Introduction to Management
WEEK TEN: THE EXCEPTIONAL MANAGER -STRATEGY
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2019 Course Experience Survey (CES)
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Objectives of this Lecture
What does it take to be an exceptional manager?
Am I really managing if I dont have a strategy?
Review of best-known classic strategy theories
How does effective execution help managers during the strategic-management process?
Introduction to Management
Functions of Management
Managing emotions at work & employees
The exceptional manager: strategy
Networking to build e-portfolios
Course Review
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The skills exceptional managers need
Technical skills
the job-specific knowledge needed to perform well in a specialised field
Conceptual skills
the ability to think analytically, to visualise an organization as a whole and understand how the parts work together
Human skills
the ability to work well in cooperation with other people to get things done
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In the 1970s researcher Robert Katz identified three skills that are very important to being an exceptional manager: technical, conceptual and human skills.
Ask your students to think of a manager who had one or two of these skills, but not all three. What was the negative impact to the business, in their opinion? Why is it important to have all three?
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Tse Leng Tham (TLT) Also how empahsis on different skills are more important at different levels of management?
Five hallmarks of a good manager
Gives employees challenging work to do
Creates space for employees to demonstrate their capacity to do a good job
Provides support when needed in ways that offer feedback without interfering in the work they have asked others to do
Gives recognition and praise when a piece of work is done well
Is not afraid to make tough decisions
Can students think of anything else that might be a hallmark of a good manager?
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Strategy, strategic management and strategic planning
Strategy
Large-scale action plan that sets the direction for an organisation
Strategic management
Process that involves managers from all parts of the organisation in the formulation and implementation of strategies and strategic goals
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Why strategic management and planning are important
An organisation should adopt strategic management and planning for three reasons:
Provide direction and momentum
Encourage new ideas
Develop a sustainable competitive advantage
There are three reasons why businesses should adopt planning and strategic management. Well discuss each of these in the slides to follow.
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Direction and momentum
Why are direction and momentum important?
Unless a plan is in place, managers may just focus on whatever is in front of them, putting out fires.
Managers may be so preoccupied with day-to-day pressures that their organisation can lose momentum.
Examples to consider
How Amazon.com has affected Borders bookstores
The impact of Uber on taxis
What blogs and internet news have meant for newspapers
The impact of microbreweries on mass produced beer
Why do businesses need direction and momentum? The main reason is so that competitors are less likely to sneak up on them! Presented are four examples students may be familiar with and which give a good idea about what can happen when businesses take their customers for granted. If they do this, they risk losing market share.
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Encourage new ideas
Strategic planning can help encourage new ideas by stressing the importance of innovation.
Management scholar Gary Hamel says that companies such as Apple have been successful because they have been able to unleash the spirit of strategy innovation.
Strategy innovation
The ability to reinvent the basis of competition within existing industries bold new business models that put incumbents on the defensive
Can students see why Apple might be described as having strategy innovation?
It was a company that was still competing in the personal computer market, but they upended the entire industry with the introduction of the smart phone (iPhone) to the market.
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Sustainable competitive advantage
Competitive advantage
The ability of an organisation to produce goods or services more effectively than its competitors do, thereby outperforming them
Sustainable competitive advantage
Occurs when an organisation is able to get and stay ahead in four areas:
In being responsive to customers
In innovating
In quality
In effectiveness
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The final reason why planning and strategic management are important is to develop a sustainable competitive advantage. The key here is that an organisation can get ahead and stay ahead in four areas.
Example: Its generally agreed that the frightful five companies that dominate the internet economy are Amazon, Apple, Facebook, Google and Microsoft. But, in the struggle for competitive advantage, the state of play is constantly shifting. Not long ago people thought IBM, Cisco Systems, Intel, and Oracle were unbeatable in tech, Farhad Manjoo (a technology writer) observes. Theyre all still large companies, but theyre far less influential than they were once. Meanwhile, Yahoo!, once a huge success story, may be running out of time, its advertising revenues slipping far behind those of its rivals, and its decline hastened by the rise of mobile devices and social media.
Ask students if they can visualise one of the frightful 5 internet companies losing their competitive advantage. How would it come about?
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What is an effective strategy?
Strategic positioning
Developed by famous strategist Michael Porter
Attempts to achieve sustainable competitive advantage by preserving what is distinctive about a company
Performing different activities from rivals, or performing similar activities in different ways
Michael Porter
Cmproject/CC BY-SA 4.0
Michael Porter is a name students should know (or learn). This Harvard Business School professor is the single most important strategist working today, and maybe of all time, raved Kevin Coyne of consulting firm McKinsey & Co. He is the most famous and influential business professor who has ever lived, says Fortune writer Geoffrey Colvin. He is widely and rightly regarded as the all-time greatest strategy guru.
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What is an effective strategy? Three principles
Strategy is the creation of a unique and valuable position:
Few needs, many customers
Broad needs, few customers
Broad needs, many customers
2. Strategy requires trade-offs in competing
3. Strategy involves creating a fit among activities
Three key principles underlie the unique and valuable position (p. 196)
Few needs, many customers: Strategic position can be derived from serving the few needs of many customers. Example: Bridgestone provides only tires and Midas provides a limited range of car repairs and services, but both provide their service to all kinds of people with all kinds of motor vehicles.
Broad needs, few customers: A strategic position may be based on serving the broad needs of just a few customers. Example: the Bank of Baroda opened in New Zealand mainly to service Indian residents.
Broad needs, many customers: Strategy may be oriented toward serving the broad needs of many customers. Example: IKEA establishes its home furnishing stores only in places that give access to populations of upwards of 500 000, which is one reason IKEA has yet to open a store in NZ.
2. Requires trade-offsa company has to choose not only what strategy to follow but what strategy not to follow. Example: Neutrogena soap, points out Porter, is positioned more as a medicinal product than as a cleansing agent. In achieving this narrow positioning, the company gives up sales based on deodorising, gives up large volume and accordingly gives up some manufacturing efficiencies.
3. Fit has to do with the ways a companys activities interact and reinforce one another. Example: A budget airline that follows a low-cost strategy and aligns all its activities accordingly. So they might pay lower wages and have fewer cabin crew but offer more flexible working arrangements, more seats per plane and a shorter turnaround time at airports.
Multimedia Lecture Support Package to Accompany Basic Marketing
Lecture Script 6-20
The strategic-management process
Figure 6.1
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There are 5 steps to the strategic management process. These will be outlined in the slides to follow.
Step 1: Establish the mission and vision
Step 2: Establish the grand strategy
Step 3: Formulate the strategic plans
Step 4: Carry out the strategic plans
Step 5: Maintain strategic control
See Appendix 1 at the end of these slides for more detail on Figure 6.1
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Question
Zach manages a small coffee shop. In order to determine if strategic planning will be likely to help his business, Zach should assess:
How many competitors he has
Foot traffic passing by his location
His profitability in the prior six months
Industry trends
The correct answer is A.
Rationale: strategic planning is not likely to result in a significant improvement unless Zach is in a highly competitive business.
Multimedia Lecture Support Package to Accompany Basic Marketing
Lecture Script 6-22
Step 1: Establishing the mission statement
| Does your companys mission statement answer these questions? |
| 1. Who are our customers? |
| 2. What are our major products or services? |
| 3. In what geographical areas do we compete? |
| 4. What is our basic technology? |
| 5. What is our commitment to economic objectives? |
| 6. What are our basic beliefs, values, aspirations and philosophical priorities? |
| 7. What are our major strengths and competitive advantages? |
| 8. What are our public responsibilities and what image do we wish to project? |
| 9. What is our attitude toward our employees? |
| 10. How are we different to our competitors? |
Table 6.1 (1 of 2)
Characteristics of a good mission statement: The mission is the organisations purpose or reason for being; it is expressed in a mission statement.
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Step 2: Establishing the vision statement
| Does your companys vision statement answer these questions? |
| 1. Is it appropriate for the organisation and for the times? |
| 2. Does it set standards of excellence and reflect high ideals? |
| 3. Does it clarify purpose and direction? |
| 4. Does it inspire enthusiasm and encourage commitment? |
| 5. Is it well articulated and easily understood? |
| 6. Does it reflect the uniqueness of the organisation, its distinctive competence, what it stands for and what its able to achieve? |
| 7. Is it ambitious? |
Source: F. R. David, How companies define their mission, Long Range Planning, February 1989: 907; and B. Nanus, Visionary Leadership: Creating a Compelling Sense of Direction for Your Organisation, San Francisco: Jossey-Bass, 1992: 289.
Table 6.1 (2 of 2)
Characteristics of a good vision statement: An organisations vision, its long-term goal of what it wants to become, is expressed in a vision statement which describes its long-term direction and strategic intent.
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Step 3: Establish the grand strategy
Grand strategy
Comes after assessing the current reality through a rigorous analysis of where the organisation is presently heading and determining where it should be heading in the future
Explains how the organisations mission is to be accomplished
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Three common grand strategies
Growth strategy
Involves expansion of sales revenues, market share, number of employees or number of customers or (for nonprofits) clients served
Stability
Involves little or no significant change
Defensive
Involves reduction in the organisations efforts
Retrenchment
Stable strategy. Shotover Jet has a strategy of maintaining its jet boat rides down the Shotover River as an adventure tourist experience unique to Queenstown and New Zealand.
Courtesy Ngai Tahu Tourism Southern
Growth strategy example: Etsy is a Brooklyn, New York, company that runs an online marketplace for handmade and vintage goodsjewellery, homewares, T-shirtsfor which it charges fees to sellers for use of its platform. The firm showed strong growth in 2015, when revenues in the fourth quarter rose 35% to USD$87.9 million.
Stability example: Without much changing their product, the makers of Timex watches decided to stress the theme of authenticity (Wear it well) over durability (the old slogan was It takes a licking and keeps on ticking). Or Shotover Jet from NZ which markets its thrilling jet boat rides as a unique experience but the importance it places on safety standards means the company declines many requests for a licence to operate a shotover jet in another country.
Defensive example: Big sales numbers that have sustained the recorded music business for years are substantially down, and it is hard to see how they could ever return to where they were even a decade ago, says one analysis. Example: Goodman Fielder, the Australasian manufacturer of breads, oils, dairy products, spreads, etc. found themselves being squeezed by competitors so in 2011 they decided to narrow their product range and integrate business operations in a strategy called Project Renaissance.
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How companies can implement a grand strategy
Table 6.2
| GROWTH STRATEGY | STABILITY STRATEGY | DEFENSIVE STRATEGY |
| Improve an existing product or service to attract more buyers | Go for a no-change strategy (if, for example, it has found that too-fast growth leads to foul-ups with orders and customer complaints) | Reduce costs, as by freezing hiring or tightening expenses |
| Increase its promotion and marketing efforts to try to expand its market share | Go for a little-change strategy (if, for example, the company has been growing at breakneck speed and feels it needs a period of consolidation) | Sell off (liquidate) assetsland, buildings, inventories and the like |
| Expand operations, as in taking over distribution or manufacturing previously handled by someone else | Gradually phase out product lines or services | |
| Expand into new products or services. | Divest part of its business, as in selling off entire divisions or subsidiaries | |
| Acquire similar or complementary businesses | Declare bankruptcy | |
| Merge with another company to form a larger company | In an attempt a turnarounddo some retrenching, with a view toward restoring profitability |
Here are some examples of how companies can implement grand strategies.
Can students think of examples of companies that might be using (or have used) one of these grand strategies?
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Step 3: Formulate strategic plans
Formulate strategic plans
The grand strategy must be translated into more specific strategic plans which determine what the organisations long-term goals should be for 15 years
Strategy formulation
Process of choosing among different strategies and altering them to best fit the organisations needs
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Step 4: Carry out the strategic plans
Strategy implementation
Putting strategic plans into effect
Dealing with roadblocks within the organisations structure and culture, and seeing if the right people and control systems are available to execute the plans
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Step 5: Maintain strategic control
Strategic control
Consists of monitoring the execution of strategy and making adjustments, if necessary
To keep a strategic plan on track you need to do the following:
Engage people
Keep it simple
Stay focused
Keep moving
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To keep a strategic plan on track, suggests Bryan Barry, you need to do the following:
Engage peopleActively engage people in clarifying what your group hopes to accomplish and how you will accomplish it
Keep it simpleKeep your planning simple, unless theres a good reason to make it more complex
Stay focusedStay focused on the important things
Keep movingKeep moving toward your vision of the future, adjusting your plans as you learn what works
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Competitive intelligence
Competitive intelligence
Gaining information about your competitors activities so that you can anticipate their moves and react appropriately
Includes publicity and advertising, investor information, business associations and trade shows
The Smart electric car model displayed by Mercedes at Mondial de lAuto, Paris, 2008
© Idealink Photography/Alamy
If you are a manager, one of your worst nightmares is that a competitor will surprise you with a service or productas boutique beers did to major brewers and mountain bikes did to major bicycle makersthat will revolutionise the market and force you to try to play catch-up. Successful companies conduct competitive intelligence. This is a search of publications, advertising, investor information and other informal sources of information to ensure that you know what your competitors are up to.
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SWOT analysis (1 of 2)
Environmental scanning
Careful monitoring of an organisations internal and external environments to detect early signs of opportunities and threats that may influence the firms plans
SWOT analysis
SWOT process for scanning:
Internal Strengths
Internal Weaknesses
External Opportunities
External Threats
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A SWOT analysis should provide you with a realistic understanding of your organisation in relation to its internal and external environments so you can better formulate strategy in pursuit of its mission.
A SWOT grid is shown on the next slide.
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SWOT analysis (2 of 2)
Figure 6.2
See Appendix 2 at the end of this slide deck for additional information.
The SWOT analysis is divided into two partsinside matters and outside mattersthat is, an analysis of internal strengths and weaknesses and an analysis of external opportunities and threats.
Organisational strengths: skills and capabilities that give the organisation special competencies and competitive advantages in executing strategies in pursuit of its mission
Organisational weaknesses: drawbacks that hinder an organisation in executing strategies in pursuit of its mission
Organisational opportunities: environmental factors that the organisation may exploit for competitive advantage
Organisational threats: environmental factors that hinder an organisation from achieving a competitive advantage
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Example: SWOT characteristics that might apply to a university
| SSTRENGTHS (INTERNAL STRENGTHS) | WWEAKNESSES (INTERNAL WEAKNESSES) |
| Faculty teaching and research abilities High-ability students Loyal alumni Strong interdisciplinary programs | Limited programs in business High teaching loads Insufficient racial diversity Lack of high-technology infrastructure |
| OOPPORTUNITIES (EXTERNAL OPPORTUNITIES) | TTHREATS (EXTERNAL THREATS) |
| Growth in many local skilled jobs Many firms give equipment to universities Local minority population increasing High school students take university classes | Depressed state and national economy High school enrolments in decline Increased competition from other colleges Funding from all sources at risk |
Here is an example of a SWOT that could be performed on a typical university.
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Question
When analysing the W in SWOT analysis, Roberta, the manager, might be assessing:
Possible challenges in the market
Competitors actions
High turnover of employees
Good financial resources of the firm
The correct answer is C. High turnover, as this could be viewed as an internal weakness for the firm.
Multimedia Lecture Support Package to Accompany Basic Marketing
Lecture Script 6-35
Example: How would you analyse Toyota?
Internal strengths
Attention to detail and a frugality that shuns waste of every kind
Internal weaknesses
Parts supplied by outside companies rather than trusted traditional suppliers
External opportunities
Stressed commitment to customers
Still ranks high in quality
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Forecasting: Predicting the future
Forecasting
A vision or projection of the future
Trend analysis
Hypothetical extension of a past series of events into the future
Contingency planning
Creation of alternative hypothetical but equally likely future conditions
Also called scenario planning and scenario analysis
Lots of people make predictions, of course, and often they are wrong. In the 1950s, the head of IBM, Thomas J. Watson, estimated that the demand for computers would never exceed more than five for the entire world. In the late 1990s, many computer experts predicted power outages, water problems, transportation disruptions, bank shutdowns, and far worse because of computer glitches (the Y2K bug) associated with the change from the year 1999 to 2000.
Of course, the farther into the future one makes a prediction, the more difficult it is to be accurate, especially in matters of technology. Yet forecasting is a necessary part of planning. The two types are trend analysis and contingency planning.
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Porters five competitive forces
Porter contends that business-level strategies originate in five primary competitive forces in the firms environment:
Threat of new entrants
Bargaining power of suppliers
Bargaining power of buyers
Threat of substitute products or services
Rivalry among competitors
Developed by Michael Porter, the five competitive forces can help businesses strategise based on five forces: threat of new entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitute products, and rivalry among competitors.
Consider showing this YouTube video where Michael Porter explains his five competitive forces (13:11): https://youtu.be/mYF2_FBCvXw
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Porters four competitive strategies (1 of 2)
Cost-leadership strategy
Keep the costs of a product or service below those of competitors while maintaining a similar level of quality and targeting a wide market
Differentiation strategy
Offer products that are of unique and superior value compared to those of competitors but to target a wide market
Figure 6.3 PORTERS FOUR COMPETITIVE STRATEGIES
There are four competitive strategies (two on this slide and two on the next):
Cost-leadership focuses on keeping prices low in a wide marketfirms include Timex, computer maker Acer, hardware retailer Home Depot and pen maker Bic
Differentiation focuses on unique and superior products targeting a wide marketthis is the strategy followed by Ritz-Carlton hotels and the makers of Lexus automobiles
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Porters four competitive strategies (2 of 2)
Cost-focus strategy
Keep the costs of a product below those of competitors and to target a narrow market
Focused-differentiation
Offer products that are of unique and superior value compared to those of competitors, and to target a narrow market
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Cost-focus keeps prices low, targeting a narrow marketoften executed with low-end products sold in discount stores, such as low-cost beer or cigarettes, or regional petrol stations
Focused-differentiation focuses on unique and superior products targeting a narrow marketAustralian and NZ wine are good examples but show that focused-differentiation products need not be expensive
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Question
The companys CEO puts pressure on the firms R&D managers to develop products that can be created cheaply. The firm would be following a ________ strategy:
Cost leadership
Differentiation
Cost focus
Retrenchment
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The correct answer is A, cost leadership.
Multimedia Lecture Support Package to Accompany Basic Marketing
Lecture Script 6-41
The BCG matrix
Figure 6.4
See Appendix 3 at the end of this deck for more detail.
Developed by the Boston Consulting Group, the BCG Matrix is a means of evaluating strategic business units on the basis of (1) their business growth rates and (2) their share of the market. Business growth rate is concerned with how fast the entire industry is increasing. Market share is concerned with the business units share of the market in relation to competitors. Market growth is divided into two categories, low and high. Market share is also divided into low and high.
Thus, in this matrix, stars are business units that are highly desirable (high growth, high market share), compared to dogs, which are not so desirable (low growth, low market share).
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Execution: Getting things done
Execution
Consists of using questioning, analysis and follow-through in order to mesh strategy with reality, align people with goals and achieve results promised
A central part of any companys strategy
Optus is a start-up company that was born out of the need for market competition. It was the first challenger brand in the industry and remains the biggest challenger today.
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In implementing strategy and maintaining strategic control, the focus is on effective execution.
A survey of 769 global CEOs from 40 countries revealed that excellence in execution was their most important concernmore important than profit growth, customer loyalty, stimulating innovation and finding qualified employees.
Ask students what might happen if a company does not effectively execute its strategy and maintain strategic control?
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Question
John owns a piano sales and tuning store. He wants to be the biggest retailer in the region. Adding salespeople would be part of his strategic ________.
Locution
Execution
Efficacy
efficiency
The correct answer is B, execution. See previous slide: Execution: Getting things done.
Multimedia Lecture Support Package to Accompany Basic Marketing
Lecture Script 6-44
The three core processes of business
A companys overall ability to execute is a function of effectively executing according to three processes:
Peopleconsider who will benefit you in the future
Strategyconsider how success will be accomplished
Operationsconsider what path will be followed
A companys overall ability to execute is a function of effectively executing according to three processes: people, strategy and operation
