Implementation of Strategic Management

1. Implementation of Strategic Management Rev: Feb, 2012 Euiho (David) Suh, Ph.D. POSTECH Strategic Management of Information and Technology Laboratory (POSMIT: http://posmit.postech.ac.kr) Dept. of Industrial & Management EngineeringPOSTECH

2. Contents

3. Discussion Questions (1/2) Briefly explainthe seven components of the strategic management process. Which of these components do you think is most important to the organization? Why? In the component you chose in the previous question, what factors are important to proceed the component activity? What is the generic strategy? How can generic corporate level strategies be driven? What do you think is most important in implementing strategies? In the case study, what were two strategies of Kwang-dong Pharmacy? To achieve its mission, which IS was applied?

4. Discussion Questions (2/2) • In the HBR case study, “Strategic Sourcing”, • Explain how the “changing basis of competitive advantage” or changing basis of competition” affected the outsourcing of the companies such as AT&T, Wal-Mart, Chrysler, American Express, etc. • How did the 7-Eleven benchmark the Japanese keiretsu model to bring a dramatic success? • Explain the differences of the following: • Business Strategy vs. Corporate Strategy • Vertical Integration vs. Horizontal Integration • Discussion Questions in textbook (p. 67, Chapter 2) • How could a business leverage its investment in information technology to build strategic IT capabilities that serve as a barrier to new entrants into its markets? • How could a business use information technology to increase switching costs and lock in its customers and suppliers? Use business examples to support your answer.

5. Strategic Management Process 2. Strategic Management Process 1 UnderstandCompany Mission 2 3 Opportunity& Threat AnalyzeExternal Environment AnalyzeInternal Environment Strength& Weakness 4 Set Long term Objectives 5 Craft the Strategy 6 Implementthe Strategy Feedback 7 Evaluate & Control the Strategy Today’s Coverage Strategic Management Process

6. 2. Strategic Management Process 4) Set Long Term Objectives Setting Strategic (Long Term) Objectives • Characteristics of Long Term Objectives • Acceptable to managers • Adaptable to extraordinary changes in the environment • Clearly measurable against specified criterion • Understandable • Generic Groups of Long Term Objectives • Product/Market scope • Profitability • Competitive edge • Financial specifications, expenditures, net worth, etc. • Innovation and technology • Employee Development/Productivity • Sources of, and Deployment of resources • Synergy • Risk • Legitimacy (Satisfaction of Resources) • Ideological leadership

7. 2. Strategic Management Process 5) Craft the Strategy Crafting Corporate Level Strategy • Objectives • Maintaining corporate-wide consistency of direction of the total companytoward long range • Leveraging resources for long range goals • Reducing financial risk by building a balanced portfolio of businesseswith a balanced portfolio of advantages • Investing in core competencies for the businesses(usually called Strategic Business Units or SBUs) • Process • Choose Generic Corporate Level Strategies • Feasible corporate level strategies • Choose final generic strategy option • Choose Specific corporate level strategy, guide by final generic strategy to yield

8. 2. Strategic Management Process 5) Craft the Strategy Choose Generic Corporate Level Strategies(1/2) • Generic Strategy • A group of corporate level strategies that are first determined so that the decision maker is guided toward making an appropriate specific strategy • List of generic strategies • Concentration • Concentric diversification • Conglomerate diversification • Vertical backward integration • Forward integration • Joint ventures • Divestiture • Turnaround/Restructuring • Bankruptcy • Liquidation

9. 2. Strategic Management Process 5) Craft the Strategy Choose Generic Corporate Level Strategies(2/2) • Feasible Corporate Generic Strategies Rapid Market Growth Reformation of concentration Horizontal integration Divestiture Liquidation Concentration Vertical Integration Concentric Diversification Specialty Shop Group Supermarket Group Drug Store Group Weak Competitive Position Strong Competitive Position Turnaround or retrenchment Concentric diversification Conglomerate Diversification Divestiture Liquidation Concentric Diversification Conglomerate Diversification Joint Ventures Slow Market Growth

10. 2. Strategic Management Process 6) Implement the Strategy Implementing The Strategy (1/2) • Implementing with structure • Communicating the strategy to the organization to prepare every employee with an understanding of what will follow and the things in general that must be done • Prepare and disseminate a list of major annual objectives for the organization • Establish policies and procedures for actions • Prepare an organization structure that matches the new strategy • Install best practices for each department based on the value chain and benchmarks • Implementing with organizational leadership • Staff the organization with committed leaders capable of driving implementation • Avoid resistance to change through employee development and communication with employees • Tie rewards and communication with employees • Develop a strategy-supporting culture • Implementing with concern for laws, environmental, and social concerns • Implementation must be carried out with concern for factorsthat may not always be spelled out • But must represent good citizenship

11. 2. Strategic Management Process 6) Implement the Strategy Implementing The Strategy (2/2) • Implementing with the functional components of strategy • Marketing: product policies, distribution policies, ethics, customer relations, pricing policies • Production/operations: equipment, layout, method of delivery of services, work methods, production planning, quality control, outsourcing • R&D/design: estimating the time for new product development, quality and cost balance in design, continuing education of creative workers, outsourcing of design work • Accounting/finance: increasing labor costs, increasing sales expense, economic value added, taxes, exchange rate between U. S. and other currencies, transfer pricing • Human Resource Management: assignment of people to new projects, salary and bonus payments, promotions and dismissals, major human errors, recruitment and selection • Corporate information and communication systems: management information system, personal communications, mass communications, communicating policies

12. 2. Strategic Management Process 7) Evaluate the Strategy Strategy Evaluation • Quantitative Criteria • Overall financial performance such as ROI, ROE, profit margin, market share, earning per share • Time of implantation vs. planned time • Increase in productivity, quality, number of employees, etc. • Qualitative Criteria • Is the strategy internally consistent? • Is the strategy consistent with the environment? • Is the strategy appropriate in view of the available resources? • Does the strategy involve an acceptable degree of risk? • Does the strategy have an appropriate time framework? • Is the strategy workable?

13. Case Study 3. Case Study

14. HBR Case Study 3. Case Study Strategic Sourcing, HBR[Mark Gottfredson, Rudy Puryear and Stephen Phillips, 2005]

15. Reference Euiho Suh, “Strategic management 1 (PPT Slide)”, POSMIT Lab. (POSTECH Strategic Management of Information and Technology Laboratory) Euiho Suh, “Strategic management 2 (PPT Slide)”, POSMIT Lab. (POSTECH Strategic Management of Information and Technology Laboratory) O’Brien & Marakas, “Introduction to Information Systems – Fifteenth Edition”, McGraw – Hill, Chapter 2, pp. 43~71 Cathy A. Enz. “Hospitality Strategic Management: Concepts and Cases“, WILEY,Chapter 1