Strategic Management Lecture Notes PDF

Strategic Management Wk1 Lecture Presentation Facilitator: Collin 1 Turner 9/8/2023 Prepared by Collin Turner  Course Rationale  The effective management of organizations today, is essentially important for gaining and maintaining competiti...

Strategic Management Wk1 Lecture Presentation Facilitator: Collin 1 Turner 9/8/2023 Prepared by Collin Turner  Course Rationale  The effective management of organizations today, is essentially important for gaining and maintaining competitive advantage in the global business environment.  The course focuses on a wide range of areas in strategic management relating to formulation of strategies for organizations, competitive and industry analysis, evaluation of strategic choices, and strategic surveillance and controls. 2 9/8/2023 Prepared by Collin Turner  Course Rationale  The course is to provide an opportunity for participants to understand and be competent in applying the steps required to develop a strategic management perspective in their respective work environments. 3 9/8/2023 Prepared by Collin Turner  Course Description  This course introduces participants to the essential principles of Strategic Management.  Participants will develop an appreciation of the importance of strategic management to the effective and successful management of business activities, as well as providing clear, motivating, strategic vision for an organization. 4 9/8/2023 Prepared by Collin Turner TEACHING STRATEGIES  Lectures  Class Discussions  Group Activities  Case Studies  Presentations  Handouts 5 9/8/2023 Prepared by Collin Turner  ASSESSMENT Online Delivery 1. Pre-Mid Module Quiz/DQ 5% 2. Case Studies/Assignments 15 % 3. Group Project & Presentation (Written project 15%/Presentations 5%) 20% 4. Mid-Module Exam 20 % 5. End of Module Exam (including Case Studies & Essays) 40% Total 100 % 6 9/8/2023 Prepared by Collin Turner LEARNING RESOURCES  Books, Periodicals, Business Magazines, handouts, Newspaper Articles, Journals, etc Required Text(s) [Latest Edition]: RECOMMENDED TEXT(S) David, F. (2017). Strategic Management: A competitive advantage approach, concepts and cases (16th Ed). Suggested Readings Pearce II, J.A, Robinson Jr. R.B. (2012). Strategic management: Formulation, implementation and control. McGraw-Hill Education.  Rothaermel, F., McDonnough, R. (2012). Strategic management: Concepts and cases.McGraw-Hill Education. Journal of Strategic Management Harvard Business Review 7 9/8/2023 Prepared by Collin Turner Introduction to Strategic Management 9/8/2023 Prepared by Collin Turner 8 Learning Objectives 1. Describe the strategic-management process. 2. Explain the need for integrating analysis and intuition in strategic management. 3. Define and give examples of key terms in strategic management. 4. Discuss the nature of strategy formulation, implementation and evaluation activities within the context of an ethical framework 1-9 9/8/2023 Prepared by Collin Turner  Learning Objectives Cont’d 5. Describe the benefits of good strategic management. 6. Compare Business and Military strategies. 7. Discuss how a firm may achieve sustained competitive advantage. 1-10 9/8/2023 Prepared by Collin Turner NATURE OF MANAGEMENT  A manager has one and only one mandate – to achieve the results required of him/her during any given period of time through the effective utilization of the resources at his or her disposal 9/8/2023 Prepared by Collin Turner 11 MANAGE WHAT?  Material resources – procuring ingredients for production.  Human resources – leads and motivates people with individual needs, wishes and desires, problems, fears, worries etc. 9/8/2023 Prepared by Collin Turner 12 MANAGE WHAT? Financial resources – monetary, economic, pecuniary, fiscal, banking, commercial, business, investment. Capital resources – maximum cost-benefit ratio i.e. equipment, machinery, buildings, vehicles, supplies etc. 9/8/2023 Prepared by Collin Turner 13  MANAGE WHAT?  Intangible resources – Brand names, reputation, trademarks, patents  Structural/cultural resources –Organizational history, culture, work systems, policies, trust, relationships, formal organizational structure 9/8/2023 Prepared by Collin Turner 14 Recall: Where Do Managers Work? Organization - A deliberate arrangement of people assembled to accomplish some specific purpose (that individuals independently could not accomplish alone). 15 9/8/2023 Prepared by Collin Turner Characteristics of An Organization 16 9/8/2023 Prepared by Collin Turner Characteristics of An Organization 1. PURPOSE: Mission Statement 2. PEOPLE: Operations Manager 3. STRUCTURE: org. chart 17 9/8/2023 Prepared by Collin Turner  Organization of HR Department HRM in large scale organization Chairman/ President/ CEO Director Director Director Director Production Finance R&D HRM Deputy Deputy Deputy Director Director Director Recruitment Training Promotions Source: Aswathappa, 2008, p.11 9/8/2023 Prepared by Collin Turner 18 THE ORGANIZATION AND THE BUSINESS ENVIRONMENT PUBLIC PRESSURE SUPPLIERS GROUPS GOVERNMENT THE ORGANIZATION COMPETITIORS CUSTOMERS 9/8/2023 Prepared by Collin Turner 19 Business Environment: Managing in the Global Arena 9/8/2023 Prepared by Collin Turner 20 The Arena 21 9/8/2023 Prepared by Collin Turner  The Nature of Strategic Management 9/8/2023 Prepared by Collin Turner 22 Strategic Management –Defined Art and science of formulating, implementing, and evaluating, cross- functional decisions that enable an organization to achieve its objectives(David, 2017). The set of decisions and actions that result in the formulation and implementation of plans designed to achieve a company’s objectives (Pierce & Robinson, 2014) 9/8/2023 Prepared by Collin Turner 23 Strategic Management ❑Strategicmanagement is used synonymously with the term strategic planning. 9/8/2023 Prepared by Collin Turner 24 Strategic Management In essence, the strategic plan is a company’s game plan. 9/8/2023 Prepared by Collin Turner 25 Strategic Management  A strategic plan results from tough managerial choices among numerous good alternatives,  It signals commitment to specific markets, policies, procedures, and operations. 9/8/2023 Prepared by Collin Turner 26 Strategic Management ◼ Strategic planning: Long range planning to set organizational goals, objectives, and policies to determine strategies, tactics, and programs for achieving them. Top management makes strategic plans. Middle Management makes annual plans (to implement the above). For supervisors the planning period is usually a week, day, or shift ( to deal with daily work). 9/8/2023 Prepared by Collin Turner 27 Strategic Management Strategic Management achieves a firm’s success through integration --- of key functional areas Management Marketing Finance/Accounting Production/Operations Research & Development MIS 9/8/2023 Prepared by Collin Turner 28 Stages of Strategic Management Strategy Strategy Strategy formulation implementation evaluation 1-29 9/8/2023 Prepared by Collin Turner Strategic Management Strategy Formulation Includes: developing a vision and mission, identifying an organization’s external opportunities and threats, determining internal strengths and weaknesses, establishing long-term objectives, generating alternative strategies, and choosing particular strategies to pursue 9/8/2023 Prepared by Collin Turner 30 Strategic Management Strategy Formulation Vision & Mission External Opportunities & Threats Internal Strengths & Weaknesses Long-Term Objectives Alternative Strategies Strategy Selection 9/8/2023 Prepared by Collin Turner 31  Strategic Management Issues in Strategy ✓New Business Formulation opportunities ✓Businesses to abandon ✓Allocation of resources ✓Expansion or diversification ✓International markets ✓Mergers or joint ventures ✓Avoidance of hostile takeover 9/8/2023 Prepared by Collin Turner 32  Strategic Management Strategy Implementation Requires a firm to: ◦ establish annual objectives, ◦ devise policies, ◦ motivate employees, and ◦ allocate resources so that formulated strategies can be executed ◦ This is the action stage!! 9/8/2023 Prepared by Collin Turner 33  Strategic Management Strategy Implementation includes: ◦ developing a strategy-supportive culture, ◦ creating an effective organizational structure, ◦ redirecting marketing efforts, ◦ preparing budgets, ◦ developing and utilizing information systems, and ◦ linking employee compensation to organizational performance. 9/8/2023 Prepared by Collin Turner 34 Strategic Management Strategy Implementation Annual Objectives Policies Employee Motivation Resource Allocation 9/8/2023 Prepared by Collin Turner 35 Strategic Management Issues in Strategy Action Stage of Implementation Strategic Management – ✓Most difficult stage ✓Mobilization of employees & managers ✓Interpersonal skills critical ✓Consensus on goal pursuit 9/8/2023 Prepared by Collin Turner 36  Strategic Management Strategy Evaluation ✓ Strategy evaluation is the final stage in the strategic management process. ✓ Managers desperately need to know when particular strategies are not working well; ✓ Strategy evaluation is the primary means for obtaining this information. 9/8/2023 Prepared by Collin Turner 37  Strategic Management Strategy Evaluation What happens at this stage? 1. reviewing external and internal factors that are the bases for current strategies, 2. measuring performance, and 3. taking corrective actions 9/8/2023 Prepared by Collin Turner 38 Strategic Management Strategy Evaluation Internal Review External Review Performance Metrics Corrective Actions 9/8/2023 Prepared by Collin Turner 39 Strategic Management Issues in Final Stage of Strategic Strategy Management - Evaluation ✓Subject to future modification ✓Today’s success no guarantee of future success ✓New & different problems ✓Complacency leads to demise 9/8/2023 Prepared by Collin Turner 40 Strategic Management Prime Task of Strategic Management Peter Drucker: -- think through the overall mission of a business. Ask the key question: “What is our Business?” 9/8/2023 Prepared by Collin Turner 41 Strategic Management 9 Critical Tasks of Strategic Management 1. Formulate the company’s mission 2. Conduct an internal analysis 3. Assess the external environment – competitive and general contexts 4. Analyze the company’s options by matching its resources with the external environment 5. Identify the most desirable options in light of the mission 42 9/8/2023 Prepared by Collin Turner Strategic Management 9 Critical Tasks of Strategic Management 6. Select a set of long-term objectives and grand strategies that will achieve the most desirable options 7. Develop annual objectives and short- term strategies that are compatible with long-term objectives and grand strategies 8. Implement the strategic choices 9. Evaluate the success of the strategic process for future decision making 43 9/8/2023 Prepared by Collin Turner Strategic Management ❖ Strategyformulation, implementation, and evaluation activities occur at three hierarchical levels in a large organization: 1. corporate, 2. divisional or strategic business unit, and 3. functional ❖ Strategicmanagement helps a firm to function as a competitive team 9/8/2023 Prepared by Collin Turner 44  Levels of Strategy Corporate level: board of directors, CEO & administration [Highest] Business level: business and corporate managers [Middle] Functional level: Product, geographic, and functional area managers [Lowest] 45 9/8/2023 Prepared by Collin Turner Alternative Strategic Management Structures 46 9/8/2023 Prepared by Collin Turner Hierarchy of Objectives and Strategy 47 9/8/2023 Prepared by Collin Turner  Strategy Makers Ideal strategic management planning process includes decision makers from all three levels Top managers must give final approval Strategic decisions coincide with managers’ responsibilities 48 9/8/2023 Prepared by Collin Turner  Strategy Makers: The CEO A firm’s CEO plays a prominent role in strategic planning The CEO’s principal duty is giving long-term direction to the firm The CEO bears ultimate responsibility for the firm’s success and strategic success CEOs are typically strong-willed, company-oriented individuals 49 9/8/2023 Prepared by Collin Turner Strategic Management Integrating Intuition and Analysis  Most organizations can benefit from strategic management, which is based upon integrating intuition and analysis in decision making  Intuition is particularly useful for making decisions in situations of great uncertainty or little precedent 9/8/2023 Prepared by Collin Turner 50 Strategic Management Integrating Intuition and Analysis The strategic management process attempts to organize quantitative and qualitative information under conditions of uncertainty. 9/8/2023 Prepared by Collin Turner 51 Strategic Management Integrating Intuition and Analysis Intuition is based on: ◦ Past experiences ◦ Judgment ◦ Feelings Intuition is Useful for decision making – Conditions of great uncertainty – Conditions with little precedent 9/8/2023 Prepared by Collin Turner 52 Strategic Management Integrating Intuition and Analysis Intuition & Judgment Involve Management at all levels Influence all Analyses 9/8/2023 Prepared by Collin Turner 53 Strategic Management Integrating Intuition and Analysis Analytical Thinking Intuitive Thinking 9/8/2023 Prepared by Collin Turner 54 Strategic Management Adapting to Change: Organizations must monitor events  On-going process  Internal and external events  Timely changes 9/8/2023 Prepared by Collin Turner 55 Competitive Advantage 9/8/2023 Prepared by Collin Turner 56 Competitive Advantage Achieving Sustained Competitive Advantage 1. Adapting to change in external trends, internal capabilities and resources 2. Effectively formulating, implementing & evaluating strategies 9/8/2023 Prepared by Collin Turner 57 How to Gain & Sustain Competitive Advantages 9/8/2023 Prepared by Collin Turner 58  Strategic Management Adapting to Change Rate & magnitude of change increasing dramatically E-commerce Demographics Technology 9/8/2023 Prepared by Collin Turner 59  Strategic Management Adapting to Change Effective Adaptation Requires long-term focus 9/8/2023 Prepared by Collin Turner 60  Strategic Management Adapting to Change – Key Strategic Management Questions  What kind of business should we become?  Are we in the right fields  Are there new competitors  What strategies should we pursue?  How are our customers changing? 9/8/2023 Prepared by Collin Turner 61 Questions or comments? 9/8/2023 Prepared by Collin Turner 62 Thank you! 9/8/2023 Prepared by Collin Turner 63 Wk2 Lecture Presentation Facilitator: Collin Turner 1 4/6/2023 Prepared by: Collin Turner 4/6/2023 Prepared by: Collin Turner 2 Learning Objectives 1. Describe the strategic-management process. 2. Explain the need for integrating analysis and intuition in strategic management. 3. Define and give examples of key terms in strategic management. 4. Discuss the nature of strategy formulation, implementation and evaluation activities within the context of an ethical framework 1-3 4/6/2023 Prepared by: Collin Turner  Learning Objectives 5. Describe the benefits of good strategic management. 6. Compare Business and Military strategies. 7. Discuss how a firm may achieve sustained competitive advantage. 1-4 4/6/2023 Prepared by: Collin Turner Key Terms ➔ Strategists – Firm’s success/failure →individuals who are most responsible for the success or failure of an organization Various Job Titles: ✓ Chief Executive Officer (CEO) ✓ Chief Strategy Officer (CSO) ✓ President ✓ Owner ✓ Board Chair ✓ Executive Director 4/6/2023 Prepared by: Collin Turner 5 Key Terms ➔ Strategic Management :- →Gaining and Maintaining Competitive Advantage Competitive Advantage- “Anything that a firm does especially well compared to rival firms” 4/6/2023 Prepared by: Collin Turner 6 Key Terms ➔ Vision Statement – What do we want to become?  often considered the first step in strategic planning 4/6/2023 Prepared by: Collin Turner 7 Key Terms ➔ Mission Statement – What is our business? ◦ enduring statements of purpose that distinguish one business from other similar firms ◦ identifies the scope of a firm’s operations in product and market terms ◦ addresses the basic question that faces all strategists: “What is our business?” 4/6/2023 Prepared by: Collin Turner 8 Key Terms ➔ Opportunities and Threats (External) Largely beyond the control of a single organization refer to economic, social, cultural, demographic, environmental, political, legal, governmental, technological, and competitive trends and events that could significantly benefit or harm an organization in the future 4/6/2023 Prepared by: Collin Turner 9 Key Terms ➔ Opportunities & Threats (External) Analysis of Trends: Economic Social Cultural Demographic/Environmental Political, Legal, Governmental Technological Competitors 4/6/2023 Prepared by: Collin Turner 10 Key Terms ➔ Opportunities & Threats (External) Examples 1. Computer hacker problems are increasing. 2. Intense price competition is plaguing most firms. 3. Unemployment and underemployment rates remain high. 4. Interest rates are rising. 5. Product life cycles are becoming shorter. 6. State and local governments are financially weak. 4/6/2023 Prepared by: Collin Turner 11 Key Terms ➔ Opportunities & Threats (External) Environmental Scanning (Industry Analysis) ◦ Process of conducting research and gathering and assimilating external information 4/6/2023 Prepared by: Collin Turner 12 Key Terms ➔ Strengths & Weaknesses (Internal) ❑Theses are controllable activities performed especially well or poorly 4/6/2023 Prepared by: Collin Turner 13 Key Terms ➔ Strengths & Weaknesses (Internal) Typically located in functional areas of the firm Management Marketing Finance/Accounting Production/Operations Research & Development Computer Information Systems 4/6/2023 Prepared by: Collin Turner 14 Key Terms ➔ Strengths & Weaknesses (Internal) Assessing the Internal Environment Financial Ratios Performance Metrics Internal Factors Industry Averages Survey Data 4/6/2023 Prepared by: Collin Turner 15 Key Terms ➔ Long-term Objectives ❑Mission-driven pursuit of specified results more than one year out ✓specific results that an organization seeks to achieve in pursuing its basic mission ✓long-term means more than one year ✓should be challenging, measurable, consistent, reasonable, and clear 4/6/2023 Prepared by: Collin Turner 16 Key Terms ➔ Long-term Objectives Essential for ensuring the firm’s success Provide direction Aid in evaluation Create synergy Focus coordination Basis for planning, motivating, and controlling 4/6/2023 Prepared by: Collin Turner 17 Key Terms ➔ Strategies ✓ Means by which long-term objectives are achieved; ✓ Used to interact within competitive environment to achieve company goals; ✓Large-scale, future-oriented plan; ✓Provides a framework for managerial decisions; ✓Reflects a company’s awareness of the main elements of competition. 4/6/2023 Prepared by: Collin Turner 18 Key Terms ➔ Strategies Some Examples Geographic Market penetration expansion Retrenchment Diversification Liquidation Acquisition Joint venture 4/6/2023 Prepared by: Collin Turner 19 Sample Strategies 4/6/2023 Prepared by: Collin Turner 20 Key Terms ➔ Annual Objectives ❑ Short-term milestones that firms must achieve to attain long-term objectives should be measurable, quantitative, challenging, realistic, consistent, and prioritized should be established at the corporate, divisional, and functional levels in a large organization 4/6/2023 Prepared by: Collin Turner 21 Key Terms ➔ Generic Strategies: Fundamental philosophical options for the design of strategies. Grand Strategies: The means by which objectives are achieved. Functional Tactics: Short-term, narrow scoped plans that detail the “means” or activities that a company will use to achieve short-term objectives. 4/6/2023 Prepared by: Collin Turner 22 Key Terms ➔ Policies ❑ Means by which annual objectives will be achieved include guidelines, rules, and procedures established to support efforts to achieve stated objectives guides to decision making and address repetitive or recurring situations 4/6/2023 Prepared by: Collin Turner 23 Key Terms ➔ Strategic Control: Tracking a strategy as it is being implemented, detecting problems or changes in its underlying premises, and making necessary adjustments. Continuous Improvement: A form of strategic control in which managers are encouraged to be proactive in improving all operations of the firm. 4/6/2023 Prepared by: Collin Turner 24 Key Terms ➔  Social responsibility ◦ actions an organization takes beyond what is legally required to protect or enhance the well-being of living things ◦ What is CSR?  Sustainability ◦ the extent that an organization’s operations and actions protect, mend, and preserve rather than harm or destroy the natural environment 4/6/2023 Prepared by: Collin Turner 25 Key Terms ➔  Corporate Social responsibility ◦ Corporate social responsibility (CSR), is the idea that business has a duty to serve society in general as well as the financial interests of stockholders. ◦ 4/6/2023 Prepared by: Collin Turner 26 Benefits of a Participative Approach to Strategic Management: 1. Managers at all levels interact in planning and implementing strategy 2. Similar to participative decision making 3. Assessing strategy formulation requires looking at nonfinancial evaluations as well as financial ones 4. Promoting positive behavioral consequences enables achievement of financial goals 4/6/2023 Prepared by: Collin Turner 27  Businesses vary in formulation and other processes The basic components of the models used to analyze strategic management are similar Strategic management is a process—a flow of information through interrelated stages of analysis toward the achievement of some goal 28 4/6/2023 Prepared by: Collin Turner 4/6/2023 Prepared by: Collin Turner 29 4/6/2023 Prepared by: Collin Turner 30 Strategic Management Process ❑ Dynamic & Continuous ❑ More formal in larger organizations 4/6/2023 Prepared by: Collin Turner 31 ✓ Company Mission ✓ Internal Analysis ✓ External Analysis ✓ Strategic Analysis & Choice ✓ Long-Term Objectives ✓ Generic & Grand Strategies ✓ Short-Term ✓ Action Plans & Objectives Functional Tactics ✓ Policies ✓ Restructuring, Empowering Reengineering & Action Refocusing ✓ Strategic Control & Continuous Improvement 4/6/2023 Prepared by: Collin Turner 32 1. Identify Existing -- Vision Mission Objectives Strategies 4/6/2023 Prepared by: Collin Turner 33 2. Audit external environment 3. Audit internal environment 4. Establish long-term objectives 5. Generate, evaluate & select strategies 6. Implement selected strategies 7. Measure & evaluate performance 4/6/2023 Prepared by: Collin Turner 34 ❑ Strategic management help organizations formulate better strategies through the use of a more systematic, logical, and rational approach to strategic choice ❑ Communication is a key to successful strategic management 4/6/2023 Prepared by: Collin Turner 35  Proactive in shaping firm’s future Initiate and influence firm’s activities Formulate better strategies Systematic, logical, rational 4/6/2023 Prepared by: Collin Turner 36 Financial Benefits Improvement in sales Improvement in profitability Productivity improvement 4/6/2023 Prepared by: Collin Turner 37 Non-Financial Benefits It allows for identification, prioritization, and exploitation of opportunities. It provides an objective view of management problems. It represents a framework for improved coordination and control of activities. It minimizes the effects of adverse conditions and changes. 4/6/2023 Prepared by: Collin Turner 38  Non-Financial Benefits It allows major decisions to better support established objectives. It allows more effective allocation of time and resources to identified opportunities. It allows fewer resources and less time to be devoted to correcting erroneous or ad hoc decisions. It creates a framework for internal communication among personnel. 4/6/2023 Prepared by: Collin Turner 39 (Greenley) 1. Identification of Opportunities 2. Objective view of management problems 3. Improved coordination & control 4. Minimizes adverse conditions & changes 5. Decisions that better 4/6/2023 support objectives Prepared by: Collin Turner 40 (Greenley) 6. Effective allocation of time & resources 7. Internal communication among personnel 8. Integration of individual behaviors 9. Clarify individual responsibilities 10. Encourage forward thinking 4/6/2023 Prepared by: Collin Turner 41 (Greenley) 11.Encourages favorable attitude toward change 12.Provides discipline and formality to the management of the business 4/6/2023 Prepared by: Collin Turner 42 Why Some Firms Do No Strategic Planning: Poor reward structures Fire-fighting Waste of time Too expensive Laziness Content with success 4/6/2023 Prepared by: Collin Turner 43 Why Some Firms Do No Strategic Planning: Fear of failure Overconfidence Prior bad experience Self-interest Fear of the unknown Suspicion 4/6/2023 Prepared by: Collin Turner 44 Pitfalls in Strategic Planning 1. Using strategic planning to gain control over decisions and resources 2. Doing strategic planning only to satisfy accreditation or regulatory requirements 3. Too hastily moving from mission development to strategy formulation 4. Failing to communicate the plan to employees, who continue working in the dark 5. Top managers making many intuitive decisions that conflict4/6/2023 with the formal plan 45 Prepared by: Collin Turner Pitfalls in Strategic Planning 6. Top managers not actively supporting the strategic-planning process 7. Failing to use plans as a standard for measuring performance 8. Delegating planning to a “planner” rather than involving all managers 9. Failing to involve key employees in all phases of planning 10.Failing to create a collaborative climate supportive of change 4/6/2023 Prepared by: Collin Turner 46 The Dynamics of Social Responsibility  Inside Vs. Outside Stakeholders  Duty to serve society plus duty to serve stockholders  Flexibility is key  Firms differ along: ✓ Competitive Position ✓ Industry ✓ Country ✓ Environmental Pressures ✓ Ecological Pressures 4/6/2023 Prepared by: Collin Turner 47 Types of Social Responsibility  Economic – the duty of managers, as agents of the company owners, to maximize stockholder wealth  Legal – the firm’s obligations to comply with the laws that regulate business activities  Ethical – the company’s notion of right and proper business behavior.  Discretionary – voluntarily assumed by a business organization. 4/6/2023 Prepared by: Collin Turner 48 Corporate Social Responsibility  Corporate social responsibility (CSR), is the idea that business has a duty to serve society in general as well as the financial interests of stockholders. 4/6/2023 Prepared by: Collin Turner 49 CSR and Profitability  The dynamic between CSR and success (profit) is complex.  They are not mutually exclusive, and they are not prerequisites of each other.  Better to view CSR as a component in the decision-making process of business that must determine, among other objectives, how to maximize profits. 4/6/2023 Prepared by: Collin Turner 50 Factors Complicating a Cost-Benefit Analysis of CSR: 1. Some CSR activities incur no dollar costs at all. In fact, the benefits from philanthropy can be huge. 2. Socially responsible behavior does not come at a prohibitive cost. 3. Socially responsible practices may create savings, and, as a result, increase profits. 4. Proponents argues that CSR costs are more than offset in the long run by an improved company image and increased community goodwill. 4/6/2023 Prepared by: Collin Turner 51 CSR Today  Priority of businesses  Sustainability and the Resurgence of Environmentalism  Increasing Buying Power among Consumers  Globalization of Business 4/6/2023 Prepared by: Collin Turner 52 Sarbanes-Oxley Act of 2002 Law that revised and strengthened auditing and accounting standards. ✓CEO and CFO must certify every report containing company’s financial statements ✓Restricted corporate control of executives, acting, firms, auditing committees, and attorneys ✓Specifies duties of registered public acting firms that conduct audits ✓Composition of the audit committee and specific responsibilities ✓Rules for attorney conduct ✓Disclosure periods are stipulated ✓Stricter penalties for violations 4/6/2023 Prepared by: Collin Turner 53 New Corporate Governance Structure  Restructuring governance structure in American corporations  Heightened role of corporate internal auditors  Auditors now routinely deal directly with top corporate officials  CEO information provided directly by the company’s chief compliance and chief accounting officers 4/6/2023 Prepared by: Collin Turner 54 The New Corporate Governance Structure 4/6/2023 Prepared by: Collin Turner 55 CSR’s Effect on Mission Statement  The mission statement embodies what company believes  Managers must identify all stakeholder groups and weigh their relative rights and abilities to affect the firm’s success 4/6/2023 Prepared by: Collin Turner 56 Social Audit  A social audit is an attempt to measure a company’s actual social performance against its social objectives.  The social audit may be used for more than simply monitoring and evaluating firm social performance. 4/6/2023 Prepared by: Collin Turner 57 Satisfying Corporate Social Responsibility  Conflicting pressures on executives  The CSR Debate: centuries old  There are mutual advantages to using Collaborative Social Initiatives (CSIs) 4/6/2023 Prepared by: Collin Turner 58 Continuum of Corporate Social Responsibility Commitments 4/6/2023 Prepared by: Collin Turner 59 5 Principles of Successful CSIs 1. Identify a Long-Term Durable Mission 2. Contribute “What We Do”* *This is the most important principle 3. Contribute Specialized Services to a Large-Scale Undertaking 4. Weigh Government’s Influence 5. Assemble and Value the Total Package of Benefits 4/6/2023 Prepared by: Collin Turner 60 5 Principles of Successful Corporate Social Responsibility Collaboration 4/6/2023 Prepared by: Collin Turner 61 The Limits of CSR Strategies  Some companies have embedded social responsibility and sustainability commitments deeply in their core strategies.  Larger companies must move beyond the easy options of charitable donations but also steer clear of overreaching commitments.  CSR strategies can also run afoul of the skeptics—the speed of information on the Internet makes this an issue with serious ramifications. 4/6/2023 Prepared by: Collin Turner 62 The Future of CSR CSR is firmly and irreversibly part of the corporate fabric Corporations will face growing demands for social responsibility contributions far beyond simple cash or in-kind donations The public’s perception of ethics in corporate America is near its all-time low Even when groups agree on what constitutes human welfare, the means they choose to achieve it may differ 4/6/2023 Prepared by: Collin Turner 63 Business Ethics defined: Principles of conduct within organizations that guide decision making and behavior. 4/6/2023 Prepared by: Collin Turner 64 Good business ethics – ❑Prerequisite for good strategic management 4/6/2023 Prepared by: Collin Turner 65 Code of business ethics – ❑Provides basis on which policies can be devised to guide daily behavior and decisions in the workplace 4/6/2023 Prepared by: Collin Turner 66 Business practices always considered unethical – ✓ Misleading advertising ✓ Misleading labeling ✓ Harm to the environment ✓ Insider trading ✓ Dumping flawed products on foreign markets ✓ Poor product or service safety ✓ Padding expense accounts 4/6/2023 Prepared by: Collin Turner 67 Code of Ethics  Basic Principles ◦ Responsibility to Customers GraceKennedy’s ◦ Management's Responsibility to Staff Code of Ethics ◦ Employees' Responsibility to the Company  Honesty and Fair Dealing ◦ Unethical Behaviour: Relationships with Competitors ◦ Dealings with Customers and Business Associates  Gifts, Entertainment, Gratuities and Other Payments ◦ Dealings with the Company  Improper Use of Records  Improper Expense Claims  Using Company facilities or Opportunities for Personal Transactions  Conflicts of Interest ◦ Directorships ◦ Other Employment or Outside Business Interest 4/6/2023 Prepared by: Collin Turner 3-68 Code of Ethics  Confidentiality ◦ Customer Confidentiality Grace ◦ Company Confidentiality Kennedy’s  Insider Trading and Tipping Off Code of Ethics  Money Laundering Laws  Compliance with Laws and the Code of Ethics & Guidelines For Business Conduct ◦ Compliance ◦ Reporting of Breaches or Irregularities & "Whistle Blowing"  Safeguarding Company Assets including Intellectual Property ◦ Protect all Company Assets and Intellectual Property ◦ Property Entrusted to Third Parties ◦ Use of Company's Property Off Premises ◦ Computer Systems  Fair and Equitable Treatment 4/6/2023 Prepared by: Collin Turner 3-69 Business practices: Code of Ethics  To ensure that the code of ethics is read, understood, believed, and remembered, periodic ethics workshops are needed to sensitize people to workplace circumstances in which ethics issues may arise 4/6/2023 Prepared by: Collin Turner 70 An Ethics Culture  Whistle-blowing ◦ refers to policies that require employees to report any unethical violations they discover or see in the firm  Ethics training programs ◦ should include messages from the CEO or owner of the business emphasizing ethical business practices, the development and discussion of codes of ethics, and procedures for discussing and reporting unethical behavior 4/6/2023 Prepared by: Collin Turner 71 Guidelines for Effective Strategic Management 4/6/2023 Prepared by: Collin Turner 72 Guidelines for Effective Strategic Management 4/6/2023 Prepared by: Collin Turner 73 Comparing Business & Military Strategy ❖A fundamental difference between military and business strategy is that business strategy is formulated, implemented, and evaluated with an assumption of competition, whereas military strategy is based on an assumption of conflict ❖ Both business and military organizations must adapt to change and constantly improve to be successful 4/6/2023 Prepared by: Collin Turner 74 Thank you! 4/6/2023 Prepared by: Collin Turner 75 Wk3 Lecture Presentation Facilitator: Collin Turner 1 4/6/2023 Prepared by: Collin Turner 4/6/2023 Prepared by: Collin Turner 2 Learning Objectives 1. Describe the nature and role of vision and mission statements in strategic management 2. Distinguish between vision and mission statement 3. Describe the steps in developing a good mission statement 4. Describe a company mission and explain its value 5. Explain why the mission statement should include the company’s basic product or service, its primary markets, and its principal technology 6. Explain which goal of a company is most important: survival, profitability, or growth 1-3 4/6/2023 Prepared by: Collin Turner  Learning Objectives 7. Discuss the importance of company philosophy, public image, and company self-concept to stockholders 8. Give examples of the newest trends in mission statement components: customer emphasis, quality, and company vision 9. Evaluate mission statements of different organizations 10. Develop vision and mission statements for various scenarios 11. Describe the role of a company’s board of directors 12. Explain agency theory and its value in helping a board of directors improve corporate governance 1-4 4/6/2023 Prepared by: Collin Turner 4/6/2023 Prepared by: Collin Turner 5 4/6/2023 Prepared by: Collin Turner 6  Company Mission Strategic Analysis External Analysis & Choice Generic & Grand Long-Term Strategies Objectives Action Plans & Short-Term Functional Tactics Objectives Restructuring, Policies Reengineering & Empowering Refocusing Action Strategic Control Internal Analysis & Continuous Improvement 7 4/6/2023 Prepared by: Collin Turner 4/6/2023 Prepared by: Collin Turner 8   Agreement on the basic vision for which the firm strives to achieve in the long run is critically important to the firm’s success. 2-9 4/6/2023 Prepared by: Collin Turner   A vision statement should answer the basic question, “What do we want to become?” ◼ often considered the first step in strategic planning 2-10 4/6/2023 Prepared by: Collin Turner   A vision statement presents a firm’s strategic intent designed to focus the energies and resources of the company on achieving a desirable future. 2-11 4/6/2023 Prepared by: Collin Turner   The vision statement should be: ✓short, ✓preferably one sentence, ✓and as many managers as possible should have input into developing the statement. ✓established first and foremost 2-12 4/6/2023 Prepared by: Collin Turner   The vision statement should be: ✓ clear and provides the foundation for developing a comprehensive mission statement. Many organizations have both a vision and a mission statement, 2-13 4/6/2023 Prepared by: Collin Turner Vision Statement Examples Tyson Foods’ vision is to be the world’s first choice for protein solutions while maximizing shareholder value. 2- 4/6/2023 Prepared by: Collin Turner 14 Vision Statement Examples Tyson Foods’ vision is to be the world’s first choice for protein solutions while maximizing shareholder value. 2- 4/6/2023 Prepared by: Collin Turner 15 Vision Statement Examples General Motors’ vision is to be the world leader in transportation products and related services. 2- 4/6/2023 Prepared by: Collin Turner 16 Vision Statement Examples PepsiCo’s responsibility is to continually improve all aspects of the world in which we operate – environment, social, economic – creating a better tomorrow than today. Statement too vague? Should it reveal beverage and food business? 2- 4/6/2023 Prepared by: Collin Turner 17 Vision Statement Examples 2- 4/6/2023 Prepared by: Collin Turner 18 Vision Statement Examples 2- 4/6/2023 Prepared by: Collin Turner 19 Vision Statement Examples 2- 4/6/2023 Prepared by: Collin Turner 20 Clear Business Vision Comprehensive Mission Statement 4/6/2023 Prepared by: Collin Turner 21 Mission Statement: ◦ An enduring statements of purpose that distinguish one business from other similar firms; ◦ It identifies the scope of a firm’s operations in product, market & technology terms 4/6/2023 Prepared by: Collin Turner 22 Mission Statement ◦ It addresses the basic question that faces all strategists: “What is our business?” ◦ It is essential for effectively establishing objectives and formulating strategies 4/6/2023 Prepared by: Collin Turner 23   Mission statement ◦ It reveals what an organization wants to be and whom it wants to serve 2-24 4/6/2023 Prepared by: Collin Turner  Why is this firm in business?  What are our economic goals?  What is our operating philosophy in terms of quality, company image, and self-concept?  What are our core competencies and competitive advantages?  What customers do and can we serve?  How do we view our responsibilities to stockholders, employees, communities, environment, social issues, and competitors? 4/6/2023 Prepared by: Collin Turner 25   Mission statement Also called ✓a creed statement, ✓a statement of purpose, ✓a statement of philosophy, a statement of beliefs, and ✓a statement of business principles 2-26 4/6/2023 Prepared by: Collin Turner   Shared vision creates a commonality of interests that can lift workers out of the monotony of daily work and put them into a new world of opportunity and challenge. 2-27 4/6/2023 Prepared by: Collin Turner   An organization that fails to develop a vision statement as well as a comprehensive and inspiring mission statement loses the opportunity to present itself favorably to existing and potential stakeholders. 2-28 4/6/2023 Prepared by: Collin Turner   Clear mission is needed before alternative strategies can be formulated and implemented  Participation from diverse managers is important in developing the mission. 2-29 4/6/2023 Prepared by: Collin Turner The Process 1. Select several articles about these statements and ask all managers to read these as background information. 2. Ask managers themselves to prepare a vision and mission statement for the organization. 2-30 4/6/2023 Prepared by: Collin Turner The Process 3. Merge these statements into a single document and distribute the draft statements to all managers Process should create an“emotional bond” and “sense of mission”between the organization and its employees 4. Gather feedback from managers 5. Meet to revise the final document 2-31 4/6/2023 Prepared by: Collin Turner  Benefits of Developing a Written Mission Statement: 1. To ensure unanimity of purpose within the organization 2. To provide a basis, or standard, for allocating organizational resources 3. To establish a general tone or organizational climate 2-32 4/6/2023 Prepared by: Collin Turner  Benefits of Developing a Written Mission Statement: 4. To serve as a focal point for individuals to identify with the organization’s purpose and direction 5. To facilitate the translation of objectives into a work structure 6. To specify organizational purposes 2-33 4/6/2023 Prepared by: Collin Turner  1. Firms with a formalized mission statement have twice the average return on shareholders’ equity than those firms without a formalized mission statement 2. There is a positive relationship between mission statements and organizational performance 3. Firms using mission statements have a 30% higher return on financial measures 2-34 4/6/2023 Prepared by: Collin Turner  The mission statement is a declaration of attitude and outlook more than a statement of specific details. 4/6/2023 Prepared by: Collin Turner 35  First, a good mission statement allows for the generation and consideration of a range of feasible alternative objectives and strategies without unduly stifling management creativity. 4/6/2023 Prepared by: Collin Turner 36  Second, a mission statement needs to be broad to reconcile differences effectively among, and appeal to, an organization’s diverse stakeholders 4/6/2023 Prepared by: Collin Turner 37  It should be short – less than 250 words.  arouses positive feelings and emotions about an organization;  motivates readers to action. 4/6/2023 Prepared by: Collin Turner 38  Stakeholders (Who are they?) ◦ employees, governments managers, (local, state, stockholder federal, and s, boards of foreign), directors, unions, customers, competitors, suppliers, environmental distributors, groups, and the creditors, general public. 2-39 4/6/2023 Prepared by: Collin Turner Steps to Incorporate Stakeholders 1. Identification of stakeholders 2. Understanding stakeholders’ specific claims vis-à-vis the firm 3. Reconciliation of these claims and assignment of priorities 4. Coordination of the claims with other elements of the company mission 4/6/2023 Prepared by: Collin Turner 40  2- 4/6/2023 Prepared by: Collin Turner 41 4/6/2023 Prepared by: Collin Turner 42  2- 4/6/2023 Prepared by: Collin Turner 43 A mission statement should: define what the organization is and what the organization aspires to be be limited enough to exclude some ventures and broad enough to allow for creative growth distinguish a given organization from all others 2-44 4/6/2023 Prepared by: Collin Turner  A mission statement should also: serve as a framework for evaluating both current and prospective activities be stated in terms sufficiently clear to be widely understood throughout the organization 2-45 4/6/2023 Prepared by: Collin Turner  A good mission statement reflects the anticipations of customers. The operating philosophy of organizations should be to identify customers’ needs and then provide a product or service to fulfill those needs. 2-46 4/6/2023 Prepared by: Collin Turner  Products Services Markets Customers Technology Employees Mission Survival Elements Growth Profit Public Image Self- Philosophy QUALITY Concept 2-47 4/6/2023 Prepared by: Collin Turner  WEEK 3 Discussion Question: Distinguish between the “self- concept” and the “philosophy” components in a mission statement. Give an example of each for your company. 2-48 4/6/2023 Prepared by: Collin Turner 1. Customers—Who are the firm’s customers? 2. Products or services—What are the firm’s major products or services? 3. Markets—Geographically, where does the firm compete? 4. Technology—Is the firm technologically current? 2-49 4/6/2023 Prepared by: Collin Turner  5. Concern for survival, growth, and profitability—Is the firm committed to growth and financial soundness? 6. Philosophy—What are the basic beliefs, values, aspirations, and ethical priorities of the firm? 7. Self-concept—What is the firm’s distinctive competence or major competitive advantage? 2-50 4/6/2023 Prepared by: Collin Turner  8. Concern for public image—Is the firm responsive to social, community, and environmental concerns? 9. Concern for employees—Are employees a valuable asset of the firm? 10.Quality—is there a quality philosophy? 2-51 4/6/2023 Prepared by: Collin Turner Three Indispensable Components:  Basic Product or Service  Primary Market  Principal Technology If a firm uses a “silver bullet” mission for outsiders to read, it will include these three components. 4/6/2023 Prepared by: Collin Turner 52 Primary Company Goals  Survival – A firm that is unable to survive will be incapable of satisfying the aims of any of its stakeholders. ◦ This goal is often taken for granted ◦ If neglected, firm may focus on short-term aims 4/6/2023 Prepared by: Collin Turner 53 Primary Company Goals  Profitability – A firm’s profitability is the mainstay goal of a business. ◦ Clearest indication of firm’s ability to satisfy principal claims and desires of employees and stockholders 4/6/2023 Prepared by: Collin Turner 54 Primary Company Goals  Growth – A firm’s growth is tied inextricably to its survival and profitability. Growth in this sense must be broadly defined. ◦ Important to define growth – i.e., in terms of market share, etc. 4/6/2023 Prepared by: Collin Turner 55 Company Philosophy  Company philosophy is often called company creed.  Usually accompanies or appears within the mission statement  Reflects the basic beliefs, values, aspirations, and philosophical priorities to which strategic decision makers are committed in managing the company 4/6/2023 Prepared by: Collin Turner 56 Public Image  Both present and potential customers attribute certain qualities to particular businesses.  Firms seldom address the question of their public image in an intermittent fashion.  Firms should be concerned with their public image even when there is no public agitation. 4/6/2023 Prepared by: Collin Turner 57 Company Self-Concept  A major determinant of a firm’s success is the extent to which the firm can relate functionally to its external environment.  The ability of firms to survive in a dynamic and highly competitive environment would be severely limited if they did not understand their impact on others or of others on them.  Ordinarily, descriptions of the company self-concept per se do not appear in mission statements. 4/6/2023 Prepared by: Collin Turner 58 Quality “Quality is job one!” ◦The work of W. Edwards Deming and J.M. Juran ◦Malcolm Baldridge Awards 4/6/2023 Prepared by: Collin Turner 59 Deming’s 14 Points: 1. Create constancy of purpose. 2. Adopt the new philosophy. 3. Cease dependence on mass inspection to achieve quality. 4. End the practice of awarding business on price tag alone. Instead, minimize total cost, often accomplished by working with a single supplier. 5. Improve constantly the system of production and service. 6. Institute training on the job. 7. Institute leadership. 4/6/2023 Prepared by: Collin Turner 60 Deming’s 14 Points (cont’d): 8. Drive out fear. 9. Break down barriers between departments. 10. Eliminate slogans, exhortations, and numerical targets. 11. Eliminate work standards (quotas) and management by objective. 12. Remove barriers that rob workers, engineers, and managers of their right to pride of workmanship. 13. Institute a vigorous program of education and self- improvement. 14. Put everyone in the company to work to accomplish the transformation. 4/6/2023 Prepared by: Collin Turner 61 Excerpts From Actual Mission Statements 4/6/2023 Prepared by: Collin Turner 62 Excerpts From Actual Mission Statements 4/6/2023 Prepared by: Collin Turner 63 Mission Statement Evaluation Matrix The mission statement evaluation matrix is an instrument for determining the appropriateness of the mission statement for an organization. This is accomplished using the elements of the mission statement (previously discussed) 4/6/2023 Prepared by: Collin Turner 64 Mission Statement Evaluation Matrix COMPONENTS Concern for Survival, Products Growth, Organization Customers Services Markets Profitability Technology Fleetwood PepsiCo Dell 4/6/2023 Prepared by: Collin Turner 65 Mission Statement Evaluation Matrix COMPONENTS Self- Concern for Concern for Organization Philosophy Concept Public Image Employees Fleetwood PepsiCo Dell 4/6/2023 Prepared by: Collin Turner 66 Fleetwood Enterprises will lead the recreational vehicle and manufactured housing industries ( ) in providing quality products, with a passion for customer-driven innovation ( ). We will emphasize training, embrace diversity and provide growth opportunities for our associates and our dealers ( ). We will lead our industries in the application of appropriate technologies ( ). We will operate at the highest levels of ethics and compliance with a focus on exemplary corporate governance ( ). We will deliver value to our shareholders, positive operating results and industry-leading earnings ( ). 2-67 4/6/2023 Prepared by: Collin Turner   We aspire to make PepsiCo the world’s ( ) premier consumer products company, focused on convenient foods and beverages ( ). We seek to produce healthy financial rewards for investors ( ) as we provide opportunities for growth and enrichment to our employees ( ), our business partners and the communities ( ) in which we operate. And in everything we do, we strive to act with honesty, openness, fairness and integrity ( ). 2-68 4/6/2023 Prepared by: Collin Turner   Dell’s mission is to be the most successful computer company ( ) in the world ( ) at delivering the best customer experience in markets we serve ( ). In doing so, Dell will meet customer expectations of highest quality; leading technology ( ); competitive pricing; individual and company accountability ( ); best-in-class service and support ( ); flexible customization capability ( ); superior corporate citizenship ( ); financial stability ( ). 2-69 4/6/2023 Prepared by: Collin Turner   Procter & Gamble will provide branded products and services of superior quality and value ( ) that improve the lives of the world’s ( ) consumers. As a result, consumers ( ) will reward us with industry leadership in sales, profit ( ), and value creation, allowing our people ( ), our shareholders, and the communities ( ) in which we live and work to prosper. 2-70 4/6/2023 Prepared by: Collin Turner   At L’Oreal, we believe that lasting business success is built upon ethical ( ) standards which guide growth and on a genuine sense of responsibility to our employees ( ), our consumers, our environment and to the communities in which we operate ( ). 2-71 4/6/2023 Prepared by: Collin Turner   The Bellevue Hospital, with respect, compassion, integrity, and courage, honors the individuality and confidentiality of our patients, employees, and community, and is progressive in anticipating and providing future health care services. -- The Bellevue Hospital 2-72 4/6/2023 Prepared by: Collin Turner Boards of Directors The board of directors is the group of stockholder representatives and strategic managers responsible for overseeing the creation and accomplishment of the company mission. 4/6/2023 Prepared by: Collin Turner 73 Major Board Responsibilities:  Establish and update mission  Elect top officers & CEO  Establish compensation for top officers  Determine amount & timing of dividends  Set broad company policy  Set objectives and authorize managers to implement long-term strategy  Mandate company’s legal and ethics compliance 4/6/2023 Prepared by: Collin Turner 74 Agency Theory & Costs  Agency theory is a set of ideas on organizational control based on the belief that the separation of the ownership from management creates the potential for the wishes of owners to be ignored.  Agency Costs - the cost of agency problems plus the cost of actions taken to minimize agency problems are collectively termed agency costs. 4/6/2023 Prepared by: Collin Turner 75 How Agency Problems Occur  Moral hazard problem Executives are often free to pursue their own interests because of the disproportionate access they have to company information. This is the moral hazard problem.  Adverse selection is an agency problem caused by the limited ability of stockholders to determine the competencies and priorities of executives at hire. 4/6/2023 Prepared by: Collin Turner 76 Problems Resulting from Agency  Executives pursue growth in company size rather than earnings  Executives attempt to diversify their corporate risk  Executives avoid healthy risk  Managers act to optimize their personal payoffs  Executives protect their status 4/6/2023 Prepared by: Collin Turner 77 Solutions to Agency Problem  Owners pay executives a premium for their service to increase loyalty  Executives receive back-loaded compensation.  Creating teams of executives across different units of a corporation can help to focus performance measures on organizational rather than personal goals. 4/6/2023 Prepared by: Collin Turner 78 Aligning Executive Interests with Owner Interests  Stock Option Plans  Bonus plans  Incentives for Long- Term Performance 4/6/2023 Prepared by: Collin Turner 79 ✓Broad in scope ✓Generate strategic alternatives ✓Not overly specific ✓Reconciles interests among diverse stakeholders ✓Finely balanced between specificity & generality 4/6/2023 Prepared by: Collin Turner 80 ✓Arouse positive feelings & emotions ✓Motivate readers to action ✓Generate favorable impression of the firm 4/6/2023 Prepared by: Collin Turner 81 ✓ Reflect future growth ✓Provide criteria for strategy selection ✓Basis for generating & evaluating strategic options ✓Are dynamic in nature 4/6/2023 Prepared by: Collin Turner 82   Every organization has a unique purpose and reason for being.  This uniqueness should be reflected in vision and mission statements. 2-83 4/6/2023 Prepared by: Collin Turner   The nature of a business vision and mission can represent either a competitive advantage or disadvantage for the firm.  A firm achieves a heightened sense of purpose when strategists, managers, and employees develop and communicate a clear business vision and mission. 2-84 4/6/2023 Prepared by: Collin Turner Questions or comments? 4/6/2023 Prepared by: Collin Turner 85 Thank you! 4/6/2023 Prepared by: Collin Turner 86  Strategic Management Wk4 Lecture Presentation Facilitator: Collin Turner 1 16/9/2023 Prepared by: Collin Turner  External Assessment 16/9/2023 Prepared by Collin Turner 2 CASE ANALYSIS A. Case Abstract (Summary) B. Vision and Mission Statements (proposed/actual)  C. External Audit Conduct an industry analysis Conduct a competitive analysis Conduct an environmental analysis at the domestic level and global level Assess the competitive strategies for firms in foreign markets Conduct an environmental forecast  D. Internal Audit Use any analysis tool you may deem effective to do an internal analysis of the firm/company, which may include a SWOT analysis, a Value Chain Analysis or a ratio analysis. NB* may use net worth analysis or IFE matrix  16/9/2023 Prepared by Collin Turner 2-3 CASE ANALYSIS E. Strategic Choices Select an appropriate grand strategy option for the company Select a strategy for effectively building a sustainable competitive advantage Evaluate the strategic choices for the business Assess the short-term objectives of the organization  F. Strategy Implementation Develop functional tactics from business strategies Select an organizational structure that is appropriate for a successful strategy Develop an implementation plan for the strategy. G. Recommendations and Conclusion H. References and Appendices 16/9/2023 Prepared by Collin Turner 2-4 CASE ANALYSIS A.Case Abstract B. VisionStatement (proposed/ actual) C.Mission Statement D.External Audit 1 Opportunities 2 Threats 3 Competitive Profile Matrix 4 EFE Matrix E. Internal Audit 1.Strengths 2.Weaknesses 3.Financial Ratio Analysis 4.Net Worth Analysis (in millions) 5.IFE Matrix 16/9/2023 Prepared by Collin Turner 2-5 CASE ANALYSIS F. SWOT Matrix G.SPACE Matrix H.Grand Strategy Matrix I. The Internal-External (IE) Matrix J. QSPM K.Recommendations L. EPS/EBIT Analysis M.Epilogue 16/9/2023 Prepared by Collin Turner 2-6 Learning Objectives 1. Describe macro environmental forces that affect the firm 2. Identify tools used to carry out business analysis 3. Identify key sources of external information, including the internet 4. Describe the components of the SWOT analysis 5. Apply the SLEPT analysis to a given scenario 6. Identify and evaluate the effect of different characteristics of the external environment 1-7 16/9/2023 Prepared by Collin Turner Learning Objectives 7. Describe the three tiers of environmental factors that affect firm performance 8. List and explain the five factors in the remote environment 9. Give examples of the economic, social, political, technological, and ecological influences on a business 10. Discuss the importance of gathering competitive intelligence 11. Demonstrate an understanding of global strategic planning and environmental forecasting 12. Describe the trends toward cooperation 1-8 among competitors 16/9/2023 Prepared by Collin Turner Learning Objectives 13. Explain the five forces model of industry analysis and give examples of each force 14. Give examples of the influences of entry barriers, supplier power, buyer power, substitute availability, and competitive rivalry on a business 15. List and explain the five factors in the operating environment 16. Give examples of the influences of competitors, creditors, customers, labor, and direct suppliers on a business 1-9 16/9/2023 Prepared by Collin Turner External Assessment WEEKS 4 & 5 Discussion Questions: What are the three basic objectives of a competitive intelligence program? Define and explain value chain analysis (VCA). 2-10 16/9/2023 Prepared by Collin Turner Strategic Management Model 16/9/2023 Prepared by Collin Turner 11 External Audit  It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change. – Charles Darwin  Nothing focuses the mind better than the constant sight of a competitor who wants to wipe you off the map. – Wayne Calloway, Former CEO, PepsiCo 3- 16/9/2023 Prepared by Collin Turner 12 External Audit What are we doing? ❑Environmental Scanning ❑Industry Analysis ❑Analysis of the Macroenvironment 3- 16/9/2023 Prepared by Collin Turner 13 External Environment  The factors beyond the control of the firm that influence its choice of direction and action, organizational structure, and internal processes.  These factors play a principal role in determining the opportunities, threats, and constraints that the firm faces. 16/9/2023 Prepared by Collin Turner 14 The Firm’s External Environment Comprised of following Components: ◦ Remote environment ◦ Industry environment ◦ Operating environment 16/9/2023 Prepared by Collin Turner 15 Remote Environment  Economic, social, political, technological, and ecological factors that originate beyond, and usually irrespective of, any single firm’s operating situation.  PESTLE, SLEPT analysis 16/9/2023 Prepared by Collin Turner 16 The Firm’s External Environment 16/9/2023 Prepared by Collin Turner 17 Remote Environment  Economic Factors  Social Factors  Political Factors  Technological Factors  Ecological Factors 16/9/2023 Prepared by Collin Turner 18 External Audit (Analysis) ◦ Focuses on identifying and evaluating trends and events beyond the control of a single firm ◦ An external audit reveals key opportunities and threats confronting an organization so that managers can formulate strategies to take advantage of the opportunities and avoid or reduce the impact of threats. 3- 16/9/2023 Prepared by Collin Turner 19 External Audit  External audit What are these trends and events? stock market volatility population shifts increased foreign competition Fluctuation in foreign exchange rate Information technology 3- 16/9/2023 Prepared by Collin Turner 20 The Nature of an External Audit ❖The purpose of an external audit is to develop a finite list of opportunities that could benefit a firm and threats that should be avoided 3- 16/9/2023 Prepared by Collin Turner 21 External Audit  External audit What then, is the purpose of this audit? ◦ Identify: ✓Opportunities ✓Threats 3- 16/9/2023 Prepared by Collin Turner 22 The Nature of an External Audit ❖The external audit is aimed at identifying key variables that offer actionable responses ❖ Firms should be able to respond either offensively or defensively to the factors by formulating strategies that take advantage of external opportunities or that minimize the impact of potential threats. 3- 16/9/2023 Prepared by Collin Turner 23 The Process of Performing an External Audit First, gather competitive intelligence and information about the following trends: ❖economic, ❖political, ❖social, ❖governmental, ❖Cultural, legal, and ❖demographic, ❖ technological ❖Environmental, trends. 3- 16/9/2023 Prepared by Collin Turner 24 Relationship between Key External Factors & the Organization Changes in external factors translate into changes in consumer demand for both industrial and consumer goods & services. 16/9/2023 Prepared by Collin Turner 25 Relationship between Key External Factors & the Organization External factors affect: ✓ the types of products developed, ✓ the nature of positioning and market segmentation strategies, ✓ the types of services offered, and ✓ the choice of businesses to acquire or sell. 16/9/2023 Prepared by Collin Turner 26 Relationship between Key External Forces & the Organization ▪ External forces directly affect both suppliers and distributors. ▪ Identifying and evaluating external opportunities and threats enables organizations to develop a clear mission, to design strategies to achieve long-term objectives, and to develop policies to achieve annual objectives. 16/9/2023 Prepared by Collin Turner 27  The Process of Performing an External Audit 1. This process must involve as many managers and employees as possible. 2. Gather competitive intelligence and information about social, cultural, demographic, environmental, economic, political, legal, governmental, and technological trends. 16/9/2023 Prepared by Collin Turner 3- 28  The Process of Performing an External Audit 3. Information should be assimilated and evaluated 4. A final list of the most important key external factors should be communicated and distributed widely in the organization 3- 16/9/2023 Prepared by Collin Turner 29 The Process of Performing an External Audit Key external factors should be: 1. important to achieving long-term and annual objectives 2. measurable 3. applicable to all competing firms, and 4. hierarchical in the sense that some will pertain to the overall company and others will be more narrowly focused on functional or divisional areas 3- 16/9/2023 Prepared by Collin Turner 30 The Industrial Organization (I/O) View ❖The Industrial Organization (I/O) approach to competitive advantage advocates that external (industry) factors are more important than internal factors in a firm for achieving competitive advantage. 3- 16/9/2023 Prepared by Collin Turner 31  The Industrial Organization (I/O) View  Firm performance is based more on industry properties 3-32 16/9/2023 Prepared by Collin Turner The Industrial Organization (I/O) View  External Factors versus Internal Factors  Industry forces primarily determine organizational performance.  Factors Affecting Firm Performance 3- 16/9/2023 Prepared by Collin Turner 33 The Industrial Organization (I/O) View Managing strategically from the I/O perspective entails firms: ◆striving to compete in attractive industries, ◆avoiding weak or faltering industries, and ◆gaining a full understanding of key external factor relationships. 3- 16/9/2023 Prepared by Collin Turner 34 The Nature of an External Audit ❖The purpose of an external audit is to develop a finite list of opportunities that could benefit a firm and threats that should be avoided 3- 16/9/2023 Prepared by Collin Turner 35 The Firm’s External Environment 16/9/2023 Prepared by Collin Turner 36 1) Economic Factors  Economic factors have a direct impact on the potential attractiveness of various strategies. ◦ For example, if interest rates rise, then funds needed for capital expansion become more costly or unavailable. ◦ Prime interest rates, inflation rates, and trends in the growth of the gross national product are other economic factors they should monitor. 3- 16/9/2023 Prepared by Collin Turner 37 1) Economic Factors  Economic factors concern the nature and direction of the economy in which a firm operates: ◦ Because consumption patterns are affected by the relative affluence of various market segments, each firm must consider economic trends in the segments that affect its industry. ◦ On both the national and international levels, managers must consider the general availability of credit, the level of disposable income, and the propensity of people to spend. 3- 16/9/2023 Prepared by Collin Turner 38 1) Economic Factors 3- 16/9/2023 Prepared by Collin Turner 39 1) Economic Factors 3- 16/9/2023 Prepared by Collin Turner 40 Advantages and Disadvantages of a Weak Dollar 3- 16/9/2023 Prepared by Collin Turner 41 2) Social, Cultural and Demographic Factors ◆ Social, cultural, demographic, and environmental changes have a major impact on virtually all products, services, markets, and customers. ◆ Small, large, for-profit, and non-profit organizations in all industries are being staggered and challenged by the opportunities and threats arising from changes in social, cultural, demographic, and environmental variables. 3- 16/9/2023 Prepared by Collin Turner 42 2) Social, Cultural and Demographic Factors The social factors that affect a firm involve: the beliefs, values, attitudes, opinions, and lifestyles of persons in the firm’s external environment, as developed from cultural, ecological, demographic, religious, educational, and ethnic conditioning. 3- 16/9/2023 Prepared by Collin Turner 43 2) Social, Cultural and Demographic Factors U.S. Facts ◦ Aging population ◦ Less white ◦ Widening gap between rich & poor ◦ 2025 = 18.5% population > 65 years ◦ 2075 = no ethnic or racial majority World Facts ◦ World population 7 billion ◦ World population = 8 billion by 2028 ◦ World population = 9 billion by 2054 ◦ U.S. population > 310 million 3- 16/9/2023 Prepared by Collin Turner 44 2) Social, Cultural and Demographic Factors 3- 16/9/2023 Prepared by Collin Turner 45 2) Social, Cultural and Demographic Factors 3- 16/9/2023 Prepared by Collin Turner 46 Key Social, Cultural, and Demographic, Variables 3- 16/9/2023 Prepared by Collin Turner 47 3) Political, Governmental, and Legal Factors ❖ The increasing global interdependence among economies, markets, governments, and organizations makes it imperative that firms consider the possible impact of political variables on the formulation and implementation of competitive strategies. ❖ Political factors define the legal and regulatory parameters within which firms must operate 3- 16/9/2023 Prepared by Collin Turner 48  3) Political, Governmental, and Legal Factors Government Regulation * Key opportunities & threats ✓ Antitrust legislation ✓ Tax rates ✓ Lobbying efforts ✓ Patent laws *Changes in these activities can affect firms significantly 16/9/2023 Prepared by Collin Turner 49 3) Political, Governmental, and Legal Factors Increasing Global Interdependence Political variables impact – ◼ Formulation of strategies ◼ Implementation of strategies 16/9/2023 Prepared by Collin Turner 50 3) Political, Governmental, and Legal Factors Increasing Global Interdependence Strategists in a global economy -- ◼ Forecast political climates ◼ Legalistic skills ◼ Diverse world cultures 16/9/2023 Prepared by Collin Turner 51 3) Political, Governmental, and Legal Factors Globalization of Industry Worldwide trend toward similar consumption patterns Global buyers and sellers E-commerce Technology for instant currency transfers 16/9/2023 Prepared by Collin Turner 52 Key Political, Governmental, & Legal Variables Regulation/deregulation Anti-trust enforcement Tax law changes Global relationships Special tariffs Import/export Voter participation rates regulations Number of patents Political conditions Changes in patent laws Location & severity of Environmental terrorist activity protection laws Equal employment legislation Government subsidies 16/9/2023 Prepared by Collin Turner 53 Key Political, Governmental, & Legal Variables 16/9/2023 Prepared by Collin Turner 54 4) Technological Factors The fourth set of factors in the remote environment involves technological change. ◦ To avoid obsolescence and promote innovation, a firm must be aware of technological changes that might influence its industry. ◦ Creative technological adaptations can suggest possibilities for new products, for improvements in existing products, or in manufacturing and marketing techniques 3- 16/9/2023 Prepared by Collin Turner 55 4) Technological Factors The Internet has changed the very nature of opportunities and threats by: ✓altering the life cycles of products, ✓increasing the speed of distribution, ✓creating new products and services, ✓erasing limitations of traditional geographic markets, ✓changing the historical trade-off between production standardization and flexibility. 3- 16/9/2023 Prepared by Collin Turner 56  4) Technological Factors  The Internet is altering economies of scale, changing entry barriers, and redefining the relationship between industries and various suppliers, creditors, customers, and competitors 3- 16/9/2023 Prepared by Collin Turner 57 4) Technological Factors  Many firms now have: ✓ a Chief Information Officer (CIO) and ✓ a Chief Technology Officer (CTO) who work together to ensure that information needed to formulate, implement, and evaluate strategies is available where and when it is needed 3- 16/9/2023 Prepared by Collin Turner 58 4) Technological Factors Technological advancements can: Create new markets, Result in a proliferation of new and improved products, Change the relative competitive cost positions in an industry, Render existing products and services obsolete. 3- 16/9/2023 Prepared by Collin Turner 59 4) Technological Factors  Technological forces represent major opportunities and threats that must be considered in formulating strategies.  Technological advancements can dramatically affect organizations’ product, services, markets, suppliers, distributors, competitors, customers, manufacturing practices, and competitive position. 3- 16/9/2023 Prepared by Collin Turner 60 4) Technological Factors ◆ Technology management is one of the key responsibilities of strategists. ◆Not all sectors of the economy are affected equally by technological developments. Compare volatility? communications, electronics, aeronautics, textile, forestry, poultry, metals/scrap metals, logistics 3- 16/9/2023 Prepared by Collin Turner 61 5) Ecological (Natural Environmental) Factors Social, cultural, demographic, and ecological (environmental ) trends are shaping the way people live, work, produce, and consume. Ecology refers to the relationships among human beings and other living things and the air, soil, and water that supports them. 3- 16/9/2023 Prepared by Collin Turner 62 5) Ecological (Natural Environmental) Factors Ecological Factors: The reciprocal relationship between business and the ecology Global climate change Loss of habitat and biodiversity Air, land & water pollution Toxic by-products of its current manufacturing processes Impact of environmental legislation on corporate strategies worldwide 3- 16/9/2023 Prepared by Collin Turner 63 The Firm’s External Environment 16/9/2023 Prepared by Collin Turner 64 Industry Environment Defined  The general conditions for competition that influence all businesses that provide similar products and services. 16/9/2023 Prepared by Collin Turner 65 Competitive Intelligence Programs  What is Competitive intelligence (CI)? ◦ This is a systematic and ethical process for gathering and analyzing information about the competition’s activities and general business trends to further a business’s own goals 3- 16/9/2023 Prepared by Collin Turner 66 Competitive Intelligence Programs The three basic objectives of a CI program are: 1. to provide a general understanding of an industry and its competitors 2. to identify areas in which competitors are vulnerable and to assess the impact strategic actions would have on competitors 3- 16/9/2023 Prepared by Collin Turner 67 Competitive Intelligence Programs Three basic objectives of a CI cont’d: 3.to identify potential moves that a competitor might make that would endanger a firm’s position in the market 3- 16/9/2023 Prepared by Collin Turner 68 Competitive Factors NB: Collection & evaluation of data on competitors is essential for successful strategy formulation  Competitors are firms that offer similar products in the same market  Markets can be geographic, product, areas, or segments  Competition on virtually all industries can be described as intense. 3- 16/9/2023 Prepared by Collin Turner 69 Competitive Factors An important part of an external audit is: a) identifying rival firms and b) determining their ✓strengths, ✓weaknesses, ✓capabilities, ✓opportunities, ✓threats, ✓objectives, and ✓strategies 3- 16/9/2023 Prepared by Collin Turner 70 Competitive Factors Characteristics of the most competitive companies: 1. Market share matters 2. Understand and remember precisely what business you are in 3. Whether it’s broke or not, fix it–make it better 4. Innovate or evaporate 5. Acquisition is essential to growth 6. People make a difference 7. There is no substitute for quality 3- 16/9/2023 Prepared by Collin Turner 71 How Competitive Forces Shape Strategy  The essence of strategy formulation is coping with competition.  Competition in an industry is rooted in its underlying economics, and competitive forces exist that go well beyond the established combatants in a particular industry.  The corporate strategists’ goal is to find a position in the industry where his or her company can best defend itself against these forces or can influence them in its favor. 16/9/2023 Prepared by Collin Turner 72 Jockeying for Position Intense rivalry occurs when:  Competitors are numerous or are roughly equal  Industry growth is slow, precipitating fights for market share that involve expansion  The product or service lacks differentiation or switching costs  Fixed costs are high or the product is perishable, creating strong temptation to cut prices  Capacity normally is augmented in large increments  Exit barriers are high  Rivals are diverse in strategy, origin, and personality 16/9/2023 Prepared by Collin Turner 73 Questions or comments? 16/9/2023 Prepared by Collin Turner 74  External Assessment (Part 2) 16/9/2023 Prepared by Collin Turner 75 Strategic Management Model 16/9/2023 Prepared by Collin Turner 76 Industry Analysis & Competitive Analysis Key questions to ask: 1. What are the boundaries of the industry? 2. What is the structure of the industry? 3. Which firms are our competitors? 4. What are the major determinants of competition? 16/9/2023 Prepared by Collin Turner 77 Industry Analysis & Competitive Analysis  An industry is a collection of firms that offer similar products or services.  Structural attributes are the enduring characteristics that give an industry its distinctive character.  Concentration refers to the extent to which industry sales are dominated by only a few firms.  Barriers to entry are the obstacles that a firm must overcome to enter an industry. 16/9/2023 Prepared by Collin Turner 78 Problems in Defining Industry Boundaries The difficulty in defining industry boundaries stems from three sources: The evolution of industries over time creates new op