Strategic Management - Raymond F. Zammuto University of Colorado, Denver

Course Objectives

The objectives of this course are to:

• Develop your understanding of concepts and approaches to strategy formulation and implementation.
• Enable you to recognize the most important internal and external influences on an organization's strategy.
• Increase your skills in identifying strategic issues and options.
• Understand the benefits and drawbacks of different strategies.

Course Description

A couple of decades ago, senior managers could plan a corporate strategy and execute it over a period of years and not be overly concerned about having to change it. Today managers face a different reality, one of rapidly changing markets, globalization, shifting government policies, new technologies, and increasingly fickle consumer tastes, all of which have made the task of strategic management more difficult and more critical over time.

This course is about the strategic management process-how managers develop and implement strategies in organizations-and how that process itself is changing. We will discuss (1) how different industry conditions support different types of strategies, (2) how industry conditions change and the implications for strategic management, and (3) how organizations develop and maintain capabilities that lead to sustained competitive advantage. We will pay particular attention to how information-based technologies and e-commerce are changing the both industry conditions and the strategic options open to organizations.

The course consists of two essential parts-knowing and doing. The "knowing" portion involves the strategic concepts and techniques applicable to strategic management. You will learn about these concepts through lectures and readings, and you will have an opportunity to develop your own understanding of the concepts by applying them in case discussions. The case discussions focus on current situations as they unfold in the business press (e.g., Fortune, Business Week, Fast Company).

The "doing" portion involves participation in Capstone^®; , a strategic management simulation. This simulation provides you with the opportunity to gain hands-on experience in running a business as a member of a senior management team. The management teams are required to evaluate situations and make decisions, assess outcomes, and compete with other management teams for resources, opportunities, and markets. Each team develops a strategy for its firm and applies the course's concepts within a practical decision-making framework. The result is that you will have an opportunity to see the interaction of a firm's production, marketing, R&D, HR, and financial operations and observe the impact of key decisions on business performance within a competitive market.

Class time will be allocated for your strategic decision-making. I suggest, however, that you discuss your competitive situation and your strategies with your top management teammates during breaks, after class, and before class as time permits. The first few decision sessions may feel pressed because the learning curve for the simulation is very steep. However, most of you will feel comfortable with the allotted time within a few sessions. A thorough understanding of the Team Member Guide is critical.

Course Materials

* Readings packet

* Capstone^®; manual

* Fortune (subscription forms at student rates will be provided at the first class)

Assignments

Capstone^®; Exam (February 20th)

The purpose of the exam is to determine whether you are intimately familiar with the Capstone^®; Team Member Guide. It includes about 30 multiple choice, 30 True/False, and 12 Matching questions. The questions are quite detailed and require that you thoroughly study the guide, not simply read it.

Strategy Statement (e-mail to me by 8pm, February 19th)

Complete the Strategy Statement form posted on the Class Conference page of the Capstone^®; website. It asks you to provide the following types of information:

• Your team's strategic objectives, including the product/markets you plan to pursue.
• A summary of the concrete functional level strategies (e.g., marketing, finance, production, R&D, and HR) you intend to use to support of your company's strategy
• A summary of your planned decision processes, including approaches/ techniques for making sales forecasts, decision rules to determine investments (e.g., R&D, advertising), approaches for raising capital and justification for approaches choice of indicators to determine the success of your strategy.
• A list of your top management team members and their role (e.g., Marketing VP, Finance VP, Operations VP, Human Resources VP, CEO) in your organization.

Don't be generic! What makes your firm unique? In what fundamental ways will you distinguish yourself from your competitors?

You also need to decide on the criteria by which your financial performance will be evaluated and the weights for those criteria. Complete the Financial Performance worksheet included in the course outline and enter the criteria and weights you select on the Success Measurements page of the Capstone^®; website by 8:00 pm, February 19th.

Shareholder Debriefing (email to your Board Members and me or bring hard copies to class for distribution on April 24th)

Each team should maintain a record of its activities including such things as strategic postures taken, assumptions employed, decisions made, the outcomes of those decisions, and the changes felt necessary. Based on this information, each team will report on its Capstone^®; experiences to the Company's Board of Directors and shareholders. Each team will be assigned a Board of Directors (from the members of the other industry) and this Board will evaluate the performance of their assigned team over the seven-year time period of the simulation.

Complete the Shareholder Debriefing form posted on the Class Conference page of the Capstone^®; website. Email the completed form to your Board Members and to me by April 24th or bring hard-copies for distribution to class on that date.. Your Shareholder Debriefing is the basis for your presentation to the Board of Directors during the following two weeks. Each team will have 10-12 minutes to present their case (usually gloating or begging for mercy) to their board and shareholders, followed by a 10-minute question-and-answer period. Boards of directors will meet after an industry's presentations, complete the Capstone^®; Evaluation Form (attached), and make their recommendations to me.

The Shareholder Debriefing and presentation should describe:

• Your company's initial strategy (intended strategy).
• How your strategy evolved over time (emergent strategy).
• An analysis of your market and competition.
• A description of the strategic decisions you made over time, why you made them, and how you implemented them.
• A discussion of what you learned from your experience, what worked well, and what you will do differently in the future.

Grading

Your grade will be determined as follows:

50% - Capstone^®; performance

40% - Two exams (20% each)

10% - Capstone^®; Quiz

The two exams will contain six short essay questions and cover material from the readings, lectures and assigned current Fortune readings. Make-up exams are scheduled only under extreme circumstances and with advance notice.

Note: Occasionally, there are free riders on the teams, people who don't carry their weight in getting the work done. I will allow a team to petition me to differentially assign Capstone^®; performance grades to its members if a majority indicates that there has been a serious problem in getting a member to contribute.

3/13	Emergent Strategy	R3	Mintzberg, H. "Crafting strategy," Harvard Business Review, July-August, 1987, pp. 66-74. Hamel, G. "Waking up IBM: How a gang of unlikely rebels transformed Big Blue." Harvard Business Review, July-August, 2000, pp. 5-11 Dillon, Pat. "Conspiracy of change," Fast Company, October 1998, 182-195.
3/20	Diversification: Mergers & Acquisitions	R4	Markides, C. "To diversify or not to diversify," Harvard Business Review, November-December, 1997, pp. 93-99. Kover, A. "Big banks debunked,"Fortune, February 21, 2000, pp. 187-194. Kover, A. "Dick Kovacevich does it his way," Fortune, Mary 15, 2000, pp. 299-306. Marks, M.L. & Mirvis, P.H. "Making mergers and acquisitions work: Strategic and psychological preparation,"Academy of Management Executive, 15(2), 2000, 80-92.
3/27	Spring Break
4/3	Diversification: Strategic Alliances	R5	Magretta, J. "The power of virtual integration," Harvard Business Review, March-April, 1998, pp. 72-84. Das, T.K. & Teng, B.S. "Managing risks in strategic alliances." Academy of Management Executive, 13(4), 1999, 50-62. "When your partner fails you," Fortune, May 26, 1997, pp. 151-154.
4/10	Diversification: Global Strategies	R6	Ohmae, K. "Managing in a borderless world," Harvard Business Review, May-June, 1989, pp. 2-9. O'Keefe, B. Global brands," Fortune, November 26, 2001, pp. 102-110. Rohwer, J. "GE digs into Asia," Fortune, October 2, 2000, pp. 165-178.
4/17	Leadership & Change	R7	Beer, M & Nohria, N. "Cracking the code of change," Harvard Business Review, May-June, 2000, pp. 133-141. Collins, J. "Level 5 leadership," Harvard Business Review, January 2001, pp. 66-76. Charan, R. & G. Colvin, "Why CEOs fail,"Fortune, June 21, 1999, pp. 69-82.
4/24	Exam #2		Assignment: Board Reports due
5/1	Board Presentations
5/8	Board Presentations

Note: Capstone^®; decisions are to be uploaded on the web site <www.capsim.com> by 8pm on the Tuesday before the assigned class. For example, your decision for Trial Round 1 is due by 8pm on Tuesday, February 5th. The results will be discussed in class on February 6th. Teams posting their decisions late will be charged a $3,000,000 "consulting fee" for that round. (The time shown on the Capstone^®; web site is for the eastern time zone and will appear as 10 pm, which is 8 pm our time.)

Capstone^®; Evaluation Form

BOARD OF DIRECTORS

Company & Industry: Your name:

_______________________________ __________________________

Your charge is to evaluate the overall performance of this team. The first set of questions focuses on this team's performance during the full seven years of the simulation and accounts for 40% of the team's Capstone^®; score. The second set of questions focuses on the firm's positioning for the future, accounting for 30% of the team's Capstone^®; score. A financial performance score, calculated using the weighted criteria the team selected; will be provided to you by the instructor and accounts for 30% of the Capstone^®; score. Please complete the forms, add any comments, and return them to the instructor immediately following the Board presentations of this company's industry.

Ratings: Please indicate the effectiveness of the company in the following areas with a rating of 1 to 5, with 5 indicating that they did an excellent job in this area.

Seven-Year Summary

1. Were the market segments in which the company operated consistent with its

strategy? ______

2. Was the company's R&D and product positioning within market segments

congruent with its strategy? ______

3. Was the company's financial strategy and cash management consistent with

its overall strategy? ______

4. How successful does the company's promotion and sales force

management appear to be? ______

5. How well were inventories and stock outs controlled? ______

6. How effective was the team's use of capacity and automation within the

context of the company's overall strategy? ______

7. Was the company's management of human resources consistent with its

strategy? ______

8. If the company got into trouble, did it make reasonable decisions

to overcome the problem? ______

Total points for Questions #1-8 ______

Positioning for the Future

9. If the simulation were to continue for another four years, is this

company in a good position to do well in the future? ______

10. Has the management team made adequate investments in plant capacity

and product development to position the firm for the future? ______

11. Has the management team struck a good balance between short- and

long-term concerns? ______

12. Have they been thorough and realistic in identifying potential future

threats and opportunities? ______

13. Have they made decisions that position the company to minimize the

threats and maximize the opportunities? ______

14. Have the members of this management team shown that they have the

competencies required to manage this company successfully in the future? ______

Total points for Questions #9-14 _____

Financial Performance (You will be provided with a score for the criteria and weights this team selected.)

Cumulative profits

Overall market share in $$$ (final)

Return on assets (average) Financial performance ______

Return on equity (average) score times 5 x 5

Return on sales (average)

Asset turnover (average)

Stock price (final)

Total points for Financial Performance ______

Total Points _____

Taking into consideration how this team performed relative to the other teams in its industry, what letter grade would you assign to this team's performance?

___A ___A- ___B+ ___B ___B- ___C+ ___C ___C- ___D ___F

Comments

Scoring Capstone^®; Financial Performance

Team _____________________________ Industry ________

To determine the winner of the game, a possible seven categories may be measured: 1) profits, 2) overall market share in dollars, 3) ROA, 4) ROS, 5) ROE, 6) asset turnover, and 7) stock price.

Each team will select the categories by which they wish to be scored. A minimum of four categories must be selected (total profits must be one of the categories, minimum weight 20%). The maximum allowable percentage for any single category is 30%. Place a check mark to the left of each desired category, then place a percentage (from 10% to 30%) in the box on the far right.

Criteria		AVG	TOTAL	FINAL	%
	Profits		X
	Overall market share in $$$			X
	ROA	X
	ROE	X
	ROS	X
	Asset turnover	X
	Stock price			X
Total 100%

Enter the criteria you have selected and their weights on the Success Measurements page on the Capsim website.