2*.Part 1 Strategy Analysis2-*

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LO 2-1 Explain the role of vision, mission, and values in the strategic management process.LO 2-2 Describe and evaluate the role of strategic intent in achieving long-term goals.LO 2-3Distinguish between customer-oriented and product-oriented missions and identify strategic implications.LO 2-4Critically evaluate the relationship between mission statements and competitive advantage.LO 2-5Explain why anchoring a firm in ethical values is essential for long-term success.LO 2-6Compare and contrast strategic planning, scenario planning, and strategy as planned emergence, and discuss strategic implications.

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ChapterCase 2 Teach For America: Inspiring Future LeadersTFA Mission: Eliminate educational inequalityStarted by an undergraduate studentInspiring mission Provide a meaningful service option for bright young peopleMake teaching to the neediest high prestige Over 40,000 applicants for 4,500 jobsTFA Video2-*

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Teach For America Inspiring OthersWhat are the key issues in the opening case?How was TFA able to successfully recruit? Established an inspiring missionAppealing to the target demographicClear communication of the goals of the organizationThe program is highly selective2-*

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VISION, MISSION, AND VALUESWhat are visionary organizations? Begin with the end in mindSimilar to designing & building a homeVision what to ultimately accomplish? Mission what is the firm about? Values how to accomplish goals?

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Teach For America: Vision, Mission, and ValuesEXHIBIT 2.12-*

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VISION, MISSION, AND VALUESWhat is forming strategic intent? Staking out a desired leadership position in the long term that far exceeds a company's current situation

Often used in Japanese corporate settingsCanon will "beat Xerox"

Effective use of stretch goalsCompetitive advantage for tomorrow

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1*STRATEGY HIGHLIGHT 2.1Winning Through StrategicIntent: The Pocketable RadioSmall Japanese Company after WWIIInvented an electric rice cookerWanted to license the transistor from Bell Labs in U.S.Japanese Government & Bell Labs both said NOPersisted with request Finally,1953 got transistor!Beat Bell Labs to pocket-sized radio1957 Launched worlds FIRST pocket radio1958 Changed company name to.SONY2-*

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SMART Goals (Text Extension)SpecificMeasurableAchievableRelevantTime-specificSMART canIncrease motivationClear directionManage by Objectives BUTcan alsoTrigger unethical actions

SMART example:3M CorporationGoal: 30% of all sales from products under 4 years on the market

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LO 2-1 Explain the role of vision, mission, and values in the strategic management process.LO 2-2 Describe and evaluate the role of strategic intent in achieving long-term goals.LO 2-3Distinguish between customer-oriented and product-oriented missions and identify strategic implications.LO 2-4Critically evaluate the relationship between mission statements and competitive advantage.LO 2-5Explain why anchoring a firm in ethical values is essential for long-term success.LO 2-6Compare and contrast strategic planning, scenario planning, and strategy as planned emergence, and discuss strategic implications.

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VISION, MISSION, AND VALUESCUSTOMER-ORIENTED MISSIONSDefine the firm in terms of solutions for customersDisney: "Make People Happy"Enhanced strategic flexibility NOT the same as listening to customers

PRODUCT-ORIENTED MISSIONSDefine the firm in terms of products or servicesU.S. Railroads: "Safest N. American railroad Missed the chance to move into delivery before UPS & Federal Express

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MISSION STATEMENTS ANDCOMPETITIVE ADVANTAGEDo mission statements help gain & sustain competitive advantage? Results are inconclusiveNeed strategic commitments to succeedPositive associations Visionary firmsNegative associations Better World BooksNo associations Intel

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Mission StatementIntel Corp. In search of a missionFrom product orientation To be the pre-eminent building block supplier of the PC industry To be the pre-eminent building block supplier of the Internet economyTo customer orientation Delight our customers, employees, and shareholders by relentlessly delivering the platform and technology advancements that become essential to the way we work and live What is the link between a firms mission statement and competitive advantage?2-*

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LO 2-1Explain the role of vision, mission, and values in the strategic management process.LO 2-2Describe and evaluate the role of strategic intent in achieving long-term goals.LO 2-3Distinguish between customer-oriented and product-oriented missions and identify strategic implications.LO 2-4Critically evaluate the relationship between mission statements and competitive advantage.LO 2-5 Explain why anchoring a firm in ethical values is essential for long-term success.LO 2-6Compare and contrast strategic planning, scenario planning, and strategy as planned emergence, and discuss strategic implications.

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Living the ValuesEthical standards and norms that govern behavior.How do we accomplish our goals?McKesson ICAREShared principles a framework for daily interactionsDark side of valuesBernard MadoffPonzi scheme estimated at $65 billion in fraudEnronOne of the largest bankruptcies in U.S. historyOver 50,000 jobs lost (Enron & Arthur Anderson)

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2013 by The McGraw-Hill Companies, Inc. All rights reserved.

LO 2-1Explain the role of vision, mission, and values in the strategic management process.LO 2-2Describe and evaluate the role of strategic intent in achieving long-term goals.LO 2-3Distinguish between customer-oriented and product-oriented missions and identify strategic implications.LO 2-4Critically evaluate the relationship between mission statements and competitive advantage.LO 2-5 Explain why anchoring a firm in ethical values is essential for long term success.LO 2-6Compare and contrast strategic planning, scenario planning, and strategy as planned emergence, and discuss strategic implications.

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The Strategic Management ProcessStrategic Planning

Scenario Planning

Strategy as Planned Emergence

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Strategy as Strategic Planning Top-down rational planningDefine mission, vision, & goal (strategic intent)External analysis of opportunities and threatsInternal analysis of strengths and weaknessesCreate strategic fit through SWOTFormulate appropriate strategyImplement chosen strategyMonitor performance & modify if necessary

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Strategic Planning Traditional view of strategyWorks reasonably well in stable environmentScientific managementStrategy is an engineering programming problemPast predicts the futureStrategic thinking is separated from implementation

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Strategy as Scenario Planning Scenario planning Envision different "what-if" plansGenerates a dominant plan Must implement the most probable option Keeps other scenarios in the event of changes "Arab Spring" impact on the oil industry?Good example of the AFI framework2-*

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Scenario PlanningThe future cannot be knownSome examples: UPS, FedEx, AirTran, Delta How to compete if the barrel of oil costs $35 or $200?Boeing, Harley-Davidson, Caterpillar How to compete if 1 euro = $2 or $1 = 75 yenHow to obtain capital when the DJIA is at 6,800 and the credit markets are frozen up?Thinking outside the boxBut tendency is not to think about pessimistic scenarios

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EXHIBIT 2.2 Scenario Planning in the AFI Strategy Framework2-*

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STRATEGY HIGHLIGHT 2.2Shells Future ScenariosPetroleum industry use of scenario planningShell made right move in the 1960s Again in the 1980s Communisms might fall Now projecting 20% energy from renewables by 20252-*

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Small Group Exercise Global Trends 2025Consider the above lists as a starting point What implications would these possible futures haveIf your group is (1) Ford, (2) GE, (3)ExxonMobil, (4)Google, (5) U.S. Govt Use scenario planning process What is your dominant plan?Adapted from Global Trends 2025: A Transformed World. National Intelligence Council, Washington, DC, November 2008.2-*

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Strategy as Planned EmergenceStrategic InitiativeGoogle 50% from the "20% rule" Enron wind investmentMintzberg Planned EmergenceStrategy can come from top or bottom Some intended strategies drop off in the processAllows for new emerging ideas to become realizedResource allocation process (RAP)Serendipity can have dramatic effects

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Strategic Initiatives and SerendipityPolaroidInstant photography3MMasking tapePost-it notesScotchguardJapan RailwaysBottled waterPfizerViagra

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Bottom-up Strategic Initiatives / Autonomous ActionsMicrosoftInternet ExplorerXboxIntelDRAM exit and entry into semiconductorsStarbucksFrappuccinoGoogle50% of new products come from 20% autonomous time2-*

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EXHIBIT 2.3MINTZBERGS PLANNING FRAMEWORK.2-*

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STRATEGY HIGHLIGHT 2.3Its Not What We Do!StarbucksAutonomous action of mid-level managerTenacity and persistence of a store managerRisk of failurePossible career-limiting actionOrganization must be willing to accept new ideasFrappuccino was born! Contributing 20% of revenues for Starbucks recently2-*

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Small Group Exercise # 2 Ideas BloomFirms today need to allow more "emergence" How can firms generate more new ideas?What if managers got 2% of their budget for investing?The organization would generate many "seeds"Experimentation would growFirms become network of small angel investorsNew ideas would get small funds for initial testsApplication of real options thinkingWhat are some implementation problems here?Use a firm someone in your group knows well to discuss problems with widely spreading small project approvals across the company. 2-*

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Implications for the Strategist Net Present Value (NPV)Widely used financial toolInappropriate when uncertainty is highDoesnt capture home run upsides

Real OptionsUses a set of smaller decisionsKeeps options open longerPrevents early shutdown of projectsMicrosoft Keywords (Ch.1 opener) They may have stayed with it longerPossibly hit stride on search earlier

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CHAPTERCASE 2 /Consider ThisTeach For America is TWENTY years old!

A $200 million dollar organizationTeacher effectiveness improves withStudentoriented achievement course objectives

What role did TFAs vision statement have?

How have they recruited so many into teaching?

Could it have worked as a for-profit firm?

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LO 2-1Explain the role of vision, mission, and values in the strategic management process.A vision captures an organizations aspirations. An effective vision inspires members of the organization.A mission statement describes what an organization actually does and why it does it.Values define the ethical standards and norms that should govern the behavior of individuals within the firm.Success is created twice: first analyzing a mental model and second formulating and implementing a strategy to make a vision a reality.LO 2-2Describe and evaluate the role of strategic intent in achieving long-term goals.Strategic intent finds its expression in stretch goals that exceed the firms existing resources and capabilities by a large margin.Effective use of strategic intent creates at all levels of the organization an obsession with winning that can help companies ascend to global leadership.Take-Away Concepts2-*

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Take-Away Concepts (contd)LO 2-3Distinguish between customer-oriented and product-oriented missions and identify strategic implications.Customer-oriented missions define businesses providing solutions to customer needs. Product-oriented missions define a business in terms of a good or service provided.Customer-oriented missions provide managers with more strategic flexibility than product-oriented missions.LO 2-4Critically evaluate the relationship between mission statements andcompetitive advantage.Mission statements can help a firm achieve superior performance, but mission statements by themselves do not directly affect firm performance.To be effective, mission statements need to be backed up by hard-to-reverse commitments.2-*

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Take-Away Concepts (contd)LO 2-5Explain why anchoring a firm in ethical values is essential for long-term success.Ethical core values enable employees to make day-to-day decisions that are guided by correct principles.Values are guardrails to keep a company on track for competitive advantage.LO 2-6Compare and contrast strategic planning, scenario planning, and strategy as planned emergence, and discuss strategic implications.Top-down strategic (long-range) planning works reasonably well when the environment does not change much.In scenario planning, managers envision different what-if scenarios and prepare contingency plans that can be called upon when necessary.Strategic initiatives can be the result of top-down planning by executives or can emerge through a bottom-up process from deep within the organization.A firms realized strategy is generally a combination of its top-down intended strategy and bottom-up emergent strategy, resulting in planned emergence.2-*

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Dominant strategic planEmergent strategyIntended strategyMissionOrganizational valuesRealized strategyScenario planningStrategic commitmentsStrategic initiativeStrategic intentStrategic management processStrategic (long-range) planningUnrealized strategyVision2-*

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***INSTRUCTOR: The textbook DVD has a video of TFA founder Wendy Kopp. A shorter video is embedded in the TFA video label at the bottom of this slide. Run the slide show and click on this area of the slide to bring up the video if your classroom has Internet access.

The URL link is also below: http://ecorner.stanford.edu/authorMaterialInfo.html?mid=2599 *INSTRUCTOR: An Interactive activity on President John F. Kennedy's call for manned flights to the moon is available online through McGraw-Hill Connect on this section of the text.

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*NOTE to Instructor:This is from additional material found in the instructors manual. It is NOT directly in the text.

*INSTRUCTOR: An Interactive video activity with the CEO of McKesson is available online through McGraw-Hill Connect on this section of the text. It is available as an auto-graded homework assignment if desired.

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INSTRUCTOR: An Interactive activity is available online through McGraw-Hill Connect on this section of the text. **INSTRUCTOR: An Interactive activity is available online through McGraw-Hill Connect on this section of the text.

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