COURSE EXERCISES – STRATEGIC MANAGEMENT - MAN 4720

1) Strategic Audit

Company: TTI Insurance

A) Current Performance: TTI Insurance is the biggest Allstate Agency in the nation. They
currently have a 16% market share in the State of Florida out of all Allstate Agencies in
Florida. in 2018, ROI was 11%, and the company had around $2 million in profitability.

B) Strategic Posture:
a) The mission, objectives, strategies, and policies are merely implied from
performance. The company sells multiple insurance products in one of the most
competitive industries in the nation.

C) Board of Directors
a) There are three members as part of the BOD. The founder of the company Ted
Todd, his wife Marilyn Todd, and their son Charley Todd. Charley Todd is
currently the CEO of the company and the only internal member of the
company.
b) Only the external members of the BOD own stock in the company. Since this is
a private company, it is not publicly traded in the stock market, and therefore,
the owners possess full ownership of the company.
c) Board members contribute to the company with their expertise. The owner of the
company has over 30 years of insurance experience along with his wife, while
their son and current CEO has a wide variety of expertise in the business world.
Charley, the CEO of the company, is very concerned with environmental
sustainability and it is actively finding ways to use the latest technology in order
to become more sustainable. For example, the company gave up all fax
machines for electronic fax machines, These decreased the use of paper
substantially.
d) Both owners of the company have served on the BOD since the company was
founded in 1986. Charley, the current CEO, has served on the BOD since 2015.
e) All members on the BOD are fully involved with the day to day operations of
the company from a management standpoint. All three of the members
participate in strategic planning and suggest future direction for the company

D) Top Management
a) The company has a corporation structure: CEO, CFO, COO, etc. Every person
who provides guidance and leadership are considered top management.
b) Every person in top management has had multiple years of insurance
experience. In addition to their insurance experience, every person in top
management has some sort of business degree, and abundant experience
managing staff. All management has internal experience within the company-

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 they are all familiar with the products that are being sold to the public. In the
past, the company has acquired other smaller agencies. Executives from these
other companies are not considered top management as TTI’s prior acquisitions
were in terms of book of business only, and not in terms of staff.
c) Top management has been directly responsible for the positive performance of
the company over the past four years. 75% of the managers have been in the
current position for at least 2 years or more, and all of the management team has
been internally promoted.
d) Top management is fully responsible for the strategic management process of
the company.
e) TTI has a culture of transparency and open communication, Therefore, top
management regularly interacts with lower level management and vice versa.
Open communication is encouraged within the company, and even staff
performing internships are encouraged to communicate with upper management.
f) TTI’s strategic decisions are always ethically made in a socially responsible
manner. The CEO encourages diversity in every aspect, and therefore, any
decision has to be made carefully to ensure the comfort of every employee
within the company. Additionally, all decisions are also taken in an
environmentally sustainable manner as the example previously given.
g) In addition to the two owners of the corporation, no other employee top
management executive owns any shares of the company.
h) Top management is definitely skilled to cope with future changes. The company
itself has established as forward thinking, technologically advanced company
and it is setting the example for other insurance agencies. The company has a
team of data analysts that look at past trends and also tried to predict future
trends.
E) Summary Report:

TTI Insurance has a top management team that can objectively be described as
innovatie. From creating ergonomic work spaces to ensure employee satisfaction, to
creating a team that is looking into future trends, the company is a pioneer in the
insurance industry. The level of knowledge, expertise, and motivation that top
management has makes TTI the expectation of the insurance industry. Based on my
findings, my recommendation is to have top management moving the company forward.

Source: Charley Todd- CEO of TTI Insurance.

2) Course Exercise Questions in Course Content. (Instructor to provide questions) (25

pts.)

1) How do the three elements of Globalization, Innovation, and Sustainability impact

your understanding of Strategy?

Strategy, in its most basic defininito, is the set of decisions that help determine the future of an

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 organization. These decisions have to be consciously made at al times. With globalization, a
company has to understand the impact that their product may have in a different culture.
Simultaneously, a company has to understand the environmental impact of a specific product,
and also how innovation can help achieve such strategy.

2) Organizational strategy can be divided roughly into two categories: a) formulation

and b) implementation. While there is legitimate crossover between the two, how would
you characterize the issues involved in each effort?

Formulation is the creation of a strategy. It is the mission statement, vision statement, etc. It is
the basic starting point of a strategy. On the other hand, implementation is the creation of
procedures in order to get the formulation moving forward.

3) What is meant by a hierarchy of strategy?

The hierarchy of strategy refers to the different levels of strategies, from top management to
lower management. Top management strategies are broader such as the mission statement and vision
for the company, while lower management strategies are more specific.

4) What are the roles and responsibilities of an effective and active Board of Directors?
What are the issues that suggest the need for oversight of a particular company’s
management team?

The Board of Directors oversights all management of the company and its decisions. Since the
BOD is elected by the shareholders, the BOD is responsible for the company’s performance.
Any issues that can potentially affect the company’s shareholders is grounds for an oversight of
a particular management team.

5) What recommendations would you make to improve the effectiveness of today's boards
of directors?

One of the biggest complaints that I have read online is that the BOD is not always aware of the
company’s internal issues, especially at lower management levels. Recognition of small scale
problems such as production bottlenecks can potentially solve future issues, thus improving the
effectiveness of the BOD.

6) How has moral relativism led to criminal activities by some employees in companies?

When morality is seen as optional, it is called moral relativism. Employees have committed
criminal activities such as stealing money from a cash register with the excuse of moral
relativism.

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 7) Using Carroll's list of four responsibilities, should a company be concerned about
discretionary responsibilities? Why or why not?

Yes, although a company does not have to follow Carroll’s four responsibilities, the company
still has to make sure that they do not get any public backlash for violating any of the four
responsibilities. Any backlash can potentially affect profits and reputation.

8) How does STEEP analysis aid in the development of the strategy in a company?

Companies use the STEEP analysis to help them make considerate decisions in each area of the
analysys. The analysis includes the following areas: Sociocultural, technological, economic,
environmental, and political.

9) Why is environmental uncertainty an important concept in strategic management?

A company has the social responsibility of being environmentally sustainable. They have to
predict how their product or processes may impact the environment presently, and in the future.

10) Explain how using an IFAS Table impacts the understanding of a company’s internal
resources and capabilities.

The Internal Factors Analysis Summary is a table that helps companies quantify their strengths
and weaknesses in order to evaluate performance or strategize.

11) What kind of internal factors help managers determine whether a firm should
emphasize the production and sales of a large number of low-priced products or a small
number of high-priced products?
The skills of all employees, research and development, and plant capabilities. Once a firm has a
full understanding of these factors, they can determine where to emphasize production.

12) Explain how our understanding of the three generic strategic approaches available to
companies can be used to direct the efforts of all employees at those companies.

Regardless of which strategic approach is in place by any company (cost leadership, focus, or
differentiation), they will only be successful if the entire company understand the strategy and
its goal. From top management, all the way down to employees. Without aligning goals, the
company’s strategy will not succeed.

13) What does a business have to consider when trying to follow a cost leadership strategy
and a differentiation strategy simultaneously? Can you name a company doing this?

The most famous company using both of these approaches is Walmart. Walmart sells products
with high margins (low cost products), while also using differentiation (online, store pick up,
return merchandise at any location, etc).

14) How does horizontal growth differ from vertical growth as a corporate strategy?

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 From concentric diversification?

Vertical growth is creating new products within the same line of business, while horizontal
growth is creating products for a new market. Concentric diversification on the other hand is
the creation of new products that are closely related to existing products with the intent of
reaching new audiences.

15) Compare and contrast a SWOT approach with portfolio analysis.

SWOT is an acronym that helps management find the strength and weaknesses of a
corporation, while portfolio analysis using multiple techniques to analyze a company. Both
analysis identify the strategic factors that can help a company become successful.

16) What concepts or assumptions underlie the BCG growth-share matrix? Are these
concepts valid? Why or why not?

These are the assumptions of the BCG growth-share matrix: ROI is higher if higher market
share, balanced portfolio in terms of resources, return dynamics are the same for all aspects of
the portfolio, constrained resources, resources can be allocated across the portfolio. Not all
concepts are valid- for example, return dynamics cannot be the same across all aspects of a
portfolio because every division or every product within a company has different return
dynamics.

17) Should functional strategies be categorized under strategy formulation or under

strategy implementation?

Formulation refers to planning and decision making, while implementation is the process of
putting the formulation in place. Functional strategy is the bigger scale organizational planning.
Therefore, functional strategies encompasses both formulation and implementation.

18) How do timing tactics impact the strategy implementation efforts of a company?

There are multiple ways that timing tactics can impact the strategy implementation efforts.
Normally, the first company to produce a product has to also solve all the issues of the product.
This is how it can be advantageous for other companies to take advantage of timing tactics.
Moreover, some companies are able to produce similar products at a lesser price, and therefore,
they can quickly gain market share.

19) How can a corporation keep from sliding into the decline stage of the organizational
life cycle?

Companies have multiple to keep them from sliding into the decline stage. For example,
introducing new products (both vertical and horizontal growth). An example would be Apple-
they introduced new iphones, and later on they introduce a watch, ipad, earbuds, etc. Another

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 method would be through the acquisition of other companies just like Apple acquired Beats.

20) Does structure follow strategy or does strategy follow structure? Why?

Structure refers to all the shareholders, products, processes, etc of a corporation. If the structure
does not follow the strategy, the company will fail. If structure is changed, it is because strategy
was changed. Therefore, structure follows strategy.

21) How can corporate culture be changed?

The most effective way to change the culture is through communication. Top management must
communicate its strategy to all employees, and open themselves up to any questions.
Transparency is very important here as employees will want to know the reason for the
changes. In addition, training resources should be made available to all employees.

22) Why is an understanding of national cultures important in strategic management?

Globalization. It is important for companies to understand what products are acceptable in

specific markets, otherwise, they will lose market share. It is also important for top
management to understand national cultures in order to run a business. Some places have
different methods of running business and some countries may have significantly more
government regulation than others.

23) Why bother with shareholder value or a stakeholder scorecard? Isn't it simpler to
evaluate a corporation and its SBUs just by using standard measures like ROI or earnings
per share? What are the pros and cons of using the strategic audit as a framework for
case analysis?

Shareholder value or stakeholder scorecard provide far more information about a corporation
than ROI or EPS would. ROI and EPS provide limited information about the performance of
the company, and do not take into account all factors. An strategic audit provides a detailed
analysis of the management of the company, but it does not provide concrete evidence in order
to aid management make decisions.

24) What ratios would you use to begin your analysis of a case? What are the five crucial
steps to follow in basic financial analysis?

The main rations to begin an analysis are as follows: Liquidity ratios, profitability ratios,
activity ratios, and leverage ratios. The five crucial steps for basic financial analysis are the
following: 1) Examine past date, 2) Compare historical data, 3) Calculate changes in individual
categories from year to year and cumulative, 4) Determine changes as percentages, 5)Adjust for
inflation.

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 3) Shark Tank Report

“Rock Band”- July 9th, 630pm

Lee Dover is the creator of Rock Band. A company that sells fashion items with a unique twist-
the items have a rock that is manually carved and integrated into the items. The products have a
rock music style. Less was looking for a $100,000 investment for 20% of the company. Lee is
very persistent and he went as far as selling his home in order to fund and start his company.
Additionally, Lee has had a few bumpy steps along the way including issues with the trademark
of the company as he sold a portion of the trademark to a European company, and his sales are
not as great as the sharks normally like to see. His sales have been $300,000 in the last 5 years.
One of the biggest eye openers for the sharks was the margin of the product. The cost per unit is
$12, while suggested retail value is $99 to $150 depending on the item. He was in 5 major U.S.
retail stores and could not keep up with the production demand. Given that his product is being
sold nationwide, including famous people such as Brittany Spears, all sharks made reasonable
offers. Two of the sharks offered $100,000 cash to buy the company completely with an
additional 7% in royalties. Another two of the sharks partnered up and offered him $100,000
for 40% of the company. Lee accepted Mark Cuban’s offer for $100,000 for 40% of the
company, with the promise that Lee would still hold majority ownership of the company. The
offer was made to Lee as the sharks saw the value in the brand, and not necessarily the product.

“Vest Packs”- July 9th, 8pm

Michael is the CFO of Vest Packs, and his partner Arthur also came along with Michael. They
are asking for $50,000 for a 10% stake in his company. The product was invented by his daughter
when she was on the 6th grade. Vest pack is a combination of a backpack and a vest. The unique design
helps distribute the weight across the whole upper body instead of just the shoulders. Unfortunately,
right off the back, the sharks asked how much money they have in sales, and were disappointed to find
out that they only had $10,000 in sales between January and March. The product sells for $14.98 retail,
and it costs $4.75 per unit to make one. The product was in 75 Walmarts between January and
February. Once the sharks found out that the product was in 75 Walmart stores and only had $10,000 in
total sales, they were taken back abruptly. They all declined to make an offer due to the low demand of
the product. One of the sharks argued that ony $10,000 in sales while the product was in 75 major
retail stores indicates that the consumer does not want the product, and the consumer shows no signs of
demand for the product.

1) Individual Essay

My present position with my company requires that I manage a team of people, and I am also
responsible for the production of the team, therefore, my job includes tasks ranging from managing
people to basic financial planning and. forecasting.
Basic financial planning such as budgeting is an important part of my current job. Without proper

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 budgeting, it is hard to figure out what the department’s capabilities will be. Forecasting is especially
important in my career as I manage a team that is primarily in charge of sales. Without forecasting, it
would be difficult to predict future trends. We use historical date and industry analysis in order to
create forecasts and possible trends.
Additionally, my current position requires me to monitor competitors for strategic planning. We use
our monitoring capabilities to find out whether other companies may have a competitive advantage
over our company, and therefore, take proper steps in order to mitigate any possible losses, or to
properly strategize in order to come up with a more innovative and better products.
In conclusion, a lot of the items learned from the book are either already in place, or they have
motivated me to try new approaches in order to keep moving my team forward.

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