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The Strategic Planning Process

In the 1970's, many large firms adopted a formalized top-down strategic planning model. Under this model, strategic planning became a deliberate process in which top executives periodically would formulate the firm's strategy, then communicate it down the organization for implementation. This process is most applicable to strategic management at the business unit level of the organization. For large corporations, strategy at the corporate level is more concerned with managing a portfolio of businesses. For example, corporate level strategy involves decisions about which business units to grow, resource allocation among the business units, taking advantage of synergies among the business units, and mergers and acquisitions. In the process outlined here, "company" or "firm" will be used to denote a single-business firm or a single business unit of a diversified firm. Mission A company's mission is its reason for being. The mission often is expressed in the form of a mission statement, which conveys a sense of purpose to employees and projects a company image to customers. In the strategy formulation process, the mission statement sets the mood of where the company should go. Objectives Objectives are concrete goals that the organization seeks to reach, for example, an earnings growth target. The objectives should be challenging but achievable. They also should be measurable so that the company can monitor its progress and make corrections as needed. Situation Analysis Once the firm has specified its objectives, it begins with its current situation to devise a strategic plan to reach those objectives. Changes in the external environment often present new opportunities and new ways to reach the objectives. An environmental scan is performed to identify the available opportunities. The firm also must know its own capabilities and limitations in order to select the opportunities that it can pursue with a higher probability of success. The situation analysis therefore involves an analysis of both the external and internal environment. The external environment has two aspects: the macro-environment that affects all firms and a micro-environment that affects only the firms in a particular industry. The macroenvironmental analysis includes political, economic, social, and technological factors and sometimes is referred to as a PEST analysis.

An important aspect of the micro-environmental analysis is the industry in which the firm operates or is considering operating. Michael Porter devised a five forces framework that is useful for industry analysis. Porter's 5 forces include barriers to entry, customers, suppliers, substitute products, and rivalry among competing firms. The internal analysis considers the situation within the firm itself, such as: • Company culture • Company image • Organizational structure • Key staff • Access to natural resources • Position on the experience curve • Operational efficiency • Operational capacity • Brand awareness • Market share • Financial resources • Exclusive contracts • Patents and trade secrets A situation analysis can generate a large amount of information, much of which is not particularly relevant to strategy formulation. To make the information more manageable, it sometimes is useful to categorize the internal factors of the firm as strengths and weaknesses, and the external environmental factors as opportunities and threats. Such an analysis often is referred to as a SWOT analysis. Strategy Formulation Once a clear picture of the firm and its environment is in hand, specific strategic alternatives can be developed. While different firms have different alternatives depending on their situation, there also exist generic strategies that can be applied across a wide range of firms. Michael Porter identified cost leadership, differentiation, and focus as three generic strategies that may be considered when defining strategic alternatives.

he argued that only one of the generic strategy alternatives should be pursued.Porter advised against implementing a combination of these strategies for a given product. For effective implementation. the implementation phase involves identifying the required resources and putting into place the necessary organizational changes. The expression of the strategy in terms of functional policies also serves to highlight any practical issues that might not have been visible at a higher level. with changes made as required to keep the plan on track. Control Once implemented. the actual performance measured. The strategy should be translated into specific policies for functional areas such as: • Marketing • Research and development • Procurement • Production • Human resources • Information systems In addition to developing functional policies. Control systems should be developed and implemented to facilitate this monitoring. the results of the strategy need to be measured and evaluated. and appropriate action taken to ensure success. Standards of performance are set. . it needs to be translated into more detailed policies that can be understood at the functional level of the organization. Implementation The strategy likely will be expressed in high-level conceptual terms and priorities. rather.

long-term forecasts cannot be relied upon with a high level of confidence. Drawbacks of this Process The strategic planning process outlined above is only one approach to strategic management. A change in one component can necessitate a change in the entire strategy. In this respect. many firms have turned to scenario planning as a tool for dealing with multiple contingencies. Brief History Of Apple Inc . In an uncertain world.Dynamic and Continuous Process The strategic management process is dynamic and continuous. As such. A drawback of this top-down approach is that it may not be responsive enough for rapidly changing competitive environments. where managers are closer to customers on a day-to-day basis. It is best suited for stable environments. Throughout the process the firm may need to cycle back to a previous stage and make adjustments. the process must be repeated frequently in order to adapt the strategy to environmental changes. Another drawback is that this strategic planning model assumes fairly accurate forecasting and does not take into account unexpected events. some of the more successful strategies emerge informally from lower levels of the organization. In times of change.

which famously started out building computers in a garage in Silicon Valley. announces plans to open a 150. once employed thousands of Americans to build its computers in places like Texas.200 layoffs. Calif.. adding a 200. Colorado and California.000 square-foot facility in Fountain. and a small parts plant in Ireland. Calif. moving to an area less prone to earthquakes than its plant in Fremont. SCI agrees to make Macs at the site for three years. here’s a brief look at the company’s history in U.. 1996: As part of a reorganization. 1981: Apple opens a plant in Singapore to manufacture circuit boards. a site in Garden Grove. Colo. The Elk Grove and Fountain plants produce most of the Apple computers sold in North America for several years. which made the Lisa computer. manufacturing: 1980: Newly public Apple. Apple also shifts circuit board assembly from its Elk Grove site to its sites in Singapore and Cork. the site employs about 1. 1985: As part of a bigger restructuring that includes 1. 1991: Apple opens a 360.000 square-foot plant in Cork. The company.” But it wasn’t always that way.000 square-foot manufacturing plant in Carrollton. By 1996. It also said it would shut down a pilot factory in Cupertino.. including the Carrollton site. Apple closes three of six manufacturing sites. 1994: Apple announces plans to expand its manufacturing operations in Elk Grove.Apple AAPL +3.000-square foot facility to manufacture logic boards and add 300 jobs.100 people. Calif.43% sells millions of iPhones. Calif. iPads and Macintosh computers stamped “Made in China. 1992: Apple opens a computer assembly plant in Elk Grove. as well as subcontractors. It marks the first time another company manufactures a large number of Apple’s computers. and move that production to Carrollton and Cork. to manufacture subassemblies and finished computers. In light of today’s news that Apple is planning to bring some production of its Mac computers to the U. and a 43. gearing up for the release of the Apple II.S. 1997: Apple sells some circuit board assembly assets from its Singapore plant to a Singapore contract manufacturer. 1983: Apple opens a highly automated plant in Fremont. The following year it sells circuit board assembly assets .. to manufacture the first Macintosh computers. Texas. 1996: With its sales slumping and losses mounting. Apple sells its Fountain plant to contract manufacturer SCI Systems SANM +0. that made keyboards and mouse devices.S.36%.. Ireland..

400 jobs at its Cork manufacturing facility. OS X operating system and iLife andprofessional applications.24%. Subcontracts production of iMacs to a plant owned by LG Electronics 066570. 1999: Apple cuts 400 of 1. has created a revolution with its uniquestyle starting with music devices to more sophisticated mobile Cork to the same firm.S. continues to leadthe industry in innovation with its award-winning computers.” (Investor Relations FAQ. Mission Statement: “Apple Inc. today Apple Inc. which also assembles its iPhones and iPads. 2004: Apple shuts down its last U. which makes computers for European markets.SE -1. is also spearheading the digital media revolution with its iPodportable music and video players and iTunes online store. 33) Starting from 1970s. 2317. laying of 235 fulltime workers. Today.36% in Wales. para. With differentproducts and services. II and reinvented the personal computer in the 1980s with the Macintosh.TW -0. With new digital media Apple Inc. a unit of Hon Hai Precision Industry Co. By this time most of Apple’s manufacturing takes place at factories in China. started to lead with its new innovative strategies. Many are operated by subcontractor Foxconn. and has entered the mobile phone marketwith its revolutionary iPhone. Apple Inc. Vision Statement: . Apple Inc. manufacturing line in Elk Grove. Apple Inc. continues to maintain its global image and lead the technologyindustry with its original style. ignited the personal computer revolution in the 1970s with the Apple Inc.

Clear your mind and "Think Different" Jobs say-“Design is a “fundamental soul” that expresses itself through an end result the product.” With this strategy to beat itself. Sometimes. 1. Lead them Apple Inc.Apple Inc. They tap to organize the creativeprocess. but in most of the cases they fail.’s ability to think differently about itself has kept this company at the head of the pack and has helped to . Instead this. As management guru Peter Drucker noted long ago. tries to narrow it down. or service obsolete is the only way to prevent your competitor from doing so. process. rather than othercompanies who sell dozen of models at any given time.Company distinguishes itself. is itsattempt to beat itself. Values and /or Guiding Principles: According to Bruce MacVarish. they tend to design products in theirown way of using them. as a business that creates those alternatives. a superior alternative. which implies that consumers can’t tell you what they want from a product. success is that. 2. the following guiding principles help Apple in its strategy. They have changed our life with their products andservices. apart from beating competitors. they need to be shown.Don't follow your Customers. beat the competitors too. 4. states its vision very clearly. Apple Inc. “Your being the one who makes your products. Instead of trying to satisfy every taste. They really have demonstrated the world.Focus on the Few to sell to the Many Apple Inc. that a human has a strong capacity to create hugethings with a big impact. Apple Inc.“An Apple computer on every desk” – Steve JobsApple Inc. is focused on selling just few products in each category. follows the strategy. Devices with high technology performance are builtby engineers and also are designed by them. Apple Inc.” The motto “Think Different” explains everything.Temper Engineering with Art Most of the companies try to be like Apple Inc. 5. 3. This unfortunately demonstrates why a typical device is filled with a lotof confusing features.Be your own toughest Critic What contributes to Apple Inc.

people who demonstrate talent are given afreer hand. is far less dependent on him. disruptiveinnovations are business model innovations that incorporate five. networks and communities) to re-organize inefficient industry models. MRD.createits unique operating style.Build your Innovation infrastructure and Fortress Apple Inc. Apple’s organizational structure is one of the company’s most formidable assets. has expanded its organizational hierarchies. markets. MRD + ERD + URD Apple Inc. 7. 6. Ordinary employees are given cleardirectives and supervision. six or eight different types of innovation. 8. while empowering end users created to Apple Inc. which is referred to productive employees. On the other hand. This is what makes Apple Inc. has these three evaluations required to start a product idea. anumber of innovative business models and designs. Even though he’s still an essential part of Apple Inc. which are provided with a meticulous care. networks and communities can organize economic activitiesand drive disruptive innovations. come from Steve Jobs and his immediate deputies. 10. 11.Engineering requirement document URD.’s success.User-experience requirements documentThe documents are reviewed by a .Institutionalize your "Creatives" Steve Jobs seem to have learned how to change his aggressive personality to a sensible one with a great effect. the company has treated many of Job’s values so that now Apple Inc.Marketing requirement document ERD. On the other hand. Organize Something At 21st century.Innovation is not Invention Creating something new of value is innovation. Apple Inc. Using these (markets. regardless of job title. came up with a legal/ business innovation (the iTunes store) and a greatindustrial design (the iPod). 9. Most of the decisions at AppleInc.the Innovation Elite The “ Creatives” is a specific group.Cultivate your "Creatives" . a powerful disruptive innovation.

By the time of the "1984" TV ad. Brainy Quotes. engineering. this has resulted in a corporate culture more akin to a startup rather than a multinational corporation. etc. casual versus formal attire. Corporate Goals and Objectives To expand their sales to customers who have not yet own any Apple’s products. the company stood in opposition to staid competitors like IBM by default. Originally.” (Training and Development Program for Apple Inc. and user-experience needs. As the company has grown and been led by a series of chief executives. They plan on how to cope with marketing. Apple and Dell are the only ones in this industry making money. ” (Training and Development Program for Apple Inc. some of its original character has arguably been lost. a budget isassigned to the design. thanks to the influence of its founders. page 7) 2. but Apple still has a reputation for fostering individuality and excellence that . this trait had become a key way the company attempted to differentiate itself from its competitors. and if approved.committee of executives.). Other highly successful firms with similar cultural aspects from the same period include Southwest Airlines and Microsoft. Steve jobs in one of his famous quotes said: “Pretty much.“Apple Inc. each with his own idea of what Apple should be. 1. and a team leader is chosen. They make it by being Wal-Mart .”Apple Inc.According to a 2011 report in Fortune. sec.2 Corporate culture Apple was one of several highly successful companies founded in the 1970s that bucked the traditional notions of what a corporate culture should look like in organizational hierarchy (flat versus tall.. Steve Jobs often walked around the office barefoot even after Apple was a Fortune 500 company. We make it by innovation. page 7)3.” (Jobs. The team focuses on expanding the threerequirement documents. plans to keep creating and releasing computers and consumer electronicsthat are more user-friendly. Another objective of Apple is innovation. will focus more opening more stores even on international locations tohelp increase in sales..

As an example. in-store service. however as a result of outsourcing initiatives in the 2000s almost all of its manufacturing is now done abroad. yet he had no control of the inventory in his stores (which is done company wide by then-COO and now CEO Tim Cook who has a background in supply-chain management). which does not include perks that other CEOs enjoy such as country .A. For instance. To recognize the best of its employees. Rich Page. profit-sapping inventories. Apple's profit margins have been 40 percent compared with 10–20 percent for most other hardware companies in 2011. Ron Johnson who was Senior Vice President of Retail Operations until November 1. The Apple Fellowship has so far been awarded to a few individuals including Bill Atkinson. when iOS senior vice president Scott Forstall refused to sign Apple's official apology for numerous errors in the redesigned Maps app. Apple has developed an extremely efficient and effective supply chain which has been ranked as the world's best for the four years 2007– 2010[citation needed]. Apple created the Apple Fellows program. diligence and industrial skills of foreign workers have so outpaced their American counterparts that “Made in the U. Apple has a relatively simple compensation policy for executives. Al Alcorn. The company's manufacturing. This is the opposite of General Electric's corporate culture which has created well-rounded managers. he was forced to resign. 2011. Rod Holt. Apple is also known for strictly enforcing accountability. procurement and logistics enables it to execute massive product launches without having to maintain large. Jobs saw this as a means of having best-in-class employees in every role. Alan Kay. At Apple.reliably draws talented people into its employ.S. Steve Capps. Numerous employees of Apple have cited that projects without Jobs' involvement often take longer than projects with his involvement. According to a report by the New York Times. This was especially after Jobs' return. awarding individuals who made extraordinary technical or leadership contributions to personal computing while at the company. Unlike other major US companies. was responsible for site selection. Under the leadership of Tim Cook who joined the company in 1998 and ascended to his present position as CEO. employees are specialists who are not exposed to functions outside their area of expertise. Don Norman. Apple insiders "believe the vast scale of overseas factories as well as the flexibility. Cook's catchphrase to describe his focus on the company's operational edge is “Nobody wants to buy sour milk”. Guy Kawasaki. and Steve Wozniak." or "DRI" in Apple jargon. The company previously advertised its products as being made in America up to the late 1990s. and store layout. Each project has a "directly responsible individual.” is no longer a viable option for most Apple products".

not only are the production costs lower. the market titan Windows haslost market. Starting in the U. after the comeback of Steve fees and private use of company aircraft..Other than that it must be said that since Apple’s market is growing. Apple started selling overseas aswell. From then on it is steeply growing. . Since many of Apple’s parts and products are produced outside the U.S. but Apple also got to have better insights in those markets.’s Market started growing in 1997 then decreased slightly. the graph below shows the differences over the past years. The company usually grants stock options to executives every other year. Market Growth Apple Inc.S. (Europe and Asia). until 2000.

is the smallest market for those two products .S. and not only not first but as the coming chart will showU.S.Important to know. as many might thing. are also Apple’s biggest markets worldwide. for the iPhone and iTouch it is surprisingly not the U.

and isaccessible on Windows as well. In order to find out Apple’s position and define the strategy to be used. Opportunities and Threats. Weaknesses. . Strengths: • iTunes is a marvelous revenue source.SWOT Analysis SWOT stands for Strengths. the iPod. •For every hardware Apple Inc. internal factors (strenghts and weaknesses) and externalfactors (opportunities and threats) are analyzed. produces its own software as well. and is very important of finding out where a business currently is and where it could be tomorrow. and is master of expertisefor both. since it also sells its own tool.

meaning many people will return toApple to obtain them. trends. theyare presented as offers. • Low debt. Weaknesses also express the disadvantages to competitionthat might not let the business meet the objectives. is also easy to use. •The production of computer anti-viruses. Weaknesses: Weaknesses of a company or business are the negative elements that could be improved becausethey are under the control of that business. needs that promise beneficial outcomes for the company. which are increasing on PC’s • Large and increasing population resulting in more potential customers of tomorrow •Increasing bonds and partnerships with other companies •Increasing online sales . this implies that the development and production of new products and services has to be constant •Low presence in advertising other than products placement in publishing and educationalareas •Very little market share compared to main competitor Microsoft Opportunities: Opportunities are external factors that influence the company’s current and future position.•Apple’s price area level provides it with enough room to avoid price competition. • Apple’s so much appealing design. •Weak relationship with market titan Microsoft •Technological products as Apple’s have extremely short more space to control finance •The good brand loyalty of Apple Computers •Mergers with Intel Computers since 2006 •High developed Research & Development department •Steeply growing market •The services/products offered by Apple are original.

•The long lasting economic recession.S. which might influence Apple’s sales in the near future •Window’s 7 (software). and have a glimpse into the futureof Apple inc.S. economic. China. Political Influences: It is reported that in 2007 52% of sales of Apple were from outside America. and any of these states may have awfuloutcomes for Apple Inc. like Ireland.Apple Inc. wars and terrorism might influence Apple in a huge manner. and Cork. therefore producing more types tomeet as many needs as possible Threats: Threats are negative external factors the company has no control over. HP. In cases of threats most and best a company can do is identify them and prepare scenario’s of how threats can be turned beneficial or at least do no harm to the company. •In the Laptop market Apple has very strong competition from Dell. Economic Influences: .. Sony and Toshiba •Media piracy: iPod users illegally downloading music for free instead buying at iTunes •Its product expensiveness threatens Apple being undercut by low-cost imports. moreover these are all factorsApple has no ability to control.•Most demanded and sold Apple products are laptops.. which after the flop of vista is gaining more and more market share •The very high speed of technology development PEST Analysis The PEST analysis helps determine the current situation of Apple Inc. Czech Republic. identifying potentialinfluences of the political. produces many of its parts and products outside the U. Political Conflicts between the U.Korea. Bad internationalrelations. social and technological sectors.

Another big social influence is the music industry.therefore the products lifecycle is very short Governance Apple's Board of Directors oversees the Chief Executive Officer and other senior management in the competent and ethical operation of Apple on a day-to-day basis and assures that the long-term interests of shareholders are being served. Apple is the globally seen as the King of technology. Apple having developed the biggest virtual media store. The Board has adopted the following committee charters and governance guidelines that. but quality anddesign. in conjunction with Apple's articles of incorporation and bylaws. as Apple products might be viewed. and set standards to ensure that Apple is committed to business success through the maintenance of high standards of responsibility and ethics.The global economic depression might have immense impact on Apple Inc. while consumer’s incomes didn’t have significant changes. especially on ‘luxury products’. adding morecompetition in the market. To satisfy the Board's duties. mobile phones etc. leading to brand identification and loyalty. is not as endangered economically. combining functionality with design. All in all. to minimize the economic effects of inflation on Apple Inc.Even though the U. Apple’s image also portrays the modern individual’s lifestyle. iswell ahead any other competition of this direction. dollar has lost value. for which technology plays the main role. iTunes. Apple Inc. Social Influences: Globalization includes the interaction of people worldwide. leading consumers to spend less.S. The inflation rate is high. Today’s World cannot be imagined without technological devices as Computers. Thecorporation has purchased itself foreign currency.S. Therefore social influences have positive effectson Apple Inc. not because of most usage. . moreover the unemployment rate has increased. but most governmentspunish those behaviors. which over the last decade has become virtualand set its market to the cyberspace. It needs to be said that the U. Technological Influences: The technology market for computers and mobile phones has become huge. Web piracy might be a threat. focused approach to their positions. Also technology innovations and changes are almost as fast as light. form the governance framework for Apple. dollar’s depreciation has in fact increased Apple’s revenue in the international market. directors are expected to take a proactive. The governance structure is designed to foster principled actions.

directors are expected to take a proactive. Directors are expected to spend the time needed and meet as often as necessary to discharge their responsibilities properly. their independence. demonstrated leadership. The guidelines. Candidates should be selected for. III. in conjunction with the Corporation’s articles of incorporation. and set standards to ensure that the Corporation is committed to business success through the maintenance of high standards of responsibility and ethics. The Role of the Board of Directors The Board oversees the Chief Executive Officer (the “CEO”) and other senior management in the competent and ethical operation of the Corporation on a day-to-day basis and assures that the longterm interests of the shareholders are being served. diversity. character. I. form the framework of governance of the Corporation. Director Qualifications The Nominating and Corporate Governance Committee is responsible for reviewing the qualifications of potential director candidates and recommending to the Board those candidates to be nominated for election to the Board. and the charters of the committees of the Board. and whether such characteristics qualify the individual to fulfill the needs of the Board at that time. Corporate Governance Guidelines The Board of Directors (the “Board”) of Apple Inc. effective decision-making and appropriate monitoring of both compliance and performance. skills and abilities. Shareholders also may nominate directors for election at the Corporation’s annual meeting of shareholders by following the provisions set forth in the Corporation’s bylaws. including financial literacy. ability to exercise sound judgment. The Board will consider all relevant facts and circumstances in making a determination of independence for each director and may consider. whose qualifications the Nominating and Corporate Governance Committee will consider. Director Service on Other Public Company Boards Serving on the Corporation’s Board requires significant time and attention.effective decision-making and appropriate monitoring of both compliance and performance. as appropriate. skills. focused approach to their position. IV. bylaws. A director who also serves as the CEO of the Corporation . The Board should monitor the mix of skills and experience of its directors in order to assure that the Board has the necessary tools to perform its oversight function effectively. The Nominating and Corporate Governance Committee will consider the individual’s background. imposing independence requirements more stringent than those required by NASDAQ. II. The governance structure of the Corporation is designed to be a working structure for principled actions. age. (the “Corporation”) has adopted these governance guidelines. among other things. To satisfy its duties. and experience in the context of the needs of the Board. Director Independence It is the policy of the Corporation that the Board consist of at least a majority of independent directors who either meet or exceed the independence requirements of the NASDAQ Stock Market (“NASDAQ”).

For refusals to stand for re-election. Director Resignations. as well as officers and employees. Directors also are encouraged to visit the Corporation’s facilities and meet with Corporation employees throughout their tenure on the Board. XI. In addition. V. The Board believes the Corporation benefits from the contributions of directors who have developed. For resignations.should not serve on more than two boards of other public companies in addition to the Corporation’s Board. Directors are expected to adhere to the Corporation’s Business Conduct Policy and the Guidelines Regarding Director Conflicts of Interest. over time. Retirement Policy A director may not stand for re-election after age 75. The Board does not believe that a non-employee director in this circumstance necessarily should be required to leave the Board. VI. the director must state the effective date of the resignation or retirement. the Board believes that the Nominating and Corporate Governance Committee should review each situation and make a recommendation to the Board as to the continued appropriateness of Board membership under the new circumstances. IX. increasing insight into the Corporation. directors reasonably may rely on the honesty and integrity of . if the director has such a disagreement. but need not resign until the end of his or her term. Term of Office Directors serve for a one-year term and until their successors are elected. Retirements and Refusals to Stand for Re-Election A director who intends to resign or retire or refuses to stand for re-election to the Board must submit written notice to the General Counsel of the Corporation. In fulfilling that responsibility. to act ethically. X. Directors Who Change Their Present Job Responsibilities Each director who retires or substantially changes his or her principal occupation or business association from the position he or she held when initially elected to the Board shall tender his or her resignation to the Board at the time of such change by sending written notice to the General Counsel of the Corporation. Instead. the director also must state that the director has no disagreement with the Corporation’s operations. Director Orientation and Continuing Education The Corporation will provide new directors with materials. directors are encouraged to attend accredited director education programs at the Corporation’s expense. For resignations and retirements. Ethics and Conflicts of Interest The Board expects its directors. VIII. VII. The Nominating and Corporate Governance Committee reviews periodically the appropriateness of each director’s continued service. policies or practices or. the director must describe the disagreement. There are no limits on the number of terms that a director may serve. Directors other than the CEO of the Corporation should not serve on more than four boards of other public companies in addition to the Corporation’s Board. the director must state when the election in question will occur. Director Responsibilities The fundamental role of the directors is to exercise their business judgment to act in what they reasonably believe to be the best interests of the Corporation and its shareholders. briefings and additional educational opportunities to permit them to become familiar with the Corporation and to enable them to perform their duties.

If more than one Lead Director is appointed. Chairman of the Board and Chief Executive Officer The Board regularly evaluates whether or not the roles of Chairman of the Board and CEO should be separate and. XV. the Sarbanes-Oxley Act of 2002 and the independence definition set forth in Rule 10A-3(b) . Scheduling of Board Meetings and Attendance: The Board will meet at least four times per year. as appropriate. The Board believes these issues should be considered as part of the Board’s broader oversight and succession planning process. if they are to be separate. at least four times per year. the Board reserves time following each regularly scheduled meeting to allow the independent directors to meet in executive session. along with information and data that is important to the Board’s understanding of the business to be conducted at the Board meeting. accounting. whether the Chairman of the Board should be selected from the non-employee directors or be an employee of the Corporation. XIV. at the request ofmanagement. Communication with Stakeholders The Board believes that management speaks for the Corporation. the Board will appoint a Lead Director or Co-Lead Directors to conduct executive sessions and for such other purposes as the Board finds appropriate. but it is expected that directors would do this with the knowledge of management and. XIII. Agenda: At the beginning of each year the Board will set. Any director may suggest items to be included on the agenda or raise subjects at a Board meeting that are not on the agenda for that meeting. the Board may form new committees as it deems appropriate. If a Chairman of the Board has not been elected. a schedule of agenda items to be discussed during the year. an Audit and Finance Committee and a Compensation Committee. XII. Directors are expected to prepare for. Board Committees Standing Committees: The Board currently has a Nominating and Corporate Governance Committee. to the extent foreseeable and practicable. financial and other advisors. should be distributed to directors in advance of the meeting so that Board meeting time may be focused on questions that the Board has about the materials. Co-Lead Directors and Executive Sessions The Board expects to hold executive sessions without the presence of management. Independence and Qualifications of Standing Committee Members: All of the members of the standing committees will meet the then-effective criteria for independence established by NASDAQ and. including the CEO and other non-independent directors. in the case of the Audit and Finance Committee. Individual directors occasionally may meet or otherwise communicate with various constituencies that are involved with the Corporation. In general. absent unusual circumstances or as contemplated by the committee charters. attend and participate in all Board and applicable committee meetings. in most instances. The executive sessions shall be led by the Chairman of the Board if one has been elected.the Corporation’s senior management and expert legal. Certain matters may be discussed at the meeting without advance distribution of written materials. Annual Meeting Attendance: All directors are expected to attend the Corporation’s annual meeting of shareholders. From time to time. the Board may prescribe different responsibilities to each Co-Lead Director. An agenda for each Board meeting. and to spend the time needed to meet as often as necessary to discharge their obligations properly.

Senior officers are invited to attend Board meetings from time to time to provide additional insight into the items being discussed. the Board and the CEO should conduct an annual review of management development and succession planning for senior management. alternate standing committee members. XVIII. Director Compensation The Compensation Committee will review the form and amount of director compensation annually and recommend any changes to the Board. including the CEO. an annual evaluation of the performance of all executive officers.(1) of the Securities Exchange Act of 1934. to the extent foreseeable and practical. . The members of these committees also will meet the other membership criteria specified in the respective charters for these committees. The Board also reviews the CEO performance evaluation to ensure that the CEO is providing effective leadership of the Corporation. Standing Committee Member Assignments and Rotation: The Nominating and Corporate Governance Committee makes recommendations to the Board concerning the structure and composition of the Board committees. where applicable. Each standing committee will establish. Meeting and Agenda: The chair of each standing committee will determine. its Committees and each member at least annually to determine whether it and its members and committees are functioning effectively. the frequency and length of standing committee meetings and the standing committee’s agenda. Director Access to Officers and Employees Directors are encouraged to talk directly with any officer or employee of the Corporation. there will be occasions on which the Board may want to rotate standing committee members. as amended. The Board will designate the chair. in consultation with the appropriate standing committee members and members of management. and in accordance with the standing committee’s charter. XIX. including the CEO. Non-employee directors are expected to receive a substantial portion of their annual retainer in the form of equity. Standing Committee Charters: Each standing committee will have its own charter. The Compensation Committee is expected to use this review in the course of its deliberations when considering the compensation of the CEO and senior management. authority and responsibilities of the standing committee in addition to the qualifications for standing committee membership. by the vote of a majority of the directors. Board Evaluation The Board should undertake an evaluation of the Board. The Nominating and Corporate Governance Committee is responsible for coordinating and overseeing the annual Board evaluation process in accordance with the charter and principles of that committee. The charter will set forth the purpose. At least one member of the Compensation Committee will not serve simultaneously on the Audit and Finance Committee. committee members and. The schedule for each standing committee will be furnished to the full Board. a schedule of agenda items to be discussed during the year. and review with the Board. but the Board does not believe that it should establish a formal policy of rotation. XVI. XVII. Employee directors are not paid additional compensation for their services as directors. As part of the annual evaluation. Management Review and Succession Planning The Compensation Committee should conduct. From time to time.