Week 1: Strategic Management: Conventional and Islamic Approaches

Team teaching

Agenda

• 1. Silabus dan peraturan kelas
• 2. Ketua Kelas
• 3. Kelompok (maks 5 orang)
• 4. Materi hari ini

Lokasi dan sumber daya

• Emas3.ui.ac.id
• Teams
• Whatsapp group

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Peraturan Kelas

• Kumpulkan tugas tiap kamis (individu dan kelompok)
• Preference di emas3 atau di Teams?
• Harus baca materi
• Di kelas tinggal presentasi
• Aturan tentang AI: boleh menggunakan AI, asalkan mengerti

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Perangkat Kelas

Ketua Kelas

• Koordinasi
• Reminder

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Group work

• Maks 5 person
• Presenting group and debating group

Materi hari ini

• Chapter 1 DD (see other slides)
• Chapter 1 FA

Introduction to Strategic Management, Islamic approach

•  Core Premise and Objectives: The book is founded on the belief that the world would be a better place if business strategists applied Islamic principles when developing their strategic plans [2]
• The benefit:
• to reduce the risk of strategic failure, potentially increasing business success rates (e.g., from 10% to 30% success, thereby creating more employment opportunities and wealth for society) [3, 4].

Introduction to Strategic Management, Islamic approach

•  Critical Thinking and Paradigms: The authors emphasize the importance of critical thinking in strategic management, defining it as the art and science of evaluating claims, statements, and evidence, and thinking carefully about underlying assumptions [5]
• Qur'anic Influence on Thinking: The text highlights several Qur'anic injunctions that encourage deep thought and continuous improvement, including:
•     ◦ Tafakkur (reflection) [8]
•     ◦ Nazar (consideration) [8]
•     ◦ Tabassur (gaining insight) [8]
•     ◦ Tadabbur (pondering) [8]
•     ◦ Tafaqquah (fully understanding) [8]
•     ◦ Tadhakkur (taking heart from verses) [8]
•     ◦ I’tibar (learning from others' experience) [8]
•     ◦ Ta’aqqul (using one’s mind in the right way) [8]
•     ◦ Tawassum (reflection) [8]

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Fundamental Problems" (FPs) with Conventional Strategic Management

• FP 1: The Use of Interest-Based Loans: This is highlighted as a core problem in conventional management because Islamic law forbids interest (usury) [10, 11]. The authors argue that conventional interest-based loans assume accurate risk assessment before a transaction, which is impossible, leading to high rates of bankruptcy [10, 12, 13].
• Islamic finance, in contrast, shares risks and rewards after the transaction, which is presented as a method to reduce the risk of default and promote social justice at the macro level and avoid unnecessary bankruptcies at the micro level [10, 13, 14].

Fundamental Problems" (FPs) with Conventional Strategic Management

• FP 1 cont: Flawed Conventional Assumption: Conventional finance operates on the assumption that it is possible to accurately assess the risk of a business transaction before the transaction takes place
• Islamic Alternative (Profit- and Risk-Sharing): Islamic finance offers a model where risks and rewards are shared after the transaction is completed, which is designed to reduce the risk of default, promote social justice at the macro level, and prevent unnecessary bankruptcies at the micro level

Fundamental Problems" (FPs) with Conventional Strategic Management

• FP 2: Developing Sustainable Organizations
• ◦ Unsustainable Conventional Economy: The conventional economic structure is criticized for being inherently unsustainable, frequently prioritizing short-term gains over the long-term preservation of environmental, social, and economic systems. This mindset fails to "leave something for our children".
• ◦ Complexity and Lack of Cooperation: Modern organizations face increasing complexity, which raises the risk of failure. The solution lies in systems thinking, which helps manage this complexity by focusing on patterns of behavior over time and understanding feedback loops.

Fundamental Problems" (FPs) with Conventional Strategic Management

• FP 3:FP 3: Overcoming Defensive Routines
• ◦ Organizational Deceit: Based on Chris Argyris's work, this problem describes organizational cultures where individuals engage in "defensive routines", subtly lying or hiding embarrassing information to avoid embarrassment or minimize negative feelings.
• This behavior is often supported by the organizational culture, making it impossible for employees to discuss critical assumptions or unsustainable paths, even when they know the organization is headed for trouble. Such a culture prioritizes personal social gratification over organizational well-being.
• ◦ Islamic Solutions (Nasihah and Shurah): Islamic principles offer solutions through practices like nasihah (sincerity and advising others, including superiors, with truth) and shurah (collective decision-making based on consultation).

Fundamental Problems" (FPs) with Conventional Strategic Management

• FP 4: Overcoming Conflicts of Interest
• ◦ Individual vs. Organizational Interests: This problem highlights the inherent conflict between the interests of the individual and the interests of the whole organization. Reward and punishment systems in conventional management often encourage selfish behavior, leading individuals with power to prioritize their personal gain over what is good for the organization.
• ◦ Islamic Perspective (Accountability to God): Islamic principles aim to minimize such conflicts by placing a moral duty on leaders to ensure the rights of all stakeholders and by fostering individual accountability to God, which encourages ethical and truthful behavior.

Case study time

• How to read a case study
• Introduction to SWOT: finding information Hershey case

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Case study time

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• Week 1:
• Class Assignment – IBM and Lou Gerstner Case Analysis
• Instructions:
• You will work in group on this assignment. Read the case carefully and answer the analytical questions below. Please write in complete sentences and provide explanations, not just short answers. Aim for thoughtful analysis rather than description.
• Time allocation: 30 minutes in class.
• Length: About 3–4 sentences per answer (more if needed for clarity).
• ________________________________________
• Questions
• 1. Why did IBM nearly collapse in the early 1990s despite its technological and financial strength?
• Hint: Think about corporate culture: arrogant, big size, hard to communicate, renegotiate everything
• industry changes: PC rev, UNIX rev
• strategic missteps: invest heavily in mainframe computer.
• ________________________________________
• 2. How did Lou Gerstner’s outsider status and prior experiences shape his approach to IBM’s turnaround?
• Hint: Consider his background at McKinsey, American Express, and Nabisco.

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Case study time

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• Week 1:
• Class Assignment – IBM and Lou Gerstner Case Analysis
• ________________________________________
• Questions
• *3. Gerstner stated, “The last thing IBM needs right now is a vision. What IBM needs is execution.” Critically evaluate this statement in the context of strategic management.
• Hint: Compare the importance of vision vs. execution, and why IBM needed one more than the other at that moment.
• ________________________________________
• 4. In what ways did Gerstner change IBM’s corporate culture, and why was this essential for the turnaround?
• Hint: Think about policies, leadership practices, and internal politics.
• ________________________________________
• 5. Evaluate Gerstner’s decision to keep IBM integrated instead of splitting it into smaller businesses. Was this the right strategic choice? Why or why not?
• Hint: Think about customer needs, IBM’s unique capabilities, and risks of splitting.

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Exercise (participation 3 credits)

• Instructions: Answer each question in 2-3 sentences.
• 1. How has the perception of religion's role in strategic management changed over the past 15 years, and what prompted this shift?
• 2. Describe the "Tragedy of the Commons" and provide an example of how it manifests in organizations, as discussed in the text.