levels:
❖ Formulating Business-Level Strategy (Chap. 5) - addresses the issue of
how to compete in a given business to attain competitive advantage.
E.g. Cost leadership and differentiation.
❖ Formulating Corporate-Level Strategy (Chap. 6) - a) what businesses to
compete in, b) how businesses can be managed to achieve strategy
❖ Formulating International Strategy (Chap. 7) - a firm must determine
the best method to develop international strategies as it ventures bend
its national borders
❖ Entrepreneurial Strategy and Competitive Dynamics (Chap. 8) -
formulate effective entrepreneurial initiatives
 Strategy Implementation
❖ Involves ensuring proper strategic controls and organizational
designs, which includes establishing effective means to
coordinate and integrate activities within the firm as well as
with its suppliers, customers, and alliance partners.
❖ Strategic Control and Corporate Governance (Chap. 9)
❖ a) Informational control - continually monitor and scan the
environment and respond to threats and opportunities.
❖ b) Behavioral control involves the proper balance of rewards
and incentives as well as cultures and boundaries (or
constraints).
Strategy Implementation (con’t)
❖ Creating Effective Organizational Designs (Chap. 10) - To
succeed, firms must have organizational structures and designs
that are consistent with their strategy, and flexible to changes.
❖ - Strategic alliances.
❖ Creating and Learning Organization and an Ethical
Organization (Chap. 11) - towards an organization that benefits
from collective talents, and manage grey areas
❖ Fostering Corporate Entrepreneurship (Chap. 12) - continually
improve and grow through innovation.
❖ Analyzing Strategic Management Cases (Chap. 13) -
application to real world situations.
 The Role of Corporate Governance
and Stakeholder Management

❖ Corporate Governance - the relationship among various participants in

determining the direction and performance of corporations -
shareholders, management, and the board of directors.
❖ Stakeholder Management - a firm’s strategy for recognizing an
responding to the interests of all its salient stakeholders.
Stakeholders Nature of Claim
Stockholders Dividends, capital appreciation
Employees Wages, benefits, safety, security
Suppliers Payment on time, continued relationships
Creditors Payment of interest, principal
Customers Value, warranties
Government Taxes, compliance to regulations
Communities Good citizenship behavior
 Discussion: What is Crowdsourcing?

https://www.youtube.com/watch?v=-38uPkyH9vI
 Corporate Social Responsibility
and Environmental Sustainability

❖ Corporate Social Responsibility (CSR) - the

expectation that businesses or individuals will strive
to improve the overall welfare of society
❖ https://www.youtube.com/watch?v=0-jnefZuOhA

❖ Shared Value - policies and operating practices that

enhance the competitiveness of a company while
simultaneously advancing the economic and social
conditions in which it operates
❖ https://www.youtube.com/watch?v=1vK3cxnP6I4
 Social Responsibility at McDonald’s:
Some Elements
• Supporting more than 200 Ronald McDonald Houses in 19 countries
(providing comfort and care to children and their families)
• Eliminating 150,000 tons of recycled products and more than one
million tons of corrugated cardboard in the U.S. over a ten-year period
• As part of their diversity program, more than 30 percent of their
franchisees are now women or minority and in 1999, McDonald’s
purchased approximately $3 billion worth of goods and services from
women and minority suppliers
• Providing about $5 million in educational assistance through a variety
of scholarships
• Partnered with Chicago’s Field Museum to restore Sue—the largest
Tyrannosaurus Rex fossil ever discovered in a laboratory for public
viewing

Source: McDonald’s Corporation 1999 Annual Report, page 6.

 Shared Values:
Win-Win Benefits by Addressing Societal Challenges
❖ Hindustan Unilever’s Project Shakti - operated by 45,000 underprivileged
female entrepreneurs covering 100,000 villages across 15 Indian states - now
accounts for 5% of Unilever’s revenue reaching hard-to-reach customers
❖ Johnson & Johnson says healthcare benefits is not enough - started a “stop
smoking” campaign - eventually saved $250million in healthcare costs, in
addition to a more present and productive costs
❖ Olam International, producer of cashews, used to ship from Africa to Asia -
now, has opened processing plants and trained workers in four African
countries, greatly reducing carbon emissions and 25 percent of shipping
costs, and provided 17,000 people where jobs otherwise were unavailable.
❖ Dell’s Asset Recovery System helps dispose of old computers. For $25, they
perform data overwrite, dismantling, and refurbishes and reuses old parts
and recycles the plastic - enhanced customer relationships, drive sales. The
service was as even profitable!
 The Triple Bottom Line

❖ Defined as the assessment of a firm’s financial,

social, and environmental performance

❖ “…corporations are the only organizations with

the resources, the technology, the global reach,
and the motivation to achieve sustainability” -
Stuart Hart, HBR.
 Three Types of Leaders

❖ There is a need for greater empowerment throughout

the organization. Critical need for three types of leaders:
❖ Local Line Leaders - profit and loss responsibilities
❖ Executive Leaders - who champion and guide ideas
and establish a domain for taking action
❖ Internal Networkers - generate their power though the
conviction and clarity of their idea
Ensuring Coherence in Strategic Direction

❖ hierarchy of goals - organisational goals ranging from, at the top, those that
are less specific yet able to evoke powerful and compelling metal images to,
at the bottom, those that are more specific and measurable
❖ Organizational Vision - organisational goal(s) that evoke(s) powerful and
compelling mental images. Usually stays the same over a long period of time
❖ What company has this vision?
❖ “To be the happiest place on earth”
❖ “Inspire the World, Create the Future”
❖ “To organize the world’s information and make it universally accessible and
useful”
 Why some visions fail

Walk that doesn’t

match the talk
Irrelevance

Why Company
Visions Fail

Belief in the An ideal future

one solution for irreconciled
all problems with the present
❖ Mission Statements - a set of organisational goals that include the purpose of the
organisation, its scope of operations, and the basis of its competitive advantage. It
changes over time
❖ Eg. “To produce superior financial returns for our shareholders as we serve our
customers with the highest quality transportation, logistics, and e-commerce” - FedEx
❖ Strategic Objectives - A set of organisational goals that are used to operationalise the
mission statement and that are specific and cover a well-defined time frame

Criteria for
Meaningful
Specific
Objectives Timely

Measurable Realistic

Appropriate
❖ Examples of Strategic Objectives:
❖ Increase sales growth 6% to 8% and accelerate core net earnings
growth 13% to 15% per share in each of the next five years - P&G
❖ Growth in earnings per share averaging 10% a year or better - 3M
❖ We want a majority of our customers, when surveyed, to say they
consider Wells Fargo the best financial institution in the
community. (Well Fargo)
❖ We want to operate 6,000 stores by 2010 - up from 3,000 in 2000 -
Walgreen’s
❖ Reduce greenhouse gases by 10 percent (from a 1990 base) by 2012
- BP Amoco