What is Strategy? (Part Two)

Key Concepts

• Managerial Cognition

• Business Model

• Stakeholders

• The Balanced Scorecard

Managerial Cognition

Involves managements’ beliefs and understanding about:

Macro/Industry Environment (e.g., demographic trends, competitors)

How to Compete (e.g., Strategic positioning: low cost, differentiation, focus)

Appropriate Size and Diversity ( e.g., integrated healthcare systems)

How to Organize (organizational structure)

Cognitive Biases in Strategic Management

Examples:

Confirmation Bias

Availability Heuristic

Non rational Escalation of Commitment

Groupthink

Business Models

Answers the following questions:

How do we make money in this business?

What is the underlying economic logic that explains how we candeliver value to customers at an appropriate cost?

Consider the Following:Who is the customer?

What does the customer value?

What activities will be performed?How will these activities be performed?

Look at the Components of the Business

How are Revenues Generated?

How Does the Firm Lower Costs?

Greater Profitability

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Dell Corporation’s Business Model

Primary Revenue Streams:

• Direct Sales Model for Individual Customers • Relationship-Oriented Field Sales Force for Corporations

and Institutional Customers• Services (e.g., Training and Certification, Support, Professional,

Deployment, etc.)

• Multiple Product Lines in Different Segments of the Industry (e.g., enterprise systems, client systems, printing and imaging systems, software and peripherals)

• Financial Services (Financing)

***Focused R&D and Branding via advertising

Dell Corporation’s Business Model

• Direct Sales Model and Extensive Market Segmentation• Build to Order Manufacturing and Mass Customization• Extensive Testing and Quality Control• Partnerships with Suppliers and JIT Practices• E-Commerce Technology (Sales and Service Support)

Costs are Lowered Through:

Measuring Performance

What are stakeholders?

Who are the different organizational stakeholders?

What are some of the objectives of these stakeholders?

Impact of Stakeholders

Relative influence and power over issues and initiatives

Participation in strategic management process

Expertise and validation

Problem-solving and collaboration

Balanced Scorecard

Four Types of Measures:

Financial: How does the firm look to its Shareholders/Creditors?

Customer: How does the firm look to its Customers?

Internal Business Processes: Identifies processes most important tomeet shareholder and customer expectations.

Learning and Growth: Identifies the infrastructure that the firmmust build to create long-term growth.

Financial Measures

Return on Equity

Cash Flow

Return on Assets

Return on Investment

Project Profitability

Customer Measures

Value for money

Competitive Price

Customer Service

Customer Retention

Market Share

Image and Reputation

Internal Business Processes

Superior Project Management

Product development cycle

Innovation

Product Quality Measurement

Order Process Time

Learning and Growth

Product/Service Innovation

Empowered Workforce

Information Systems Capabilities

Motivation

Employee Capabilities, Satisfaction, Retention, Productivity

How does the firm decide what to measure?

Mission

Critical Success Factors

Critical Measures

Financial

Financial

Customer

Customer

IBP

IBP

L & G

L & G

Mission

North Oakland Medical Centers is a multi-divisional urbanhealthcare system whose mission is to deliver high qualityhealthcare and health related services in northern OaklandCounty in a cost effective and efficient manner.

Financial Critical Success Factors and Measures

Critical Success Factors:

Increase in capitation contractsReduce emergency room useExpand community philanthropy

Critical Measures:

Number of capitation contracts received% of capitation contracts relative to competitors% unnecessary emergency room usageDollars raised (numbers and dollars of corporate donations)

Customer Critical Success Factors and Measures

Critical Success Factors:

Prompt ServiceHigh Quality CareStaff Attitude and FriendlinessGood Food

Critical Measures:

Emergency room and Admission timesPatient Referrals/Repeat Patients and External RatingsPatient Satisfaction SurveysNumber of Complaints

Internal Business Perspective Critical Success Factors and Measures

Critical Success Factors:

Cost ControlEfficiencySelected SpecializationQuality of Care

Critical Measures:

Cost per patient dayAnalysis of use of equipment and space, degree of automationCancer, heart (provide value for the cost)Evaluations of doctors, staff and administrators, patient satisfaction

Learning and Growth Critical Success Factors and Measures

Critical Success Factors:

Doctor research and creativityContinuous innovationState of the art technologyPartnerships with research institutions

Critical Measures:Number of professional presentations and publicationsNumber and quality of new services offered in past 5 yearsDegree automation, expenditures on software/hardware, rate of increaseof outpatientsNumber of joint activities

Oakland University

Who are Oakland’s stakeholders?

What are some of the objectives of these stakeholders?

How are these objectives linked to performance?

How should performance be measured?

What needs to be measured?

How should the SBA best measure performance based on theirstakeholders’ objectives?

SBA Mission Statement

The mission of the School of Business Administration (SBA) is to advance knowledge and enhance students' abilities to manage in a global business environment.

The mission is achieved through a synergistic combination of teaching, scholarship, and professional service, with emphasis on the linkage of theory and practice, and the application and management of technology. Toward the achievement of these ends, the SBA promotes collaborative relationships among students, faculty, administrators and employers.