Ch3: Strategic management and the entrepreneur

Chapter 2 Strategic ManagementChapter 2 Strategic Management Copyright Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall©2012 Pearson Education, Inc. publishing as Prentice Hall2-2-11

Strategic Managementand the Entrepreneur


Strategic ManagementStrategic Management Small companies that are prepared Small companies that are prepared

can can createcreate the disruptions that the disruptions that revolutionize their industries, and, revolutionize their industries, and, in the process, create a competitive in the process, create a competitive edge edge Apple Computer and the iPodApple Computer and the iPod

Knowledge has become Knowledge has become thethe critical critical factor of productionfactor of production

Intellectual capital counts! Intellectual capital counts!


A Major Shift...A Major Shift...

... from financial capital to ... from financial capital to intellectual capitalintellectual capital HumanHuman StructuralStructural CustomerCustomer


Strategic ManagementStrategic Management Is crucial to building a successful Is crucial to building a successful

business business Involves developing a game plan to Involves developing a game plan to

guide a company as it strives to guide a company as it strives to accomplish its mission, goals, and accomplish its mission, goals, and objectives, and to keep it on its objectives, and to keep it on its desired coursedesired course


Strategic Management Strategic Management and Competitive Edgeand Competitive Edge Developing a strategic Developing a strategic

plan is crucial to gaining a plan is crucial to gaining a competitive advantagecompetitive advantage, , the aggregation of factors the aggregation of factors that sets a company apart that sets a company apart from its competitors and from its competitors and gives it a unique position gives it a unique position in the marketin the market


Key: Core Key: Core CompetenciesCompetencies

Unique set of skills, knowledge, or Unique set of skills, knowledge, or abilities that a company develops in key abilities that a company develops in key areas such as superior quality, customer areas such as superior quality, customer service, innovation, team-building, service, innovation, team-building, flexibility, responsiveness, and others flexibility, responsiveness, and others that allow it to vault past competitors.that allow it to vault past competitors.

The special attributes or abilities that The special attributes or abilities that give an organization a competitive edge give an organization a competitive edge

Chapter 2 Strategic ManagementChapter 2 Strategic Management

Definition of Strategy

Strategy: A firm’s theory about how to gaincompetitive advantages


Herb Kelleher, a founder and CEO of Southwest Airlines, seems to have had a different theory about how to gain competitive advantage.

His theory was that people would be willing to fly instead of driving, taking a bus, or taking a train if the price could be made affordable. He also theorized that a certain part of the market would prefer to pay a lower price and fly without some of the usual benefits of air travel, like meals and reserved seats.

Both of these theories, and many others, can lead to competitive advantage depending on circumstances, strategic insight, and strategic implementation.



Theories are based on a set of

assumptions and hypotheses about

the way competition in an industry is

likely to evolve (develop) and how that

evolution can be exploited to earn a

profit.



Theories are based on a set of assumptions and hypotheses about the way competition in an industry is likely to evolve (develop) and how that evolution can be exploited to earn a profit.



The greater the extent to which these assumptions and hypotheses accurately reflect how competition in this industry actually evolves, the more likely it is that a firm will gain a competitive advantage from implementing its strategies.

If these assumptions and hypotheses turn out not to be accurate, then a firm’s strategies are not likely to be a source of competitive advantage.


Definition of StrategyAnother Definition

Strategy: is a set of managerial decisions and actions that determines the long run performance of a corporation.

Source: Strategic Management and Business Policy, Wheelen and David, 13E

Strategy: the art and science of formulating, implementing, and evaluating cross-functional decisions that enable an organization to achieve its objectives.

Source: Strategic Management (Concepts and Cases), Fred R. David, 13E


Strategic Strategic Management Management ProcessProcess

Step 1Step 1: Develop a vision and : Develop a vision and translate it into a mission statementtranslate it into a mission statementStep 2Step 2: Assess strengths and : Assess strengths and weaknessesweaknessesStep 3Step 3: Scan environment for : Scan environment for opportunities and threatsopportunities and threats


Strategic Management Strategic Management Process...Process...Step 4Step 4: Create goals and : Create goals and

objectivesobjectives Step 5Step 5: Formulate : Formulate

strategiesstrategies Step 6Step 6: Translate plans : Translate plans

into actionsinto actions Step 7Step 7: Establish : Establish

accurate controlsaccurate controls

(continued)(continued)


Mission Objectives

ExternalAnalysis

InternalAnalysis

StrategicChoice

StrategyImplementation

CompetitiveAdvantage

The Strategic Management Process

Vision

Chapter 2 Strategic ManagementChapter 2 Strategic Management Copyright © 2011 Pearson Education, Inc. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice HallPublishing as Prentice Hall Ch 2 -Ch 2 -1616


Step 1: Step 1: Develop a VisionDevelop a Vision and Create a Mission and Create a Mission StatementStatement


Vision Statement

A A vision statement vision statement should answer should answer the basic question: the basic question:

““What do we want to become?What do we want to become?””


Vision Statement (What do we want to become?)

The The vision statement vision statement should be short, should be short, preferably one sentence, and as many preferably one sentence, and as many managers as possible should have managers as possible should have input into developing the statement.input into developing the statement.

Agreement on the basic vision for which the firm strives to achieve in the long term is especially important.


ComprehensiveMission Statement

Vision

Clear Business Vision


General Motors’General Motors’ vision is to be vision is to be the world leader in transportation the world leader in transportation products and related services.products and related services.

Vision Statement Examples

(Author comment: Good statement)


PepsiCo’sPepsiCo’s responsibility is to responsibility is to continually improve all aspects of the continually improve all aspects of the world in which we operate – world in which we operate – environment, social, economic – environment, social, economic – creating a better tomorrow than today.creating a better tomorrow than today.


(Author comment: Statement is too vague; it should reveal how the firm’s food and beverage business benefits people)


Samsonite’s Samsonite’s vision is to provide innovative vision is to provide innovative solutions for the traveling world.solutions for the traveling world.


What is your comment ?


Answers the question:Answers the question:

““What is our business?”What is our business?”

Mission Statement


An enduring statement of purpose An enduring statement of purpose that distinguishes one organization that distinguishes one organization from other similar enterprises.from other similar enterprises.

A declaration of an organization’s A declaration of an organization’s “reason for being” or “reason of “reason for being” or “reason of existence”existence”

Mission Statement


It is essential for effectively establishing It is essential for effectively establishing objectives and formulating strategies.objectives and formulating strategies.

Mission Statement

In multidivisional organizations, each division should develop a mission statement consistent with and supportive of the corporate mission.













Developing Vision & Mission

Participation by as many managers as possible is important in developing the mission because through involvement people become committed to an organization


Steps to Developing Vision Steps to Developing Vision & Mission Statements& Mission Statements1.1. Have managers read related articlesHave managers read related articles2.2. Have managers prepare a vision and Have managers prepare a vision and

mission statement for the mission statement for the organizationorganization

3.3. Merge the documents into one and Merge the documents into one and distributedistribute

4.4. Gather feedback from managersGather feedback from managers5.5. Meet to revise the final documentMeet to revise the final document



Resolution of Resolution of Divergent ViewsDivergent Views A genuine decision must be based A genuine decision must be based

on divergent views to have a on divergent views to have a chance to be a right and effective chance to be a right and effective decisiondecision

Considerable disagreement over Considerable disagreement over vision and mission statements can vision and mission statements can cause trouble if not resolvedcause trouble if not resolved



Step 2: Assess Step 2: Assess Company Strengths Company Strengths and Weaknessesand Weaknesses

StrengthsStrengths Positive internal factors that Positive internal factors that

contribute to accomplishing contribute to accomplishing the mission, goals, and the mission, goals, and objectivesobjectives

WeaknessesWeaknesses Negative internal factors that Negative internal factors that

inhibit the company’s ability inhibit the company’s ability to accomplish its mission, to accomplish its mission, goals, and objectivesgoals, and objectives


Step 3: Scan for Step 3: Scan for Opportunities and Opportunities and ThreatsThreats

OpportunitiesOpportunities Positive external options the Positive external options the

company can exploit to company can exploit to accomplish its mission, goals, accomplish its mission, goals, and objectivesand objectives

ThreatsThreats Negative external forces that Negative external forces that

inhibit the company’s ability inhibit the company’s ability to accomplish its mission, to accomplish its mission, goals, and objectivesgoals, and objectives


A good analysis of the external environment may allow a firm to face threats and opportunities.

For example, a firm thinking entry into a new business may discover a significant threat through its external analysis before actually entering the new business.

Such a discovery would allow the firm to either abandon the idea or adopt a strategy that would neutralize that particular threat


A condition may present opportunity to one type of firm and a threat to another type of firm.

For example, a falling unemployment rate (economic climate) presents opportunity to a manufacturer of home appliances and a threat to fast food restaurants. Falling unemployment means disposable incomes are likely to rise, allowing people to spend on larger ticket items like washing machines.

Falling unemployment also means that workers have more and better options for employment, meaning that low paying fast food restaurant jobs will be more difficult to fill.




TWO LEVELS OF EXTERNAL ENVIRONMENT External analysis consists of looking at two ‘levels’ of environment: •the general environment and •the industry environment.

The general environment is the environment in which all firms in an economy operate, regardless of a firm’s specific industry.

Elements of the general environment have a potential effect on every firm in an economy.


Buyers

Suppliers

Entry

Rivalry

Substitutes

Complementors

DemographicTrends

TechnologicalChange

CulturalTrends

EconomicClimate

Legal/PoliticalConditions

SpecificInternational

Events

Industry

General External Environment

Chapter 2 Strategic ManagementChapter 2 Strategic Management Copyright Copyright ©2012 Pearson Education, Inc. Publishing as Prentice Hall©2012 Pearson Education, Inc. Publishing as Prentice Hall2-2-5151

Technological change creates both opportunity, as firms begin to explore to use technology to create new products and services, and threats, technological change forces firms to rethink their technological strategies.


The Demographic The Demographic EnvironmentEnvironment

Population Growth TrendsPopulation Growth Trends

Population Age and Gender MixPopulation Age and Gender Mix

General global trends towards an ageing population.General global trends towards an ageing population. The Arab world has an unusual age structure compared to The Arab world has an unusual age structure compared to

the world trend – higher economically active population the world trend – higher economically active population growth.growth.

Female labour force participation in the Arab world has Female labour force participation in the Arab world has been consistently on the rise. Expected to reach 43 percent been consistently on the rise. Expected to reach 43 percent in 2020.in 2020.


Case study Case study

Copyright Copyright ©2012 Pearson Education, Inc. Publishing as Prentice Hall©2012 Pearson Education, Inc. Publishing as Prentice Hall2-2-5353


been the growth of the Hispanic population. In 1990, the percentage of been the growth of the Hispanic population. In 1990, the percentage of the U.S. population that was African American was greater than the the U.S. population that was African American was greater than the percentage that was Hispanic. However, by 2000, people of Latin percentage that was Hispanic. However, by 2000, people of Latin descent outnumbered African Americans. Currently, Hispanics descent outnumbered African Americans. Currently, Hispanics constitute almost 15 percent of the U.S. population, whereas the constitute almost 15 percent of the U.S. population, whereas the percentage of African Americans remains constant at less than 8 percentage of African Americans remains constant at less than 8 percent. These trends are particularly notable in the South and percent. These trends are particularly notable in the South and Southwest. For example, more than 36 percent of children under 18 in Southwest. For example, more than 36 percent of children under 18 in Houston are Hispanic, 39 percent in Miami and San Diego, 53 percent in Houston are Hispanic, 39 percent in Miami and San Diego, 53 percent in Los Angeles, and more than Los Angeles, and more than 61 percent in San Antonio.61 percent in San Antonio.

Of course, firms are aware of this growing population and its buying Of course, firms are aware of this growing population and its buying power. Indeed, Hispanic disposable income in the United States jumped power. Indeed, Hispanic disposable income in the United States jumped 29 percent, to $652 billion, from 2001 to 2003. In response, firms have 29 percent, to $652 billion, from 2001 to 2003. In response, firms have begun marketing directly to the U.S. Hispanic population. In one year, begun marketing directly to the U.S. Hispanic population. In one year, Procter & Gamble spent $90 million marketing directly to Spanish-Procter & Gamble spent $90 million marketing directly to Spanish-speaking customers. Procter & Gamble has also formed a 65-person speaking customers. Procter & Gamble has also formed a 65-person bilingual team to manage the marketing of products to Hispanics. bilingual team to manage the marketing of products to Hispanics. Indeed, Procter & Gamble expects that the Hispanic population will be Indeed, Procter & Gamble expects that the Hispanic population will be the cornerstone of its sales growth in North America. the cornerstone of its sales growth in North America.


Firms can try to exploit their understanding of a Firms can try to exploit their understanding of a particular demographic segment of the population to particular demographic segment of the population to create a competitive advantage—as Procter & Gamble create a competitive advantage—as Procter & Gamble is doing with the U.S. Hispanic population—but is doing with the U.S. Hispanic population—but focusing on too narrow a demographic segment can focusing on too narrow a demographic segment can limit demand for a firm’s productslimit demand for a firm’s products. .


Case studyCase study



Porter 5 forces


Economic EnvironmentEconomic Environment The economic environment depends on The economic environment depends on

current income, prices, savings, debt current income, prices, savings, debt and credit availability.and credit availability.

Strategists should consider Strategists should consider patterns including:patterns including:

– Income distributionIncome distribution– Savings, debt and creditSavings, debt and credit– Family businesses (the prevalence and success of Family businesses (the prevalence and success of

these)these)


Political-Legal Political-Legal EnvironmentEnvironment

The legal and political dimensions of The legal and political dimensions of an organization’s general environment an organization’s general environment are the laws and the legal system’s are the laws and the legal system’s impact on business, together with the impact on business, together with the general nature of the relationship general nature of the relationship between government and business. between government and business. These laws and the relationship These laws and the relationship between business and government can between business and government can vary significantly around the world.vary significantly around the world.


specific international specific international eventsevents

These include events such as civil These include events such as civil wars, political coups, terrorism, wars wars, political coups, terrorism, wars between countries, famines, and between countries, famines, and country or regional economic country or regional economic recessions. All of these specific events recessions. All of these specific events can have an enormous impact on the can have an enormous impact on the ability of a firm’s strategies to ability of a firm’s strategies to generate competitive advantage.generate competitive advantage.


Of course, one of the most important of these Of course, one of the most important of these specific events to have occurred over the past specific events to have occurred over the past several decades was the terrorist attacks on New several decades was the terrorist attacks on New York City and Washington, D.C., on September York City and Washington, D.C., on September 11, 2001. 11, 2001.

Beyond the tragic loss of life, these attacks had Beyond the tragic loss of life, these attacks had important business implications as well. For important business implications as well. For example, it took more than five years for airline example, it took more than five years for airline demand to return to pre–September 11 levels. demand to return to pre–September 11 levels.


Insurance companies had to pay out billions of Insurance companies had to pay out billions of dollars in unanticipated claims as a result of the dollars in unanticipated claims as a result of the attacks. Defense contractors saw demand for attacks. Defense contractors saw demand for their products soar as the United States and their products soar as the United States and some of its allies began fighting war in some of its allies began fighting war in Afghanistan and then Iraq.Afghanistan and then Iraq.


Industry AnalysisThe Model of Environmental Threats

Buyers

Suppliers

Entry

Rivalry

Substitutes

Industry

Threat

Higher Threat Lower Average Profits


Model of Environmental Threats

Threat from New Competition

• If firms can easily enter the industry, any above normal profits will be bit away quickly.

• Barriers to entry …….lower the threat of entry.

• Barriers to entry make an industry more attractive.

• This is true whether the focal firm is already in the industry or thinking about entering.


Model of Environmental Threats contd.

Threat of New Competition

Barriers to Entry:

• Economies of scale—firm that can’t produce the minimum efficient scale will be at a disadvantage.

• Product differentiation—entrants are forced to overcome customer loyalties to existing products.

• Cost advantages

• Government policies—governments may imposetrade restrictions and/or grant monopolies.


Model of Industry Competition

Threat from Existing Competitors

• Attributes of an Industry That Increase the Threat of Direct Competition:

• large numbers of competitors• slow or declining growth• high fixed costs and/or high storage costs• low product differentiation

• industry capacity added in large increments



Threat of Substitute Products

• Substitutes fill the same need but in a different way.

- Coke and Pepsi are rivals, milk is asubstitute for both.

• Substitutes create a price maximum because consumersswitch to the substitute if prices rise.

• Substitutes will likely come from outside theindustry—be sure to look.



Threat of Supplier Leverage

• Powerful suppliers can “squeeze” (lower profits)the focal firm.

Industry conditions that facilitate supplier power:

• small number of firms in supplier’s industry

• highly differentiated product

• lack of close substitutes for suppliers’ products

• supplier could integrate forward

• focal firm is an insignificant customer of supplier



Threat from Buyers Influence• Powerful buyers can “squeeze” (lower profits)

the focal firm by demanding lower prices and/orhigher levels of quality and service.

Industry conditions that facilitate buyer power:

• small number of buyers for focal firm’s output

• lack of a differentiated product

• the product is significant to the buyer



Threat from Buyers Influence

Indicators of the threat of buyers influence:

• Buyers operate in a competitive market—they arenot earning above normal profits.

• Buyers can vertically integrate backward.

• Many small buyers can be united around an issueto act as a block.



Buyers

Suppliers

Entry

Rivalry

Substitutes

Industry

Threat

If all threats are high expect normal profits

If all threats are low expect above normal profits

Most industries are somewhere between the extremes.


Complementors As Another Force

Complementors Increase the Value of the Focal Firms Product

• Customers perceive more value in the focal firm’sproduct when it is combined with the complementor’s product.

if your customers value your product more when they have this other firm’s product than when they have your product alone.


Ex:the value of cable television companies depends partly on the existence of television production firms.

Because the value of program-producing companies is greater when cable television firms exist and because the value of cable television companies (channels) is greater when program-producing companies exist, these types of firms are complements.


Responding to Environmental Threats

Neutralizing Threats

• Most firms cannot individually change the threats in an industry.

• By altering relationships in an industry, firms may reduce threats and/or create opportunities, thereby increasing profits.


firms can respond by 1) avoiding the industry (choosing not to enter or choosing to exit), or, 2) making strategic choices that may neutralize the threats.

In a sense, many of the possible strategic choices consist of basically turning a threat into an opportunity. These choices are treated in more detail in later chapters.


A regional bakery (Bakery X) faces intense rivalry from two other bakeries that constantly compete for business with fast food restaurants and small, independent grocery stores. These bakeries do most of their business through brokers who ask for bids on behalf of restaurants and grocers. After a period of particularly intense price competition, Bakery X decides it is time to try to manage the rivalry.


When the largest broker approaches Bakery X with a request for bid from a restaurant chain to supply hamburger buns in a neighboring city in which one of the rival bakeries is located, Bakery X provides the broker with a bid. However, the bid is higher than recent history suggests and includes a written statement. The statement explains that Bakery X plans to focus on servicing restaurants and stores in certain selected cities and that it will be forced to charge higher prices in other cities. Bakery X does this knowing that the broker will communicate this odd behavior to the other bakeries. The other bakeries recognize the signal and begin to respond. Price wars are avoided and average profits rise for all three bakeries.


Industry Structure and Environmental Opportunities

• Identifying environmental threats is only half the task in accomplishing an external analysis.

• Such an analysis must also identify opportunities.

• .


Step 4: Create Step 4: Create Company Goals and Company Goals and ObjectivesObjectives

Goals – broad, long-range attributes to Goals – broad, long-range attributes to be accomplished; general and abstractbe accomplished; general and abstract

Objectives – more detailed, specific Objectives – more detailed, specific targets of performance that are targets of performance that are S.M.A.R.T.S.M.A.R.T. SSpecificpecific MMeasurableeasurable AAssignablessignable RRealistic (yet challenging)ealistic (yet challenging) TTimelyimely


Step 5: Formulate Step 5: Formulate StrategiesStrategies StrategyStrategy

A “road map” that guides a company A “road map” that guides a company through a turbulent environment as it through a turbulent environment as it seeks to fulfill its mission, goals, and seeks to fulfill its mission, goals, and objectives objectives

Focused on the key success factors Focused on the key success factors identified in Step 4identified in Step 4

Mission, goals, and objectives = EndsMission, goals, and objectives = Ends Strategy = MeansStrategy = Means


Three Strategic Three Strategic OptionsOptionsThree basic strategies:Three basic strategies:

Strategy?

Cost leadership

Differentiation

Focus

Three Strategic Three Strategic OptionsOptions

Source of Competitive AdvantageSource of Competitive Advantage

Target Target MarketMarket

IndustryIndustry

NicheNiche

Uniqueness PerceivedUniqueness Perceived by the Customerby the Customer

Low-CostLow-CostPositionPosition

Differentiation

Low Cost

Differentiation Focus

CostFocus

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2-29


Cost LeadershipCost Leadership Goal: to be Goal: to be thethe low-cost producer in the low-cost producer in the

industry or market segmentindustry or market segment Advantages: Advantages:

Reaching buyers who buy on the basis of priceReaching buyers who buy on the basis of price Power to set the industry’s price floorPower to set the industry’s price floor

Works well when:Works well when: Buyers are sensitive to price changesBuyers are sensitive to price changes Competing firms sell the same commodity Competing firms sell the same commodity

productsproducts A company can benefit from economies of A company can benefit from economies of

scale scale


DifferentiationDifferentiation Company seeks to build customer Company seeks to build customer

loyalty by positioning its goods or loyalty by positioning its goods or services in a unique or different fashionservices in a unique or different fashion

Idea is to be better than the competition Idea is to be better than the competition at something customers valueat something customers value

Key: Build basis for differentiation on a Key: Build basis for differentiation on a distinctive competence, something that distinctive competence, something that a small company is uniquely good at a small company is uniquely good at doing in comparison to its competitors doing in comparison to its competitors

Example: Classic AfricaExample: Classic Africa


FocusFocus Company selects one or more Company selects one or more

customer segments in a market, customer segments in a market, identifies customers’ special needs, identifies customers’ special needs, wants, or interests, and then wants, or interests, and then targets them with a product or targets them with a product or service designed specifically for service designed specifically for themthem

Strategy builds on Strategy builds on differencesdifferences among market segmentsamong market segments


FocusFocus Rather than try to serve the total Rather than try to serve the total

market, the company focuses on market, the company focuses on serving a niche (or several niches) serving a niche (or several niches) within that market within that market

Examples:Examples: Lena Blackburne Baseball Rubbing Lena Blackburne Baseball Rubbing

MudMud Oh My Dog SuppliesOh My Dog Supplies CretorsCretors


Step 6: Strategies into Step 6: Strategies into Action PlansAction Plans

To make the plan workable, business To make the plan workable, business owners should divide the plan into owners should divide the plan into projects, carefully defining each one projects, carefully defining each one by the following:by the following:



Create projects by defining:Create projects by defining: PurposePurposeWhat is the project designed to What is the project designed to accomplishaccomplish?? ScopeScopeWhich Which areasareas of the company will be involved in the of the company will be involved in the

project?project? ContributionContributionHow does the project relate to How does the project relate to other projects other projects and to the and to the

overall strategic planoverall strategic plan??



Resource requirementsResource requirementsWhat human and financial resources are What human and financial resources are needed to complete the project successfully?needed to complete the project successfully?

TimingTimingWhich schedules and deadlines will ensure Which schedules and deadlines will ensure

project completion?project completion?


Step 7: Establish Step 7: Establish Accurate ControlsAccurate Controls

Planning without control has little operational Planning without control has little operational value, and a sound planning program requires a value, and a sound planning program requires a practical control process.practical control process.

The plan establishes the standards against which The plan establishes the standards against which actual performance is measured actual performance is measured

Entrepreneur must:Entrepreneur must: Identify and track key performance indicatorsIdentify and track key performance indicators Take corrective actionTake corrective action


To evaluate the effectiveness of their To evaluate the effectiveness of their strategies and to link them to strategies and to link them to everyday performance, everyday performance, manymany companies are developing companies are developing balanced balanced scorecardsscorecards


Balanced ScorecardBalanced Scorecard A set of measurements unique to a company that A set of measurements unique to a company that

includes both financial includes both financial andand operational measures. operational measures. Rather than sticking solely to the traditional financial Rather than sticking solely to the traditional financial

measures of a company’s performance, the balanced measures of a company’s performance, the balanced scorecard gives managers a comprehensive view scorecard gives managers a comprehensive view from from both a financial and an operational perspective.both a financial and an operational perspective.

This means that it gives managers a quick yet This means that it gives managers a quick yet comprehensive picture of a company’s overall comprehensive picture of a company’s overall performance.performance.


Balanced ScorecardBalanced Scorecard Five Perspectives:Five Perspectives:

1.1. Customer: How do customers see us?Customer: How do customers see us?2.2. Internal Business: At what must we excel?Internal Business: At what must we excel?3.3. Innovation and Learning: Can we continue to Innovation and Learning: Can we continue to

improve and create value?improve and create value?4.4. Financial: How do we look to shareholders? Financial: How do we look to shareholders? 5.5. Corporate Citizenship: What must we do to Corporate Citizenship: What must we do to

meet our social responsibility to society as a meet our social responsibility to society as a whole, the environment, the community, and whole, the environment, the community, and other stakeholders? other stakeholders?


Balanced ScorecardBalanced ScorecardCustomer

InternalBusiness

Innovation and Learning

Financial

CorporateCitizenship


How do customers see us?


On what factors must we excel?


How do we look to investors


Innovation and Learning Innovation and Learning PerspectivePerspective

Can we continue to improve and create value? Can we continue to improve and create value? This view of a company recognizes that the This view of a company recognizes that the targets required for success are never static; targets required for success are never static; they are constantly changing. they are constantly changing.

If a company wants to continue its pattern of success, If a company wants to continue its pattern of success, it cannot stand still; it must continuously improve. it cannot stand still; it must continuously improve.

A company’s ability to innovate, learn, and improve A company’s ability to innovate, learn, and improve determines its determines its future. future.



Innovation and Learning Innovation and Learning PerspectivePerspective

These goals and measures emphasize the These goals and measures emphasize the importance of continuous improvement in importance of continuous improvement in customer satisfaction and internal customer satisfaction and internal business operationsbusiness operations



Corporate citizenshipCorporate citizenship

How well are we meeting our social How well are we meeting our social responsibility to society as a whole, the responsibility to society as a whole, the environment, the community, and other environment, the community, and other external stakeholders?external stakeholders?




All rights reserved. No part of this publication may All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, electronic, mechanical, photocopying, recording, or otherwise, without the prior written or otherwise, without the prior written permission of the publisher. Printed in the United permission of the publisher. Printed in the United States of America.States of America.

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Ch3: Strategic management and the entrepreneur

Leadership & Management