Answers

Q1: Which int’l strategy should a company employ and why?

Figure 7.1 p.193

Q2: What kinds of pocicies and procedures would facilitate great strategy execution?

FIGURE 11.1
How Policies and
Procedures Facilitate
Good Strategy Execution

(c) 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution
11–11
in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

Q3: Why does corporate culture matter to the strategy execution process?
A company’s culture is grounded in and shaped by its core values and ethical standards.

Core values and ethical principles serve two roles in the culture-building process: (1) They foster a work
climate in which employees share common and strongly held convictions about how company business
is to be conducted, and (2) they provide company personnel with guidance about the manner in which
they are to do their jobs—which behaviors and ways of doing things are approved (and expected) and
which are out-of-bounds. They serve as yardsticks for gauging the appropriateness of particular actions,
decisions, and behaviors.
A culture well matched to the requirements of the strategy execution effort focuses the attention of
employees on what is most important to this effort; Culture-induced peer pressure induces personnel to
do things in a manner that aids good strategy execution; A culture consistent with the requirements for
good strategy execution can energize employees, deepen their commitment to execute the strategy,
and enhance workers productivity.

Q4: What is the scope of the firm? Which one should a company use?

 What is the scope of the firm?

The scope of the firm refers to the range of activities that the firm performs internally, the
breadth of its product and services offerings, the extend of its geographic market presence, and
its mix of businesses.
 Which one should a company use?
Decision concerning the scope of a company’s operations – which activities a firm will perform
internally and which will not – can also affect the strength of a company’s position in a given
market. Whether aCompany chooses to expand their scope horizontally (more broadly within
their focal market) or vertically (up of down the industry value chain system that starts with raw
– material production and ends with sales and service to end consumer) depends on its
objective. However, the company should used horizontal merger and acquisition because of the
following reasons:

Horizontal mergers and acquisitions typically have five objectives: lowering costs, expanding
geographic coverage, adding product categories, gaining new technologies or other resources
and capabilities, and preparing for the convergence of industries. They can strengthen a firm’s
competitiveness in five ways: (1) by improving the efficiency of its operations,(2) by heightening
its product differentiation, (3) by reducing market rivaly,(4) by increasing the company’s
bargaining power over suppliers and buyers, and (5) by enhancing its flexibility and dynamic
capabilities.

Vertical integration, forward and back ward, makes most strategic sense if it strengthens a
company’s position via either cost reduction or creation of a differentiation-based advantage.
Otherwise, the drawbacks of vertical integration( increased investment, greater business risk,
increased vulnerability to technological changes, less flexibility in making product changes, and
the potential for channel conflict) are like ly to outweigh any advantages.

Q5: According to Dr Porter, how can business solve social problems?

There is a CONVENTIONAL WISDOM – Business profits from CAUSING social problems

The conventional wisdom in economics and the view in business has historically been that actualy,
there’s a tradeoff between social performance and economics performance. The conventional wisdom
has been that business actually makes a profit by causing a social problem.

And the question is, how can we get business thinking to adapt this issue of shared value?

This is what I call shared value:

CREATING SHARED VALUE:

Addressing a SOCIAL ISSUE with a BUSINESS MODEL

Shared value is capitalism, but it’s a higher kind of capitalism.

It’s capitalism as it was ultimately meant to be, meeting important needs, not incrementally competing
for trivial differences in product attributes and market share.

CREATING SHARED VALUE: Social Value + Economic value

Shared value is when we can create social value and economic value simultaneously.

It’s finding those opportunities that will unleash the greatest possibility we have to actually address
these social problems bcz we can scale.

LEVELS OF SHARED VALUE

- Meeting societal needs through products

- Utilizing resources, suppliers, logistics, and emplyees more productively
- Improving the local business environment

SOLUTIONS

I think if we can get business seeing itself differently, and if we can get others seeing business
differently, we can change the world.

Q6: What did Dr Porter mean when he talked about rethinking capitalism?

Rethinking capitalism aims for a Sustainable and Inclusive Growth of firms. The problem that we’re
facing now is that we’re into a sort of vicious cycle in thinking about business and society, purpose of
capitalism and benefits of capitalist system to meeting society’s needs (improving life, health).
The business involves in a direction that we’ve kind of narrow the scope of how to create economic
value.
Wrong thought: companies create profit as an expense for communities, the only target is maximizing
the profit.
Business and commutity need each other
-> in a broader way and longer-term of sustainability of company,
should create shared value: whats good for society is good for business.
Social benefits are considered as a powerful way to create economic value.
-> create social and economic value at same time
-> make products good for customers to get economic profits
->need to figure out how to create more value to benefit everyone.
(ex: train farmers, give out toolkits)
=>real impact now is not CSR department or doing charities but mobilizing the business itself with the
target of creating and maintaining profits for both company and society.

Q7:How would local companies defend against global giants?

DEFENDING AGAINST GLOBAL GIANTS: STRATEGIES FOR LOCAL COMPANIES IN DEVELOPING COUNTRIES

 Develop a business model that exploits shortcomings in local distribution networks or

infrastructure.

 Utilize knowledge of local customer needs and preferences to create customized products or
services.

 Take advantage of aspects of the local workforce with which large multinational firms may be
unfamiliar.

 Use acquisition and rapid-growth strategies to defend against expansion-minded internationals.

 Transfer company expertise to cross-border markets and initiate actions to contend on an

international level.

Q8: Why should a company diversify?

1) Growth:

--The desire to escape stagnant or declining industries is a powerful motive for diversification
(e.g. tobacco, oil, newspapers).

-- Growth strategies (esp. by acquisition), tend to destroy shareholder value.

2) Spread Risk:

-- Diversification reduces variance of profit flows

-- But, doesn't create value for shareholders—they can hold diversified portfolios of securities.
 3) Profit:

-- For diversification to create shareholder value, then bringing together of different businesses
under common ownership must somehow increase their profitability.

Which kind should a company use?

Related diversification provides a stronger foundation for creating shareholder value than
unrelated diversification, since the specialized resources and capabilities that are leveraged in
related diversification tend to be more valuable competitive assets than the generalized
resources and capabilities underlying unrelated diversification, which in most cases are relatively
common and easier to imitate.

Q9: What are the key actions that a company should use to build an organization capable of good
strategy execution?

BUILDING AN ORGANIZATION CAPABLE OF GOOD STRATEGY EXECUTION:

THREE KEY ACTIONS

(1) staffing the organization—assembling a talented management team, and recruiting and
retaining employees with the needed experience, technical skills, and intellectual capital;

(2) acquiring, developing, and strengthening strategy-supportiveresources and capabilities—

accumulating the required resources, developing proficiencies in performing strategy-critical
value chain activities, and updating the company’s capabilities to match changing market
conditions and customer expectations; and

(3) structuring the organization and work effort—instituting organizational arrangements that
facilitate good strategy execution, deciding how much decisionmaking authority to delegate,
and managing external relationships.

Q10: What would be considered as good strategy execution?

♦ . Good strategy execution requires a team effort. All managers have strategy-executing
responsibility in their areas of authority, and all employees are active participants in the strategy
execution process.

♦ The two best signs of good strategy execution are whether a company is meeting or beating its
performance targets and whether they are performing value chain activities in a manner that is
conducive to companywide operating excellence.