Strategic Business

Management
EMT 715
Class I
Murad Mithani

Strategic Management
is about
Learning

to use Strategic Sense . . .

Common Sense Vs Strategic

Sense
Common

Sense:

Our natural response to challenging situations

Learned over time
Requires minimal thinking

Strategic

Sense:

Learned in order to deal effectively with challenging

situations
Improves with practice
Requires significant thinking and rethinking:
Holistically
Integrated
Focused on parts of a complex whole

Example 1: Common Vs
Strategic

Situation: It is 12pm and you just put $1,000 in

your wallet after cashing a check. As you turn
onto the street where you live, someone suddenly
sneaks up and asks for your wallet. The person
appears to be homeless and fairly weak, although
you cant be sure if s/he is carrying a weapon.
Common Sense: Fight, Flight, or Freeze
Strategic Sense: Talk to him/her, handover

what s/he wants

Example 2: Common Vs
Strategic

Situation: You are planned to meet one of your

old friends at 7pm who is visiting the city for
the first time. Your boss comes to you at
4:45pm and asks you to work on an urgent
assignment that will take you at least 4 hours.
Common Sense: Just say no!
Strategic Sense: Evaluate will helping

your boss at that hour benefit your career?

Example 3: Common Vs
Strategic
Situation:

Your firm has a large market share where

recently a new startup has entered. It is imitating your
product and strategy. The people involved are
hardworking but they have few resources to compete
with you. They are focusing on market segments
where your product is currently unavailable.
Common Sense: Compete aggressively until they exit
Strategic Sense: Form an alliance for the untapped market

. . . the entering firm is a big multinational

Common Sense: Compete cautiously / try forming alliance
Strategic Sense: Compete aggressively until they exit

So Why Study Strategy?

We

often use strategy:

Consciously / unconsciously generally for

repetitive choices
Studying

strategy helps us understand:

The most practical way of planning for

unfamiliar situations
Minimizes the effect of personal, group and
organizational biases

Strategy: Typical Outcomes

Successful Strategies:
30%
Failed Strategies: 70%
Informati
on 5%

Factor
Criticality
5%

Logic
30%

Execution
30%

Occasions for Business

Strategy
Businesses

generally depend on some latent

strategy
Conscious

efforts to develop a strategy result

from the realization of a:
Lack of fit between organization and the environment
Threat of bankruptcy
Desire for accelerated growth
Availability of a unique opportunity

What is Strategy
Steps

that lead to the optimal outcome

Optimal

outcome: Can be a result of

1. Trial and error

2. Imitation
3. Belief
4. Luck
5. Follow best practices: This Course

Critical

elements: Choices & Goal

Question: In the presence of a single available path,

can there be a strategy?

Recall: Management
Process

maximizing the possibility of goal

achievement

Can

be divided into:

Planning: goals
Organizing: resources
Leading: execution
Controlling: evaluation

Question: Is management possible in the absence

of either planning, organizing, leading or
controlling?

Strategic Management
Strategy

+ Management:
Management of Strategy

Planning, organization, leading and controlling of a

sequence of steps which can maximize the
likelihood of the desired outcome.
Reduces trial and error
Optimizes but does not guarantee
Relies on proven paths
Difficult when historical choices are unavailable

Warm-Up Exercise

Divide into 2 groups (only for this exercise)

Task: Make and fly paper planes into the other
groups territory

First 2 minutes: Develop a strategy

Next 3 minutes: Make and fly as many paper
planes as you can
Second round of 2 minutes: Review your strategy
Final 3 minutes: Make and fly as many paper
planes as you can

Notes:
1. Only start making planes when I start the timer
2. Stop when I ask you to

What Did We Learn

Division

of labor Specialization

Strategy

versus Execution

Learning

from Mistakes

The

same goal can be achieved

through multiple means/paths An
effective strategy is to identify the
optimal path

Origins of Strategic
Management
Term

inherited from military

Traditional

approach: To win against

competitors in the market

Modern

Concept: To develop a successful

match between external opportunities and
internal capabilities

Question: Can there be more than one winner

in a market?

What is Strategic
Management
Set

of tools and approaches (SM

tools)

Contingent

to situations

Often

the primary purpose of SM

tools is to train the intuition

Improves

with practice

Common Omission in
Strategy
Strategy

viewed as action rather than belief

Bad

strategy with a strong commitment leads

to a higher likelihood of success than a
Good strategy without a strong commitment

Why:

because good strategies are contagious

Strategies evolve as they are communicated
and implemented

Remember
Strategy

does not mean:

A Single Answer (relevant when solving cases)

Strategy

also does not mean:

Infinite Answers (relevant when taking the quiz)

Strategy=f(creativity)
Strategy

& Creativity=f(diversity)

is not the best solution

It is the optimal solution given the circumstances/info

Larger space of possibilities = greater potential of

success

Major Conceptual Elements

of SM
Conceptual
elements

Strategic
initiatives

Member
words

Actions

Incidence
of
appearanc
e in
denitions
(%)

Member
words

Resources

Resources

Performance

Capabilities
Performance

86

45

Plans

Internal
organization

Conceptual
elements

Incidence
of
appearanc
e in
denitions
(%)
14

Strategy

Advantage

Choices

Value

Positioning

Success

Process

Outcomes
Sustainabilit
y

30

Internal
Behavior
Implementati
on

Firms

Profits
Firm

64

Organization
From: Nag,
Hambrick &

Use of SM in organizations
Use

of strategic management = Level in

organization

Danger:

Often these tools are forgotten by the

time individuals reach the level where they are
most needed
Practice in the class
Read business sections in the news
Discuss with friends and colleagues
Stay alert to recognize new terminologies and trends

(outsourcing, business process reengineering, six

sigma)

What to expect from this

course
Exposure

to strategic management

tools
Understanding

of the appropriate

use of SM tools
Practice:

to gain fluency with the

terminology and mind-set necessary
for strategic management

Marks Distribution
Individual:
Discussion + Summaries (x 2) = 10
Exam (Quiz) = 20
Pair (2 people; 1 pair with 3 people)
Discussion + Report (x 2) = 25
Group (2 pairs; 1 group with 5 people)
Presentation + Report (x 2) = 30
Management Team (x 2)
= 15
Total 100

Group Presentations
Presenters
Marks: 0
10 (Final:
0 20)
Management

Marks: 0 5
(Final: 0 10)

Instructor

Scheduled in advance
Solves a case assigned to the class
Will get at least 2 weeks to solve the case,
prepare the presentation and write the report
Have 10 minutes to present and convince
Reviewers and Instructor
Picked by the instructor on the day of
presentation (will be identified earlier for the
final presentation)
Will get 10 minutes (one week for the final)
to review the report before the start of the
presentation
Will have 5 minutes to ask questions
Questions have to demonstrate their
Evaluate Presenters
separately. Presenters will
understanding
of the case
get highest marks whatever the source
(Management or Instructor). Management will
get full marks if their grade is within 2 marks of

Pairs and Groups

Form

a Pair by the 2nd Class

Form

a Group by the 3rd Class

Final Presentation
Select

an existing company (anywhere in the world)

Identify

a new or existing market (product/line of business) that

your group suggests the company should focus on

Develop

a Strategic Management Program for the business in

the context of the company and its environment. In particular,
identify:
Strategic planning process that led to the business
Strategic organization required to manage it
Strategic leadership that will ensure its success
Strategic controls to ensure the continuity of success
Include financial forecasts (both for the business and the corporation)

Report

due: previous week: Mar 28th (Sunday)

Presentation:

Final class - 10 minutes

Management Team
Management

Team should have already

understood and solved the case on their own
prior to the presentation.
For Group Presentation 1: They will have 10 minutes

before the start of the presentation to examine the

report. They are expected to have studied the case
before the class.
For Group Presentation 2: They will have at least a
week before the final class to examine the report.
They are expected to have studied the case before
the class.
At the end of the presentation, the Management
group will grade the quality of the presentation and
the report on the criteria listed on the following slide.

Group Presentation Report

Introduction (~ 2 pages): Briefly describe the background of the case

and the key characters for those who have not read the case
Statement of the Problem (~ 1 2 sentences): The problem or
opportunity central to the case
Available Alternatives (~ 4 pages): Identify all possible choices that
can resolve the problem or help benefit from the opportunity
Recommendation (~ 4 pages): Suggest one or more of the
alternatives and explain the reason for your selection
Conclusion (~ 2 pages: 2 marks): Summarize your argument. Explain
what do you think will happen if the solution is not accepted. Identify
boundary conditions for your recommendations (assumptions need to
hold for your plan to work, how long will it work, etc.)

Final

Report: Include pro-forma income statements and

explanations for the first 5 years of the suggested business and the
overall corporation (No limit on the number of pages)

Management of Technology
without Technology
Controlling

for other conditions, those who

use laptops, phones or other electronic
devices in my class have generally (90%
of the time) failed to get an A

Why?
Class discussion provides a mindset . . .

Distraction makes it difficult to acquire the

strategic logic that is necessary to succeed in
this course.

Strategy, Managers and

Students
Type

A:

Feel bad about losses (mistakes / lost marks)

Look for personal weaknesses that can be improved
Frequently learn from losses
Amongst the most successful CEOs and entrepreneurs

Type

B:

Feel bad about losses (mistakes / lost marks)

Look for problems in the environment
Rarely learn from losses
Fail to exceed beyond middle management positions

Survey
Please

fill out the survey handout

Break 10 minutes

Recap
Strategic

Management: Planning,
organization, leading and controlling
of a sequence of steps which can
maximize the likelihood of the
desired outcome.

Focus:

Goals and Choices

Organizational Goals
Vision:

Purpose of existence (e.g. constitution)

To create a socially responsible society

Mission:

What are we aiming for

Environmental education for high school students

Goals:

What is the desired outcome

To ensure that all high school graduates in the US

are familiar with environmental conservation

practices by 2017.
Objectives:

Desired financial/non-financial
outcomes leading to the attainment of the goal
Year 1: xxx, Year2: xxx, . . .

Identifying Available
Alternatives
SWOT

Analysis
Strengt
hs

Opportuniti
es

Within the firm

Weakness
es

Threat

In the external environment

Identifying Available
Alternatives
SWOT

Analysis: McDonalds

Strengths
1. Large customer
base
2. Extensive network
Opportuniti
es
1. Growing
population
2. More low income
areas can afford
products

Weakness
es
1. Menu not
customizable
2. Limited healthy
choices
Threat
1. Increasing
competition
2. Greater
consciousness of
healthy foods

Class Exercise 15 minutes

(Temporary Group: 4 5 individuals)
Select one of the fictional companies listed below
which is not already chosen by another group. Do a
SWOT analysis (you can use the computer) in the
allocated time and nominate one or more members
of your group to present your ideas in two minutes
(you can use white board or power point).
Fictional Companies (avoid overlaps with other groups):
1. Canvasena: Pulp and paper producer
2. Purika: Water filter producer
3. Rivera: Gossip magazine focusing on politicians,
television and movie stars
4. Saverra: A 450 room medium sized 3 star hotel in
downtown New York
5. Conekt: Copper cable producer

Competitive Advantage
The

ability of a firm to perform better than

its competitors
Ques: Can there be more than one winner in a

market?
Do

individuals have competitive

advantage?
If yes: What is your competitive advantage?
Looks?
Wealth?
Intelligence?
Network?
Ques: What would you like your competitive

Sources of Competitive
Advantage
Lower

operating costs (e.g. China)

Focused services (e.g. Boeing)
Differentiation (e.g. Apples operating system)
Possession of resources not easily available to
others (RBV: scientists, location, brand name)
Able to change rapidly with customer
expectations (DC: e.g. Apple)
Ques:

What are other examples of

competitive advantage?
Ques: Does competitive advantage lead to
higher profits?

Distinction: Competitive
Advantage & Strategy
SM:

Planning, organizing, leading and controlling

to attain the most favorable outcome.

Selection

of one path excludes other potential

paths
Strategy = trade-off

Competitive

Advantage = to be better than the

competitor/s serving the same market
Better than others using the same choices = efficiency
Better than others using alternate choices =

effectiveness

Measuring Competitive
Advantage
Performance

Measures

Sales
Gross Margins
Profitability
Consistent profits
Long-term survival
Market value
Economic value added (EVA)
Altmans Z (threatened < 1.8, doing well > 3.0)
Tobins q

Ansoffs Strategy Matrix

Product
New

Existing Market +
New Product =
Product
Development

Existing Market +
Existing Product
Existing
=
Market
Penetration
Existing

New Market +
New Product =
Diversification
Existing Product
+
New Market =
Market
Development
New

Market

Ansoffs Strategy Matrix

Product
New

Product
Development

Market
Penetration

Harness critical
resources
(e.g. Apple
IPhone)
Market
Development

Low prices, Mass

marketing
(e.g. Heinz
Existing
ketchup)

Differential
pricing,
Internationalizati
New
on (e.g.
day-old

Integrated focus
(e.g. Visual C++)

Existing

Diversification

Market

Strategy as Tradeoff
New
Product New Product Sales:
s
Growth
New
Foreign Market
Sales:
Decline
Tradeo
ff

Existing

Kumar

Existing

Existing Product
Sales:
Growth
Foreign Market
Sales:
Growth
New Product Sales:
Decline
Foreign Market
Sales:
Growth
Foreign
New
Market

Place products in each category &

Justify (Temp 4 5 ppl Group): 10 min
Product
New

Existing Market +
New Product =
Product
Development

Existing Market +
Existing Product
Existing
=
Market
Penetration
Existing

New Market +
New Product =
Diversification
Existing Product
+
New Market =
Market
Development
New

Market

Individual Exercise: Ansoffs

Matrix
On

Canvas Finish before the next

class.

Strategy = ProblemSolving
Individual

Assignments: Develop wider

understanding of issues and solutions

Pair

Assignments: Solutions to specific facets of

cases

Group

Assignments: Formal Solutions and more

complex analysis of cases

Management

Team: To identify when someone is

bluffing. To improve the quality of ideas of those
who make sense.

Most Important Part of the

Course
Problem-Solving
Identification: Problem Statement
Analytical Skills
Individual-level deep thinking + Group-level
critique
Resolution: Alternatives /

Recommendation
Creative Skills
Relies on group
Group-level brainstorming + Individual-level
critique

Identication of Problems
Levels

of Problem
What the
author/speaker
wants you to
believe
What
Infyour
instincts
or
tellmyou
Note: Problem
Identification is not
ed
an exact science.
ju
There is always
dg
some aspect that
m

Group Exercise: 15 minutes

(Temporary Group: 4 5 Individuals)
Read

the enclosed handout (Security Banks bankruptcy)

and identify what you think was the problem that led to
the bankruptcy (You can use the computer and access
the Internet for this exercise).

Write

the statement of problem as a single sentence on a

piece of paper and be prepared to discuss.

Suggestion:
Read it individually to identify authors perception of the

problem
Then identify what your instincts tell you regarding the problem
Work as a group to come to an informed conclusion

Security Bank
1.
2.
3.
4.
5.

1980: Security Bank was founded

2007: Bank acquired by CP Capital Asset Acquisition
for $20 million
~2008: Bank acquired by Faro Bankcorp (peak of
subprime mortgage crisis)
2009 2011: Bank continued to earn losses, Banks
management was fined for unsafe practices
Banks holding companys assets:

a) Deposit for lease at Security Banks office.

b) Judgments purchased from the bank and tax rebates from

the banks losses

c) No one owned more than 10% shares
d) The directors were not shareholders

Individual Assignment 1: 5
marks
Answer

the following questions from

the Questions for Discussion section
at the end of chapters 1 and 2. Bring
your answers as a handout in the next
class and be prepared to discuss:

Chapter

1 Questions: 2, 3, 5, 6, 8, 9
Chapter 2 Questions: 1, 2, 5, 7, 8, 9,
10

For Next Week

Individual

Assignment 1: Graded (5 marks)

Individual

Assignment 2: Ansoffs Matrix

(online Canvas): No Grade

Individual

Assignment 3: Complete your

profile on Canvas (bio+photo)

Security

Bank Problem Statement for 4 5

people group: No Grade