Strategic Management - Homer H. Johnson, Ph.D. Loyola University, Chicago
Course Overview:
Why are some firms wildly successful while other firms end up in bankruptcy? Why has Wal-Mart made it big, while literally hundreds of similar companies in the retail market have folded, some of which tried to imitate the Wal-Mart model exactly? Why has SouthWest Airlines been the only profitable air carrier since 9/11? Why has MicroSoft eaten its competition? What about Starbucks? Most people thought that basing a business on a $3 cup of coffee was just plain dumb. Can Argo Tea duplicate the Starbucks success with tea? These are the kind of questions that a course on strategic management attempts to answer.
The Strategic Management course is intended as a challenging capstone course for the undergraduate business curriculum. The course centers around the theme that a company achieves sustained success if and only if its managers 1) have an astute and timely strategic plan for running the company, and 2) implement and execute the plan with proficiency. Strategy integrates, or uses, much of the knowledge learned in other courses in the business curriculum. For example, accounting, finance, marketing, and human resources are all involved in the formulation of strategy. Good strategy brings these pieces together to lead the firm to competitive success.
In some sense, all firms, large and small (including nonprofits), have a "strategy" for doing business. That is to say, all firms begin with a product or service, they target certain customers, they decide on the pricing of their products and services, etc. However, the strategy for many firms is poorly crafted and not well thought out. Sometimes people just start business because they have an interesting idea, or want to be their own boss, or think they will get rich quick. It seems obvious that the strategies developed by most firms probably fall into the "poor" category, given that most new firms fail within the first couple of years of their existence.
So, the issue is not how to craft a strategy. Rather the issue is how to craft a good strategy - a strategy that will lead to a sustainable competitive advantage. That's the purpose of this course. In this course we will examine the tools used to craft a good strategy, and also have an opportunity to practice strategy in a simulated exercise.
Some Basic Terms:
There are no generally accepted definitions for many of the key terms used in the strategy field, however, most books on the topic are fairly similar in their terminology. In this course we will follow the definitions used in the textbook, which are:
The term strategy refers to "a set of related actions that managers take to increase their company's performance." A firm has " a competitive advantage over its rivals when its profitability is greater than the average profitability of all other companies competing for the same set of customers." And company has "a sustainable competitive advantage when its strategies enable it to maintain above-average profitability for a number of years."
The book also uses the term business model which is defined as "a manager's conception of how the set of strategies that the company pursues should mesh together into a congruent whole, enabling the company to gain a competitive advantage and achieve superior profitability and profit growth." Business models are more comprehensive than strategies. Wal-Mart's strategy is name brands and low price. They also have a business model that includes the products offered, the pricing, the store construction, the employee pay, the vendor contracts, the inbound logistics, etc, etc.
"Good" strategies achieve competitive advantage and allow the firm to be successful. Conversely, "poor" strategies put the firm in a difficult competitive position and often lead to the demise of the firm.
The term strategic management (or strategy-making process ) usually refers to a process - "a sequential analyses and choices that increase the likelihood that the firm will chose a good strategy." In this course we will go through the steps of this process.
Finally, the competitive environment in which a firm operates is of critical important. It is always changing, with the emergence of new products, new competitors, mergers, resource crises (e.g., the price of oil), new technology (e.g., the internet), new competitive factors (global labor costs), changing government regulations (e.g., NAFTA) and many other developments. What worked yesterday will probably not work tomorrow. So, the strategic management process is never ending and companies are continuously refining and changing their approach to the marketplace. Those firms who don't change are probably not going to last very long.
Course Objectives:
This course has three primary objectives:
Text:
Hill, C and G. Jones, Strategic Management Theory , (7th edition), Boston , MA : Houghton Mifflin, 2007. (ISBN: 0 618 64164 5) Note: Only purchase the Theory edition of the textbook. We will not use the full text (with cases) or the Case edition. The publisher's list price is (or was) $96.36.
Book should be available at the Barnes and Noble (Loyola) bookstore on State Street and Beck's bookstore on Chicago Ave. You also might try amazon.com or the other online book services. Used books are okay.
The cost of textbooks is getting outrageous. One option to reduce the cost (aside from used books) is to purchase an eBook. This text is available as an eBook. The price is about $73.56 - however the eBook also contains both the theory and cases and we will not use the cases part. Actually, it may be cheaper to buy the Theory text and resell it to the bookstore after the course is over, rather than purchasing the eBook edition. If you select the eBook option you will be able to read the text (same as the print edition), to
make notes online, to print pages, and to bookmark. Probably the easiest way to order the eBook is to go to the student web page (see below), click on Bookstore at top, and then scroll down to the eBook, and order.
Business Simulation:
Students will be placed in teams and required to participate in an online business simulation. In the simulation each team will be a company that is competing against other companies in the same market. This exercise simulates an actual business situation. The simulation for this semester is Capstone ( www.capsim.com ), which is the leading simulation used by business schools. Students will register for, and pay for ($39.95 per person), the simulation online. The registration ID will be given in class. The instructor will provide further information in class. Students must be registered for the simulation in order to receive credit for this part of the class requirements.
Please note that each section of this course provides a competitive environment that is unique to that section. Thus each team should develop their own competitive strategy and not try to imitate or copy strategies used in other sections or classes.
(For those who would like to continue competing in the simulation there is an Advanced Capstone Challenge or MSI Challenge every fall and spring. It is free-of-charge to anyone who has previously paid for Capstone. You can compete individually or form a team. I think it includes additional parts not covered in the class simulation, such as Human Resources and Quality. Check the Capstone homepage for details.)
Attendance and Preparation:
Classroom preparation and participation are fundamental parts of a good education. Students are expected to be on time, attend the full class session, attend every class session, and participate fully. Students are expected to read the assigned material in advance of the first scheduled meeting for the topic. Be prepared to discuss the material in class.
Since much of the course involves in-class exercises, class attendance will be recorded and the student's final grade will be progressively lowered for every absence after the seventh.
A significant part of the course will be a team exercise (a simulated company) and for that part of the course each student's grade will be the grade achieved by the team. Thus it is important that all team members fully participate as the lack of participation by one member could negatively impact the grades of the other team members. The instructor will check team participation periodically and those students who are not participating will be dropped from the team activities and assigned the appropriate grade.
Academic Honesty:
Academic honesty is an expression of the ethic of interpersonal justice, responsibility and care, applicable to Loyola faculty, students and staff, which demands that the pursuit of knowledge be carried out with sincerity and integrity.
The university has a strict policy against cheating and plagiarism. Cheating involves dishonesty in a test situation. Plagiarism involves dishonesty of materials for presentation or in written papers. Note all materials presented or turned in this course must be original to this course. Violations of academic honesty are subject to disciplinary action. If you have questions about the use of materials please ask the instructor.
Note that frequently an attendance sheet will be passed out in class, and signing another person's name to the sheet (or any other document) or having someone sign you name is a violation of the university ethics policy.
The final course grade will be based on:
This component of the grade is based on the team (not individual) grade. Your contribution to the team activities (based on the peer evaluation) will also be factored in the grade for this component. The simulation grade will be lowered for those students who make a low contribution to the team effort.
Note that the grade for the simulation is heavily weighted on your company's performance. The better the performance, the better the grade.
Please note: The University has recently instituted plus and minus grades. In this course the plus or minus indicates that the student is borderline. For example, a C- grade would indicate that the student is borderline D, not that the student is solidly in the C range. Conversely a C+ would indicate that the student is borderline B.
The final grade for the course will be computed on the weighted sum of scores of the separate components that make up the course grade. For example, the percent correct on the first test will be multiplied by .33 which is the weight of the first test, etc. The separate scores will then be added up. The determination of letter grades is computed likewise using the cutoff scores that separate each letter grade.
Class Schedule: (also be sure to note Capstone dates in next section!)
Date: Topic: Text Assignment:
Jan 16 Intro to course None
18 Intro to Strat Management Chapter 1
Jan 23 External Analysis Chapter 2
25 External Analysis Chapter 2
Jan 30 Internal Analysis Chapter 3
Feb 1 Intro to Capstone
Feb 6 Business-Level Strategy Chapter 5
8 Business-Level Strategy Chapter 5
Feb 13 Business-Level Strategy Chapter 6
15 Capstone briefing
Feb 20 Business-Level Strategy Chapter 6
22 Business-level Strategy
Feb 27 Red and Blue Ocean Strategy
Mar 1 First Quiz (text chapters 1-6, plus inclass material) Mar 6 Spring Break
8 Spring Break
Mar 13 Competitor Analysis
15 Competitor Analysis- Competing against Wal-Mart
Mar 20 Global Strategy Chapter 8
22 Corporate-level Strategy Chapter 9
Mar 27 Corporate-level Strategy Chapter 9
29 Corporate-level Strategy Chapter 10
Apr 3 Integrative case
5 Integrative case
Apr 10 Integrative case
12 Quiz #2 (note final round decisions due at 5pm on 14 th )
Apr 17 Review presentation and report format
19 Team Day - Prep for presentations
Apr 24 Board of Directors presentations
26 Board of Directors presentations
Final Exam - The final exam in this course is a final paper which is the team (written) final report to the Board of Directors. This report is due by 5pm on Wednesday, May 2. The Peer Evaluations are also due by 5pm on Wednesday, May 2.
Examinations:
Examinations will be a combination of multiple-choice and short answer. The examinations are not cumulative, rather will cover only the chapters and lectures listed for that section of the syllabus. Students should be present on test days - note that there are no make-up exams in this course except in special circumstances.
Key dates for Capstone simulation
The Capstone simulation is an important part of this course and it is critical that all deadlines are met regarding the simulation. Below are listed the key dates for the simulation (only).
Jan 23 - 30 - Students register for simulation online
- Students read Capstone manual
- Read 3 tutorials online
Jan 30 - Feb 8 - Individual rehearsal on simulation - do 3 rounds (with coach)
Feb 8 - Teams (companies) formed by instructor
Feb 15 - (Written) situational analysis due - team paper
Feb 17 - Practice round #1 due - by team (enter decisions by 5pm on 17th)
Feb 24 - Practice round #2 due - by team (enter decisions by 5pm on 24th)
Mar 3 - Year #1 decisions due (decision must be entered by 5pm on the 3rd)
Mar 17 - Year #2 decisions due (must be entered by 5pm on the 17th)
Mar 20 - (Written) strategic or business plan for company due (team)
Mar 24 - Year #3 decision due (must be entered by 5pm on the 24th)
Mar 31 - Year #4 decision due (must be entered by 5pm on the 30th)
Apr 7 - Year #5 decision due (must be entered by 5pm on the 6th)
Apr 14 - Year #6 decisions due (must be entered by 5pm on the 13th)
Apr 24 and Apr 26 - Oral presentation to Board of Directors - team
Apr 25 to May 2 ( 5pm ) - Online peer evaluations due
May 2 ( 5pm ) - Last day to turn in (or email) written Board of Director report - team