BUSINESS MANAGEMENT

COMBA
WEEK 1: LESSON 1: STRATEGIC MANAGEMENT ESSENTIALS

What is strategic management?

Strategic management is the process of formulating, implementing, and evaluating decisions that
help an organization achieve its objectives. It includes areas such as management, marketing,
finance, accounting, production, and information systems to achieve success. Essentially, it’s
about distributing resources effectively to gain a competitive advantage.

Firms face decisions about what markets to enter or avoid, which competitors to challenge, and
how to position themselves. These decisions are crucial for survival. A key part of strategic
management is formulating strategies (like product offerings and market positioning) that give a
company a sustainable competitive edge, while also executing them effectively through operational
actions like hiring, cost management, and financing.

To secure a sustainable advantage, companies need to offer unique products or services. For
example, Apple differentiates itself through its exclusive operating system that runs on its products,
and Rolex maintains its reputation by resisting the temptation to offer cheaper watches.

Core values, vision, and mission are foundational to a firm’s strategy and uniqueness. All
successful companies distinguish themselves from competitors through these elements, making
trade-offs and tough decisions to maintain that distinctiveness.

In business education, strategic management is often the capstone course, bringing together all
aspects of business administration.

Strategic planning

"Strategic management" is often used interchangeably with "strategic planning." While "strategic
planning" is more common in business, "strategic management" is often used in academic
contexts and refers to the entire process of strategy formulation, implementation, and evaluation.
Strategic planning specifically focuses on creating new opportunities for the future, whereas long-
range planning aims to optimize current trends.

Strategic planning became popular in the 1950s and peaked between the 1960s and 1970s, but lost
favor in the 1980s due to disappointing results. However, it made a comeback in the 1990s and is
widely used today.

A strategic plan is essentially a company’s roadmap for success, like a game plan for a sports team.
With slim profit margins, businesses must make tough decisions, committing to certain markets,
policies, and operations, while leaving other options behind.
Strategic-management model

The strategic-management model is a widely accepted approach for formulating, implementing,

and evaluating strategies. It doesn't guarantee success, but it offers a practical and structured way
to manage strategy. The model is dynamic, with continuous feedback and interrelated components
that drive strategic decisions. The process involves answering three key questions: "Where are we
now?", "Where do we want to go?", and "How are we going to get there?" Starting with a company's
vision, mission, objectives, and current strategy is crucial, as these factors shape future decisions.

The strategic-management process is ongoing and flexible, requiring constant adjustments as

conditions change. The feedback loop is vital, as shifts in one area (like a change in mission or
market conditions) can impact other parts of the strategy. In practice, strategic planning is not a
rigid step-by-step process but involves collaboration across organizational levels, often through
semiannual retreats for review and updates.

Larger organizations or those in rapidly changing industries tend to apply the strategic-management
process more formally, with clearer roles and responsibilities. Formality in the process is linked to
greater organizational success, while smaller businesses may have a less structured approach.

Stages of strategic management

The strategic-management process consists of three stages: strategy formulation, implementation,

and evaluation.

1. Strategy Formulation involves defining a company’s vision and mission, analyzing external
opportunities and threats, assessing internal strengths and weaknesses, setting long-term
objectives, and choosing strategies to pursue. This stage requires making critical decisions
about which businesses to enter or exit, whether to expand, diversify, or merge, and how to
compete globally. Strategy-formulation decisions are significant, as they determine the
company’s direction and resource allocation over time.

2. Strategy Implementation is the action stage, where formulated strategies are put into
action. This includes setting annual objectives, creating a supportive culture, allocating
resources, and motivating employees. It requires strong leadership and interpersonal skills
to ensure alignment and commitment across the organization. Successful implementation
hinges on motivating people and fostering teamwork to achieve the company’s objectives.

3. Strategy Evaluation involves reviewing internal and external factors, measuring

performance, and making necessary adjustments. This stage helps managers identify when
strategies are not working and allows for corrective actions. Since external and internal
conditions constantly change, strategies must be flexible and subject to modification to
ensure long-term success.
These activities occur at different levels of the organization—corporate, divisional, and functional—
requiring communication across all levels to function effectively as a team. In smaller businesses,
the process may focus only on the corporate and functional levels.

Peter Drucker emphasizes that strategic management’s core task is defining the business’s mission
and making decisions today that will shape the future. This requires balancing current needs with
long-term goals and allocating resources effectively.

Integrating analysis and intuition

Edward Deming’s quote, "In God we trust. All others bring data," emphasizes the importance of data
in strategic decision-making, yet the strategic-management process is not a purely scientific
approach. While data and analysis are essential, intuition also plays a key role in making strategic
decisions. Many successful leaders, like Will Durant of GM and Albert Einstein, relied on intuition
alongside analysis to guide their decisions. However, while some organizations may thrive on
intuitive leadership, most benefit from combining both intuition and data in decision-making.

The strategic-management process integrates intuition and analysis, with both complementing
each other. However, relying solely on intuition without validating it with data is dangerous. As Peter
Drucker warns, "management by intuition" without discipline can lead to failure. In today’s fast-
changing business environment, experience alone is no longer enough for making strategic
decisions, especially when those decisions have major, irreversible consequences.

Adapting to change

The strategic-management process emphasizes the importance of organizations constantly

monitoring internal and external changes to adapt quickly. As the rate of change accelerates,
organizations must be skilled at adapting to survive. For example, the Chinese company Mobike is
highlighted as being successful in adapting to change. In today’s fast-evolving business
environment, the key to success is managing change by continuously adjusting strategies,
products, systems, and cultures.

Organizations face important strategic questions, such as whether they are in the right business,
how to respond to new competitors, and how customer needs or technologies are changing. The
rise of online commerce is a major example of change, forcing traditional retailers to adapt or close.
Companies like Bebe Stores are shifting entirely to online operations, while others like Macy's and
Target are converting physical store space into warehouses to meet the growing demand for online
shopping.

Key terms in strategic management

The strategic-management process focuses on gaining and maintaining competitive advantage,

defined as what a company does especially well compared to rivals or any valuable resource it
possesses. Sustaining this advantage requires ongoing adaptation to internal and external changes,
offering unique products, and making strategic tradeoffs.

Strategists are key decision-makers in an organization, such as CEOs or division managers. They
play a crucial role in gathering and analyzing data, identifying opportunities, and developing
strategies. A Chief Strategy Officer (CSO) position is now common in many companies.

A vision statement defines what an organization wants to become, while a mission statement
explains the company’s purpose and scope. Both are critical for guiding strategic planning.

External opportunities and threats refer to trends and events in the economy, politics, and
technology that could impact the company, often beyond its control. Companies must identify and
capitalize on opportunities while minimizing threats.

Internal strengths and weaknesses are areas where an organization excels or falls short,
compared to competitors. These are essential for strategy formulation and resource allocation.

Long-term objectives are measurable goals set to achieve the organization’s mission and vision.
These objectives guide strategy and should be challenging but achievable.

Strategies are the actions taken to achieve long-term objectives, such as expansion,
diversification, or joint ventures.

SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats) is a tool for matching internal
capabilities with external conditions to create strategies.

Annual objectives are short-term goals that lead to achieving long-term objectives and are
essential for allocating resources.

Policies are the guidelines and rules that help achieve annual objectives and ensure consistency in
decision-making across the organization. Policies support strategy implementation and help
coordinate actions across different departments.

Overall, effective strategic management requires a continuous process of adapting, making

informed decisions, and maintaining consistency in the execution of strategies.

Benefits of engaging in strategic management

Strategic management helps organizations proactively shape their future by guiding them to initiate
and influence actions rather than just reacting to external events. It allows organizations to gain
control over their destiny, making it especially valuable for small business owners, CEOs,
presidents, and managers of both for-profit and nonprofit entities.

1. Systematic Decision-Making: Strategic management helps organizations formulate better

strategies using a logical, structured approach, leading to more informed and rational
decisions.
 2. Process Over Product: The process of engaging in strategic management is just as
important, if not more so, than the final strategy itself. Through active participation in the
process, managers and employees become committed to the organization’s goals.

3. Communication and Engagement: A key benefit is the communication and involvement it

fosters across all levels. By including employees in the strategic planning process, they feel
a greater sense of ownership, creativity, and innovation. Empowering employees through
participation in decision-making strengthens their commitment.

4. Employee Empowerment: The strategic planning process encourages initiative,

imagination, and a sense of ownership among employees, motivating them to act as if the
business were their own.

5. Ownership of Strategy: It’s critical that line managers, who will execute the strategy, are
involved in its formulation. This ensures they are committed to its success.

Financial Benefits:

Organizations that use strategic management tend to perform better financially, showing
improvements in sales, profitability, and productivity. High-performing firms systematically plan for
future fluctuations, anticipate both short- and long-term consequences, and make informed
decisions. In contrast, poorly performing firms often react impulsively to internal problems,
underestimate competitors, and fail to anticipate future challenges. Strategic management can
help prevent business failure, which is a common risk (with 100,000 businesses failing annually in
the U.S.).

Nonfinancial Benefits:

Beyond financial gains, strategic management offers various nonfinancial advantages:

1. Awareness of External Threats: It enhances an organization's awareness of external

threats and competitors' strategies.

2. Improved Productivity: By engaging employees in the process, productivity increases, and

resistance to change decreases.

3. Problem Prevention: The strategic management process fosters interaction and

communication among managers across different departments, promoting a proactive
approach to problem-solving.

4. Order and Discipline: It introduces a disciplined approach to management, improving

coordination, decision-making, and the allocation of resources.

5. Positive View of Change: Strategic management helps employees see change as an

opportunity rather than a threat, making it easier for the organization to adapt and grow.

6. Increased Synergy: With better coordination and communication, the firm experiences
greater synergy, enabling more effective use of time and resources.
Why some firms don’t use this

Some firms do not engage in formal strategic planning, and some firms do engage in strategic
planning but receive little support from managers and employees. Ten reasons (excuses) often
given for minimal or no strategic planning in a firm are as follows:

1. No formal training in strategic management

2. No understanding of or appreciation for the benefits of planning

3. No monetary rewards for doing planning

4. No punishment for not planning

5. Too busy “firefighting” (resolving internal crises) to plan ahead

6. View planning as a waste of time because no product/service is made

7. Laziness; effective planning takes time and effort; time is money

8. Content with current success; failure to realize that success today is no guarantee for
success tomorrow;

9. Overconfidence

10. Prior bad experience with strategic planning done sometime, somewhere

Pitfalls in strategic management

Strategic planning is an involved, intricate, and complex process that takes an organization into
uncharted territory. It does not provide a ready-to-use prescription for success; instead, it takes the
organization through a journey and offers a framework for addressing questions and solving
problems. Being aware of potential pitfalls and being prepared to address them is essential to
success.

There are some pitfalls in doing strategic planning; avoid the following:

• Using strategic planning to gain control over decisions and resources

• Doing strategic planning only to satisfy accreditation or regulatory requirements

• Too hastily moving from mission development to strategy formulation

• Not communicating the plan to employees, who continue working in the dark

• Top managers making many intuitive decisions that conflict with the formal plan

• Top managers not actively supporting the strategic-planning process

• Not using plans as a standard for measuring performance

 • Delegating planning to a “planner” rather than involving all managers

• Not involving key employees in all phases of planning

• Not creating a collaborative climate supportive of change

• Viewing planning as unnecessary or unimportant

• Viewing planning activities as silos comprised of independent parts

• Becoming so engrossed in current problems that insufficient or no planning is done

• Being so formal in planning that flexibility and creativity are stifled

Comparing business and military strategies

The study of strategic management has strong roots in military strategy. Terms like "objectives,"
"mission," "strengths," and "weaknesses" were originally developed to address battlefield
challenges. The word "strategy" itself comes from the Greek strategos, meaning a military general,
and its origins are deeply tied to the planning and execution of large-scale military operations.

The key goal of both military and business strategy is to gain a competitive advantage. Just as
military strategists use their forces’ strengths to exploit opponents’ weaknesses, business
strategists do the same. Both fields emphasize that success is not accidental but the result of
careful, adaptive planning and constant attention to changing circumstances.

Key Parallels Between Military and Business Strategy:

1. Competition vs. Conflict:

o Military strategy assumes direct conflict, where there is generally one winner.

o Business strategy, however, operates in a competitive environment where multiple

firms can succeed simultaneously. For example, businesses can succeed in the
same industry (e.g., hamburgers) without directly confronting a larger competitor
like McDonald's, by offering different products or services.

2. The Element of Surprise:

o Both military and business strategies thrive on surprise, using information systems
to understand competitors’ moves and resources.

3. Adaptation to Change:

o Both military and business organizations must continuously adapt. Failure to do so

leads to stagnation. For instance, Napoleon’s success came from innovating new
strategies, while his defeat came from using outdated ones against evolving
opponents.
 4. Historical Military Influences:

o Alexander the Great is a prominent example of military leadership. His strategies,

often about leadership and strategic planning, continue to influence business
strategies today. His quote, "Greater is an army of sheep led by a lion, than an army
of lions led by a sheep," underscores the importance of strong leadership in
executing a strategy.

o Sun Tzu's The Art of War has also had a significant influence on business strategy.
Its emphasis on outsmarting opponents without engaging in direct conflict is
applicable to competitive strategies in business, like negotiations or mergers.

Developing employability skills

Broad Skills to Be Developed:

1. Critical Thinking: Ability to define problems, make decisions, and form judgments.

2. Collaboration: Working effectively with others on reports, presentations, and projects.

3. Knowledge Application and Analysis: Learning concepts and applying them to new
challenges.

4. Business Ethics and Social Responsibility: Understanding that good ethics is crucial for
long-term business success.

5. Information Technology: Enhancing skills in word-processing, spreadsheets, databases,

presentations, and software tools.

6. Data Literacy: Accessing, analyzing, and interpreting data to make informed decisions.

Specific Skills to Be Gained:

1. Develop a 3-year strategic plan for any organization.

2. Write and evaluate vision and mission statements.

3. Conduct external and internal strategic assessments.

4. Formulate strategies using SWOT analysis.

5. Use BCG and IE portfolio matrix analyses.

6. Apply QSPM (Quantitative Strategic Planning Matrix) analysis.

7. Determine recommendations and their associated costs for any firm.

8. Develop perceptual maps for market positioning.

 9. Value a company using various corporate valuation methods.

10. Perform EPS-EBIT analysis to assess capital structure.

11. Use value chain analysis, balanced scorecards, and financial ratios.

12. Evaluate corporate structures and create effective organizational charts.

13. Create projected financial statements to support strategic plans.

14. Utilize a popular corporate strategic planning Excel template.

WEEK 1: LESSON 2: ANALYSE VISION AND MISSION STATEMENTS

Core value statements

Core values are fundamental to a company’s ethical foundation and play a crucial role in shaping
its vision and mission. A core values statement reflects a firm's commitment to principles such as
integrity, fairness, teamwork, accountability, and continuous improvement. For example, LinkedIn’s
core values include putting customers first, fostering relationships, being honest, requiring
excellence, taking intelligent risks, and acting like an owner.

Core values are generally fixed and should not change over time, even with shifts in technology,
trends, or global challenges. Companies with strong core values are guided by principles that
transcend external changes. For instance, Disney’s core value is “to make people happy,” while a
tech company may focus on “connecting the world.”

Core values should provide clarity on the firm’s identity and help guide its strategic decisions

Visions statements

A clear and shared vision is crucial for guiding an organization’s long-term direction. A vision
statement answers the fundamental question, "What do we want to become?" It should be
concise, typically just one sentence, and developed with input from as many managers as possible.
The vision provides the foundation for the mission statement, which outlines the company’s
purpose and goals. Proverbs 29:18 emphasizes the importance of vision: "Where there is no vision,
the people perish."

While profit is often seen as the main motivator, it alone is not enough to inspire employees. A
vision gives meaning to profit and motivates the workforce by aligning them with a larger purpose.
Reuben Mark, former CEO of Colgate, highlights the importance of a global, simple vision that
resonates across cultures, such as “We make the world’s fastest computers” or “Telephone service
for everyone.”
When employees and managers collaborate to create a vision statement, it reflects their personal
aspirations and unites them in a shared purpose. This shared vision fosters motivation, dedication,
and a sense of belonging, ultimately driving commitment and productivity within the organization.

Characteristics of a vision statement

A vision statement should clearly reveal the type of business a firm conducts while being written
from the customer’s perspective. It should describe a desired future state that is both challenging
and achievable. A strong vision statement should serve as a guide for organizational change and
align employees and customers with the firm’s goals.

Effective vision statements can be evaluated using the "5-out-of-5 Test," which includes five key
characteristics:

1. Clear: Specifies the industry and what the firm strives to become.

2. Futuristic: Describes the firm’s goals or accomplishments within the next five years.

3. Concise: Is typically one sentence in length.

4. Unique: Highlights the firm’s competitive advantage.

5. Inspiring: Motivates readers to support the firm.

Mission statements

A mission statement, based on Peter Drucker’s guidelines, defines an organization's purpose and
answers the key question, “What is our business?” It is a declaration of the company’s reason for
existence and distinguishes it from others in the same industry. A clear mission statement is crucial
for setting objectives and formulating strategies.

Drucker emphasized that a mission statement is the foundation for priorities, strategies, job
designs, and organizational structures. While it may seem straightforward to know a company’s
business (e.g., a lumber mill makes lumber), the correct answer often requires deep reflection.
Developing a strong mission statement is the responsibility of strategists and should not be rushed.

However, many organizations neglect to create or regularly update mission and vision statements.
Some companies develop them simply because it’s seen as fashionable, not out of genuine
commitment. Companies that treat their mission and vision statements as living documents—such
as Johnson & Johnson, which regularly reviews and reaffirms its mission—experience great
benefits. This ongoing commitment enhances company culture and aligns employees with
organizational goals.
Characteristics of missions statements

A mission statement serves as a broad declaration of a company’s purpose, guiding its objectives
and strategies while appealing to diverse stakeholders, such as employees, stockholders,
customers, suppliers, and the public. It should be broad enough to encourage creativity and allow
for growth, but specific enough to exclude irrelevant ventures. A quality mission statement helps
reconcile varying stakeholder expectations, like balancing social responsibility with profitability,
and provides general direction for the company.

Key attributes of an effective mission statement:

1. Broad scope: Avoids overly specific numbers or details that could stifle creativity and limit
growth.

2. Concise: Should be under 100 words for clarity and focus.

3. Inspiring: Motivates stakeholders and fosters positive feelings about the company.

4. Reflects utility: Identifies the value the firm provides through its products or services.

5. Social and environmental responsibility: Demonstrates the firm’s commitment to these

areas.

6. Comprehensive: Includes components such as customers, products/services, markets,

technology, growth, philosophy, competencies, public image, and employee concerns.

7. Reconciliatory: Balances conflicting interests among various stakeholders.

8. Enduring: Provides a lasting vision but remains flexible to change as needed.

Components of a mission statement

An exemplary mission statement should include nine key components that reflect the firm’s
purpose and values, while addressing various stakeholder concerns. These components help
create a mission statement that is both comprehensive and customer-focused.

The nine components are:

1. Customers: Identify the firm’s current and potential customer groups.

2. Products or services: Specify the firm’s main offerings.

3. Markets: Describe the geographical areas where the firm operates.

4. Technology: Address whether the firm uses current and relevant technology.

5. Concern for survival, growth, and profitability: Show commitment to the firm’s long-term
financial health and expansion.
 6. Philosophy: Reflect the firm’s values, beliefs, and ethical priorities.

7. Distinctive competence: Highlight the firm’s competitive advantage.

8. Concern for public image: Demonstrate the firm’s social and environmental responsibility.

9. Concern for employees: Acknowledge employees as valuable assets to the organization.

An example mission statement for a charter boat fishing company could be:

“Our fleet of fast, clean deep-sea fishing boats offers outdoor enthusiasts an exciting fishing
adventure off the coast of North Carolina. Using the latest safety and fishing equipment, as well as
emission-friendly engines, our experienced staff ensures customers ‘catch rather than just fish.’ We
offer affordable pricing while focusing on repeat customers and creating lifelong memories, all
while adhering to the Golden Rule.” (85 words)

This statement encapsulates all nine components, including the firm’s commitment to customers,
products, technology, competitive edge, and more.

Importance of a vision and mission statement

A meta-analysis of 20 years of research found a positive link between mission statements and
financial performance. Developing a well-crafted mission statement offers several key benefits:

1. Clarity: Ensures all employees and managers understand the firm’s purpose.

2. Strategy Foundation: Provides a basis for prioritizing internal and external factors in
strategy formulation.

3. Resource Allocation: Helps allocate resources efficiently.

4. Organization and Alignment: Facilitates organizing work, departments, and activities

around a common purpose.

Additionally, creating a mission statement can reveal divergent views among managers, prompting
necessary negotiation and compromise to align the organization’s strategy.

However, unresolved disagreements can lead to problems, as seen in the case of W. T. Grant’s
bankruptcy, where lack of consensus on the firm’s mission and vision contributed to its downfall.

While vision and mission statements are often developed in times of crisis, it is critical to develop
them proactively—even during periods of success. Drucker emphasized that successful
companies must periodically reassess their mission, as success can obscure new realities and
challenges.

In larger, multidivisional organizations, each division should develop its own mission and vision
statements that align with the corporate mission, ensuring consistency across the organization.
Ultimately, having clear vision and mission statements allows a company to present itself favorably
to stakeholders (customers, employees, suppliers, etc.) and is crucial for effective communication
and strategic planning.

The process of developing vision and mission statements should involve as many managers as
possible to increase commitment and support for the organization. One common approach is to
have managers read background articles and individually create vision and mission statements. A
facilitator or a committee of top managers can then merge these into a draft document, which is
circulated for feedback and revisions. This process helps ensure broad managerial involvement and
buy-in, which makes it easier to gain support for strategy formulation and implementation.

Some organizations may use discussion groups or hire an external consultant to guide the process.
An unbiased outside expert can sometimes manage the process more effectively than an internal
group.

When done well, developing a mission statement fosters an emotional bond and sense of mission
among employees and customers. It goes beyond intellectual agreement and creates a personal
identification with the company’s values. Including marketers and sales reps in the process and
writing from a customer perspective helps strengthen this emotional connection and enhances
customer service commitment.

Evaluating and writing missions statements

A strong mission statement should go beyond including basic words like "products" or
"employees"—it must motivate stakeholders, be customer-focused, inspiring, informative, and
enduring. The Hershey company’s actual mission statement (only 12 words) is too brief, vague, and
misses six of the nine essential components needed for a comprehensive mission statement.

A proposed, revised Hershey mission statement (73 words) includes all nine key components:

1. Customers: "Serve consumers of all ages and lifestyles."

2. Products/Services: "High-quality chocolate, candy, and snack products."

3. Markets: "Globally."

4. Technology: "Using robotics and business analytics."

5. Survival/Growth/Profits: "Grow and expand product offerings."

6. Philosophy: "Dedicated to supporting communities, especially the Milton Hershey School."

7. Distinctive Competence: "Provide the best chocolate, wrapped in Hershey Happiness."

8. Public Image: "Support communities where we operate."

9. Employees: "Friendly and well-trained employees."

WEEK 2: LESSON 3: GLOBAL AND INTERNATIONAL ISSUES

Nature of doing business globally

• Globalization is a process of doing business worldwide, such that strategic decisions are
made based on global profitability (decentralized) of the firm rather than just domestic
considerations. A global strategy aims to meet the needs of customers worldwide, with the
highest value at the lowest cost.
• E.g. production in countries with lower labor costs or lots of natural resources…
• A global strategy includes designing, producing, and marketing products with global needs
in mind rather than considering just a home country. A global strategy integrates actions
against competitors into a worldwide plan.
• In any industry that is global, it can be a risky posture to remain a domestic competitor,
because more aggressive rival firms may use global growth to capture economies of scale
and learning. The domestic firm could then face an attack on domestic markets using
different (and possibly superior) technology, product design, manufacturing, marketing
approaches, and economies of scale.

Multinational firms

• They conduct business across national borders. Strategic management process is

conceptually the same for multinational firms as for purely domestic firms, but the process
is more complex for international firms as result of more variables & relationships.

• More time and effort are required to identify and evaluate external trends and events in
multinational firms. Geographic distance, cultural and national differences, and variations
in business practices often make communication between domestic headquarters and
overseas operations difficult. Strategy implementation can be more difficult because
different cultures have different norms, values, and work ethics.

• Before entering international markets, firms should scan relevant journals and patent re-
ports, seek the advice of academic and research organizations, participate in international
trade fairs, form partnerships, and conduct extensive research to broaden their contacts
and diminish the risk of doing business in new markets.

Labor unions

• Existence of prevalence of labor unions can be important in strategic decisions

• Such as, where locate stores/factories because companies often like to avoid unions

Tax rates

• Represent important strategic consideration regarding where to build manufacturing

facilities or retail stores or even where to acquire other firms
Advantages and disadvantages of doing business globally

Advantages

1. Firms gain new customers

2. Foreign operations absorb excess capacity, reduce unit costs, spread econ risks over wider
nr of markets

3. Foreign operations allows firms to est low-cost production facilities in locations close to
raw materials/cheap labour

4. Comp in foreign markets may not exist, or comp may be less intense

5. Foreign operations result in reduced tariffs, lower taxes, fav political treatment

6. Multinational joint ventures enable firms to learn tech, culture, etc

7. Economies of sale achieved from operation in global rather than only domestic

8. Firms power & prestige in domestic markets enhances if firm competes globally

Disadvantages

1. Foreign operations seized by nationalistic factions

2. Firms confront different & often little-understood PESTLE

3. Weaknesses of comp in foreign lands often overestimated & strengths underestimated

4. Language, culture, value systems differ = barrier to comm

5. Gaining understanding of regional organs = difficult

6. Dealing w/h 2/+ monetary systems can complicate international bus operations

The Global Challenge

• World economy & monetary system = emerging

• Markets shifting rapidly & converging in tastes, trends & prices

• Protectionism

• Countries imposing tariffs, taxes & regulations on firms outside country to favor own
companies & ppl

o US & China in 2018 imposed tariffs on each others products imported

• Knowing how to use that information for one’s competitive advantage is even more
important.
 • For example, firms may look around the world for the best technology and select one that
has the most promise for the largest number of markets. When firms design a product, they
design it to be marketable in as many countries as possible. When firms manufacture a
product, they select the lowest-cost source, which may be Japan for semiconductors, Sri
Lanka for textiles, Malaysia for simple electronics, and Europe for precision machinery.

Outsourcing and reshoring

• Outsourcing

• Companies hiring other companies to take over various parts of functional

operations

• Example: HR, info systems, payroll, accounting, marketing

Potential benefits for outsourcing:

1. Cost savings (lower wages in foreign countries)

2. Risk management (manage risks by partnership w/h outside firm)

3. Tax benefit (capitalise on tax incentives to avoid high taxes)

4. Catalyst 4 change (outsourcing agreement 4 major change can’t be achieved alone)

5. Knowledge (gain access to intellectual property & wider experiences)

6. Access to talent (gain access to larger talent pool & sustainable source of skills)

• Reshoring

o US companies moving portion of manufacturing back to US

Potential benefits of reshoring:

1. U.S. laws protect female and minority employees

2. Reliable energy at low cost

3. Excellent security to protect designs from overseas copycats

4. Enable closer tabs on quality control and supply chains

5. Excellent economy with consumers purchasing more

6. Less shipment costs with consumers nearby

7. Excellent human rights, education, legal, and political systems that promote freedom and

opportunity for citizens

U.S. vs Foreign Business Culture

• For multinational firms, knowledge of bus culture variation across countries = essential
for gaining & sustaining competitive advantage

Communication across countries

USA:

• Intrusive, manipulative = reduce effectiveness in comm

• Action-oriented than others
• Blunt criticism, ask prying questions, quick decisions

Mexico:

• Want agreeable, respectful, obedient workers over innovative, creative, independent

• ER = paternalistic
• EE’s with more than paycheck in exchange for allegiance

Japan:

• Group loyalty, consensus = Wa (name of the concept)

• When confronted with disturbing questions = managers remain silent

China:

• Rarely do business w/h companies/ppl they don’t know

• Organ chart = NB in bus relationships
• Being late= insult & negatively affect relationship
• Need patience, phone calls = boisterous

India:

• Don’t like to say “no”

 • Will rather say “not available” or offer response you want to hear or be vague
• Prefer to do business w/h those they have est relationship, trust or respect
• Punctuality = NB
• Don’t trust legal system & someone’s word often sufficient to reach agreement

Business cultures across countries

Ease of doing business rankings based on how easy it is to:

1. Start a business

2. Deal w/h construction permits

3. Register property

4. Get credit

5. Protect investors

6. Pay taxes

7. Trade across borders

8. Enforce contracts

9. Resolve insolvency

10. Get electricity

Africa:

• 30 African countries = democracies

• Currencies in Asia = stabilising & countries = fund-raising to build highways, ports & power grids

• African & non-African companies launch operations in Africa due to growing middle class &
average GDP growth of 5% in 2020

• By 2025, 50% of Africa = online

China:

• China’s econ output annually exceeds USA

• China ranks 90th out of 190 countries

• China accounts for ⅓ of global markets for cars

• China = low ranking in ease of doing business because human rights issues & substantial
disregard for copyright, patent & trademark rules of law
Indonesia:

• Democratic Pacific archipelago of 1000s of islands

• Rupiah & economy fast growing

• GDP: 5% in 2017

• Economic forecast = bright

India:

• Ranks 130 ito ease of doing business

• Ranks lowest among BRICS

Mexico:

• 4th largest auto exporter

• Auto industry employs 1/6 workers, which is ⅓ of all Mexican exports

• FDI surged to exceed $30 billion annually

WEEK 2: LESSON 4: ETHICS, SOCIAL RESPONSIBILITY AND SUSTAINABILITY

Business ethics:

• Principle of conduct in organ that guides decision making & behaviour

Social responsibility:

• Actions an organ takes beyond what's legally required to protect/enhance the well-being of
living things

Sustainability:

• Extent organ’s operations & actions protect, mend & preserve rather than harm/destroy
natural envir

WHY “GOOD ETHICS IS GOOD BUSINESS”:

• Moral breaches of ethical conduct

• By public & private organs

 • Reported hourly on internet, social media, texts, newspapers etc

• Quickly spreads facts & rumours regarding inside dealings

Does it pay to be ethical:

• Bad ethics derails the best strategic plans

How to establish an ethics culture:

• Code of ethics

• Ensures ethics are read, understood, believed, remembered

• Periodic workshops needed to sensitize ppl to workplace circumstances where

ethics issues arise

Unethical business practices:

1. Misleading advertising or labelling

2. Causing environmental harm

3. Producing unsafe products or services

4. Padding expense accounts

5. Insider trading

6. Dumping banned or flawed products in foreign markets

7. Discriminating against women and minorities

8. Overpricing or price gouging

9. Sexual harassment, bullying, and favouritism

10.Using company resources for personal gain

Principles of good business ethics:

1. Be trustworthy; no individual or business wants to engage in business with an organisation it

does not trust.

2. Be open-minded, continually asking for “ethics-related feedback” from all internal and external
stakeholders.
3. Honour all commitments and obligations.

4. Avoid misrepresenting, exaggerating, or misleading with print materials, actions, or words.

5. Visibly be a responsible community citizen.

6. Use your accounting practices to identify and eliminate questionable activities.

7. Follow the Golden Rule: “Do unto others as you would have them do unto you.”

WHISTLE-BLOWING:

• EE’s reporting unethical violations they discover or see in firm

BRIBERY:

• Offering, giving, receiving, soliciting any item of value to influ actions

• Of an official or other person in discharge of public or legal duty

• Crime in most countries

WORKPLACE ROMANCE:

• Romance can be detrimental to morale & productivity

1. Favouritism complaints

2. Confidentiality of records breached

3. Reduced quality & quantity of work

4. Personal arguments lead to work arguments

5. Whispering secrets = tensions

6. Sexual harassment charges

7. Conflicts of interest

ENVIRONMENTAL SUSTAINABILITY:

• EE’s. cons, gov & society resentful of firms who harm envir

• Ppl today appreciate operations that mend, conserve & preserve natural envir
Sustainability reports & Environmental Protection Agency (EPA):

• Sustainability report

• How firms operations impact natural envir

• Disclose to SH info about firms labour practices, product sourcing, energy

efficiency, envir impact & business ethics practices

International Standardisation Organisation (ISO) Certification:

• ISO1400

• Family of standards concerning extent firm minimises harmful effects on envir

• Caused by acts & continually monitors

• Improves own envir performance

• ISO14001

• Set of standards adopted by 1000s of firms worldwide

• Certify to constituencies that they’re conducting bus in envir friendly way

• Results in Environmental Management System (EMS)

ENVIRONMENTAL SUSTAINABILITY:

• Reasons why preserving envir should be permanent part of doing business

1. Consumer demand for envir safe products & packages = high

2. Public opinion demands firms to conduct bus in way to preserve natural envir = high

3. Envir advocacy grp now have more than 20 million Americans has members
 4. Federal & state envir regulations changing rapidly & becoming complex

5. More lenders examining envir liabilities of bus seeking loans

6. Cons, suppliers, distributors, investors don’t do bus with envir weak firms

7. Liability suits & fines against firms having envir problems = rising

CORPORATE SOCIAL RESPONSIBILITY (CSR):

• Ralph Nader proclaims organ to have big social obligations

• Milton Friedman asserts organ = no obligation to do more for society than whats legally
required

• Research shows

• U-shaped relation btw CSR & corporate financial performance

• Greater CSR = higher financial performance

• Lower CSR = higher performance than those w/h moderate SR

• No social need can be met if firm fails

Food suppliers & livestock welfare:

• Cons expect humane treatment of animals

• Cons flocking to organic products

Wildlife welfare:

• Cons globally becoming increasingly intolerant that directly/indirectly destroys wildlife

• Esp endangered wildlife (tigers, elephants, whales, songbirds & coral reefs)

What firms are best CSR Stewards:

• Companies ranked in 7 categories:

1. Envir

2. Climate change

3. EE relations
 4. Human rights

5. Corporate governance

6. Financial performance

7. Philanthropy & community support

IMPLICATIONS FOR STRATEGISTS:

1. Ethical violations can destroy comp advantage

2. Leadership sets ethical tone

3. Strategists lead by example

4. Ethics = foundation of all business pracs & long-term success

IMPLICATIONS FOR STUDENTS:

1. Triple bottom line (ppl, planet, profit) as guiding framework

2. Ethical & envir responsible is essential

3. Compare with competitors to highlight areas for improvement

4. Give financially sound strats for CSR that enhance business success

WEEK 3: LESSON 5: TYPES OF STRATEGIES

Long term objectives:

• Results from pursuing certain strats

• 2-5 yrs

• W/out LT objectives, organ drift aimlessly towards unknown end

5 characteristics of objectives:

1. Quantitative (measurable)

2. Understandable (clear)

3. Challenging (achievable)

4. Compatible (consistent vertically & horizontally in chain of command)

5. Obtainable (realistic)

Benefits of having clear objectives:

1. Allow synergy

2. Aid in design of jobs

3. Aid in allocation of resources

4. Est priorities

5. Reduce uncertainty

6. Minimise conflicts

7. Stimulate exertion

Financial vs Strategic Objectives:

• Financial

• Incl. growth in revenues, growth in earnings, higher dividends, larger profit margins,
greater return on investment, higher earnings per share, rising stock price, improved
cash flow etc

• Strategic

• Incl. larger market share, quicker on-time delivery, shorter design-to-market times,
lower costs, higher products, wider geographic coverages, achieving tech
leadership, new/improved products

• All ahead or done better than rivals

Avoid managing by Crisis, Hope, Extrapolation & Mystery (CHEM):

• Not managing by objectives but by

• Managing by Crisis

• Managing by Hope

• Managing by Extrapolation

• Managing by Mystery

TYPES OF STRATEGIES:

• Most organs simultaneously pursue combo of 2/+ strats

• For combo strategy, exceptionally risky if carried too far

• No organ can afford to pursue all strats that might benefit firm

• Difficult decisions must be made & priorities must be est

Forward integration

• Gaining ownership/increased control over distributors/retailers

Backward integration

• Seeking ownership/increased control of firm’s suppliers

Horizontal integration

• Seeking ownership/increased control over competitors

Market penetration

• Seeking increased market share for present g/s in present markets through greater
marketing efforts

Market development

• Introducing present g/s into new geographic area

Product development

• Seeking increased sales by improving present g/s or developing new 1s

Related diversification

• Adding new, related g/s

Unrelated diversification

• Adding new, unrelated g/s

Retrenchment

• Regrouping through cost & asset reduction to reserve declining sales & profits

Divestiture

• Selling division or part of organ

Liquidation

• Selling all company’s assets (in parts) for tangible worth

Levels of strategies:

• Not just task for top lvl

• Middle & lower lvl also involved in strategic-planning process to extent possible

• Large firms = x4 lvls of strategies

1. Corporate

• CEO

2. Divisional

• Division president or exec VP (only for big companies)

3. Functional
 • Finance, marketing, info systems, HR managers

4. Operational

• Plant, sales, production managers

WEEK 3: LESSON 6: PORTERS 5 GENERIC STRATEGIES AND MEANS OF ACHIEVEMENT

Integrations strategies:

Forward:

1. Organ present distributors esp expensive

2. Availability of quality distributors ltd as to offer comp advantage

3. Organ competes in growing industry

4. Organ has capital & HR to manage distributing own products

5. Advantages of stable productions = high

6. Present distributors/retailers = high profit margins

Backward:

1. Organ present supplier esp expensive/unreliable

2. Nr of suppliers = small & nr of comp = large

3. Organ competes in growing industry

4. Organ has capital & HR

5. Advantages of stable prices = NB

6. Present suppliers = high profit margins

7. Organ needs quickly acquire needed resource

Horizontal:

1. Organ gain monopolistic characteristics in particular area/region w/out being challenged by

federal gov

2. Organ competes in growing industry

3. Increased economies of scale = comp advantage

 4. Organ has capital & human talent

5. Competitors faltering due to lack of managerial expertise

6. Firm desires to enter new geo market quickly

Intensive strategies:

Market penetration:

1. Current markets not saturated w/h particular g/s

2. Usage rate of present cust could be increased significantly

3. Market shares of major comp = declining, total industry sales = increasing

4. Correlation btw dollar sales & dollar marketing expenses = high

5. Increased economies of scale = major comp advantages

Market development:

1. New channels of distribution available = reliable, inexpensive, good quality

2. Organ = successful @ what it does

3. New untapped/unsaturated market exists

4. Organ = need capital & HR to manage expanded operations

5. Organ = excess production capacity

6. Organ = basic industry = rapidly becoming global in scope

7. Consumption habits = similar in other geo areas

Product development:

1. Organ = successful goods @ maturity state of life cycle

2. Organ competes in industry characterised by rapid tech developments

3. Major comp = better-quality goods @ comparable prices

4. Organ competes in high-growth industry

5. Organ = strong research & development capabilities

Diversification strategies:

• Companies favor related diversification strategies to capitalise on synergies:

1. Transferring competitively valuable expertise, tech know-how or other capabilities from 1

bus to another

2. Combo of related acts of separate bus into single operation to achieve lower costs

3. Exploiting common use of known brand

4. Using cross-business collab to create strengths

Related:

• Value chains = competitively valuable cross-business strat fits

1. Organ competes in no-growth or slow-growth industry

2. Adding new (related) goods would enhance sales of current goods

3. New (related) goods offered @ highly competitive prices

4. New (related) products = seasonal sales lvls that counterbalance organ’s existing peaks &
valleys

5. When organ = strong management team

Unrelated:

• Value chains = dissimilar that no competitively values cross-business relationships exist

1. Existing markets for organ present products = saturated

2. Organ competes in highly comp or no-growth industry, indicated by low industry profit
margins & returns

3. Organ’s present channels of distribution used to market & new products to current
customers

4. New products = countercyclical sales patterns compared to present products

5. Organ = capital & managerial talent needed to compete successfully in new industry
Defensive strategies:

Retrenchment:

• Regroups through cost & asset reduction to reverse declining sales & profits

1. Organ plagued by inefficiency, low profitability & poor EE morale & pressure from
stakeholders to improve performance

2. Organ fails to capitalise on external opp’s & minimise external threats, take advantage of
internal strengths & overcome internal weaknesses over time (when organ strategic
managers have failed)

3. Organ has grown so large so quickly that major internal reorgan is needed

Divestiture:

• Selling division or part of organ

• Often used to raise capital for further strategic acquisitions or investments

1. Organ pursued a retrenchment strategy & failed to accomplish improvements

2. Division = responsible for organ’s overall poor performance

3. Division of misfit w/h rest of organ

4. Large amount of cash needed quickly & cannot be obtained reasonably

5. Gov antitrust action threatens an organ

Liquidation:

• Selling all company’s assets (in parts) for their tangible worth

1. Organ pursued retrenchment & divestiture = not worked

2. Stockholders of firm can minimise losses by selling organs assets

Value chain analysis and benchmarking:

VCA:

• Process where firm determines value (price minus cost)

• Of each & all acts

 • That went into producing & marketing a good

• From purchasing raw materials to manufacturing, distributing & marketing

1. VC acts identified & assessed

2. Core competencies arise in some acts

3. Some core competencies evolve into distinctive competencies

4. Some distinctive competencies yield sustained competitive advantages

Benchmarking:

• Examination of VA acts across an industry

• To determine “best practices”

• Among competing firms

• Firms engaging in benchmarking for purpose of duplicating/improving on those best

practices

MICHEAL PORTER’S 2 GENERIC STRATEGIES:

Cost leadership:

• Emphasises producing standardised products @ very low per-unit cost for cons who are
price-sensitive

• Type 1: low-cost

• Offers g&s to wide range of customers @ lowest price available on market

• Type 2: narrow or focusesd low-cost

• Offers g&s to small range of customers @ 1 of lowest prices in market

Differentiation:

• Aimed @ producing g&s considered unique industry-wide & directed @ cons who are
relatively price-insensitive

• Type 3: wide target market

 • Type 4: narrow target market

Cost leadership Differentiation

Market segments

Broad Type 1 Type 3

Narrow Type 2 Type 4

MEANS FOR ACHIEVING STRATEGIES:

• BUILD from within to grow (organic growth, blue ocean strategy)

• BORROW from others to grow (joint venture)

• BUY others to grow (mergers & acquisitions)

6 reasons why mergers & acquistions fail:

1. Integration difficulties up & down 2 VC’s

2. Taking on too much new debt the target firm owes or to buy the target

3. Inability to achieve synergy

4. Too much diversification

5. Difficult to integrate different organ culture

6. Reduced EE morale due to layoffs & relocations

12 potential benefits of merging or acquiring:

1. Improve capacity utilisation

2. Make better use of existing sales force

3. Reduce managerial staff

 4. Gain economies of scale

5. Smooth out seasonal trends in sale

6. Gain access to new suppliers, distributors, customers, products & creditors

7. Gain new tech

8. Gain market share

9. Enter global markets

10. Gain pricing power

11. Reduce tax obligations

12. Eliminate competitors

1ST-MOVER ADVANTAGES:

• Benefits a firm may achieve by entering new market or developing a new g/s prior to rival
firms

X6 benefits of being a first mover:

1. Secure access & communiaction to rare resources

2. Gain new knowledge of critical success factors & issues

3. Gain market share & position in best locations

4. Est & secure LT relations w/h customers, suppliers, distributors, investors

5. Gain cust loyalty & commitments

6. Gain patent protection early

STRATEGIC MANAGEMENT IN NONPROFIT & SMALL FIRMS:

Difference btw non-profit & for-profit:

1. NP = no tax

2. NP = no SH to give capital

Examples of NP’s:
 1. Educational institutions

2. Gov agencies & departments

3. Small firms

IMPLICATIONS FOR STRATEGISTS:

1. Est clear vision & mission

2. Formulate strategies

3. Implement strategies

4. Evaluate & monitor results

WEEK 4: LESSON 7: INTERNAL ASSESSMET

Internal assessment phase of strategy formulation

Internal audit:

• Requires

1. Gathering

2. Assimilating &

3. Prioritising info

• About the firms

1. Management, Marketing, Finance & accounting, Productions/operations, Research &

development, Management info system operations

• Provides more opps for participants to understand how their jobs, departments & divisions
fit into whole firm

Resource-based view (RBV):

• Internal resources more NB for firm than external factors when achieving sustaining comp
advantage

• Proponents of RBV state organ performance primarily depends on internal resources

• Internal resources grouped into

 1. Tangible

2. Intangible

• Empirical factors:

• For resoruce to be valuable, needs to be

1. Rare

2. Hard to imitate or

3. Not easily substitutable

• Enables firm to implement strats that

1. Improve efficiency & effectiveness &

2. Lead to sustainable comp advantage

Key internal forces:

• Distinctive competencies

• Firms strengths cannot be easily matched/imitated by comp

• Building comp advantage involved taking advantage of distinctive competencies

Management:

Functions of management consist of 4 basic activities:

1. Planning

• Managerial acts related to prepping for future

• Example: est objectives, devising strats, develop policies

2. Organising

• Managerial acts result in structure of task & authority relations

• Example: organ design, JD & JS, job design & analysis

3. Motivating

• Efforts directed toward shaping human behaviour

• Example: comm, leadership, teamwork, HRM

4. Controlling

• Managerial acts compare actual results w/h planned results

• Example: quality control, financial control, rewards, sanctions

Stages of Strategic Management process when most important:

• Planning

• Strategy formulation

• Organising

• Strategy implementation

• Leading

• Strategy implementation

• Controlling

• Strategy evaluation

X6 ways HRM can provide competitive advantage:

1. Analyse turnover to determine where problems lie

2. Measure & monitor EE engagement & morale scores

3. Track EE data to identify high & low performers

4. Provide guidance on legal issues related to all personnel matters

5. Determine going market rates for talent & align compensation w/h company goals

6. Design EE development & training pathways that take into acc strat & LT needs

Production/operations function:

• All acts that transform inputs into g&s

• Deals w/h inputs, transformations & outputs

Basic decisions areas in production/operations:

 1. Process

• Robotics, process flow analysis, transportation analysis, line balancing

2. Capacity

• Forecasting, scheduling, capacity planning, capacity utilisation

3. Inventory

• Lvl of raw matters, what to order, when to order, how much to order

4. Workforce

• Managing the skilled, unskilled, clerial by job design, job enrichment

5. Quality

• Quality control, sampling, testing, quality assurance, cost control

Integrating strategy & culture:

• Organ culture = effects planning acts

• Strategy capitalising cultural strengths (such as strong work ethic) help management swiftly
& easily implement changes

• Organisational culture

• Pattern of behavior that has been developed by organ as it learns to cope w/h
problem of external adaptions & internal integration

• That has worked well enough to be considered valid & to be taught to new members
as correct way to perceive, think & feel

• Aspects of organ culture:

1. Strong work ethic, arrive early & leave late

2. High ethical beliefs, clear code of bus ethics followed

3. Formal clothing

4. Informal clothing for casual days

5. Socialise together outside work

6. Don’t question supervisors decision

 7. Encourage whistle-blowing

8. Have numerous meetings

Management audit checklist of questions:

1. Does firm use SM concepts?

2. Are company objectives & goals measurable & well communicated?

3. Do managers delegate authority well?

4. Is EE morale high?

5. Do managers delegate authority well?

6. Are JD’s & JS’s clear?

MARKETING:

• Process of defining, anticipating, creating & fulfilling customer needs & wants

5 basic acts in marketing:

1. Marketing research & target market analysis

2. Product planning

3. Pricing products

4. Promoting products

5. Placing or distributing products

Marketing research & target market analysis:

• Marketing research

• Systematic gathering, recording & analysing of data about problems

• Relating to marketing of g&s

• Can uncover critical strengths & weaknesses

 • Target market analysis

• Examination & evaluation of consumer needs & wants

Marketing mix components:

1. Product

• Quality, features & options, styles & brands, packaging, product line

• Important when pursuing product development or diversification

2. Place

• Intermediaries that take good from producer to end customers

• Distribution channels & coverage, outlet location, inventory lvls, transportation

3. Promotion

• Advertising, personal selling, sales promotion, publicity

• Promotional tools designed to inform cons about goods

4. Price

• Deciding amount an indiv must exchange to receive firms product offering

• Strategies based on cost, demand, comp, customer needs

• Lvl, discounts, allowances, payment terms

Marketing audit checklist of questions:

1. Are markets segmented effectively?

2. Is organ positioned well among comp?

3. Are present channels of distribution reliable & cost effective?

4. Is firm conducting & using market research effectively?

5. Are product quality & customer service good?

6. Does firm have effective promotional strategy?

FINANCE & ACCOUNTING FUNCTIONS:

X3 decisions:

1. Investment decision

• Allocation & reallocation of capital & resources to projects, products, assets & divisions of
organ

2. Financing decision

• Capital structure for firm & incl. examines methods for firms to raise capital

3. Dividend decision

• Amount of funds retained in firm compared to amount paid to stockholders

Financial ratios:

• Computed from income statement & balance sheet

1. How has each ratio changed over time?

2. How does each ratio compare to industry norms?

3. How does each ratio compare w/h key competitors?

Financial ratios:
Finance & accounting audit checklist:

1. Where is the firm financially strong & weak as indicated by financial ratio analyses?

2. Can firm raise needed ST capital?

3. Can firm raise needed LT capital through debt or equity?

4. Does firm have sufficient working capital?

5. Are capital budgeting procedures effective?

6. Are dividend payout policies reasonable?

7. Is the firms debt situation excellent?

MANAGEMENT INFORMATION SYSTEMS (MIS):

• Receive raw material from ext & int evaluation of organ

• Improves performance of enterprise by improving quality of managerial decisions

• Collects, codes, stores, synthesises & presents info into such manner that answers NB
operating & strategic questions

Business analytics:

• Bus technique that involves using software to mine huge volumes of data to help executives
make decisions

• Called predictive analytics, machine learning, data mining

INTERNAL FACTOR EVALUATION (IFE) MATRIX:

Actionable-quantitative-comparative-divisional (AQCD) test:

• When identifying & prioritising key internal factors in strat planning, make sure factors
selected meet following criteria:

1. Actionable

• Meaningful, helpful in deciding what actions or strategies

2. Quantitative

• %, ratios, dollars & nr

3. Comparative

• Changes over time

4. Divisional

• Firms products &/or regions so interferences can be drawn regarding what goods & regions
are doing well or not

Steps in developing an IFE Matrix:

Step 1

• Develop full & narrow list of key internal factors

Step 2

• Assign weights to key interal factors

Step 3

• Assign ratings to key internal factors

Step 4

• Obtain weighted score

Step 5

• Obtain total weighted score

Guidelines for developing an IFE Matrix:

1. Use narrow industry the firm competes in

2. State factors so they pass actionable-comparative-divisional (AQCD) test

Example of IFE Matrix:

1. List key internal factors as identified in internal-audit process

2. Assign weight that ranges from 0.0 (not important) to 1.0 (all-important) to each factor

3. Assign 1-4 rating to each factor to indicate whether factor represents strengths or
weaknesses
 4. Multiply each factor’s weights by rating to determine weighted score for each variable

5. Sum weighted scores for each variable to determine total weighted score for organ

IMPLICATIONS FOR STRATEGISTS:

Gain & sustain comp advantage:

1. Est clear vision & mission

2. Formulate strategies

3. Implement strategies

4. Evaluate & monitor results

WEEK 4: LESSON 8: EXTRERNAL ASSESSMET

EXTERNAL ASSESSMENT PHASE OF STRATEGY FORMULATION:

External audit

• Identifies & evaluating trends & events beyond control of single control

• Key opps & threats confronting an organ so managers can formulate strats to take
advantage of opps & avoid/reduce impact of threats

• Aimed at identifying key variables that offer actionable responses

• Firms respond offensively or defensively to factors

• By forming strats that take advantage of external opps or minimise impact of potential
threats

Key external forces:

1. Economic forces

2. Social, cultural, demographic, envir (SCDE) forces

3. Political, gov, legal forces

4. Tech forces
 5. Competitive forces

The Actionable-Quantitative-Comparative-Divisional (AQCD) Test:

• Identifying 7 prioritising key external factors in strat planning, x4 factors NB:

1. Actionable

2. Quantitative

3. Comparative

4. Divisional

• AQCD measures the quality of an external factor

10 EXTERNAL FORCES THAT IMPACT ORGANISATIONS:

1. ECONOMIC

• Direct impact on potential attractiveness of strats

• Interest rates, inflation rates, lvl of dispo income, price fluctuations

2. SOCIAL, CULTURAL, DEMOGRAPHIC, ENVIRONMENT (SCDE)

• Impact strat decisions on all g&s, markets & customers

 • Forces shape way ppl live, work, produce & consume

• Nr of marriages, divorces, births, deaths

3. POLITICAL, GOVERNMENTAL & LEGAL

• Local, state & federal laws

• Regulatory agencies & special interest groups

• Have major impact on strats of small, large, for-profit & nonprofit

4. TECHNOLOGICAL

• New tech fuels innovations in industries & impact strategy-planning decisions

• Internet, 3D printing, biotech, phones

• Firms = CIO & CTO who work to ensure info needed to implement & evaluate strats =
available where & when needed

5. COMPETITIVE

• Identify rival firms

• Determine their SWOT, objectives & strats

Legal & ethical ways to obtain comp intelligence:

• Reverse-engineer rival firm goods

• Analyse rival firms Form 10-K

• Search online databases

• Hire top execs from rival firms

• Buy social media data about cons of all firms in industry

Competitive intelligence (CI):

 • Systematic & ethical process

• For gathering & analysing info

• About comp’s acts & general bus trends to further bus own goals

PORTER’S 5 FORCES MODEL:

1. Rivalry among comp firms

• Most powerful

• Focus on comp advantage of strats over other firms

• Conditions that cause high rivalry:

1. Nr of firms = high

2. Competing firms = similar size

3. Comp firms = similar capabilities

4. Fixed costs = high among comp

5. Cons can switch brands easily

2. Potential entry of new comp

• Barriers to entry:

• Lack of experience

• Strong cust loyalty

• Strong brand preference

• Tariffs

• Gov regulatory policies

• Large capital requirements

• Undesirable locations

• Quality, pricing & marketing can overcome barriers

3. Potential development of substitute goods

• Pressure increases when:

• Prices of substitute decrease

• Cons switching costs decrease

4. Bargaining power of suppliers

• Power increased when:

• Few suppliers

• Few substitutes

• Cost of switching raw materials = high

• Backward integration = gaining control/ownership of suppliers

5. Bargaining power of consumers

• Cust being concentrated/buying in volumes affects intensity of comp

• Cons power higher when goods are standard or undifferentiated

Consumers gain bargaining power under the following circumstances:

1. If buyer can inexpensively switch

2. If buyers = NB

3. If sellers = struggling in face of falling cons demand

4. If buyers = informed about seller products, prices & costs

5. If buyer = discretion in whether & when they purchase product

KEY SOURCES OF INFO FOR EXTERNAL AUDIT:

1. Unpublished

• Cust surveys, market research, speeches by professionals & SH meetings, TV programs,

interviews, convos w/h STH
2. Published

• Strat info

• Periodical, journal, reports, gov doc’s, abstracts, books, newspapers, manual

FORECASTING & MAKING ASSUMPTIONS:

1. Forecasts

• Educated assumptions about future trends & events

• No forecast = perfect

2. Assumptions

• Best present estimates of impact of major external factors

• Managers = little if any control but

• Can make significant impact on performance or

• The ability to achieve desired results

EXTERNAL FACTOR EVALUATION (EFE) MATRIX:

1. Political

2. Economic

3. Social

4. Technological

5. Legal & governmental

6. Environmental

7. Cultural

8. Democratic

9. Competitive
STEPS TO DEVELOP AN EFE MATRIX:

STEP 1:

• Develop full & narrow list of key external factors

STEP 2:

• Assign weights to key external factors

STEP 3:

• Assign ratings to key external factors

STEP 4:

• Obtain weighted scores

STEP 5:

• Obtain total weighted score

Example of EFE Matrix:

1. List 20 key external factors

2. Weight from 0.0 to 1.0

3. Rate effectiveness of current strats from 1-4

4. Multiply weight * rating

5. Sum weighted scores

COMPETITIVE PROFILE MATRIX (CPM):

• Identifies firm’s major comp, strengths & weaknesses in relation to sample firms strategy
positions

• Critical success factors incl internal & external issues

WEEK 5: LESSON 9: STRATEDGY GENERATION AND SELECTION

CHAPTER 6: STRATEGY ANALYSIS & CHOICE

• Identifies & evaluates trends & events beyond the control of single firm

• Firm presents strategies, objectives, vision, mission + external & internal audit info

• Provides basis for generating & evaluating feasible alt strategies

Process of Generating & Selecting Strategies:

• Manageable set of most attractive alt strats must be developed

• Advantages, disadvantages, trade-offs, costs & benefits need to be determined

• Identify & evaluating alt strats involves many managers & EE’s who assembled organ vision
& mission, performed external audit & internal audit

• Alt strats proposed

• Need to be considered & discussed in meetings

• Listed in writing

• Feasible strats = identified, given & understood

• Strats ranked in order of attractiveness

STRATEGY-FORMULATION ANALYTICAL FRAMEWORK:

STAGE 1: INPUT STAGE

• Summarise basic input info needed to formulate strats

• Consists of

1. EFE matrix

2. IFE matrix

3. Competitive profile matrix (CPM)

STAGE 2: MATCHING STAGE

• Generates feasible alt strats

• By aligning key ext & int factors

 • Includes

1. SWOT

2. SPACE (Strategic Position & Action Evaluation Matrix)

3. BCG (Boston Consulting Group Matrix)

4. IE (internal-external Matrix)

5. Grand Strategy Matrix

STAGE 3: DECISION STAGE

• Quantitative strategic planning matrix (QSPM)

• Reveals relative attractiveness of alt strats &

• Provides objective basis for selecting specific strats

SWOT MATRIX:

• SO

• Strategies: use firms int strengths to take advantage of ext opps

• WO

• Strategies: aim to improve int weakness by taking advantage of ext opps

• ST

• Strategies: use firms strengths to avoid/reduce impact of ext threats

• WT

• Strategies: defensive tactics directed @ reducing int weakness & avoid ext threats

Consulting SWOT:

1. List firm’s key int S

2. List firm’s key int W

3. List firm’s key ext O

4. List firm’s key ext T

 5. Match int S w/h ext O & record resultant SO strats

6. Match int W w/h ext O & record resultant WO strats

7. Match int S w/h ext T & record resultant ST strats

8. Match int W w/h ext T & record resultant WT strats

SPACE MATRIX:

• X4 quadrant framework

• Indicates whether aggressive, conservative, defensive or comp strategy = most appropriate

• X2 internal dimensions

1. Financial position (FP)

2. Competitive position (CP)

• X2 external dimensions

1. Stability position (SP)

2. Industry position (IP)

• X2 most NB determinants of overall strat position

Steps in doing a SPACE analysis:

1. Select set of variables to define FP, CP, SP & IP

2. Assign numerical value ranging from +1 (worst) to +7 (best) to each variable that makes up
FP & IP

Assign numerical value ranging from -1 (best) to -7 (worst) to each variable that makes up SP & CP

3. Compute average score for FP, CP, IP & SP

4. Plot the average scores for FP, IP, SP & CP on axis

5. Add 2 scores on x axis & plot resultant point on X

Add 2 scores on y axis & plot resultant on point Y

Plot intersection of new XY point

6. Draw directional vector from original of SPACE

Matrix through new intersection point

Vector reveals type of strats recommended (aggressive, competitive, defensive or conservative)

Examples of SPACE strategy profiles:
BOSTON CONSULTING GROUP (BCG) MATRIX:

• Graphically portrays differences among divisions

• In terms of relative market share position & industry growth rate

• Allows multidivisional organ to manage portfolio of bus by examining relative market share
position & industry growth rate of each division relative to all other division

• Major benefit:

• Draws attention to cash flow, investment characteristics, needs of organs various

divisions

Reasons to disclose financial info by segment (by division):

1. STH = better understand firm = greater support

2. Managers & EE = better understand firm = greater commitment

3. Disclosure enhances comm process (in & out of organ)

Reasons to NOT disclose financial info by segment (by division):

1. Avoid rival firms obtaining free comp info

2. Avoid performance failures being exposed

3. Avoid rivalry among segments = too intense

4. Avoid lucrative markets = revealed to rivals

BCG Matrix:
Question Marks (quadrant 1):

• Organ decide whether to strengthen them

• By pursuing intensive strategy (market penetration, market development, product

development) or to sell them

Stars (quadrant 2):

• Reps organs best long run opp for growth & profitability

Cash cows (quadrant 3):

• Generate cash in excess of their needs

• Managed to maintain strong position for as long as possible

Dogs (quadrant 4):

• Compete in slow- or no-market-growth industry, bus liquidated, divested or trimmed down

through retrenchment
THE INTERNAL-EXTERNAL (IE) MATRIX:

• 2 key dimensions

1. IFE total weighted scores on x-axis &

2. EFE total weighted scores on y-axis

• 3 major regions

1. Growth & build

2. Hold & maintain

3. Harvest or divest

GRAND STRATEGY MATRIX:

• Based on 2 evaluate dimensions:

1. Competitive position

2. Market (industry) growth

Quadrant 1:

• Continued concentration on current markets (market penetration & development) &

• Products (product development) in appropriate strategy

Quadrant 2:

• Unable compete effectively

• Need to determine why firm’s current approach = ineffective & how company can best
change to improve competitiveness

Quadrant 3:

• Make drastic changes quickly to avoid further decline & possible liquidation

• Extensive cost & asset reduction (retrenchment) should be pursued 1st

Quadrant 4:

• High cash-flow lvls & ltd internal growth

• Needs & often-can pursue related or unrelated diversification successfully

THE DECISION STAGE: QSPM

• Objectively indicates which alt strats = best

• Uses input from Stage 1 analyses &

• Matching results from Stage 2 analyses to decide objectively among alt strats

QUANTITATIVE STRATEGIC PLANNING MATRIX (QSPM):

X6 steps required to develop a QSPM:

1. Make list of firm’s ext O & T & internal S & W in left column

2. Assigns weights to each key ext & int factor

3. Examine Stage 2 (matching) matrices, & identify alt strats that should be considered to
implement

4. Determine Attractiveness Scores (A S)

 5. Compute Total Attractiveness Scores

6. Compute Sum Total Attractiveness Score

Positive features & limitations of QSPM:

• Positive

• Set strats can be examined sequentially or simultaneously

• Requires strategists to integrate pertinent ext & int factors in decision process

• Can be adopted for use by small & large for-profit & non-profit organs

• Limitations

• Always requires informed judgement

• Only as good as prereq info & matching analyses on which its based

HOW TO ESTIMATE COSTS ASSOCIATED WITH RECOMMENDATIONS:

• Recommendation

• Any alt strat that is selected for implementation

• Due to monetary/non-monetary constraints

• No firm can implement all alt strats proposed in matching matrices

• So use QSPM & expert judgement to select particular strats

CULTURE ASPECTS OF STRATEGY ANALYSIS & CHOICE:

• Organ culture

• Set of shared values, beliefs, attitudes, customs, norms, rituals, personalities,

heroes & heroines that describe firm
 • Strats need fewer cult changes = more attractive because extensive changes = more time &
effort

• If firms strategy supported by organ culture, managers implement changes swiftly & easily

• If supportive culture doesn’t exist & not cultivated, strat changes = difficult to implement

POLITICS OF STRATEGY ANALYSIS & CHOICE:

• All organs = political

• Political maneuvering consumes valuable time, subverts organ objectives, diverts human
energy

• Results in loss of valuable EEs

• Political bias & personal pref = unduly embedded in strat choice decisions

• Successful strats lead strat BUT don’t dictate it

• Give few orders, announce few decisions, depend heavily on informal questioning, &

• Seek to probe & clarify until consensus emerged

WEEK 6: LESSON 10: STRATEDGY IMPLEMENTATION

STRATEGIC MARKETING ISSUES:

Countless marketing considerations affect success/failure of strat implementation effort,

such as:

1. How to make advertisements more interactive = more effective

2. How to take advantage of social-media convo’s about bus & company

3. To use exclusive dealerships/multiple channels of distribution

4. To use heavy, light, or no TV advertising vs online advertising

5. To limit (or not) share of bus done w/h single supplier/bus cust

6. To be price leader or price follower

7. To offer complete/ltd warranty

8. To extend existing product line or create new line of products

Segment & target markets effectively:

• Firms engage in market segmentation, dividing market into distinct subsets of cust

• Differs from 1 another in product needs & buying habits

• Segmentation requires strats to determine

1. Characteristics & needs of cons,

2. To analyse cons similarities & differences &

3. Develop cons group profiles

Product positioning:

• After markets = segmented & 1/more segments = selected as target market = fims engage in
positioning

• Positioning entails designing marketing mix that offers unique value to target cysts

• Product

1. Offering

2. Price

3. Way its promoted or advertised &

4. Channels through which its sold

• All complement 1 another & designed to attract particular target market

Perceptual mapping:

• Firms continuously monitor image of their brands as perceived by cons

• Product-positioning tool widely used in marketing = perceptual mapping or developing

schematic representations to reflect how firms g&s compare to comp in mind of cons

• Used for deciding how to better needs & wants of cons groups

STRATEGIC MARKETING ISSUES:

Technique:
 1. Select key criteria that effectively differentiate products in industry

• Specifically key characteristics of brand offering that = unique value to target customers

2. Diagram 2-D product-positioning map w/h specified criteria on each axis

3. Plot major comp brands in resultant 4-quadrant matrix

4. Assess whether brands location in matrix = ideal

• Esp relative to comp

5. Reposition brands offering as needed to shift cons perceptions of brand to location that
provides comp advantage over rival brands

Engage customers in social media:

• Social media marketing = NB in strategy issue & effective way to understand cons
perceptions of brands

• Marketing = evolved to be more about binding 2-way relation w/h cons than informing cons
about g&s

• Companies want cust to interact w/h firm on social media networks

• Example: Facebook, Twitter, LinkedIn, Instagram, Pinterest

MANAGEMENT INFORMATION SYSTEMS (MIS):

• Receives raw material from ext & int evaluation of organ

• Improves performance of enterprise by improving quality of manager decisions

• Collects, codes, stores, synthesises, presents info that answers important operating & strat
questions

Business analytics:

• Bus techniques involves using software to mine huge volumes of data to help exec make
decisions

• Aka predictive analytics, machine learning or data mining

STRATEGY EXECUTION:
TRANSITIONING FROM FORMULATING TO IMPLEMENTING STRATEGIES:

• Successful strat formulation doesn’t guarantee successful strat implementation

• More difficult to do something (strat implementation) than to say you are going to do it (strat
formulation)

• Inextricably linked, strat implementation fundamentally diff from strat formulation

NEED FOR CLEAR ANNUAL OBJECTIVES:

• Annual objectives

• Desired milestones

• An organ needs to achieve

• To ensure successful strat implementation

1. Represents basis for allocating resources

2. Are primary mechanisms for evaluating managers

3. Major instrument for monitoring progress toward achieving LT objectives

4. Est organisational, divisional & departmental priorities

5. Essential for keeping strat plan on track

• Clearly stated & communicated objectives = critical to success in all types & sizes

• Annual objectives

• Measured

• Consistent

• Reasonable

• Challenging

• Clear

• Communicated throughout organ

ESTABLISH POLICIES:
 • Policies

• Specific guidelines, methods, procedures, rules, forms & admin pracs

• Est to support & encourage work towards stated goals

• Essential instruments for strat implementation:

1. Set boundaries, constraints, limits on kinds of admin actions taken to reward & sanction
behaviour

2. Let both EE & managers know what's expected, increasing likelihood that strats will be
implemented successfully

3. Provide basis for management control & allow coordination across organ units

4. Reduce amount of time managers spend making decisions

• Policies clarify what work is to be done & by whom

5. Promote delegation of DM to appropriate managerial lvls where various problems arise

6. Clarify what can & cannot be done in pursuit of organ objectives

ALLOCATE RESOURCES & MANAGE CONFLICT:

Allocate resources:

• All organs = at least 4 types of resources that can be used to achieve desired
objectives:

1. Financial resources

2. Physical resources

3. HR

4. Tech resources

• Resource allocation

• Distributing organs “assets” across products, regions & segments according to

priorities est by annual objectives

• Allocating resources = vital strat implementation activity

Manage conflict:

• Conflict can be disagreement btw 2/+ parties on 1/+ issues

 • Est annual objectives can lead to conflict

• Because indiv have diff expectations & perceptions,

• Schedules create pressure,

• Personalities = incompatible &

• Misunderstandings occur btw line managers & staff managers

MATCH STRUCTURE WITH STRATEGY:

• Structure dictates how objectives & policies = est

• Structure dictates how resources = allocated

• Changes in strategy requires changes in way organ = structured

• 2 main reasons

1. Structure dictates how objectives & policies = est

2. Structure dictates how resources = allocated

TYPES OF ORGAN STRUCTURE:

1. Functional

2. Divisional-by-region

3. Divisional-by-product

4. Divisional-by-customer

5. Divisional-by-process

6. Strategic business unit (SBU)

7. Matrix

1. Functional

• Grp tasks & acts by bus function

• Such as production, operations, marketing, finance etc

• Most widely used structure = functional/centralised type because

a. Simplest &

b. Less expensive

• Advantages

• Simple & inexpensive

• Allows for rapid decision making

• Min need for elaborate control system

• Disadvantages

• Accountability forced to top

• Min career development

• Low EE & manager morale

• Comm problems & narrow thinking

2. Divisional

• Functional acts performed centrally & in separate division

• Organised by

• Geo area

• product/service

• Customer

• Process

• Divisional (decentralised) structure = 2nd most common

• Divisions referred to as

• Segments

• Profit centers or

• Business units

• Small organ grows = more difficulty managing p&s in diff markets

• Advantages

• Clear accountability
 • Creates career development

• Promotes delegation of authority

• More competitive climate internally

• Disadvantages

• Costly

• Duplication of func acts

• Requires skilled management forces

• Requires elaborate control system

3. Strategic Business Unit (SBU)

• Grps similar divisions into strat business units &

• Delegates authority & responsibility for each unit

• To senior exec who reports directly to CEO

• Can facilitate strat implementation by

Improving coordination btw similar divisions &

Channeling accountability to distinct bus units

• As nr, size & diversity of divisions increase,

• Control & evaluating divisional operations = more difficult for strategists

4. Matrix structure

• Most complex

• Because depends on vertical & horizontal flows of authority & comm

• For it to be effective = participative planning, training, clear mutual understanding of roles &
responsibilities, excellent int comm & mutual trust & confidence

• Despite complexity = widely used

• Construction, health care, research & defense

 • Advantages

• Clear project objectives

• Easy to shut down project

• EE clearly see results of work

• Special equipment, personnel, facilities

• Disadvantages

• Shared authority & reporting

• Needs mutual trust & understanding

• Violates unity of command

• Creates dual lines of budget authority

DO’S & DON’TS IN DEVELOPING ORGAN CHARTS:

• 1 never knows for sure if proposed/actual structure is indeed most effective particular firm

• Declining financial performance signals need for altering structure

Guidelines for developing an organ chart:

1. Instead of chairman of board, make chairperson of board

2. Make sure BOD reveals diversity in race, ethnicity, gender & age

3. Make sure chair isn’t also on CEO/president

4. Make sure CEO doesn’t carry title of president

5. Reserve president for division heads

6. Incl. COO if division = large or geo dispersed

7. Make sure only presidents of divisions reports to COO

8. Functional execs (CFO, CIO, CMO etc) reports to CEO not COO

9. Avoid functional type structure for all but smallest firms

10. Decentralise, using divisional structure (when possible)

How to depict an organ chart:

Step 1

• List exec positions by title & number

• Numbering positions enables nrs (rather than boxes/circles)

• To be used in structure diagram to reveal reporting relationship (easier w/h nrs)

Step 2

• Use nrs to denote positions

• Devise chart to show reporting relationships,

• Consistent w/h guidelines

Step 3

• Draw lines connecting nrs to reveal reporting relationships

• Be mindful that a line connecting 1 nr to another means that person reports to other
STRATEGIC PRODUCTION/OPERATIONS ISSUES:

• production/operations capabilities, limitations & policies = enhance/inhibit attainment of

objectives

• Production processes constitute more than 70% of firm’s total assets

3 production/operations issues:

1. Restructuring/reengineering

2. Managing resistance to change

3. Deciding where & how to produce goods

1. Restructuring & reengineering

• Restructuring

• Reducing size

• Ito nr of EEs, divisions/units, hierarchical lvls

• Primary benefit = cost reduction

• Reengineering

• reconfiguring/redesigning work, jobs, processes

• For purpose of improving cost, quality, service or speed

• Doesn’t usually affect organ structure or chart,

• Nor imply job loss or EE layoffs

2. Managing resistance to change

 • Greatest threat to successful strat implementation

• Hinges on managers ability to develop organ climate conducive to change

• Resistance to change = greatest threat to successful strat implementation

• Hinges on managers ability to develop organ climate conducive to change

3. Decide where & how to produce goods

• Incl. availability of major resources, prevailing wage rates, transport costs related to
shipping & receiving, location of major markets, political risks, currency & tax, language &
legal issues, availability of trainable EEs

STRATEGIC HR ISSUES:

• HR issues make or break successful strat implementation

X7 HR issues:

1. Linking performance & pay to strat

• Decisions on salary increase, promotions, merit pay, bonus need to support LT & annual
objectives

• Gain sharing & bonus systems used

• Compensation system needs to be aligned w/h strat outcomes

2. Balancing work w/h home life

• Work & fam strat now represent comp advantage for those who offer benefits:

• Elder care assistance, flexible scheduling, job sharing, adoption, EE help line, pet
care, onsite summer camp, lawn service referrals

3. Developing diverse workforce

• Organ = most effective when workforce mirrors diversity of cust

• 6 benefits of having diverse workforce are

a. Women & minors = different insights, opinions, POVs to be considered

b. Diverse workforce portrays firm committed to nondiscrimination

c. Workforce = mirrors cust base help attract cust, build cust loyalty, design/offer p&s that
meet cust needs/wants

d. Diverse workforce helps protect firm against discrimination lawsuits

e. Women & minors rep huge additional pool of qualified applicants

f. Diverse workforce strengthens firms SR & ethical position

4. Using caution in hiring rivals EE

• Practice of hiring EE from rival firms = long tradition

• But w/h increasing lawsuit-happy envir, firms consider if person had access to “secret
sauce formula”, cust list, program algorithm, confidential info

5. Creating strategy-supportive culture

• All organ = unique culture

• Strategists strive to preserve, emphasise, build on existing culture that supports new strats

• Aspects of existing culture antagonistic proposed strat identified & changed

6. Using caution in monitoring EE social media

• Proponents of companies monitor EE social media acts emphasise:

• Company reputation in marketplace easily damaged by disgruntled EE venting on

social media sites

• Social media records = subpoenaed & used as evidence

• Many companies monitor EE & potential EE social media (legal right to do so) but many
pro’s & con’s
7. Developing corporate wellness program

• Affordable Care Act increased max incentives & penalties ER can use to encourage EE well-
being

WEEK 6: LESSON 11: STRATEDGY EXECUTION

STRATEGY-EVALUATION PROCESS:

X3 basic activities:

1. Examine underlying bases of firms strat

2. Compare expected results w/h actual results

3. Take corrective actions to ensure performance conforms to plans

Why strat evaluation is more difficult today:

1. Domestic & world economies today more interrelated

2. Product life cycle = shorter

3. Tech advancements = faster

4. Changes occur rapidly

5. Comp abound globally

6. Planning cycles = shorter

7. Social media & phones = changed everything

3 STRATEGY-EVALUATION ACTIVITIES:

Corrective actions almost always needed except when:

1. Internal & external factors = not significantly changed &

2. Firm = progressing satisfactorily toward achieving stated objectives

Reviewing bases of strategy:

• Relations btw strategy-evaluation acts (diagram below)

• Reviews the underlying bases of organ’s strat could be approached by developing a revised
EFE Matrix & IFE Matrix

• Revised EFE Matrix & IFE Matrix addressed address following questions:

1. How have comp reacted to our strats?

2. How have comp strats changed?

3. Have major comp S & W changed?

4. Why are comp making strat changes?

5. Why are some comp strats more successful than others?

6. How fair can our major comp be pushed before retailing?

Measuring organ performance:

• Strategists use common quantitative criteria to make 3 critical comparisons:

1. Comparing firm's performance over diff time periods

2. Comparing firm’s performance to comp

3. Comparing firm’s performance to industry averages

Taking corrective actions:

• Final strategy-evaluation activity, taking corrective actions, requires making changes to

competitively reposition a firm for future

BALANCED SCORECARD:

• Developed by Harvard Business School professors

• Robert Kaplan & David Norton

• Strategy evaluation & control technique

• Wide variation in how scorecard used

• Based on need to “balance” financial measures w/h nonfinancial 1s

BOARD OF DIRECTORS: GOVERNANCE ISSUES

• BOD

• Grp of indivs @ top of organ w/h oversight & guidance

• Over management & who look out for SH interest

• Governance

• Act of oversight & direction

CHALLENGES IN STRATEGIC MANAGEMENT:

1. Deciding whether process should be more of art or science

• Contends need that firms need to systematically assess ext & int envirs, conduct research,
evaluate pros & cons of alts, perform analysis & then decide on course of action

• Answer to art vs science question = 1 that strats must decide for themselves &
 • Certainly 2 approaches = not mutually exclusive

2. Deciding whether strats should be visible or hidden from STH

• Interesting aspect of comp analysis discussion

• Decide for themselves whether risk or rival firms knowing &

• Exploiting firms strats = worth benefit of improved EE & STH motivation & input

• Strats decide what's best for firms

• Why do be open w/h strat process:

a. Managers, EE & STH contribute to process

b. Investors, cr & STH have greater basis 4 support if aware of what firms doing

c. Visibility promote democracy, secrecy promotes autocracy

d. Participation & openness enhances understanding, commitment & comm

• Why firms prefer to keep secret:

a. Free dissemination of firm strategy easily translate to comp intelligence for rivals who
expect to exploit info

b. Secrecy limits criticisms, 2nd guessing & hindsight

c. Participants in visible strat process = attractive to rivals who lure them aware

d. Secrecy limits rivals from imitating/duplicating strats & undermining them

3. Promotes workplace democracy

• EE @ more & more companies voting on more & more issues

• Research suggest giving voice/vote even on small issues

4. Contingency planning
 • Regardless of how carefully strats formulated, implemented & evaluated unforeseen events
can make strat obsolete

• To min impact of potential threats, organ develop contingency plans as part of strategy-
evaluation process

• Contingency plans

• Alt plans put into effect

• If certain key events don’t occur as expected

• Some contingency plans commonly est:

1. If major comp withdraws from market, what should we do?

2. If sales objectives not reached, what do we do to avoid profit loss?

3. If demand for new product exceeds plans, what actions should firm take to meet higher
demand?

4. If certain disasters occur, what actions do we take?

5. Auditing

• Frequently used tool in strat evaluation

• Systematic process of objectively obtaining & evaluating evidence

• Regarding assertions about econ actions & events to ascertain

• Degree of correspondence

• Btw assertions & est criteria &

• Communicating results to interested users

GUIDELINES FOR EFFECTIVE STRATEGY MANAGEMENT:

1. Keep process simple & easily understandable

2. Eliminate vague planning jargon

3. Keep process non routine, vary assignments, team membership, meeting formats, settings
& even planning calendar

4. Welcome bad news & encourage devils advocate thinking

5. Don’t allow technicians to monopolise planning process

6. To extent possible, involve managers from all areas of firm