strategic management

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CHAPTER 2

Explain the four components of a mission statement as required by our class. GIVE AN EXAMPLE—CAN BE FOR/FROM YOUR INDIVIDUAL CASE .

seq NL_a \r 0 \h Explain agency theory, its problems, and how to solve them. GIVE AN EXAMPLE

CHAPTER 3

Do you think a business organization in today’s society benefits by defining a socially responsible role for itself? Why or why not? GIVE AN EXAMPLE

Which of the three basic philosophies of social responsibility would you find most appealing as the chief executive of a large corporation? Explain. GIVE AN EXAMPLE

CHAPTER 4

Briefly describe TWO important recent changes in the remote environment of U.S. business in each of the following areas: a.) Economic. b.) Social. c.) Political. d.) Technological. e.) Ecological

Assume the invention of a competitively priced synthetic fuel that could supply 25 percent of U.S. energy needs within 20 years. Assumptions include: 1. It is an American invention, 2. It has government support. 3. Supply and price are steady.

In what major ways might this change the external environment of U.S. businesses? External being a.) Economic. b.) Social. c.) Political. d.) Technological. e.) Ecological. GIVE AN EXAMPLE of each.

CHAPTER 5

Explain when and why it is important for a company to globalize. GIVE AN EXAMPLE

Describe the four main strategic orientations of global firms. One is ethnocentric. GIVE AN EXAMPLE OF EACH

CHAPTER 6

What is the resource-based view of internal analysis? What are the three different types of resources. What are three ways resources become more valuable? GIVE AN EXAMPLE of each.

Describe SWOT analysis as a way to guide internal analysis. How does this approach reflect the basic strategic management process? What are potential weaknesses of SWOT analysis?

CHAPTER 7

Distinguish between the following pairs of grand strategies: You would only receive one of these pairs

a. Horizontal and vertical acquisition

b. Conglomerate and concentric diversification

CHAPTER 8

What are three activities or capabilities a firm should possess to support a low-cost leadership strategy? GIVE AN EXAMPLE of a company that has done this?

What are three activities or capabilities a firm should possess to support a differentiation-based strategy? GIVE AN EXAMPLE of a company that has done this?

Strategic Management
Chapter 1

Dimensions of Strategic Decisions
Strategic issues require top-management decisions
Strategic issues require large amounts of the firm’s resources
Strategic issues often affect the firm’s long-term prosperity
Strategic issues are future oriented
Strategic issues usually have multifunctional or multibusiness consequences
Strategic issues require considering the firm’s external environment

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Three 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]

Characteristics of Strategic Management Decisions: Corporate
Often carry greater risk, cost, and profit potential
Greater need for flexibility
Longer time horizons
Choice of businesses, dividend policies, sources of long-term financing, and priorities for growth

Characteristics of Strategic Management Decisions: Business
Help bridge decisions at the corporate and functional levels
Less costly, risky, and potentially profitable than corporate-level decisions
More costly, risky, and potentially profitable than functional-level decisions
Include decisions on plant location, marketing segmentation, and distribution

Characteristics of Strategic Management Decisions: Functional
Implement the overall strategy formulated at the corporate and business levels
Involve action-oriented operational issues
Relatively short range and low risk
Modest costs: depend upon available resources
Relatively concrete and quantifiable

Company Mission
Chapter 2

Four Essential Components:
Basic Product or Service
Primary Market–WHO
Where
Financial position

Primary Company Goals
Survival – A firm that can’t survive can’t satisfy its stakeholders. (Often taken for granted)
Profitability –the mainstay goal of a business.
Growth –is tied to survival and profitability. Broadly defined in terms of market share, etc.

Company Philosophy—BULLETS
Covers
Customers
Employees
Management
Stockholders
Stakeholders
Suppliers
Community
Social responsibility
Taxes
Environmental protection

AGENCY THEORY
Agency theory –based on the belief that the separation of the ownership from management creates a situation where managers will spend the stockholders’ money in ways they would not spend their own.

Agency Costs
The cost of agency problems plus the cost of actions taken to minimize agency problems are collectively termed agency costs.

How Agency Problems Occur
Moral hazard problem–Executives have disproportionate access to company information.
Adverse selection–a problem caused by the limited ability of stockholders to determine the competencies and priorities of executives they hire.

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

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.

Aligning Executive Interests with Owner Interests
Stock Option Plans
Bonus plans
Incentives for Long-Term Performance

Corporate Social Responsibility and Business Ethics
Chapter 3

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

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.

Corporate Social Responsibility & Profitability
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.
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.

Factors Complicating a Cost-Benefit Analysis of CSR:
Some CSR activities incur no dollar costs at all. In fact, the benefits from philanthropy can be huge.
Socially responsible behavior does not come at a prohibitive cost.
Socially responsible practices may create savings, and, as a result, increase profits.
Proponents argue that CSR costs are more than offset in the long run by an improved company image and increased community goodwill.

Sarbanes-Oxley Act of 2002
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

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

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.

Management Ethics
The Nature of Ethics in Business:
Belief that managers will behave in an ethical manner is central to CSR
Ethics – the moral principles that reflect society’s beliefs about the actions of an individual or a group that are right and wrong
Ethical standards reflect the end product of a process of defining and clarifying the nature and content of human interaction

3 BASIC Approaches to Questions of Ethics
Utilitarian Approach
Moral Rights Approach
Social Justice Approach

The External Environment
Chapter 4

External Environment
The factors beyond the control of the firm that influence its choice of direction and action, organizational structure, and internal processes

Remote Environment
Economic Factors
Social Factors
Political Factors
Technological Factors
Ecological Factors

Economic Factors
Prime interest rates
Inflation rates
Trends in the growth of the gross national product
Unemployment rates
Globalization of the economy
Outsourcing

Social Factors
Beliefs & Values
Attitudes & Opinions
Lifestyles

Demographics
Age
Ethnic composition
Gender
Health considerations
Religion
Education
Quality-of-life issues

Political Factors
Legal & regulatory parameters:
Fair-trade Decisions
Antitrust Laws
Tax Programs
Minimum Wage Legislation
Pollution and Pricing Policies
Administrative jawboning
Obama care

Technological Factors
Speed of new developments

Ecological Factors
Ecology refers to the relationships among human beings and other living things and the air, soil, and water that supports them.
Threats to our life-supporting ecology caused principally by human activities in an industrial society are commonly referred to as pollution
Loss of habitat and biodiversity
Environmental legislation
Eco-efficiency

International Environment
Monitoring the international environment
involves assessing each non-domestic market on the same factors that are used in a domestic assessment.
While the importance of factors will differ, the same set of considerations can be used for each country.
Economic, political, legal, and social factors are used to assess international environments.
One complication to this process is that the interplay among international markets must be considered.

Ex. 4.8 Forces Driving Industry Competition

Threats of Entry
Economies of Scale
Product Differentiation
Capital Requirements
Cost Disadvantages Independent of Size
Access to Distribution Channels
Government Policy

Powerful Suppliers
A supplier group is powerful if:
It is dominated by a few companies and is more concentrated than the industry it sells to
Its product is unique or at least differentiated, or if it has built-up switching costs
It is not obliged to contend with other products for sale to the industry
It poses a credible threat of integrating forward into the industry’s business
The industry is not an important customer of the supplier group

Powerful Buyers
A buyer group is powerful if:
It is concentrated or purchases in large volumes
The products it purchases from the industry are standard
The products it purchases from the industry form a component of its product and represent a significant fraction of its cost
It earns low profits
The industry’s product is unimportant to the quality of the buyers’ products or services
The industry’s product does not save the buyer money
The buyers pose a credible threat of integrating backward

Substitute Products
By placing a ceiling on the prices it can charge, substitute products or services limit the potential of an industry
Substitutes not only limit profits in normal times but also reduce the bonanza an industry can reap in boom times
Substitute products that deserve the most attention strategically are those that are
subject to trends improving their price-performance trade-off with the industry’s product or
produced by industries earning high profits

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

The Global Environment
Chapter 5

Globalization
Globalization refers to the strategy of pursuing opportunities anywhere in the world that enable a firm to optimize its business functions in the countries in which it operates.

Why Firms Globalize?
U.S. firms can reap benefits from industries and technologies developed abroad.
Direct penetration of foreign markets can drain vital cash flows from a foreign competitor’s domestic operations.
The resulting lost opportunities, reduced income, and limited production can impair the competitor’s ability to invade U.S. markets.
Question: Should firms be proactive or reactive?

Reasons for Going Global
PROACTIVE
Additional resources
Lowered costs
Incentives
New, expanded markets
Exploitation of firm-specific advantages
Taxes
Economies of scale
Synergy
Power and prestige
Protect home market
REACTIVE
Trade barriers
International customers
International competition
Regulations
Chance

4 Strategic Orientations of Global Firms
Ethnocentric orientation
When the values and priorities of the parent organization guide the strategic decision making of all its international operations

4 Strategic Orientations of Global Firms (contd.)
Polycentric orientation
When the culture of the country in which the strategy is to be implemented is allowed to dominate a company’s international decision making process

4 Strategic Orientations of Global Firms (contd.)
Regiocentric orientation
When a parent company blends its own predisposition with those of its international units to develop region-sensitive strategies.

4 Strategic Orientations of Global Firms (contd.)
Geocentric orientation
When an international firm adopts a systems approach to strategic decision making that emphasizes global integration.

Competitive Strategies for
Firms in Foreign Markets
Niche Market Exporting
Licensing and Contract Manufacturing
Franchising
Joint Ventures
Foreign Branching
Acquisition
Wholly Owned Subsidiary
LOOK UP EACH OF THESE AND UNDERSTAND

Internal Analysis
Chapter 6

SWOT Analysis
A traditional approach to internal analysis:
SWOT is an acronym for the internal Strengths and Weaknesses of a firm and the environmental Opportunities and Threats facing that firm.
SWOT analysis is a historically popular technique through which managers create a quick overview of a company’s strategic situation.

SWOT Components
An opportunity is a major favorable situation in a firm’s environment
A threat is a major unfavorable situation in a firm’s environment
A strength is a resource or capability relative to its
A weakness is a limitation or deficiency in a firm’s resources or capabilities relative to its competitors

S.W.O.T. Analysis
S.W.O.T. information is only as important as the analysis derived from it.
There is no magic number of strengths or weaknesses compared to a magic number of opportunities and threats.
Do you have the strengths to: 1. Take advantage of new opportunities? Or 2. Survive a threat? Or 3. To compensate for your weaknesses?
To appropriately use the S.W.O.T. study the following slide

Ex. 6.2 SWOT Analysis Diagram

Value Chain
A perspective in which business is seen as a chain of activities that transforms inputs into outputs that customers value.
Examines the contributions of different activities within the business that create customer value
A process point of view

Value Chain Analysis (contd.)
Primary Activities
The activities in a firm of those involved in the physical creation of the product, marketing and transfer to the buyer, and after-sales support
Support Activities
The activities in a firm that assist the firm as a whole by providing infrastructure or inputs that allow the primary activities to take place on an ongoing basis

Ex. 6.3 The Value Chain

Resource-Based View (RBV)
RBV is a method of analyzing and identifying a firm’s strategic advantages based on examining its distinct combination of assets, skills, capabilities, and intangibles
The RBV’s underlying premise is that firms differ in fundamental ways because each firm possesses a unique “bundle” of resources
Each firm develops competencies from these resources, and these become the source of the firm’s competitive advantages

Three Basic TYPES of Resources
Tangible assets are the easiest “resources” to identify and are often found on a firm’s balance sheet
Intangible assets are “resources” such as brand names, company reputation, organizational morale, technical knowledge, patents and trademarks, and accumulated experience
Organizational capabilities are not specific “inputs.” They are the skills that a company uses to transform inputs into outputs

What makes a resource VALUABLE?
4 Guidelines:
Is the resource or skill critical to fulfilling a customer’s need better than that of the firm’s competitors?
Is the resource scarce? Is it in short supply or not easily substituted for or imitated?
Appropriability: Who actually gets the profit created by a resource?
Durability: How rapidly will the resource depreciate?

Elements of Scarcity
Short Supply
Availability of Substitutes
Imitation
Isolating Mechanisms:
Physically Unique Resources
“Path-Dependent” Resources
Casual Ambiguity
Economic Deterrence

Using RBV in Internal Analysis
It is helpful to:
Disaggregate resources
Utilize a functional perspective
Look at organizational processes
Use the value chain approach

Long-Term Objectives and Strategies
Chapter 7

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Long-Term Objectives
Strategic managers recognize that short-run profit maximization is rarely the best approach to achieving sustained corporate growth and profitability
To achieve long-term prosperity, strategic planners commonly establish long-term objectives in seven areas:
Profitability – Productivity
Competitive Position – Employee Development
Employee Relations — Tech Leadership
Public Responsibility

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Qualities of Long-Term Objectives S.M.A.R.T.
There are five criteria that should be used in preparing long-term objectives:
Specific—clear about outcomes desired
Measurable—able to quantify
Attainable—able to achieve with current resources
Realistically challenging—provide stimulation to achieve
Timed—stating the time frame in which the objective will be accomplished

The Balanced Scorecard
The balanced scorecard is a set of four measures that are directly linked to the company’s strategy
allows managers to evaluate the company from four perspectives:
financial performance
customer knowledge
internal business processes
learning and growth

Generic Strategies
A long-term or grand strategy must be based on a core idea about how the firm can best compete in the marketplace. The popular term for this core idea is generic strategy.

The 4 GENERIC Strategies
Striving for overall low-cost leadership in the industry.
Striving to create and market unique products for varied customer groups through differentiation.
Striving to have special appeal to one or more groups of consumers or industrial buyers, focus on their cost or differentiation concerns.
SPEED rapid response to customer requests or market and technological changes

GRAND Strategies
Grand strategy
A master long-term plan that provides basic direction for major actions for achieving long-term business objectives

Grand Strategies
Concentrated growth the strategy that directs resources to the growth of a dominant product, in a dominant market, with a dominant technology
Market development consists of marketing present products to customers in related market areas by adding channels of distribution or by changing the content of advertising or promotion
Product development substantial modification of existing products or the creation of new but related products that can be marketed to current customers through established channels

Grand Strategies
Innovation companies seek high profits associated with customer acceptance of a new or greatly improved product—search for other original or novel ideas—seek to create a new product life cycle and make similar existing products obsolete
Horizontal acquisition—growth through the acquisition of one or more similar firms operating at the same stage of the production-marketing chain

Grand Strategies
Vertical acquisition—BACKWARD—acquire firms that supply it with inputs (such as raw materials) or FORWARD—are customers for its outputs (such as warehouses for finished products)
Concentric diversification involves the acquisition of businesses that are related to the acquiring firm in terms of technology, markets, or products
Conglomerate diversification—gives little concern to creating product-market synergy with existing businesses

Grand Strategies
Turnaround—Cost reduction—Asset reduction
Divestiture strategy the sale of a firm or a major component of a firm
Liquidation the firm typically is sold in parts for its tangible asset value and not as a going concern

Chapter 7 Liquidation bankruptcy—agreeing to a complete distribution of firm assets to creditors, most of whom receive a small fraction of the amount they are owed
Chapter 11 Reorganization bankruptcy—the managers believe the firm can remain viable through reorganization—management runs the day-to-day business operations but all significant business decisions must be approved by a bankruptcy court.
Bankruptcy

Grand Strategies
Joint ventures relationship between two or more parties to pursue a set of agreed upon goals or to meet a critical business need while remaining independent organizations
Strategic alliances is a business agreement in which parties agree to develop, for a finite time, a new entity and new assets by contributing equity—
Company A & B form Company C

Business Strategy
Chapter 8

Sustainable Low-Cost Activities
Some low-cost advantages reduce the likelihood of buyers’ pricing pressure
Truly sustained low-cost advantages may push rivals into other areas
New entrants competing on price must face an entrenched cost leader
Low-cost advantages should lessen the attractiveness of substitute products
Higher margins allow low-cost producers to withstand supplier cost increases

Risks of a Cost Leadership Strategy
Many cost-saving activities are easily duplicated
Exclusive cost leadership can be a trap
Obsessive cost cutting can shrink other competitive advantages
Cost differences often decline over time

Ex. 8.2 Evaluating a Business’s Cost Leadership Opportunities

Evaluating Differentiation
Differentiation requires that the business have sustainable advantages that allow it to provide buyers with something uniquely valuable to them
Differentiation usually arises from one or more activities in the value chain that create a unique value important to buyers

RISKS ASSOCIATED WITH A DIFFERENTIATION STRATEGY
Competitors may be able to imitate the unique features,
Customers may lose interest in the unique features, or
Low cost competitors may be able to undercut prices & erode brand loyalty.

Ex. 8.3 Evaluating a Business’s Differentiation Opportunities

Evaluating Speed as a Competitive Advantage
Speed-based strategies, or rapid response to customer requests or market and technological changes, have become a major source of competitive advantage for numerous firms in today’s intensely competitive global economy

Risks of Speed-based Strategy
Speeding up activities that haven’t been conducted in a fashion that prioritizes rapid response should only be done after considerable attention to training, reorganization, and/or reengineering
Some industries may not offer much advantage to the firm that introduces some forms of rapid response
Customers in such settings may prefer the slower pace or the lower costs currently available, or they may have long time frames in purchasing

Ex. 8.5 Evaluating a Business’s Rapid Response (Speed) Opportunities

Evaluating Market Focus as a Way to Competitive Advantage
Market focus: the extent to which a business concentrates on a narrowly defined market
Small companies, at least the better ones, usually thrive because they serve narrow market niches
Market focus allows some businesses to compete on the basis of low cost, differentiation, and rapid response against much larger businesses with greater resources

Risks of Market Focus
The risk of focus is that you attract major competitors who have waited for your business to “prove” the market
Publicly traded companies built around focus strategies become takeover targets for large firms seeking to fill out a product portfolio
Slipping into the illusion that it is focus itself, and not low cost, etc. that is creating the business’s success.

Chapter 2

A mission statement describes the aim of existence for an organization, person or entity. It should guide the functions, overall goals, course and decision making. For the case of an organization, information included in the statement includes aim, primary stakeholders, value proposition, and a declaration of its core purpose. For example McDonald’s mission statement highlights the aspects of fast food for global target audience, tasty and competitively priced products for its value proposition, consistency and conducive environment for its competitive advantage. Essentially, the statement answers the question of what a business does, how it does it and for whom as well as what value proposition they offer.

The agency theory is a model/concept that describes why conduct or choices differ when displayed by members of a group. The concept defines the association amongst one party, known as the principal, who assigns work to another, known as the agent. The concept explains the differences in conduct and decisions between the two by noting aspects of divergences in goals, autonomy of their individual goals, and approaches toward risk. The agency problem is about conflict of interests among the various stakeholders because of divergences in goals. The two common problems are “adverse selection” and ” moral hazard.” Adverse selection applies when the principal is unable to determine if the representative or agent truthfully embodies his capability to do the work assigned and compensated for. The remedy to this problem is to establish suitable inducements so that agents can act according to the wish of the principals.

Chapter 3

There are many benefits that accrue to organizations that define and implement social responsibility concept benefits. Social responsibility concept continues to take an evolving meaning because it is a fairly new idea to many since its advent in the early 1970s. Social responsibility refers to acts undertaken by an organization’s management that are not part of their legal mandate but which aim to enhance the relationship between the company and other stakeholders. For example, a company can support a community based talent search academy with an objective of enhancing the development of that community. The company may in future benefit when the community has enabled neighbors earn a living and possibly having purchasing power.

The three basic philosophies of social responsibility include Utilitarian, Managerial, and Relational Theories. I would find the Utilitarian the most appealing. The Utilitarian theory states that the firm is part of the economic component and those businesses or firms are there to maximize profits. Looking at the firm we all agree that the management plays the role of an agent and the real owners are the shareholders who commit their resources to make a profit. Hence, the firm is there to serve as first priority the interest of the shareholders and not any other person.

Chapter 4

Economic

Examples of adjustments in the remote environment of U.S. business in the economic area comprise:

Interest rates

Following recent credit crisis and the ensuing recession, interest rates have gone done to 0.25 percent. Wall Street and financial institutions are particularly keen on changes of interest rates, reacting positively to declines or no adjustments and unfavorably to increases.

Outsourcing

Outsourcing is “contracting work from outside the company that was previously done from within”. Firms are responding to pressure to cutback on costs, streamline capacity or gain operational competences through outsourcing concept. Research reports that about 3.4 million jobs will move to international destinations by 2020.

Social

The consumer movement

This is an organized movement of consumers and administration to reinforce and protect the rights and of buyers in goods consumption matters. Consumerists have increasingly lobbied and acquired on many fronts such as the need and right to identify the real cost of credit, basic goods ingredients and nutrition info on food.

Multiculturalism

It pertains to managing interethnic relations. This is founded on the importance and value of diversity in customs, ethnicity, culture, and religion. The U.S is now regarded as a mixture of diverse cultures which retain individual features. This is a move away from the assimilation towards multiculturalism.

Political

Acts

There are numerous Acts that aim to tighten various segments in the US. The most recent is the Healthcare Act 2010, which is aimed at ensuring medical cover for all. Others include tighter accounting measures following recent scandals and loopholes leading to the credit crisis. Some of the recent scandals include the Enron case.

Software and Video Piracy

The ever rising challenges in Intellectual property violations have persuaded the US government to apply pressure on foreign governments to crack on these vices.

Technological

Internet and IT

The internet has become a strong networking, and research tool. All companies need to understand and harness its potential on brand, image and marketing. For example, an unhappy consumer may cause millions to know and influence their behavior.

Privacy matters

Technological revolution has increased concerns over confidentiality. Identity imitations, personal data violations, and administration surveillance are some of latest technological alterations which have appeared as strong confidentiality concerns.

Ecological

This is the way human relates with other living things and elements such as the air, soil, and water and the interdependence between them.

Pollution

Businesses are often blamed as being the mainsource of pollution and need to awake to this fact and respond accordingly. New regulations are coming up that carry heavy penalties and other consequences. Companies need to know consumer and general public perceptions to avoid backlash.

Global warming

It is regarded as the rise in temperature on the earth’s atmosphere due to release of greenhouse gases.

Chapter 5

Important for a company to globalize

Firms should seek global venture in order to capitalize on existing opportunities in foreign markets. There are unexploited and emerging markets that can considerably enhance company profitability. They should also venture abroad to transfer older technology which may still be new in the foreign market. Some foreign markets are a good source of raw materials and inputs. Firms can also seek international presence to ease on domestic competition (Peteraf, 1993). An example of a company that is gradually increasing its global presence is Target Corporation.

Strategic orientations of global firms

Multinational companies have tended towards foreign undertakings. A firm with an ethnocentric alignment considers that the ideals and priorities of the mother organization ought to inform the strategic choice process of all of its processes. An example is Google Corporation. On the other hand, a company that exhibits a polycentric orientation allows the culture of the host nation to influence strategy formulation and implementation and overall dominate decision-making procedure. An example is the Coca Cola Company. In comparison, a regiocentric orientation occurs when the mother company tries to combine its own inclinations with those of the area under focus and hence attaining a regionally subtle concession. An example is the Ford Company and other car manufacturers in Asia and European locations. Geocentric orientation firms embrace a worldwide systems method to strategic decision-making, and therefore underline global integration. An example is financial institutions such as the Citi Bank.

Chapter 6

Resource-based view

Resource-based view of internal analysis refers to a strategic tool that emphasizes on distinctive and valuable resources that an organization has that offers it a continuous competitive edge (Hoopes, Madsen & Walker, 2003). A resource-based view in an organization management emphasizes on strategic design on recognizing and developing resources in areas that include branding, customer intimacy programs and product enhancement. Important resources comprise machine capacity, customer allegiance and technological edge. Resources become more valuable when they are used consistently over time, should be rare, not easy to imitate and substitute.

Swot analysis is a strategic tool or method used to establish a firm’s internal status and its external environment. The tool defines a firm’s strength, weaknesses, opportunities and threats. Swot looks at the internal condition of the firm to identify and its potential weaknesses and presents the management with information to formulate strategies to utilize its strengths and overcome its weaknesses. Potential weaknesses of the tool include its static nature in an environment that is fast evolving. The tool in its basic form does not offer strategic solution but only identify the status.

Chapter 7

Horizontal and vertical acquisition

Horizontal acquisition refers to the process where a firm acquires another‘s products or entire company in the same market sector for example, in the case of acquiring a competitor. Horizontal acquisition can grow market share and ease competition if the acquired party is a competitor. On the other hand, vertical integration entail a company acquiring another or products of another in a different market for example, acquiring a supplier of input or a distributor of firm products. Vertical acquisition offers an indirect technique of growing market share by having control of competitors’ ability to access essential supplies.

Conglomerate and concentric diversification

Conglomerate diversification happens when an organization expands its occupation into an area which is different to its core occupation. This regularly happens as a result of a merger or buyout of another organization or it can arise if the business wants to grow diverse products. The main benefit of conglomerate diversification is the potential that it unlocks and the new opportunities available.

In concentric diversification there is a technological resemblance between the industries, which implies that the company is able to influence its technical know-how to achieve some competitive advantage. For instance, a business that produces industrial pastes may choose to diversify into pastes to be sold through retailers. The technology would be similar but the marketing work would need to be amended or adjusted.

Chapter 8

A low-cost leadership strategy

A firm following the strategy should embrace three activities or capabilities that include partaking a low-cost delivery and distribution system, enhanced and tight cost control and manage a frequent comprehensive control reports (Porter, 1980). Wal-Mart stores are an example of an organization that uses and has attained low-cost leadership strategy through the stated capabilities. Wal-Mart designed the system of sharing sales information through computer systems with main dealers, such as Proctor & Gamble.

Differentiation-based strategy

These are strategies used by firms that have a wide range of products targeting diverse markets such as the middle class, low class, and the upper class (Rumelt, 1991). Differentiation strategy entails a firm using additional features to serve needs of discerning customers at a premium. Companies that use this method include the Boeing and other airline companies where aircrafts are segmented into first, economy and business classes.

References

Hoopes, D.G.; Madsen, T.L.,; Walker, G. (2003). Guest Editors’ Introduction to the Special Issue: Why is There a Resource-Based View? Toward a Theory of Competitive Heterogeneity. Strategic Management Journal, 24, 889–902.

Peteraf, M. A. (1993). The cornerstones of competitive advantage: a resource-based view. Strategic Management Journal, 14(3). 179–191.

Porter, M. E. (1980). Competitive Strategy: Techniques for Analyzing Industries and Competitors. New York, NY: Free Press

Rumelt, R. P. (1991). How much does industry matter?. Strategic Management Journal, 12(3). 167–185.