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Unformatted text preview: MGO403 FOUNDATION OF STRATEGIC MANAGEMENT
Session 2. Lecture (1) January 23, 2012 Instructor : Akie Iriyama Before Starting Class........
1) Downloaded the handout? 2) Check the syllabus? 3) Get HBS cases? The case of Disney is not posted.
2 Assignment for Next Session
GE's Two-Decade Transformation: Jack Welch's Leadership Product Number: 399-150 Read from p.1 p.11 Questions How did Jack Welch change GE? Why was it successful?
3 Contents of Session What's Why Strategic Management? do we need to study Strategy Management? 4 Akio Toyota Takanobu Ito 5 Domestic Car Sales in Japan: 2002-2010
million 6 What Strategy are Toyota and Honda Exploring Now? Diversification They strategy have entered into different businesses. 7 What is Strategic Management ? 8 What is "Strategy"? Barney & Hesterly (2008) "A firm's strategy is defined as its theory about how to gain competitive advantages." et al., (2007) "A strategy is an integrated and coordinated set of commitments and actions designed to exploit core competences and gain a competitive advantage." & Jones (2008) "A strategy is a set of related actions that managers take to increase their company's performance." Hitt Hill 9 Why Do You Need Study Strategic Management? Many managers say, "A theory does not reflect reality in business. The real business world is more complex and complicated". Strategy theory is meaningless because every company is different!
10 Competitive Advantage 11 Which has a competitive advantage? 12 What is Competitive Advantage?
Competitive Advantage The ability to create more economic value than competitors, which can not be duplicated, imitated, and appropriated for a long time. Competitive Parity The mechanism in which firms' economic values are duplicated, imitated, and appropriated for a short time. 13 How to Measures Competitive Advantage
Physical Measures Size, Growth, Market Share, Productivity Accounting Measures ROE, ROA, ROI Economic Measure Stock Price Market Value EVA Unobservable Strategy CA Measures 14 Does Sustainability Matter? Is it possible for a firm to attain competitive advantage? 15 Distribution of U.S. Non-Small Firms in Performance Categories
Ending performance (1994-1997) High 25%
Beginning performance (1981-1984) Medium 50%
Declining high performers Low 25%
Fallen high performers High 25% Medium 50% Low 25% Sustained high performers 19.4%
Rising Moderate performers 4.4%
Steady moderate performers 1.2%
Declining moderate performers 5.1%
Rising underperformers 4.2%
Chronic underperformers 0.5% 4.9% 19.6%
16 Source: McGahan (1999) Does Sustainability Matter? It is difficult to attain competitive advantage. it's not impossible. But Competitive parity mechanism does not work perfectly.
17 What Strategy are Toyota and Honda Exploring Now? Diversification They strategy have entered into different businesses. 18 Strategic Fit 19 All Elements of Strategy Process Need to Fit Each Other
Competitive Advantage Strategy Choice & Implementation) External Environment Vision & Mission
20 Internal Environment Vision & Mission 21 Vision & Mission Vision captures the firm's aspiration & strategic direction. It is what the firms wants to ultimately achieve. puts a boundary around the types of investments that are consistent with the identity of business. It is what the firm should (or should not) do.
22 Mission Vision & Mission: Example (1) 23 Vision & Mission: Example (2)
SONY's Vision in the early 50s' "Become the company most known for changing the worldwide poor quality image associated with Japanese products. Stanford University's Vision in the 40s' "being the Harvard of the West"
24 Vision & Mission: Example (3)
Starbucks' Mission Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles as we grow. 1. Provide a great work environment 2. Applying the highest standards of excellence to the purchasing, roasting, and fresh delivery of our coffee 3. Develop enthusiastically satisfied customers all of the time 4. Contribute positively to our communities and our environment 5. Recognize that profitability is essential to our 25 future success Vision & Mission
Important Facts "The earning of a god financial performance" is not mentioned in successful firms' vision or mission.
A research has shown that.....
Good Vision (+) CA Baum, et al., (1998) 26 How is a Good Vision like?
even attributes that are necessary for a vision to be effective revity larity bstractness hallenge
27 Honda Honda was originally founded as a manufacturer of engines (founded in 1926). V&M: "Dreams inspire us to create innovative products that enhance mobility and benefit society." 28 Toyota
The origin of Toyota's was a manufacturer of textile machines (founded in 1926.) V&M: "Our goal is to be a "good corporate citizen," constantly winning the trust and respect of the international community." 29 Strategic Management as "State-of-Art Knowledge" Q. Does Strategic Management always give you exactly right answers? No A. A firm's strategy is the best bet about how competition is going to evolve and how that evolution can be exploited for competitive advantage."
30 How You Climb up the Mountain of Business? 31
Graphic: McKinsey Quarterly ...
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