MGT406STRATEGI

CMANAGEMENT

Mo
dul
efo
r

MGT406

St
rat
egi
cMan
age
men
t

1
 MGT406STRATEGI
CMANAGEMENT

Modul
e1
BASI
CCONCEPTSI
NBUSI
NESSPOLI
CYANDSTRATEGI
CMANAGEMENT
Week1-3
I
ntr
odu
cti
on
Manyo ft h
ec oncep
tsan dt echni
questhatde alwithstrategicman agementhavebe en
devel
opedandu s
eds ucc
essful
lybybu s
inesscorp o
rati
ons.Inthischapter,wewil
lknowwh y
str
ategi
cman agementwaso fmostusetolargec orpo
ration
so perati
nginmu l
ti
pl
eindus
trie
s.
I
ncreasi
ngr i
skso ferror,costl
ymi s
takes,an de vene cono
micr ui
nar ecausi
ngt o
day’s
profe
ssi
onalmanagersinallorgani
zati
onstot akes t
rategi
cman agementseri
ous
lyinorder
tokeepthei
rcompani
e scompeti
tiv
einanincreasingl
yvolati
leenviron
me nt
.

L
ear
nin
gObj
ect
ive
s:
Underst
andthebenefi
tsofstrat
egi
cman age
me nt
Expl
ainhowgl
obali
zati
onande nv
iro
nme n
talsu
stai
nabi
li
tyi
nfl
uenc
e
s
trat
egi
cman age
me nt
Underst
andthebasi
cmo delo
fs t
rategi
cmanagementandi
tscompon
ent
s
Underst
andst
r at
egicdeci
si
on-makingmodes

WHATI SSTRATEGI CMANAGEMENT?

Strat e
gicman ageme n
tisas e tofman age ri
aldeci
si
onsan dac ti
onsthatde t
er mi
n es
thel
ongru nper f
ormanceo fac o
rpor ati
on.Iti
ncludesenvi
ronmentalscanni
ng( bothexternal
and inte
r nal
),s t
rategy f o
rmu l
ation (strategic orl ong-range p l
annin
g ),strate gy
i
mp l
ementation,andevaluati
onan dc ont
rol.Thes tudyofstr
at e
gicman agemen t
,therefore,
emphasi
zest hemo ni
tori
ngan devaluati
ngo fe x
te rn
alopport
uniti
esandt hreatsinli
ghtofa
corp
orati
on ’
ss tr
engths and we akn e
sses.Or igin
all
yc all
ed bu si
ness poli
c y
,s trategic
managemen tincorpor
atess uchtopicsass tr
ate gi
cp l
anni
ng,e nv
iro
n mentalscanni
ng ,an d
i
ndustr
yan alysi
s.

PHASESOFSTRATEGI CMANAGEMENT
Phase1—Bas icfin
an ci
alplanning: Man agersini
tiateseriouspl
anningwhent heyar erequested
topropo s
et hef oll
owingy ear’sbu dget.Projectsar ep r
o po
sedo nt h
ebas i
so fv erylitt
le
anal
ysis,withmo s
ti nf
ormat ionc omi ngfromwi t
h i
nt h
ef i
rm.Th esalesforceu s
u all
ypro v
ides
thesmallamo untofe nv
ironme ntal i
n for
mation.
Phase2—F o r
ecast-basedp l
ann i
n g:Asan nualbudge t
sbe comelessusefulats t
imu l
atinglong
termp l
an ni
ng,man agersat t
e mp tt op ro
po s
ef ive-yearp l
ans.Att hi
sp o i
ntth eycon s
ider
proj
ectst hatmayt akemo ret hano neyear.Inaddi t
iont oint
ernalinformation,man agers
gatheran yav ail
ablee nvironme n t
aldat a—u suall
yo nanadh ocbas i
s—an de xt
rapolate
curr
e n
tt rendsfiveyearsin t
ot hef uture.
Phase 3—Ex ternall
yo riented( strategic)p l
an n
ing:F rustr
ated withh ighl
yp ol
iti
caly et
i
neffectualf i
ve-yearp lan s
,t opman agementt ake sc ont
rolo fthep lannin
gp rocessby
i
niti
ati
ngs trategi
cp lanni
n g.Th ec o mpanys ee
kst oinc r
easei t
sr es
ponsivenesst ochanging

2
 MGT406STRATEGI
CMANAGEMENT

marke tsan dcompeti

tionbythi
nkingstrategi
call
y.Planni
ngistakenou toftheh andsoflo
we r
-l
e v
elman agersan dc on
centr
atedi nap l
anningstaffwh os
et askist ode velo
ps tr
ategic
pl
ansf or
th
ec o rporati
on.Consult
antsoftenp r
ov i
dethes ophi
sti
catedandi n
no vati
vet echni
questhat
th
ep lanningstaffusestogatherinfor
mat io
nan dforecastfut
uretrends .
Phase4—St rategi
cman agement:Reali
z i
ngthate v
ent hebeststrategicplansar eworth
less
wi
thou tthei n
putan dcommitmento flower-lev
elman agers
,topman age mentfo r
msp l
anning
groupso fman agersan dkeye mp l
oyeesatman yl evel
s,fromv ariousde partmentsan d
workgro u
ps .Theyde v
elopandintegrateas e
riesofs t
rategi
cp l
ansai medatac hi
evi
ngt he
compan y’
sp ri
mar yobject
ive
s.

BENEFITSOFSTRATEGI CMANAGEMENT
Str
ategicman agemente mphasi
zesl o
ng-t ermp er
formance.Manyc omp
aniesc an
manages hor
t-termbu rs
tsofhighperformance ,butonl
yaf ewcans u
stai
nitove
ral onger
peri
odo fti
me.Tobes ucces
sfuli
nthelong-run,c o
mp an
iesmustnotonl
ybeabletoexecute
curr
en tacti
vi
tie
st osati
sfyane xi
sti
ngmar ket,buttheymu s
taloadap
s tt
hoseacti
vi
tie
st o
sat
isfynewan dchangi
ngmar ke
t s
.

● Cl
ear
ers e
nseofstrate
gicvis
ionforthefi
rm.
● Sh
arperfocusonwhatisst
rategi
call
yimport
ant.
● I
mprovedunder
stan
dingofar api
dl
yc han
gingen
viro
nme
nt.

Tobeef
fec
tiv
e,h
owever
,st
rategi
cman
age
men
tne
edn
otal
way
sbeaf
ormalp
roc
ess
.It
c
anbegi
nwi
thafewsi
mpl
eques
tio
ns:

1.Whereistheorgan
izationno
w?( Notwheredowehopei
tis!
)
2.I
fn ochan
ge saremade ,wher
ewi l
ltheor
gani
zati
onbeinoneyear
?twoyear
s?fi
vey
ears
?
10years?Aretheanswersacceptable?
3.I
ft heanswersaren o
tac ceptabl
e,whatspec
ifi
cacti
onssho
uldmanage
mentu
nder
take
?
Whatar eth
er is
ksandp ayof
fsinvol
ved?

WHATISGLOBALIZATI
ON?
Nottoolo ngago,abu si
nessc o
rporat
ioncoul
dbes uccess
fulbyf ocu
singo n
lyo n
maki
ng ands ell
ing goods ands er
vices wi
thi
nitsn ati
onalbo un
darie
s.Internati
onal
co
nsi
derati
onswe r
emi n
imal.Prof
itsearnedfr
ome xpo
rti
ngp r
oductstoforei
gnlandswe re
co
nsi
deredfros
tingonthecake,butnotreal
lyes
sent
ialt
ocorporat
es ucc
ess.

Today,e very
thingh asc hanged.Globali
zati
on,th einte
gratedinternati
onali
zationof
marke t
san dc orpor
at i
ons,hasc hangedt hewaymo dernc orpor
atio
nsdobu si
ness.Asmo re
i
ndus t
riesbecomegl obal
,s tr
at egi
cman age mentisbec ominganincreasi
nglyimportantway
to keept r
ac ko fin t
er n
ationalde velopmentsan dp osi
ti
ona c o
mp anyf orl ong-ter
m
comp et
iti
ve adv an
tage .F ore xamp l
e,Ge ne
ralEl ectri
c mo ved a majorr ese
ar c
h an d
developmentlabf o
ritsme dicals ys
temsdi vi
si
onf r
omJap antoCh i
naino r
de rtolearnmo re
aboutde vel
opin
gn ewp roduct
sf orde ve
lopingeconomie
s .Micros
oft’
slargestresearchc e
nter
outs
ideRe dmond,Was hington,i
si nBeij
ing.Accordi
ngt oWi l
burCh u
ng,aWh arto
np rofesso
r,
“Wh ateverChinadevelopsisr o
ll
e douttot herestoft hewo rl
d.Chi
namayh aveal owerGDP

3
 MGT406STRATEGI
CMANAGEMENT

p
er-cap
itat
hande
ve l
opedco
untri
es,bu
tth
eCh
ine
seh
aveas
tro
ngs
ens
eofh
owp
rodu
cts
s
houl
dbedes
ign
edforthe
irmarke
t.”

WHATISENVIRONMENTALSUSTAINABI
LITY?
En
viro
nmentalsus
tai
nabi
li
tyr e
fe r
st ot
heu s
eo fbus
ine
ssp rac
tic
e storedu
cea
co
mpany’
simpactupont
henatur
al,phy
sicale
nvi
ron
ment.Cl
i
matechan
geisplayi
ngagrowi
ng
r
olei
nbusi
nessdeci
si
ons
.

Theeffe
ctsofcli
mat
ec h
angeonin
dus
tri
esandc
ompani
esthr
ough
outt
hewor
ldcan
begroupedi
ntosi
xc ate
gor
iesofri
sks
:regu
lat
ory
,sup
plych
ain,p
roduc
tandte
chnol
ogy
,
l
it
igat
ion
,rep
utati
onal
,andph
ysi
cal
.

1.Regu lat oryRi s

k:Co mp aniesi nmu cho ft hewo rldar eal re adys ubjectt ot heKy oto
Pro toc ol
,wh ichr e quirest hede ve l
ope dc o untries( andt hust hec ompan i
eso pe rat i
ng
with i
nt h em)t or edu cec arbo ndi oxi
dean do thergr een hous egas esbyanav erageo f
6%f ro m1 990l e velsby201 2.Th eEu rop eanUn ionh asane missi
o nstradingp r ogram
thatal lowsc omp an i
e st hate mitgr e enh ousegas esbe yon dac er t
ainp ointt obu y
addi tionalal l
owan cesf romo th erc omp anieswh osee mi ssionsar el owe rt hant hat
all
o we d.Co mp an iesc anal soe arnc reditst owar dt heire missi
on sbyi nvesti
n gi n
emis sionsabat e me ntp roje ctso u tsi
det h eiro wnf ir
ms .
2.Sup ply Ch ain Ri sk: Su pplier s wi ll be i n creasinglyv ulnerablet o go ve rnme nt
regu lations—l eadin gt oh igh e rc omp o ne ntan de n
e rgyc ostsast heyp assal ong
in
c re asingc arbo n-r elate dc ostst ot he irc us t
ome rs
.Gl obals up pl
yc hainswi llbeat
ri
skf rom ani ncre asin gin ten sityo fmaj ors tormsan df looding.Highers e
al ev el
s
resu ltingfro mt h eme lti
ngo fp olari cewi llcr eatep roble msf orseap orts.
3.Pro du ctan dTe chn ol
o gyRi s k:En viro
n me n tals ustainabi l
ityc anbeap rerequ i
sitet o
prof itable gr owt h.F o re xamp le,wo rldwi de i nvest me ntsi ns u s
tainablee n ergy
(i
nc ludingwi nd,s olar,an dwat e rp owe r)mo ret hando uble dt o$7 0.9bill
i
o nfro m2004
to2006.Si xtyp e rce nto fU. S.r e sponde ntst oanEn vi
r onicss tudys tatedt hatkn o wing
ac o mp anyi smi ndf ulo fitsi mp acto nt h ee nv i
ronme n tan ds oci
e tymake st hemmo re
li
ke lyt obu yt heirp ro du ctsan ds ervices.
4. L
itigat ionRi sk:Co mp an i
est h atge nerat es i
gn if
ican tc arbo ne missionsfac ethet h reat
oflaws uitss imilart ot h o
s eint het obac co ,p harmac eu ti
c al,an dbu i
ldingsupp l
ies( e.g.
,
asbe s tos)in dust ri
e s.F ore x amp le,oilan dgasc omp an i
e swe res uedf orgr eenh ouse
gase mi ssi
on sint hef ede raldi strictc our to fMi ssiss
ip pi,bas edo nt heas serti
o nt hat
thes ec omp an iesc on t
r i
bu tedt ot hes eve rityo fHu rrican eKat ri
na.
5.Rep ut ationalRi sk:Ac omp an y’si mpac to nt h
ee nviro nme n tcanh eavil
yaf fecti ts
over allr eput ation.Th eCar bo nTr ust,ac on sul
tinggr oup ,fo undt hatins omes ec tors
thev alueo fac omp an y’
sbr an dc ouldbeatr i
skbe cau seo fn egativep erc eptions
relat edt oc l
imat ec han ge .I nc ontras t,a c omp an y wi t
h a go odr eco rdo f
envir onme nt als ustainabi l
ity may c reat ea c omp e ti
tive adv antage int ermso f
attr ac ti
ngan dke epingl oyal c ons umer s,e mp l
o y
e es,an di nve stor
s .
6.Phy sicalRis k:Th edire ctr iskp osedbyc l
imat ec han gei nc ludest hep hysi
cale f
f ectso f
drou gh ts,f l
o ods ,sto rms ,an dr is
ings e al e vel
s.Av erageAr ctict emperat uresh ave
ri
se nf ourt of i
v ede gr ee sF ah r enhei
t( twot ot hreede gr ee sCe l
sius)int hep as t50
year s,l eadi ngt ome lti
n gg lac i
er san ds eal eve l
sr isingo nei nchp erde cade .
41

4
 MGT406STRATEGI
CMANAGEMENT

I
ndus
t r
iesmostl
ikel
ytobeaffe
c t
edarei
nsur
ance,agri
cul
ture
,fis
hing
,for
estr
y,real
e
state,andtour
ism.Ph
ysi
cal
riskcanal
soaff
ectotheri
ndust
ries
,suchasoi
landgas,
t
hroughhigh
erinsur
ancep
remiumspai
donfaci
li
ti
esinvul
ner
ableareas.

WHATI SL EARNINGORGANI ZATION?

Strategi
cf lexi
bi
lit
yde man dsa long-termc ommitmentt ot he devel
opmentan d
nurturi
ngo fc rit
icalresource
s .Italsode mandst h
att hec omp anybecomea l earni
ng
organi
zation—ano rgani
zatio
nskill
edatcreating,ac
quiri
ng,an
dt ran s
ferr
ingknowle
dgean d
atmo di
f y
ingitsbehavi
ort orefl
ectnewkn owledgeandinsi
ght
s.Or gani
zati
onall
earningisa
cri
tic
alc omponento fcompeti
ti
v en
essinady namicenvi
ronment.Itispart
icul
arl
yimp ort
ant
toinnovati
onan dnewproductde ve
lop
me nt
.

L
ear
nin
go r
ganizati
onsareskil
l
edatf ourmainacti
vi
ti
es:
● Sol
vingprobl
emss y
stemati
cally
● Experi
men t
ingwit
hn ewapproaches
● Learni
ngf r
omt hei
rowne xperi
encesandpasthi
stor
yaswel
lasfro
mt h
ee xp
eri
enc
es
ofothers
● Transfe
rringknowle
dgeq u
ickl
yan deffi
ci
entl
ythro
ugho
utt
heorgani
zat
ion
.

BASI
CMODELOFSTRATEGI
CMANAGEMENT

F
igu
re1
-1

Fi
gur e1–1ill
ustratesh o
wt hesefo urel
eme ntsinteract;F i
gure1–2e xpan dse achof
th
esee lemen t
san ds ervesast hemo de
lf orthi
smo dule.Thismo delisbo thr ation
alan d
pres
cripti
ve.Itisap l
an ni
ngmo delthatpresent
swh atac or
p o
rat i
ons h
oulddoint ermso fthe
st
rategicman ageme ntp r
o ce
ss,notwh atan ypartic
u l
arf i
rmmayac tuall
ydo .Th eration
al
pl
anningmo delpredi
ct sthatase n
v i
ronmentaluncertai
n tyi
ncre ases,corp
orationst h
atwo rk
moredili
gentlytoan alyzean dpredi
c tmo r
eac curatel
yt hec hangingsit
uationinwh ichthey
oper
atewi l
lo ut
performt hosethatdon ot.Empi
ricalresearchs tudi
ess uppor
tt hi
smo de l
.The
te
rmsu sedinF i
gure1 –2ar eexpl
ainedinthefol
lowingp ages.

5
 MGT406STRATEGI
CMANAGEMENT

F
igu
re1
-2

WHATI SENVIRONMENTALSCANNI NG?

En v
ironmentalscanni
n gisthemo nit
oring,evaluating,anddisseminati
ngo finfo
rmat i
o n
fromt heexternalandinternale n
vironmentstoke yp eoplewithi
nt heco rpor
ation.I
tsp u
r pose
i
st oidenti
fys t
rategicfactors—t hoseexternalan dinternalel
eme ntst h
atwi l
lde t
ermineth e
futur
eo fthec orporati
on.Th esimp l
estwayt oc onducte nvi
ronme ntalscanningisthr o
ugh
SWOTan alysi
s.SWOTi sanac r
o nymu sedtode scri
bet hep art
icul
arSt r
e n
gths,We aknesses,
Opportunit
ies,andTh reatsthatar es t
rategicf actorsforas pe ci
ficc ompany.Thee xternal
envi
ro n
me ntc onsi
stso fv ari
able s(Op po
r t
u ni
ti
e s and Th reats)t hatar eo uts
ide th e
organizati
onan dn ott ypic
allywi thi
nt hes ho rt
-r unc ontro
lo ft opman ageme nt
.Th e
s e
vari
able sformt hec o
n t
extwi thi
nwh i
c hthec orporati
one xist
s.F igure1 –3de pi
ctske y
envi
ro n
me ntalvariables.Theymaybege n eralfo r
ce san dt re
ndswi thi
nt hen aturalo r
soci
etale nv
ironmentso rspecif
icf actor
st hato peratewithinano rgan i
zati
on’sspeci
fictask
envi
ro n
me nt—o f
tenc al
ledisi
t ndustr
y .

6
 MGT406STRATEGI
CMANAGEMENT

F
igu
re1
-3

Theinte
r nale n
v i
ronmento fa c o
r po
rati
onc on
sistso fvari
ables( St
ren
gthsand
Weaknes
ses)th
atar ewithi
ntheo rgan
izat
ionits
elfandaren otusu
allywithi
nthesho
rt-r
un
co
ntro
loft opman agement.Thesev ari
abl
e sformthecon t
extinwh i
chwo rkisdone.Th
ey
i
ncl
udethecorp
o rati
on’sstruc
ture,cul
ture,andresou
rces.Keystren
gt h
sf o
rmas etofco
re
co
mpetenci
esthatthec orp
oratio
nc anusetogaincompeti
tiv
eadv ant
age .

WHATISSTRATEGYF ORMUL ATION?

Str
at e
gyf ormu l
atio
ni st hede ve
lopmentoflong-r
angep l
ansf orthee ff
ectiv
e
managementofe n
vir
o nmentalopport
unit
iesandthr
eats,i
nli
ghtofcorp
oratestr
e n
gthsand
weakne
sses( SWOT).I ti n
c l
udesde fi
ni
ngt hec o
rporat
e miss
ion
,s pec
ifyi
ng achi
evabl
e
obj
ecti
ves
,de ve
lopi
ngst r
ategies,an
ds et
tingpo
li
cygui
deli
nes
.

Missi
on
Ano r
gani
zati
on’
smi ss
ionisthepurpos
eorr eas
onf ortheorgani
zati
on’
se x
ist
ence.Ittel
ls
whatthecompanyisprovi
di
ngtosoci
ety—ei
theras e
rv i
cesuc
hash o
usecl
eani
ngo raproduct
su
c hasautomobil
es.Awe ll
-con
ceive
dmi s
sio
ns tatementdefi
nesthefundamental
,u n
iqu
e
purpos
ethatsetsac ompanyapartfromotherfi
rmso fitsty
peandidenti
fi
esthes c
opeo r
domainofthecomp any’
soperat
ionsinte
rmso fp r
odu c
ts(i
nclu
dingser
vices
)o ff
eredand
marketss
erved.

Objectiv
e s
Objectiv
e sareth eendresul
tso fplan
nedac ti
vit
y.Theyshoul
dbes tatedasac t
ionverbsand
tellwhati st obeac co
mp l
ishedbywh e
nan dquanti
fi
edi fp os
sibl
e.Theac h i
eve
me ntof
corporateo bjec
t i
vesshoul
dr e
su l
tinthefulf
il
lmentofac or
po r
ation’
smiss
ion.I
ne ffect
,th
is
i
swh ats ocie
tygi vesbackt ot hecorporati
onwh e
nt hec orporati
ondoesago odj obof
fulfi
l
lin
gi tsmiss
ion.I
nc o
ntrasttoano bjec
tive,weconsi
derago alasanopene nded
statemento fwh atonewan tstoac co
mp l
i
sh,withnoquanti
ficati
ono fwhatistobeac hi
eved
andn otimec ri
teriaforcomplet
ion.

7
 MGT406STRATEGI
CMANAGEMENT

So
meo ft
h ear easi nwh i
chac orporationmi ghte s
tabli
shitsgo
alsan dobje
cti
vesare
:
● Profitabil
ity(ne tprofit
s)
● Effi
c i
e ncy(lowc osts,etc.)
● Growt h(increasei ntotal assets,sales,etc.
)
● Share hol
de rwe alth(div
ide ndsp l
uss tockp r
iceappreci
ation)
● Uti
lizationo fresources( ROEo rROI )
● Repu tati
on( beingc onsi
de reda“ t
op ”firm)
● Contributionstoe mp l
oyee s( e
mp loyme ntsecuri
ty,wages,div
ersi
ty)
● Contributionst os ocie
ty( taxesp aid,p arti
ci
pationinc hari
ti
es,pro
vidi
nganeede
d
pr
o du ctors ervice)
● Mar ke tl
e adership(mar ke tshare)
● Techn olo
gical l
eade rshi
p( innovati
o ns,creati
vit
y)
● Survival(av oi
dingban kru ptcy)
● Perso naln eedso fto pman ageme nt( usingthef i
rmf orp ers
onalpurpo
ses
,su
chas
pr
o vidingjobsf orr e
lative s
)

Strategi
es
As trategyo fac orporati
onf ormsac omprehensi
vemas terp l
ant h
ats tatesh o
wt h
e
corporati
onwillachieveitsmissi
onan dobjecti
ves.I
tmax i
mizesc ompeti
tiv
eadv antageand
minimiz
esc ompetit
ivedisadvantage.Fore xample
,e venthoughCadbu rySc hweppeswasa
majo rcompeti
torinc on
fe c
tion
aryan dsoftdri
nks,itwasnotlikel
yt oachi
evei t
schall
engi
ng
objecti
veo fsigni
ficantl
yi n
creasin
gi t
sp rofi
tmar ginwi
thinf ou
ry earswi t
h o
utmaki n
ga
majo rc h
angei ns trategy.Man agementt her
eforede ci
dedt oc u tcostsbyc l
osi
ng33
factori
esan dr e
ducingstaffby1 0%.Italsomadet hestrategicdecisi
ontoc once
ntrateon
thec on
fecti
onarybu si
nessbydivesti
ngitsl
ess-profi
tabl
e.

Thet
ypi
calbu
sin
essf
irmu
sual
l
yco
nsi
der
sth
reet
ype
sofs
trat
egy
:co
rpo
rat
e,bu
sin
ess
,an
d
fu
nct
ion
al.

1.Corporates t
r ategyde scri
besac omp any’
so veral
ldirecti
onint ermso fitsge n eral
atti
tudet owar dgr o wthan dth eman ageme nto fi
tsv ari
ousbu si
nessesan dp rodu ct
li
nes.Corporat estr ategie
st ypical
l
yf itwithinthethreemai ncatego r
iesofs tabil
ity,
growth,andr etrenc hme nt
.
2. Bus
inesss trategyu s
uall
yo c cursatt hebu s
ines
su ni
to rp roductl e
vel,an di t
emp h
asizesimp rove me ntoft hec ompe t
iti
vep osi
ti
ono fac or
poration’
sp rodu c
tso r
servi
cesint h es pec if
icindustryo rmar kets egme ntservedbyt hatbu s
inessu n i
t.
Busi
nesss trat egie
smayf itwi th
int h
et woo veral
lc ategori
es,c ompetiti
ve an d
cooperati
ves trat egies.Forex ample,Stap l
es,theU.S.o f
ficesupplystorec hain,has
usedac omp etiti
ves tr
ategyt odifferenti
atei t
sr e
tailstor
esf r
omi tsc o
mp eti
t o
r sby
addings ervi
c est oi tsstores,s uchasc o pyi
ng,UPS s hi
pping
,an dh i
ringmo bile
techni
cianswh oc anf i
xcomp utersandi nst
allnetworks.Bri
ti
shAirway shasfollowe da
cooperati
ves trategybyf orminganal li
ancewi thAme ri
canAirl
inesinordertop r
o vi
de
glo
bals ervice.Co o perati
ves trategymayt husbeu sedt op r
o vi
deac omp etiti
v e
advantage.In tel,aman ufacturero fc ompu t
ermi croproces
sors,u sesitsal l
ianc e

8
 MGT406STRATEGI
CMANAGEMENT

(c
o op
erativestrategy)withMicrosof
tt odiff
erent
iateits
elf(competi
tivestrategy
)
fr
o mAMD,i tspri
mar ycompetit
or.
3.Functi
onalstrategyistheap p
roachtakenbyaf unction
alareat oachi
e v
ec orpor
ate
andbu s
inessunitobjecti
vesands t
rategi
esbymax imiz
ingreso
urc eproduct
ivit
y.Iti
s
concern
e dwi thde vel
opi
ngan dn urturi
nga disti
nctiv
ec ompetencet op rovi
dea
companyo rbu si
nessu ni
twithac ompe t
iti
veadvantage.Examplesofr esearchand
devel
opme nt(R&D)f unct
ionalstr
ategi
esar etechn
o l
ogi
calfol
lowersh
ip( i
mitati
onof
th
ep roductso fo therc ompani
es)an dt echn
ologi
calleadership(p i
oneeri
ng an
i
nnovati
o n
).

Busi
nessf
irmsuseal
lthre
et ype
sofstrategysimul
tan
eousl
y.Ahie
rarchyofst
rategyisa
gr
ou p
ingofstrat
egytypesbyle
v e
lintheorganiz
ation
.Hi
erarchyofstr
ategyi
san e
st i
ngof
on
es trat
egywith
inanot
hersothatthe
yc o
mp l
e mentandsup
porton
ean oth
er.

F
igu
re1
-4

Pol
ici
es
Apoli
cyisabroadgu i
deli
nefordeci
si
o nmaki
ngt h
atli
nksthefor
mu l
ationofast
rate
gy
wit
hitsimpl
ementati
on.Compani
esusep ol
i
ciestomakesurethatemp l
oyee
sthro
ughout
thefirm make deci
si
o n
san dt ake act
ionsthatsuppor
tt hec o
r po
rati
on’
smissi
on,
obj
ecti
ves,andstrategi
es.Pol
ic
iessuchast he
sep r
ovi
dec l
earguidancetomanagers
thr
oughoutt
heorgani
zation.

WHATISSTRATEGYIMPLEMENTATION?
Str
ategyi
mp l
ement
ati
onisap roce
ssbywh ichst
rategi
esandp o
li
ci
esareputi
nto
act
ionth
roughthedeve
lopme
nto fpro
grams,budgets
,andpr o
cedu
res.Thi
sproc
essmi
ght
i
nvol
vechangeswit
hintheover
allcul
tur
e,stru
c tu
re,and/
orman age
me ntsy
stemofthe

9
 MGT406STRATEGI
CMANAGEMENT

ent
ireorgani
zat
ion.Ex
cep twhensuchdr
ast
iccorporat
ewidechangesaren e
eded,ho
we v
e r
,
th
eimp l
ementat
ionofstrategyi
stypi
cal
lyc
onductedbymiddle-andlower-l
evelmanagers
,
wi
thr e
viewbyt opmanage ment
.Someti
mesreferr
edt oaso per
ation
alplanni
ng,st
rategy
i
mp l
ementat
ionoft
eninvo
lvesday-t
o-daydeci
si
onsi
nr es
ourceall
ocati
on.

Pro
grams
Aprogr
amisas tat
ementofth
eac ti
vi
tie
so rstep
sneededtoaccomp
li
shasingl
e-usep
lan
.It
makesastrat
egyacti
onori
ented.I
tmayi n
v o
lveres
truc
turi
ngthecorp
orat
ion,ch
angi
ngthe
co
mp an
y’si
nter
nalcul
tur
e,orbegin
nin
gan ewr es
earcheff
ort.

Budge ts
Abu dgetisas tatemento fac o
rp o
ration
’sprogramsi ntermso fde nomi n
ations
.Us edin
pl
an ningandc o
nt r
ol,abu dgetlis
tst hedetai
ledcosto feachp ro
gram.Man ycorporati
ons
deman dac e
rtainp erc
e nt
ager eturno ninve
stment,oftenc al
le
da“ hur dlerate,”be f
ore
man agementwil
lap provean ewp r
ogram.Th i
sensuresthatthenewp rogramwi l
lsi
gnif
icantl
y
addt othecorporati
on’spro f
itperformancean dthusbu i
l
ds hareho
lderv al
ue.Thebu dget
thusn otonl
yservesasade tai
ledplanoft h
en ewstrate
gyi nacti
on,i
tal sos peci
fi
esthrough
prof ormafin
ancialstatementsthee xpec
tedimpacto nt
h efi
rm’sfi
nanc i
alf utur
e.

Procedures
Procedures
,s ometi
mestermedSt an
dardOperat
ingProc
edures(SOP)
,ar eas y
stemof
se
q u
en t
ialste
pso rtec
hni
questh atdescr
ibei
ndetai
lhowap ar
tic
ulartas
ko rj
obistobe
done.Th e
yt ypic
all
ydetai
lth ev ari
ousacti
vi
ti
esthatmu s
tbec arri
edo uti
no rde
rto
complet
et hecorpor
ati
on’
sprogram.

WHATI SEVAL UATIONANDCONTROL ?

Evalu
ationan dc on
trolisap roces
sinwh i
chc or
porateacti
vi
tiesandp erf
ormance
res
ults are mo nitor
eds ot h
at ac tu
alp er
formancec an be comp ared wi
th desi
red
perf
orman ce.Man agersatalllev
e l
susetheresu
lti
nginformat
iontotakec o
rrect
iveactio
n
andresol
v eprobl
e ms.Alt
houghevaluati
onandcontr
olisthefi
nalmajo
re le
me nto
fs t
rategi
c
manageme nt,i
tc analsop i
npoi
ntwe aknes
sesi
np revi
ousl
yimpl
ementeds t
rategi
cplansand
th
uss t
imulatethee nti
reproces
st obegi
nagain
.

Perfo
rman ceist hee n
dr esul
tofac ti
vit
ies.Itincl
udestheac t
ualoutcomeso ft he
st
rategicmanageme ntprocess.Th epracti
ceofstrategicmanagementisju
stif
iedinter
mso f
i
tsabil
itytoimp r
oveano rganizati
on’sperfor
man ce,typi
call
yme asu
redintermso fprofits
andreturnoninvestme n
t.F o
re valuati
onan dcontroltobee f
fecti
ve,managersmu s
to btain
cl
ear,p ro
mp t
,an du nbi
asedi nformatio
nf romt hep eopl
ebe l
owt hemint h
ec orpor
at i
on ’
s
hi
erarchy.Usi
ngt hi
sin f
ormat i
on ,managersc o
mp arewh atisactual
lyhappeni
ngwithwh at
wasorigi
nall
yplannedinthef ormu l
ati
onstage.

FEEDBACK/LEARNI
NGPROCESS
Asaf i
rmorbusi
nessuni
tdevel
opsstr
ate
gies,programs,andtheli
ke,i
tofte
nmu stgo
backt or evi
seorc orrectdecis
ion
smade e arl
ierint h
ep roces
s.F orexample,poor
perfo
rman c
e( asmeasur
edi neval
uati
onandco n
trol)usual
lyindi
cat
e sthatso
me t
hinghas
gonewr o
ngwithei
therst
rategyformul
ati
onori
mp le
me n
t ati
on.I
tcoul
dalsomeant h
atake y

1
0
 MGT406STRATEGI
CMANAGEMENT

var
iabl
e,suc
h asa n
ewc
omp
eti
tor
,wasi
gno
red du
rin
gen
vir
onme
ntals
can
nin
g an
d
ass
essmen
t.

WHATI SSTRATEGICDECI SI
ONMAKI NG?
Thedisti
n gui
shi
ngc haract
eris
t i
cofstr
ategicman agementi
sitsemphas
isonst
rate
gic
dec
isi
onmaki ng.Aso rganiz
atio
nsgr owlargeran dmo rec ompl
ex,withmo r
eu n
cert
ain
en
viron
me nt
s,de ci
sio
nsbe comeincreasi
ngl
ycomp l
i
c atedanddiffi
cul
ttomake.Inagr
eement
wi
tht hestrat
e gicc h
oicep ersp
ecti
v ementi
onede ar
li
e r
,t h
isbookp ro
posesas t
rate
gic
dec
isi
on-makingf ramewo r
kt hatcanh el
pp eop
lemaket hesedeci
sio
nsregardl
essofthei
r
l
evelandfunct
ionint h
ec orporat
ion
.

Unl
ikeman yoth
erde ci
si
ons
,st
rat
egi
cde
cis
ion
sde
alwi
tht
hel
ong
-ru
nfu
tur
eofan
en
tir
eorganizat
ion
andhav
eth r
eec har
acter
ist
ics
:

1.Rare:
Strategi
cdecis
ion
sareunus
ualandtypi
call
yhavenopre
ce de
nttofo
ll
ow.
2.Conseq
uenti
al:Str
ategi
cdeci
si
onscommitsubst
anti
alreso
urcesanddemandagre
atdeal
ofcommitmentfrompeopl
eatall
lev
els
.
3.Direct
ive:Strat
egicdeci
si
onssetprecede
n t
sf orles
serdecisi
onsandfut
ureact
ions
throu
ghoutano r
gani
zati
on.

Ref
erence
:
Wheel
enTh o
masL .
,Hunge
rDavi
dJ.(2012)
,Strat
egi
cMan
age
men
tan
dBu
sin
essPo
li
cy.1
3th
Edi
ti
on.Pears
on,Geo
rgeWashi
ngt
onUniv
e r
sit
y

MODUL
ETESTGUI
DE

GENERALDI
RECTI
ONS
Af
terthedis
cussi
onofthetopi
csinmodu
leforMo dul
e1,thisoftes
twillasse
ssyour
l
earni
ngabou
tt h
ep re
viousl
ess
o n
.Accompl
is
hallthereq
u i
remen
t sandconsol
idat
eal ly
our
ans
wersi
nas i
ngl
e(1)worddocumenton
lyusi
ngthi
sfor
mat{Ar i
al,12,Ju
sti
fie
d,All1Margin
,

1
1
 MGT406STRATEGI
CMANAGEMENT

Si
ngleSpac
ing}.Pl eas
ep ro
videac o
pyo fth
eq u
e s
tioninyourworki
ngdocumenttoavoi
d
conf
usi
onan dformatto“BOLD”you
rf i
nalan
swers.Ki
ndlyupl
oadyourworkwithafi
lename
(L
astName ,Fi
rstName,Secti
on,Modul
e1Te s
ts)i
no urGoogl
eClas
sroom.Go
odluckandGod
Bl
ess!
DI
SCUSSI
ONQUESTI
ONS

1.Whyhasstrategicmanagementbecomesoimp o
rtanttotoday ’
scorpo
ratio
ns?
2.Howdoesstrategicmanagementtypi
cal
lyevol
veinac orporati
on?
3.Whatisalearningorgani
zati
on?Isthi
sapproachtostrategicmanagementbetterth
anth e
moretradi
tionaltop-downap pro
achinwh ic
hs trat
egicp l
an ni
ngisp r
imaril
ydo nebyto p
management?
4.Whyarestrategicdecis
ion
sdiffer
entfromotherkindsofde ci
si
ons?
5.Wh e
nist h
ep lannin
gmo deofs tr
ategi
cde ci
sio
n-makings uperi
ortot h
ee ntr
epreneu
rial
andadapti
vemo des?

Module2
ENVI
RONMENTALSCANNI
NG
Week4-5
I
ntr
odu
cti
on
Achan
gingenv
iro
nmentc
anh e
lpaswel
lashur
tacompany
.Manypi
one
erin
gcompan
iesh
ave
go
neo utofbusi
nes
sbecau
seo fth
eirfai
l
uretoadapttoe
nvi
ron
mentalch
angeor,ev
en

1
2
 MGT406STRATEGI
CMANAGEMENT

worse,be causeoft hei

rf ai
lur
et ocreat
ec h ange.Asmo rean dmo remar ketsbe c
o meglobal,
th
en u
mbe roff ac t
orsac ompanymu stconsiderinan ydecisi
onbe c
o mesh ugeandmu chmo r e
comp l
ex.Wi t
hn ewt ec
hno l
ogi
esbeingdisc
o vere deveryy ear,marke t
sc hangean dp ro
du c
t s
mustc hangewi tht hem.I nthi
sc h
apter,wewi l
llearnh owe nvi
ronmentalu ncertai
ntyisa
th
re att ostrategicman agersbecauseith amp erstheirabili
tytode vel
o plong-rangep l
an s
andt omakes trategi
cde cis
ion
st oke ept hec o
rporatio
ni ne qui
li
briu
m wi thitse xternal
envi
r o
n ment.Ont heo therhand,envir
onme ntaluncertai
n tyisano pportun
itybe causei t
createsan ewp l
ayingf i
eldinwh i
chc reat i
vi
t yandi nnovati
onc anp l
ayamaj orp arti n
st
rat egicdecis
ions.

L
ear
nin
gObj
ect
ive
s:
Di
scussenv
ironmentalsc
annin
g;
Di
scussPort
er’
sf i
veforcemodel
;
Def
inecompeti
tiv
ein t
ell
i
gence;
Un
derstandtheSWOTan al
ysi
s

WHATI SENVI RONMENTALSCANNI NG?

Be foreano r
gani
zati
onc anbe gi
ns trategyfor
mu lati
on,i
tmu stscanthee xter
nal
envi
ron
me nttoidenti
fyposs
ibl
eo pportu
niti
e sandthre
at sanditsint
ernalen
vir
o n
me ntfor
st
rengthsan d weaknes
ses.Environmentals cann
ingist h
e monito
ring
,e v
aluati
on,an d
di
ssemi
n ati
o nofin
formati
onfromt h
ee xternalandin
ternalenvi
ron
me nt
stokeypeoplewith
in
th
ec or
p oratio
n.Ac or
porat
ionusesthisto
o l
t oavoi
dstr
at egi
csurpri
seandtoens
u reit
slong
-ter
mh e al
th.

I
denti
fyi
ngExternalEnvi
ronmentalVar
iables
Thenaturalen v
ironmentincl
udesp h
ysicalresour
ces
,wi l
dl
ife,andc li
matet h
atar ean
i
nher
entparto fexi
stenceonEar t
h.Thesefactor
sformane col
ogi
calsystemofint
err
elat
ed
l
if
e.Thesocie
tale n
viro
nme nti
sman ki
nd’ssoci
alsys
temthatincl
udesgeneralf
orcest
hatdo
no
tdirectl
yt o
u chont h
es hort
-runac t
ivit
iesoftheorgani
zati
ont h
atc an,andoft
endo ,
i
nfl
uenceit
slong-rundecis
ions
.Thesefactorsaff
ectmulti
pl
eindust
riesandareasfol
lo
ws:

1.Eco
no mi
cf orce
st hatr e
gu l
atet heexchange o
fmat eri
als
,mo n
ey,energy,and
i
nformati
on.
2.Technol
ogi
calfor
cesthatge n
eratepro
blem-sol
vi
nginve
nti
ons.
3.Pol
i
tical
–le
galforcesthatal l
ocatepoweran dprov
idecons
trai
ni
ngandp r
o t
ecti
ng
l
awsan dregul
ati
ons.
4.So
ciocul
tural
forcesth
atr egul
atetheval
ues,more
s,andcus
tomsofsoc
iet
y.

Thet aske nv
ironmentincl
udest hos
ee l
ementso r groupst h
atdi r ec
tly affe
cta
cor
p o
rationand,intu r
n,areaf f
ectedbyi t.Thesear egovernments,lo
c alcommu ni
ti
es,
su
pp l
i
ers,competi
tor
s,cust
omers,credi
tor
s ,e
mploy
e e
s/labo
ru ni
ons,spe
c i
al-in
terestgroup
s,
andtradeasso
c i
ati
ons.Acorp
oratio
n’staskenvi
ronmentistyp
ical
lytheindustrywi
t h
inwhich

1
3
 MGT406STRATEGI
CMANAGEMENT

th
ef i
rmo p
e r
ates.I
ndus
tryanal
ysi
s(popu
lari
zedbyMichaelPorte
r)r e
ferstoanin-dept
h
exami
nati
ono fkeyfacto
rswith
inac o
rporat
ion
’stas
ken vi
ronment.Thenatur
al,s
ocie
tal,
andtaskenvi
ronment
smu stbemoni
tor
edt odet
ectthes
t r
ategicfactor
sthatareli
kel
yin
th
ef u
turetohaveastro
ngimpacto
nc o
rporat
esucces
sorfail
ure.

Scanni
ngt heSocietalEnvi
ronme nt:
STEEPAn alysi
s
Ass h
o wninTabl e2–1,largec orp
orati
on scategori
zet hes ocie
t alenvi
ronme n
tinan y
onegeograp hi
cr egio
ni nt
of ou
rar easan dfocust hei
rs c
an ni
ngine achar eaont rendsthat
havec orporatewider elev
ance.Byi ncl
udingt rendsf r
o mt hen at urale nvi
ronmen t
,t hi
s
scanni
ngc anbec alle
dSTEEPAn aly
sis,th
es c
ann i
ngo fSocio
cultural,Te chno
logi
cal,Economic
,
Ecol
ogical
,an dPo li
ti
cal-l
egale nvi
ronmentalforces.(I
tmayal sobec alldPESTELAn
e alysi
s
forPoli
tic
al,Econo mic,Soci
ocul
tural,Technol
ogical
,Ec o
logi
cal,an dL egalforces.
)Obv i
ousl
y,
tren
dsi nan yo near eamaybev e ryimportantt of i
rmsi no nei ndu s
trybu to flesser
i
mp ort
an c
et ofirmsino th
erindustri
es.

Tabl
e2.
1
So
meI
mpo
rtan
tVar
iabl
esi
nth
eSo
cie
tal
Env
iro
nme
nt

Trendsint ee
h conomi
cpartofthesoci
etalenvi
ronmentcanh aveanobv
iousi
mpacton
bus
inessacti
vit
y .Fore xampl
e,anincreas
eini nter
estratesme an sfewers
alesofmajor
ho
meap pli
ances.Wh y?Ar i
si
ngint
erestratetendstober e
flec
tedinh i
ghermort
gagerate
s.
Becau
seh i
ghermo rtgagerate
sincre
aset h
ecosto fbuyi
ngah ous
e ,thedemandforne
wan d
us
edh ous
estendst ofall
.

Change sinthet echnol

ogi
c alpar
to ft h
es oci
etalenvi
ronmen
tc analsoh
aveagr eat
i
mpactonmu lti
p l
eindustri
es.Improvementsincomputermicropr
ocesso
rshavenotonlyledto
t
hewidespreadu seofp ersonalc
o mpute
rsbu talsotobetterautomobi
leengi
neper
f o
r mance
i
nt er
mso fp owe ran df u
ele conomythro u
ght heu s
eo fmi c
ropro
c es
sorstomon i
torf u
el
i
nje
ction
.Re se arch
e r
satGe orge Was hi
ngton Uni
ve r
sit
yh aveidentif
iedan umbe ro f
t
echnol
ogic
al breakthroughsthatar eal
readyh av
ingas i
gni
fic
antimpactonmanyindustri
es:

1
4
 MGT406STRATEGI
CMANAGEMENT

1.Portablei n f
o r
mat ionde v i
c esan de lectro ni
cn etworking:Co mbiningth ec omputin
g
powero ft hep ersonalc omp uter,then etwo rkingo ft heInt ernet,thei mage soft h
e
tel
evision,an dth econve nienceo fthet elep hone,theseap p
liance swil
ls o
o nbeu sedby
amaj orityo fthep opulationo findustrial
ize dn ati
onst omakep honecalls,sende-mail,
andt ransmi tdocu mentsan do t
herdat a.
2.Alt
e rnati
v ee nergys ources :Theu s
eo fwi nd, geothermal ,hydr oelect
ric,sol
ar,biomass,
ando theral ternativeene rgys ourcess houldinc r
eas eco nsi
de rably.
3.Precisi
onf arming:Th ec o mp ut
erizedman age me nto fc ropst os ui
tv ari
at i
onsinland
charac teri
s ti
cswi l
lmakef ar mingmo ree fficientan dsus t
ainable .
4.Virt
u alp er s
o n
alas si
stan ts:Ve rys mar tc o mputerp rogramst h
atmo nit
ore -mail,
faxes,an dp honec all
swi llbeabl etot akeo verr outi
net asks ,su c
haswr it
ingal et
ter,
retri
e vi
ngaf il
e,maki ngap honec al
l,ors cr eeningre quests.
5.Genet i
call
yal teredo rgan isms:Ac on verge nceo fbi otechn ol
o gyan dagr icult
urei s
creatingan ewf i
eldo fl ifes ci
ence s.Pl ants eedsc anbege neti
call
ymo dif
iedt o
produc emo ren eededv itami nso rtobel essat trac t
ivet op estsan dmo reabl et o
survi
v e.
6.Smar t,mo bil
er obo t
s:Ro bo tdevelopme nth asbe enlimitedbyal ac kofs ensorydevices
ands ophisticatedar ti
fici
al intel
li
genc esys tems .

Trendsinthep ol
it
ical–l
egalpar
to fth
es oci
etalenvi
ronmenth
av easigni
fican
timpac
t
n
otonlyont helevelofco mpeti
ti
onwithi
nani ndust
rybu tals
oo nwhi
c hstr
at e
giesmigh
tbe
s
uccess
ful.Aslargec o
mp aniesfi
nditmorediff
icul
tt oacqui
reanoth
erf i
rmi nthesameora
r
elat
edindustry,th
e yaret y
p i
cal
lydri
ventodiv
e r
sif
yi n
tounrelat
edindus
tri
e s.

Demographi
ct r
endsarepartoftheso
cio
cult
uralaspec
to fthesoc
ietalen
viro
nme n
t.
Eve
nthoughtheworld’
spopul
ati
onisgro
wingfrom3.71bi
ll
io
np eopl
ein1970to6.82bil
li
onin
201
0to8.72bi
lli
onby2040,notallr
egi
onswil
lgrowequal
ly
.Mo stofthegrowthwil
lbeinthe
dev
elo
pin
gn at
ions.

Eigh
tcu
rre
nts
oci
ocu
ltu
ralt
ren
dsar
etr
ans
for
min
gNo
rthAme
ric
aan
dth
ere
sto
f
t
hewo
rld:

1.Incr
eas i
nge nvi
ronme ntalawar e
ness:Re cycl
i
ngan dc onserv
ationar ebecomingmo r
e
thanslogans.
2.Growingh eal
thc onsci
ou s
ness:Concer nsaboutpersonalhealt
hf uelthet r
endt o
war d
physi
cal fi
tnessandh ealt
hierli
vi
ng.
3.Expandings en
iorsmar ket:Astheirnu mbersinc
rease,p e
opleove rage55wi l
lbec ome
ane v
e nmo reimportantmar ket.
4.Impacto fGeneratio
nYBo omlet:Bornbe tween1978an d1994tot hebabybo oman dX
generations,t
hiscohortisalmostasl argeasthebabybo omge nerati
o n
.
5.Decli
ningmas smar ket:Ni chemar ke tsarede fi
ni
n gt h
emar keters’envi
ronme nt.
Peoplewan tproductsan dservi
cesth atareadaptedmo retot h
e i
rp e
r s
onalneeds.
6.Changingp aceandlo c
at i
ono fli
fe:I
n stantcommunicati
onv i
ae -mail,cel
lphon
e s,and
overni
gh tmailenhancese ff
ici
ency,bu tital
soputsmo repressu
r eonp eop
le.
7.Changingh ouseho
ldc omp os
iti
on:Single-per
sonh ous
e hol
ds,especial
lythoseofs ingl
e

1
5
 MGT406STRATEGI
CMANAGEMENT

womenwithchi
ldren,cou
ldsoonbec omethemo stcommonh o
useholdt y
p eintheUn i
ted
St
ates.
8
.Increasi
ngdive
r s
ityofworkforcean dmarkets:Betweennowand2050,mi nori
tieswil
l
acco
u n
tf ornearl
y90%o fpopul
ationgrowthint heUnit
edState s.Ove rti
me ,group
pe
rcentagesofthet o
talUnite
dSt atespo
p u
lationareexpecte
dt oc hangeasf oll
ows:
Non-Hispani
cWh i
tes—from 90%i n1950to7 4%in1995t o53%by2050;Hi s
panic
Whit
e s
—f rom9%i n1995t o22%i n2050;Blacks—f r
om1 3%in1 995t o1 5%in2050;
As
ians—from4%i n1995to9 %in2050 ;
AmericanIndi
ans—1%,withslightincr
ease.
Sc
ann
ingt
heTas
kEn
vir
onme
nt
AsshowninFi
gure2.
1,ac o
r p
orati
on’
ss c
annin
go ftheen
viro
nme n
ti n
clu
desan
alys
es
o
fallt h
er el
evantel
ementsinth etaske n
viron
men t
.Theseanalys
est akethefor
mo f
i
ndi
vi
dualre
po r
tswri
tte
nbyv ar
iouspeop
leindif
ferentpar
tsofthefi
rm.

F
igu
re2.
1
PORTER’
SAPPROACHTOI
NDUSTRYANAL
YSI
S
MichaelPorter,anau t
horityonc omp eti
ti
v estrategy,c ontendsthatac orporationis
mostconcernedwi t
ht heintensi
tyo fcomp eti
t i
onwi t
hinitsindustry.Thelevelofthisi
nte n
s i
ty
i
sde ter
minedbybas icc ompe t
iti
vef orces,asde pict
e dinFigure2. 2.“Thecoll
ectiv
es trength
oft h
esef orces,
”h ec on t
ends,“ determinest heu lti
mat ep rofi
tp otenti
alint heindu s
try,
wherep rofi
tp otent
iali sme asuredi nt ermso fl ong-runr et
u r
no ninveste
dc apital.
”I n
careful
lyscanni
ngi tsindustry,ac orporationmu stas sesst heimp ort
ancet oitssuccesso f
eachofs i
xf o
rces:threato fnewe nt
ran t
s,rivalryamo nge xi
s t
ingf i
rms,threatofs u
bs ti
tute
product
so rservi
ces,bar gaini
ngp owero fbuy ers
,bar gaini
ngp owe rofs u
ppli
ers,andre l
ative
powerofo therstakeholders.Thes tro
nge re acho fthesefo rces,themo reli
mitedc o
mp anies
areinth e
irabili
tytor aisep ri
cesan de arngr eat erprofits.AlthoughPo r
terme nti
on sonly
fi
vef orces,a s i
xth—o thers takeholders—is adde dh eret or ef
lectt hep owert hat

1
6
 MGT406STRATEGI
CMANAGEMENT

gov
ernmen
ts,lo
calco
mmu
nit
ies
,an
dot
hergr
oup
sfr
omt
het
aske
nvi
ron
men
twi
el
dov
er
i
ndust
ryacti
vi
ti
es.
Usi
ngt hemo delinFigu
r e2.2,ah i
ghforcecanberegardedasat h
reatbecauseiti
s
l
ikel
ytor educep r
of i
ts.Alowf or
ce ,i
nc ont
rast
,canbev i
ewedasano p
portuni
tybecauseit
mayal l
owt h
ec omp anyt oe arng reaterprofi
ts.I
nt h
es hortrun,t
hesef or
cesac tas
cons
traint
so nac omp any’
sac ti
viti
es.Inthelongrun,however,i
tmaybep oss
ibl
ef o
ra
company,throughit
sc hoiceofstrategy,tochan
get h
estrengt
ho fo
neormo reoftheforce
s
tothecomp any’
sadv antage.

F
igu
re2.
2
Th
reato
fNe
wEn
tran
ts
Newe nt
rantstoanindustr
yt ypi
cal
lybrin
gt oitn
ewc apaci
ty,ade s
iretogai
nmarket
sh
are,andsubs
tanti
al r
esourc
es.Th eyare
,t h
erefore
,thre
atst oanestabli
she
dc or
porat
ion
.
Thethr
eatofe nt
ryde p
endsont hep r
esenceofentrybarri
ersandt hereacti
onthatcanbe
expe
ctedfro
me xis
tin
gc ompeti
tors.Anentrybarri
erisanobstruct
ionthatmakesitdi
ffi
cul
t
fo
rac ompanytoenteranin
du s
try.
So
meo
fth
epo
ssi
blebar
rie
rst
oen
tryar
e:

● Economi e
so fs cal
e:Scaleeco n
o miesint hep r
oducti
onan ds al
eo fmi c
roproces
sors,
forex ample,gaveIntelasi
gnifi
can tcostadvan t
ageove ranyn ewri
v al
.
● Produc tdifferent
iat
ion:Corporationssu chasPr oct
er&Gambl ean dGeneralMil
ls,
whichman u
f actur
ep rodu
ctss uchasTi dean dCheeri
o s,cre
at ehighentrybarrie
rs
throughtheirh i
ghlev
e l
sofadv erti
singan dpromoti
on.
● Capit
alr equirements:Then e
e dt oinvesth ugefin
ancialresourcesinman u
facturi
ng
faci
li
t i
esino rdertoproducelargec omme rci
alairpl
anesc r
eat e
sas igni
fi
cantbarri
er
toentr ytoan ycompeti
torforBo ei
n gandAi r
bus.

1
7
 MGT406STRATEGI
CMANAGEMENT

● Switchi
ngc osts:On c
eas oftwarep rograms uchasEx celorWo r dbecomese s
tabli
shed
i
nano ffi
c e
,o ffic
eman ager sarev eryre l
uctanttoswitchtoan ewp r
ogrambe cause
ofthehight rainin
gc os t
s.
● Accesst odistributi
onc hannels
:Smal le nt
rep r
eneursoftenh avediffic
ultyobtain
ing
supermar ketsh el
fs pacef ortheirgoodsbe cau s
elarger et
ailerschargefors p
aceo n
thei
rs h
e l
v e
san dgivep ri
oritytothee stabli
shedfirmswhoc anp ayfortheadv er
tis
ing
neededt ogen erateh i
ghc ustomerde man d.
● Costdisadvan tagesin dependento fsize
:On cean e
wp roducte arnssuffi
ci
entmar ket
sharetobeac ceptedast hestandardf ort h
att ypeofp r
odu ct,th
emake rh asake y
advantage .
● Governme ntp oli
cy:Go v
er n
me ntsc anlimite ntryintoani ndustrythroughlicens
ing
requi
reme ntsbyr estri
ctingac cesst or aw mat eri
als
,s uchaso i
l-dri
ll
ingsitesin
protect
e dar eas.
Ri
val
ryAmo
ngEx
ist
ingF
irms
I
nmosti
ndust
rie
s,cor
por
ati
onsaremu
tual
lyde
pe n
dent
.Ac omp
eti
ti
vemov
ebyon
e
f
irmcanbeexpec
tedt oh
avean o
tic
eabl
eeff
ectonitscompet
ito
rsandthu
smayc
aus
e
r
etal
i
atio
n.
Ac
cor
din
gtoPo
rte
r,i
nte
nser
ival
ryi
sre
lat
edt
oth
epr
ese
nceo
fse
ver
alf
act
ors
,in
clu
din
g:

● Numbe rofc o
mp etitors :Wh enco mp eti
torsar ef e wan dr oughlye qu alinsize,suchasi n
theau toan dmaj orh omeap pl
ian cein dustries,t he ywat che ac ho the
rc ar eful
lyt o
makes uret hatt he ymat c han ymo vebyan otherf irmwi thane q ual countermo ve.
● Rateo fi ndu s
t rygr o wt h:An ys l
owi nginp as senge rt raf fi
ct endst os etoffp ricewar s
i
nt heai rlinein dus trybe cau seth eo nl
yp atht ogr owt hist ot akes alesawayf roma
comp etitor.
● Produc to rs ervicec har act eri
stics:Ap r oductc anbev eryu n
iqu e,wi thman yq uali
t i
es
di
ff e
r entiatingi tf romo therso fi t
ski ndo ritmaybeac ommo di
t y,ap rodu ctwh ose
charac teristi
c sar et hes ame ,regar dlesso fwh os ellsit.
● Amo unto ff ix
e dc o sts:Be cau seai rl
inesmu stflyt heirp laneso nas c hedule
,r egardless
ofthen umbe ro fp ay ingp as senger sforan yon ef l
ight ,theyo f
f erc h eaps t
an dbyfar es
whe n
e verap lan eh ase mp tyseat s.
● Capac i
t y:I ft heo n l
ywaya man ufac t
u rerc ani ncreas ec ap ac ityisi na l ar ge
i
ncr eme ntbybu i
ldingan ewp l
an t(asi nth ep ape rin du s
try),itwi llru nthatn ewp lant
atf ul
lc ap acityt oke epi tsu ni
tc o stsasl owasp ossible—t husp r o
du c i
ngs omu cht hat
these l
lingp ri
c ef allsth rou ghoutt heindu stry.
● Heighto fe xi
tbar rier s:Ex itbar rierske e pac omp an yf roml e avin gani ndustry.Th e
brewingi n dustry ,f ore x amp le,h asal owp erce ntageo fc omp an iest hatv olunt
ar il
y
l
eav et hein dustr ybe c au sebr ewe riesar es peciali
z edas setswit hf ewu sese xceptf or
makin gbe e r.
● Diversityo fr i
val s:Riv alst hath av ev e
rydi f
fe renti de aso fhowt oc ompetear elike l
y

1
8
 MGT406STRATEGI
CMANAGEMENT

t
ocr
ossp
ath
sof
tenan
dun
kno
win
glyc
hal
l
engee
acho
the
r’sp
osi
ti
on.
Th
reato
fSu
bst
itu
tePr
odu
ctso
rSe
rvi
ces
As ubsti
tutep r
o ducti sap roductt hatap pearst obedi fferentbu tc ans atisf
yt he
samen eedasan otherpr oduct.Forexamp l
e ,e -mai li
sas ubstitut
ef o
rt hefax ,Nu t
r asweetis
as ubsti
tutefors u
gar,t heIn tern
etisas ubs tit
u t
ef orv i
deos tore
s,an dbo ttledwat erisa
substi
tutef orac ola.Ac cordingtoPo rte r,“ Substitut
e sli
mitt hepot e
n ti
alr eturnso fan
i
n dust
rybyp laci
ngac eil
ingo nthepr i
cesf i
r msi nt h
ei ndust
r ycanp r
o fi
tablyc harge.”50To
thee x
tentt h
atswitchingc ostsarelow,su bstitutesmayh aveas tronge f
fe cto nani ndust
ry.
Te acanbec ons
ideredas ubstitu
tef orco ffe e.Ifthep riceo fcoffeego esu ph i
ghe n
ough,
coffeedrinkerswil
lslowlybe ginswit
c h
ingt ot ea.Th ep r
iceo fteathusp utsap r i
cec eil
i
ngo n
thep ri
ceo fc offee.So meti
me sadi ff
icultt as k,thei dentifi
cati
ono fp ossibles ubsti
tute
productsors ervi
cesme anss earchi
ngf orp ro ductso rs e
rvicesthatc anp erformt hesame
functi
on,e venthought heyh aveadi f
fere ntap pearancean dmayn otap pe art obee asi
ly
substi
tutable.
Bar
gai
ni
ngPo
wero
fBu
yer
s
Buyersaffectanindust
rythroughth
eirabil
i
tytof o
rcedo
wnp ri
ces
,bargai
nf or
h
igh
erqual
it
yo rmoreserv
ice
s,andplaycompet
ito
rsagai
nsteac
hoth
er.Abuyero
ragr o
up
o
fbuye
rsispowerf
ulifs
omeo fthef
oll
owingf
actorsh
oldt
rue:

● Abu yerpurchasesal argep ro

portionofth esell
er’sproductors ervi
ce( fore xamp l
e,
oi
lfil
terspurchase dbyamaj orau t
omake r ).
● Abu yerhast hepo tenti
alt oin
tegratebac kwar dbyp roduci
ngt hepro ductitself(for
examp l
e,ane wspap erc h
aincouldmakei tsownp ap er)
.
● Al
te r
native s uppli
e rs ar e p l
enti
f u
l be cause t he p roduct i s s tandar d o r
undif
ferenti
at e
d( fo rexamp l
e,mo t
orist
sc anchoo s
eamo ngman ygass t ati
ons).
● Changingsuppli
ersc ostsverylit
tle(forexamp le
,o ffi
cesuppli
esaree as ytofind).
● Thep urchasedp rodu c
tr ep
resentsa h ighp er c
e nt
ageo fa bu yer ’
sc osts,t hus
provi
dingani ncent i
vet os hopar oundf ora l owe rp ri
ce( f
o re xamp le,gas ol
ine
purchasedforr esalebyc onveni
ences tor
esmake suph al
ftheirtotalco st
s).
● Abu yerearnsl owp r o
fitsandist husverys ensi
tivetoc os
tsan ds e
rvic ediff
e rences
(f
o rexample,groc erystoreshavev erysmallmar gi
n s
).
● Thep urchasedp r oducti sunimportantt ot hef i
nalq ual
ityorp ri
ceo fabu y
er’s
productsors ervi
c esan dt huscanbee asil
ys ubstit
utedwi t
houtaf fec ti
ngth ef i
nal
productadversely(f orexamp l
e,electri
cwirebo ughtforu s
einlamp s)
.
Bar
gai
ni
ngPo
wero
fSu
ppl
i
ers
Sup
pli
erscanaff
ectani
ndu
strythr
oughthe
irabi
li
tytorai
sepr
icesorredu
ceth
e
q
ual
i
tyofpurch
asedgoo
dsands
ervi
ces.Asupp
li
erorsup
pli
ergr
o u
pispower
fuli
fsomeof
t
hefo
ll
owi
ngfacto
rsap
ply:

1
9
 MGT406STRATEGI
CMANAGEMENT

● Thes uppl
ierindustryisdo minatedbyaf e wc ompanies,butitsell
stoman y(for
example,thepetroleumindustry).
● I
tsp ro
du ctors ervi
ceisu ni
qu ean d/orith asbu i
ltups wit
chin
gc o
sts(fo rex
amp l
e,
wordpro c
essi
n gsoftware).
● Subst
itutesaren otreadil
yavailable(fore x
amp le,el
ectri
city
).
● Suppl
ier
sar eabl etoi nte
grat ef orwardan dc ompetedirectl
ywiththe i
rpresent
cust
ome rs(fore x
amp l
e,ami croprocessorpr oducersuc
hasI ntel
canmakePCs ).
● Ap urch
as i
ngi ndust
rybu yso nlyas mallpo r
t i
ono fthes uppl
i
ergroup’sgoodsand
serv
icesan dist husunimportantt ot h
es up p
lier(forexamp l
e,sal
esofl awnmo wer
ti
resarelessimp ort
antt othetireindustrythanar esale
so fautoti
res)
.
Re
lat
ivePo
wero
fOt
herSt
ake
hol
der
s
Asixthforceshoul
dbeadde dtoPor t
er’
slis
tt oincl
udeav ari
etyo fstakehol
der
gr
o u
psf ro
mt h
etaskenv i
ron
ment.Someoft h
esegroupsaregover
nme nt
s(ifno texpl
ic
itl
y
i
nclu
de delsewher
e),localcommuni
ti
es,credi
tors(i
fn otincl
udedwiths u
p pl
i
e rs
),trade
as
sociati
ons,spec
ial
-in
te r
estgro
ups,uni
ons(ifnotinc
lude
dwi thsupp
li
ers),shareho
lders
,
andcomplementor
s.
CATEGORI
ZINGI
NTERNATI
ONALI
NDUSTRI
ES
Ac co
rdingtoPo rter,wor l
dindust
riesvaryo nac onti
nuumf rommu lti
dome st
ictoglobal( see
Figure2.3).Multi
dome sticin
dustri
esares peci
fictoeac hcountryorgr oupofc oun
tri
e s.Th i
s
typeo fi nt
ernatio
n alindustryisac ol
le
c ti
ono fe s
s ent
iall
ydo mesticindustr
ies,suc has
retail
ingandinsuran c
e.Th eacti
viti
esinas ubsi
diaryofamu l
tinat
ionalcorporati
on(MNC)i n
thistypeofindustryar ee s
senti
all
yindependentoftheac tiv
iti
esoft heMNC’ ssubsi
diariesin
otherc ountr
ies
.Wi thine achcountry,i
th asaman ufacturi
ngf aci
li
tyt oproducego odsf or
salewithinthatcoun tr
y .TheMNCi st h
usabl etotailoritsproductsors ervi
cestot hev ery
specifi
cn eedso fco nsumersinap art
icularcountryo rgr oupofc ountri
esh avi
ngs imilar
societ
al envi
ronments.
Globalindustri
es,inc ontrast,o pe
ratewo r
ldwide,withMNCsmaki ngo nl
ys mall
adjus
tme ntsforc oun
t ry
-specifi
cc i
rcumstances.Inagl obalin
dustryanMNC’ sac t
ivi
ti
esi n
onecou nt
r yares i
gnifi
cantlyaffectedbyi tsac ti
vi
tiesino th
erc ount
r i
es.MNCsi nglobal
i
ndustri
esp roducep roductsors ervi
cesinv ari
o u
sl o
cat i
onsthroughou
tt hewo rl
dan ds el
l
the
m,maki ngonlyminoradj us
tme nt
sf orspecif
icc o
untryr equi
rements.Example
so fglobal
i
ndustri
esar ecomme rcialair
craft,te l
evi
sions e
ts,semi co
nductors
,c opi
ers,automobi
les,
watches,andt i
res.Thelargestindust
rialcorporati
onsint h
ewo rl
dintermso fsal
esr ev
en ue
are,fo
rt hemo stpart,MNCso perati
ngi ngl
obalindustr
ies.
Betweentheset
woe xtremesl
iean umberofindustr
ieswithvaryin
gc haracte
ris
tic
so f
bot
hmu lt
idomesti
candgl obalindust
rie
s.Th esear eregionalindustr
ies
,i nwh i
chMNCs
pr
imari
lycoordi
natethei
rac t
ivi
ti
eswithi
nr egi
ons,s
u chastheAme r
icasorAs i
a.Themaj or
ho
meap pli
anceindust
ryisac urrentexamp l
eo far e
gionalindust
rybe comingagl obal
i
ndust
ry.Japaneseappl
ianc
emake r
s,fore x
amp l
e,aremaj orc ompeti
torsinAsia,butonly

20
 MGT406STRATEGI
CMANAGEMENT

mi
norp l
ayersin Eur
opeo rAmer
ica.The dynami
ct e
nsi
on be
twee
nthepre
ssur
ef or
co
ordi
nati
onandt hepres
sur
eforlocalr
esp
o n
siven
essi
scont
ainedi
nth
eph
rase,“Th
ink
gl
obal
l
ybu tac
tloc
ally
.”

Fi
gure2.3
Co
nti
nuu
mofI
nter
n at
ional
Indu
str
ies
STRATEGI
CTYPES
I
nanaly
zin
gthelevelofcompeti
ti
vei
nte
n s
itywit
hinaparti
cul
arindust
ryo rstr
ategi
c
grou
p,i tisusef
ult ocharacte
riz
et hevari
ousc ompeti
tor
sf orpredict
ivep ur
poses
.A
st
rategictyp
ei sac ategor
yo ffirmsbasedo nac ommo nstrat
egi
co rient
ationanda
combin
atio
nofstruc
ture
,c ul
tur
e,andproce
ssescons
ist
entwitht
hatstr
at e
gy.
Th
esege
ner
alt
ype
shav
eth
efo
ll
owi
ngc
har
act
eri
sti
cs:

● Defendersar ec o
mp ani
eswithal imite
dp r oductli
net hatfocusonimpr
ovin
gt he
eff
ici
encyo ft h
eirex i
sti
ngoperati
ons.Thisc ostori
entati
onmake sthe
munli
kelyto
i
nnovateinn e
war eas.
● Pros
pe ct
or sarec ompanieswithfair
lybr oadp roductli
n e
st atf
h o
cusonproduct
i
nnovationandmar ketopportu
niti
es.Thiss ale
so ri
entati
onmake sthemsomewhat
i
neffi
c i
ent.Theytendtoe mph
asizecreati
vi
tyo vereffi
cien
c y.

● Analyz
ersar ec orpor
ationsthatoperat
ei natleasttwodifferentprodu
ct -market
areas,ones t
ablean don evari
able
.Inthes t
abl
ear eas,eff
ici
en c
yise mphasi
zed.In
thevari
ablear e
as ,i
nnovati
onisemphasi
zed.
● Reactors arec orpo
rationst at l
h ackac onsi
stentstrategy-st
ructur
e-c ul
ture
rel
ations
hip.Their(ofte
ni nef
fecti
ve)respon
sestoe nv
iro
nme ntalpres
surest e
ndt o
bep i
ecemealstrategi
cc hange
s.
Hy
per
comp
eti
ti
on
Mostindus
tri
est o
day ar
ef aci
ng an e
ver
-inc
re as
inglevelofe n
vir
onment
al
u
nce
rtai
nty
.Th
e yarebe
comin
gmo r
ecomple
xandmoredynamic.I
ndu
stri
est
hatusedt
obe

21
 MGT406STRATEGI
CMANAGEMENT

mult
idomesti
car ebecominggl o
bal .Ne wf l
exi
ble,aggr es
siv
e,innovati
vec ompet
itor
sar e
movi
n gintoe stabl
ish
e d marketst or apidl
ye r o
det h
eadv antageso flargep revi
ousl
y
dominantfir
ms .Dis
tri
bu t
ionchan nelsvaryfromc o
un t
ryt ocoun
tryan darebe i
ngal t
ered
dai
lythroughtheu s
eo fsophi
sti
cate dinfo
rmat i
onsystems.Clos
errelati
onsh
ipswit
hs uppl
i
e r
s
arebe i
ngf orgedt oreducec osts,increaseq ual
ity,andgainac cesston ewt ech
nology.
Companieslearnt oq ui
cklyimitatet hes ucc
essfuls t
rategi
eso fmar ketleaders
,an dit
becomeshar dertosustai
nan yc omp et
iti
veadvan t
agef orverylong.Cons
equentl
y,thelevel
ofcompeti
t i
veinten
sit
yisincreasinginmo s
tindustri
es.
COMPETI
TIVEI
NTEL
LIGENCE
Compet
iti
vein
tell
i
genceisaf ormalprogramofgatheri
ngin
format
iononacomp
any’s
c
ompeti
tors
.Of t
encall
edbusinessint
ell
i
gence,itiso
neo fthefast
estgr
owingfi
el
dswit
hin
s
trat
egicman ageme
nt.Re s
ear c
hi ndi
cate
st h
att h
erei sa str
ongassoci
ati
onbetween
c
orpor
ateperformanc
ean dcompe t
iti
vei
ntel
li
gen c
eacti
vi
ties
.
So
urc
eso
fCo
mpe
tit
iveI
nte
ll
ige
nce

✦ I
nfo
rmat
ionbr
oke
rs

✦ I
nte
rne
t

✦ I
ndu
str
ial
esp
ion
age

✦ I
nve
sti
gat
orys
erv
ice
s

SWOTANAL
YSI
S
Str
ategyformulati
on,oft
enr ef
erredtoass t
rategi
cp l
anningo rlong-rangepl
anning,
i
sc oncer
nedwi t
hde vel
opingac or
porati
on’smiss
ion,obje
ctiv
es,str ategi
es,an dpol
i
cies.It
begi
nswi thsit
uati
onan al
ysi
s:thep roc
esso ff i
ndin
gas trategicf i
tbe t
we enexternal
op
p ort
unit
iesandin t
er n
als t
rengthswhil
ewo rki
ngar ounde xt
er nalth r
eatsan dinternal
weaknesses. SWOT i s an ac ro
nym u s
ed t o de scribe t he p art
icul
ar
St
r e
ngths,
We aknes
ses,Opport
unit
ies
,andTh re
atsthatares t
rategicf ac
t o
rsfo raspeci
fi
c
company.SWOT an al
ysi
ss hou
ldn o
to nl
yr es
ultint heidenti
fi
cati
ono fac o
rporat
ion’s
di
sti
ncti
vec ompet
enci
es—thep art
icularcapabil
i
tiesandr e
sourcesthataf ir
mp ossess
e s
andthesu p
erio
rwayi nwhichthe
yar eu sed—butalsointheident
ifi
cati
onofo ppo
rtuni
ti
e s
th
att hef i
rmisn otcurre
ntlyablet otakeadv antageofdu etoal acko fap pr
opri
at e
reso
urces.Overtheyears,SWOTan aly
sishasp r
ovent obet hemoste ndu
ringanaly
tical
te
c h
niq
ueu sedi
nstrat
egicmanagemen t.
SWOTanal
ysi
s,byi
tse
lf,i
sno
tap
anac
ea.So
meo
fth
epr
imar
ycr
iti
ci
smso
fSWOT
an
alys
isar
e:

● I
tgen
erat
esl
ength
yli
sts
.
● I
tus
esnowei
ghtst
orefl
ectp
rio
rit
ies
.

22
 MGT406STRATEGI
CMANAGEMENT

● I
tusesambi guouswo rdsandp h
rases.
● Thes amef actorcanbep lacedint wocatego
rie
s(e.
g.,astr
engt
hmayal
sobea
weakn e
ss).
● Thereisnoo bl
igat
iont overi
fyopini
onswit
hdataoran
alysi
s.
● I
trequ i
reson l
yasinglelev
el o
fan al
ysis
.
● Thereisnological
li
n ktostrategyimpleme
ntati
on.

Ge
ner
ati
ngAl
ter
nat
iveSt
rat
egi
esbyUs
ingaTOWSMat
rix
Th u
sf arweh avedi s
cu ss
e dh owaf irmu se
sSWOTan al
ysistoas sessitss i
tuat
ion.
SWOTc anal s
obeu sedtoge neratean umbero fpossi
blealter
nativestrategies.TheTOWS
Matrix(TOWSi sjustanotherwayo fsayingSWOT)i ll
ust
rateshowt heexternal oppor
tuni
ti
e s
andt hr
e atsfac i
ngap arti
cularc orporati
onc anbemat c
he dwit
ht hatc omp any’sin
ternal
st
r en
gth san dwe aknessest or esul
ti nf ou
rs etso fpossi
blestrategicalter n
atives
.(Se e
Fi
gure2. 4.)Thisisago o
dwayt ou sebrainst
o r
mingt ocreatealternati
ves trategi
esthat
mightnoto therwis
ebec onsi
de red.Itforcesstrategi
cman agerstoc reatev ariou
skindso f
growthaswe l
lasr etrenchmen tstrategie
s.Itcanbeu s
edt ogeneratec o
rpor ateaswe l
las
busi
nesss t
r at
egies.

23
 MGT406STRATEGI
CMANAGEMENT

Fi
gur
e2.
4
TOWSMat
rix

Ref
erence
:
Wheel
enTh o
masL .
,Hunge
rDavi
dJ.(2012)
,Strat
egi
cMan
age
men
tan
dBu
sin
essPo
li
cy.1
3th
Edi
ti
on.Pears
on,Geo
rgeWashi
ngt
onUniv
e r
sit
y

MODUL
ETESTGUI
DE

GENERALDI
RECTI
ONS
Afte
rt h
edi scus
sionoft h
et opi
csinmoduleforMo du
le2,t hisoftestwil
lasse
ssy ou
r
l
earningaboutt heprevi
o usl
esson.Accompli
shalltherequi
reme ntsandc o
n s
oli
dateallyou
r
answersinasingl
e( 1
)wo rddocume n
to nl
yusi
ngt hi
sformat{Ar i
al,12,Jus
tifi
ed,Al
l1Mar gi
n,
Si
ngleSpacing} .Pleasep ro
videac opyo fthequesti
oninyou rwo rki
ngdo c
ume n
ttoav oi
d
confus
ionandfo rmatto“ BOLD”yourf i
nalanswers
.Kindl
yuploady ourworkwi t
haf i
l
en ame
(L
as tName ,Fi
r s
tName ,Secti
on,Mo dul
e2Te s
ts)ino u
rGo ogleClassro
om.Go odluckand
Godble
ss!
DI
SCUSSI
ONQUESTI
ONS
24
 MGT406STRATEGI
CMANAGEMENT

1.Acco
rdin
gtoPorter,whatdeterminesthelevel
ofcompeti
ti
vein
tensi
tyinanindus
try?
2.Acco
rdin
gtoPo r
ter’sdi
scus
s i
ono findust
ryanaly
sis
,isPeps
iCol
aas ubsti
tut
ef orCoca-
Co
la?
3.Di
scusshow ade v
e l
opmentinac or p
orati
on’
sn at
uralands o
cie
tale n
viro
n ment
sc an
af
fectthecor
porationth
roughitstaske nv
iro
nment.

Modul
e3
STRATEGYFORMULATI
ON
Week6-7
I
ntroduct
ion
Asme nt
ione
di nMo dule1,strategyf ormul
atio
nist h
ede ve
lopmentoflong-rangep l
ansfor
th
ee ffec
tiv
eman agemento fenviro
n mentaloppo
rtuni
tie
san dthre
ats,inl
ightofc orpo
rate
st
rengthsan dwe aknesses(SWOT) .Iti n
c l
udesdefi
ningthec o
rporatemissio
n ,speci
fyi
ng
achi
evabl
eo bjec
tives,devel
opin
gs trategi
es,andsetti
ngpol
icygui
de l
i
nes.I
nt hi
sc h
apter,we
wi
lll
e ar
nwh atist her e
levanceo fformu l
ati
ngs t
rategi
esbyme anso fse
t t
ingmi s
sio
nan d
vi
si
on,usi
ngs omemat ri
xino r
dert oac h
ievethecompany’
sobject
ivesandgoals.

25
 MGT406STRATEGI
CMANAGEMENT

L
ear
nin
gObj
ect
ive
s:
Di
scu
ssth
orou
ghl
yt h
eme an
ingan dr
elev
anceofmis
sio
n/v
isi
ons
tat
eme
nts
En
umerat
eandexpl
ainPort
er’sGener
icStr
ategi
es
Di
scu
ssth
eCorpor
ateStrat
egy
Di
scu
ssess
ent
ial
softheBal
anc e
dScorecard

WHATI
SMI
SSI
ON/
VISI
ON?
Ano rganizati
o n’
smi ssionisth epu rpo s
eo rre asonf ortheo rganization’
se xi
stence.It
tell
swh att hec omp anyi sp rovi
dingt os ociety—e i
the ras er vi
ces uchash ousecle
an i
ngo ra
produc tsuchasau to mobiles.Awe l
l-con ceivedmi ss
ions tateme ntde fi
nest hef undame ntal
,
uniquep urposet hats etsac omp anyap artf romo th erf i
rmso fi tstypean didentif
iest he
scopeo rdo maino ft hec omp any ’
so pe rationsint er
mso fprodu cts( i
n cl
udingservices)
offeredan dmar ketss erved.Re searchr eve al
st h
atf i
rmswi thmissionstat eme n
tsc ont
aining
expli
citde scripti
onso fc ustome r
ss erv
e dan dt echnologiesu s
edh aves igni
ficantl
yh igher
growt hthanf irmswi thouts uchs tatemen ts.Ami ssions t
at ementmayal soi ncl
udet hefirm’s
valuesan dp hi
losophyabo u thowi tdo esbu sinessan dt r
eat sitsemp l
o ye
e s.Itputsintowo rds
noto nlywh att hec omp an yisn owbu twh atitwan tstobe come—man age me n
t’sstrategic
vi
s i
ono fthef i
rm’ sfuture.Th emi ssi
ons tat ementp romo t
e sas enseo fshar ede x
p e
ctationsin
emp l
oy eesan dc ommu n
icate sa p ubli
ci mage t oi mpo rtants takeholde rgr oupsint he
comp any’staske nvironme nt.Somep eopleliket oc o
n si
derv isi
onan dmi ssi
onast wodifferent
concep ts:Mi ss
ion de scribeswh att heo rganiz
at i
o nisn ow;v isi
o n describeswh att he
organ i
zationwo uldliket obe c
o me.Wep re fertoc ombin et hes
ei deasi ntoas i
nglemis s
ion
stateme nt.Somec omp ani
e sp refert oli
s tt hei
rv al
u esan dp hi
losophyo fdo ingbusinessina
separat epublic
at i
onc all
edav aluess tatemen t.
Ami s
sionmaybede f
inednarrowlyo rbroadlyi nscope.Ane xamp l
eofabr oadmi ssi
o n
st
at ementist hatu sedbyman yc orporati
ons:“Se rvet hebe stinterest
so fs hare owners,
customers,ande mployees.
”Abr oadlyde fi
nedmi ss i
ons tatements uchast hiske e
p sth e
companyf romr estric
t i
ngitsel
ft oonef iel
do rpr oductl i
ne,butitf ai
lstoc l
e arlyidenti
f y
ei
therwh atitmake so rwhichproducts/marke t
si tp l
an stoe mphasize
.Be c
au set hi
sbr oad
st
at ementiss oge neral,an arrowmi ss
ions t
at eme nt,suchast heprecedi
n ge xamp lesby
GoogleandNe wp o
r tNe wsShi
pbuil
ding,i
sge neral
lymo reuseful
.An arrowmissionv eryc l
early
st
at esth
eo rgan i
zation’spr
imarybu si
ness,butitmayl imitthesc o
p eofthefirm’ sactivi
ti
e s
i
nt ermso fthep roductors ervi
ceo ffered,thet ec hnol
ogyu sed,andt hemar kets erved.
Researchindi
c atest hatan arrowmi ssi
o nstateme ntmaybebe stinat urbulenti ndust
r y
becauseitkeep sthef irmfocusedonwh atitdo esbe st;wh er
eas,abr oadmissions tatemen t
maybebe stinas tablee nvi
ronmentthatlacksgr owt hopportunit
ies.
Wh
ati
sbu
sin
esss
trat
egy
?
Bu
sin
esss
trat
egyfo
cusesoni
mprov
ingthecompet
iti
vepo
sit
ionofaco
mpany’
so r
bu
sin
essuni
t’
spr
oduct
sorser
vic
eswi
thi
nthesp
ecif
icin
dustr
yormarketse
gme
ntth
att h
e

26
 MGT406STRATEGI
CMANAGEMENT

companyorbu si
nessuni
tse r
ve s
.Bu s
inessstrategyisextreme l
yimport
an tbe causeresearch
showsthatbu si
nes
su ni
te ffectshav edoublet heimpacto no ver
allcomp anyp erforman
c e
thandoe i
thercorp
o r
ateo rindustr
ye ffec
ts.Bu si
nessstrategycanbec omp etit
ive(battl
i
n g
agains
tal lcompeti
torsfo radv antage)an d/orc ooper
at i
ve( worki
ngwi thoneo rmo re
companie
st ogainadvantageagai nstotherc ompetito
rs).Justasc or
po rates t
rat e
gyas ks
whatindustr
y(ie
s)thecomp anys ho
uldbei n,businessstr
ategyas kshowt h ecomp anyorits
unit
sshoul
dc ompet
eo rcooperateine ac
hindu s
try.
Po
rte
r’sCo
mpe
tit
iveSt
rat
egi
es
Co
mpe
tit
ives
trat
egyr
ais
est
hef
oll
owi
ngq
ues
tio
ns:

● Shoul
dwec ompeteo nt h
ebas i
so flowerc o
s t(andt hu
sp ri
ce),orsho
uldwe
dif
ferent
iat
eo u
rp roduc
tso rservi
cesonsomebas i
sotherthancost
,suc
hasq u
ali
ty
orservi
ce?
● Shoul
dwec ompeteheadtoh eadwithourmajorcompeti
torsforthebi
gges
tbutmost
sough
t-afte
rs hareo fth
emar ket
,ors hou
ldwef ocusonan i
cheinwhi
chwec an
sati
sfyales
ssought-aft
erbu tals
op r
ofit
ablesegmentofthemarket?
Mich
aelPo rt
erp rop
osest wo“gener
ic”compe
tit
ivestr
ategie
sf oro u
tperfo
rming
ot
hercorp
oratio
nsinap art
icul
arindu
str
y:lowerc
ostanddif
feren
tiati
on.Thes
es t
rategi
es
arecal
l
edge n
ericbecau
s ethe
yc anbepurs
uedbyanytypeorsi
zeofbu s
ines
sfirm,evenby
no
tfor-profi
torgani
zat
ions:

● Lowercos
tstr
ategyistheabil
it
yofac ompanyorabu sin
essu ni
ttodesign,pr
oduce,
andmarketacomparablepr
oductmoreeff
icie
ntl
yt hanit
sc ompeti
tor
s.
● Dif
fere
nti
ati
onstrat
e gyistheabi
li
tyofac ompan ytop ro
videu n
iqu
ean ds upe
rior
val
uetothebuy
erinte r
msofp r
oduc
tq u
ali
ty,spe
cialfeatur
es ,o
rafter-sales
ervic
e.

Por terf urtherp roposest hata f i

rm’sc ompeti
tiveadv an t
agei nani ndustryi s
determine dbyi tscomp et
iti
ves cope ,t h
atis ,thebr eadtho fthec ompan y’
so rbu si
nessu ni
t’s
targetmar ket.Be fo
r eusingo n
eo ft h
et woge ne r
icc o
mp eti
tives tr
at egi
e s( lo
we rc osto r
dif
fer entiation),thef i
rmo run i
tmu stc hoos ether angeo fprodu ctvarieti
e sitwi l
lpr oduce,
thedis t
ribu ti
onc hann e
lsitwil
lemp loy ,thet ypeso fbuyersitwillserve,thege o graphi
car e
as
i
nwh i
c hitwi l
ls el
l,an dthear rayo fr el
at edi ndustri
esinwh ic
hi twillalsoc ompete.Th is
shoul
dr eflectanu nde rs
tandingo ft hef i
r m’su ni
qu eresources.Simp l
yp u t,ac ompan yo r
busin
e ssu n i
tc anc ho
o seabr oadt ar get(th atis,aimatt hemi ddleoft hemas smar ke t
)o ra
narrowt ar ge t(thatis,ai
matamar ke tnich e)
.Co mbini
ngt hesetwot ypeso ft argetmar kets
witht het woc ompetiti
ves tr
at egiesr es
u l
t sint hef ourv ariati
onso fge ner i
cs trategies
depictedinF i
gu re3.1.Whe nthelowe r -costan ddifferenti
at i
ons tr
ategiesh aveabr oadmas s
-mar kett arget,theyar es i
mp l
yc alledco stleader shi
pan ddi ff
erentiatio
n .Wh enth eyare
focuse do namar ketn iche( n
ar ro wt ar get),h owever,t heyar ec alledc ostf ocusan d
dif
fer entiationfo cus
.

27
 MGT406STRATEGI
CMANAGEMENT

Costleadershi
pisal o
we r-costcompe t
iti
ves t
rategyt hataimsatt hebr oadmas s
marketan dr equ
ires“aggressi
vec onstr
u c
tio
no fe ff
ici
ent-scal
ef acil
it
ies,vigoro
usp urs
uit
ofcostr e
duc t
ionsfrome xperi
ence,tightcostando ver
h e
adc ontrol
,av oi
danc eofmar gi
nal
cus
tome raccounts,andcostminimizati
oninareaslikeR&D,s e
r v
ice,sale
sf orce,advert
isi
ng,
andsoo n.
”Be causeofitslowerco st
s,thecostleaderisabletoc hargeal owe rpri
ceforits
pro
duct sthani t
sc ompetit
o r
san dstil
lmakeas ati
sfacto
ryp r
ofit.Alt
h ou
ghi tmayn ot
neces
sar i
l
yh avethelowestcostsintheindust
ry,ithaslowercoststhanitscomp eti
tors
.
Differ
e n
tiati
oni saime datt hebr oadmas smar ketandi nvolvesthec reati
ono fa
producto rse r
vicet hatisp erc e
ivedt hr
ou ghoutitsi ndust
ryasu n i
que.Th eco mpanyo r
busin
essu ni
tmayt henc hargeap remiu mf oritsp roduct.Thi
ss pecialt
yc anbeas s
ociated
wit
hde signo rbran dimage ,technol
o gy,f eatures,ade alern etwork,o rc u
stome rservi
ce.
Dif
ferentiati
onisav iablestrategyfore arni
n gabo v
e-av eragere tu
rn sinas pe
cifi
cbu s
iness
becauset heresulti
ngbr andl oyal
tylo we r
sc us
tome rs’sensi
tiv
ityt op ri
ce.Incre
as e
dc osts
canu su
allybep as s
edo nt ot h
ebu yer s.Buy erloyal
tyal soservesasane nt
rybar ri
er;n ew
fi
rmsmu s tdevel
o ptheirowndi sti
ncti
v ec omp eten
c et odiff
erentiatet h
e i
rproductsins o
me
wayino r
de rtoco mpetes u
cce s
sfull
y.
Cos
tf o
c u
sisal ow-co
s tco
mp e
tit
ivestrat
egythatf
ocuse
sonap art
icu
larbuyer
grouporgeographi
cmarketandattempt
stos e
rveonl
ythi
sni
che
,toth
eexcl
usi
onofoth
e r
s.
Inusin
gc ostfocus,t
hec ompanyorbu s
ines
su ni
tseeksacostadv
ant
ageinitstarget
segment.
Di
fferent
iat
ionfocus,l i
kec ostfocu
s,conc ent
r ateso nap art
icul
arbu y
ergr o
up,
pr
o ductl
inesegment,orge ographi
cmar ket.Th
isi sthes trategys uc
ce s
sfull
yf ol
lo
wedby
Midamar Co r
porati
on( dis
tributoro fh al
alfoo ds),Mo rgan Mo tor Car Co mpany( a
man uf
actur
ero fclass
icBr i
tishsportscars)
,Nicke l
ode o
n( ac ablec hannelforc h
il
dren)
,
Orphagen
ix(pharmaceut
ical
s),an dlo
calethni
cgrocerys tore
s .I
nu s
ingdiffer
e nt
iati
onfocus
,
ac ompan
yo rbusi
nessuni
tsee ksdif
feren
tiati
oni
nat argetedmar ketsegme n
t .

Fi
gur
e3.1
Po
rte
r’sGe
ner
icCompe
tit
iveSt
rat
egi
es

28
 MGT406STRATEGI
CMANAGEMENT

WHATI SCORPORATESTRATEGY?
Corporatestrategyi sp ri
maril
yabo utthechoic eofdirect
ionforaf i
rmasawh olean d
theman agemento fitsbu sinessorp roductpor
tfoli
o .Th i
sistruewhe t
hert h
ef i
rmisas mall
companyo ralargemu l
ti
n ationalcorporati
on(MNC) .I nalargemu l
ti
ple-busi
nesscompany,in
parti
cular,corpo
rates trat egyisconcernedwithman agingvari
ousproductli
nesandbusiness
uni
tsformax imumv alue.
Tode alwithe acho ftheke yi s
sues,th
isc hap terisorgani
zedi n
tot hr
eep ar
tsth at
examinec or
p or
ates trate gyint ermso fdirecti
onals t
rategy(ori
entationtowardgrowth )
,
portf
oli
oan alysi
s( coordinat i
ono fc ashf l
owamo n gu nits
),andc orporateparenti
ng( the
buil
di
ngo fcorporates y
n ergiesthroughr e
sourceshar ingandde v
elopment).

Di
rec
tio
nalStrategy
Ac or
po r
at i
on’
sdirec
t i
onalstr
ate
gyi
sco
mpo
sedo
fth
ree ge
ner
alo
rie
ntat
ion
s
(s
ometi
mescall
edgr ands
trategi
es):

● Gr
owthstrategi
esexpandt
hecompany
’sact
ivi
ti
es.
● St
abil
i
tystrategi
esmakenochanget
ot h
ecompany’
sc u
rrentacti
vi
ti
es.
● Ret
rench
me ntstr
ategie
sredu
cethecompan
y’sl
evelofact
ivi
tie
s.

Havi
ngc hosent hegeneralori
e n
tati
on( s
uchasgr owth)
,ac ompany’
sman agersc
an
se
lectfroms e
v eralmorespe c
ifi
cc orp
oratestrate
gie
ss uchasc o
ncent
ratio
nwi t
hinone
pro
ductli
ne/industr
yo rdiversi
fic
ationint
oo therproduc
ts/i
ndu
stri
es.(SeeF i
gure3.
2.)
Thesest
rategi
e sareu se
fulbo t
ht oc o
rporati
onsoper
atinginonl
yo neindu
strywithone
pro
ductl
ineandt othoseope
ratinginmanyindus
tri
eswit
hman ypro
ductli
nes.

F
igur
e3.2
Co
rpo
rat
eDir
ecti
onal
Str
ate
gie
s

GROWTHSTRATEGI
ES
Conc
ent
rat
ion
29
 MGT406STRATEGI
CMANAGEMENT

Verti
calGrowth.Verti
calgrowthcanbeac h i
evedbytakingov
eraf unct
ionprev
ious
ly
prov
idedbyas u pp
li
e rorbyadi stri
bu t
or.Thec ompany,i
neffect,gro
wsbymaki ngit
so wn
sup
plie
san d/o
rbydi stri
buti
ngi t
so wnp ro
du ct
s.Thismaybedo neinordertoreducecosts
,
gai
nc ontro
love ras carceresourc
e ,guaranteequali
tyofake yinput
,o robt
ainaccessto
pot
entialcust
ome rs.Thisgrowthc anbeac hi
evede i
therint
ernall
ybye x
pandi
ngc u
rrent
oper
ationsorexternall
ythro
u ghacquisi
ti
ons.

Ver
ticalgrowthresul
tsinvert
icalintegr
at i
on—t hedegreetowh i
chaf irmo perates
ver
tic
allyi
nmu l
ti
pl
elocatio
nsonani n
du s
t r
y’svaluech ai
nf ro
me xt
rac t
ingrawmat eri
al sto
manufactur
ingtor et
ail
in
g.Mo respeci
fical
ly,assumingaf un
cti
onpr ev
ious
lyp r
ovidedbya
su
ppli
eri scalledbackwardi nt
egrati
on( goingbac kwar do nanin dus
try’
sv alu
ec h ain)
.
Ass
umingaf uncti
onprevi
ouslyp
rovi
dedbyadi st
ributorislabel
edforwardinte
gration(go i
ng
fo
rwar donanindustr
y’svalu
echain
).

Vertic
al I
n tegrationCo ntinuum
Har riganp roposest hatac omp any’sde greeo fv erti
calintegrationc anr angef rom
totalowne rshi
po fthev al uec h
ainn ee
de dt omakean ds el
lap roductt on oo wnershi
patal l
.
Underf ullin t
e gration,af i
rmi nternall
ymake s1 00% ofi tske ys upplie
san dc omp le
tely
control
sitsdi stributors.L argeo i
lcomp anies,suchasBr i
ti
shPe t
ro l
euman dRo yalDu t
chSh ell
,
aref u
llyintegrat ed.
Wi tht ap erintegr ation(alsocal l
edc onc u
rre ntsourci
n g
),af i
rmi nter n
all
yp ro duces
l
e s
st hanh alfo fi tsownr equi
rementsan dbu ysther es
tf romo utsi
des uppli
ers(bac kwar d
taperintegrat i
o n).
Wi thq uas i
-in
t e
gr at i
on,a c omp anydo esn otmakean yo fi tske ys uppli
esbu t
purchasesmo sto fitsre qu i
reme nt
sf r
o mo ut s
ides uppli
ersthatar eu nde ritspartialco nt
rol
(backwar dq uasi-integrat io
n).
L o
n g-ter mc o
n t
r ac tsareagr e eme ntsbe twe entwof i
rmst op rovi
deagr eed-u pon
goodsan ds ervicest oe ac hotherf oras pecifi
edp eri
odo ft i
me .Th isc annotr eallybe
consi
de redtobev erti
cali ntegrati
onu nlessitisane xcl
usiv
ec ontractt hatsp eci
fi
e sthatt he
suppli
ero rdistributorc an nothaveas imilarr el
ationshipwithac ompe t
iti
v efirm.

I
nter
nati
onal
EntryOp
tion
sforHor
izo
ntalGrowt
h
So
meo ft
hemo s
tpopul
aropt
ion
sfori
nter
n at
ion
ale
ntr
yar
easf
oll
ows
:

● Expor
ting:Ago odwayt omi ni
mizeriskan dexperimen twithas peci
fi
cp roductis
expo
rting,shippi
nggoodsp r
oducedinthec ompany’
sh omec o u
n tr
ytoo the
rc ount
r i
es
fo
rmar ke ti
ng.
● Li
censi
ng:Un deral i
cen s
ingagreement,thelicen
singf ir
m gr antsri
ghtstoan other
fi
rmi nt h eh o
stc ountrytop roducean d/ors el
la p r
odu ct.Thel i
censeep ays
compensationtothel
icensi
ngfir
mi nretur
nf ortechni
cal experti
se.
● Franch
ising:Underaf ranchi
si
ngagr e
eme nt,th
ef ranchise
rgr antsright
st oanother
companyt oo p
enar etailst
oreu s
ingthefranchis
er ’
sn amean do perat
ingsyste
m.I n
exch
ange ,thefranch
iseepaysthefranchi
serap ercentageo fi
t ssal
esasar oyal
ty.
30
 MGT406STRATEGI
CMANAGEMENT

● Joi
n tVe ntu res:For mingaj o i
n tven turebe twe enaf oreignc or p
or at i
onan dado me sti
c
comp an yist hemo stp op ulars trat egyu sedt oe n t
eran ewc ountr y.Co mp anieso ften
formj oi
ntv e nturest oc ombi n eth er esou rcesan de xpertisen ee de dt ode velopn ew
produc tsort ec hnologies.
● Acquisiti
ons :Ar elativelyq uickwayt omo vei ntoani n t
er nation alar e aist hrough
acquisiti
ons —p ur
c has i
ngan o therc omp anyal readyo peratingi nth atar e a.Syne rgisti
c
benef i
tsc anr e s
ulti fthec omp an yac quiresaf i
rmwi ths tr
on gc omp l
eme n t
ar yp roduct
l
inesan dago oddist ri
bu ti
o nn e t
wo rk.
● Green -Fiel
dDe velop me nt:I fac omp anydo esn’twan ttop ur chasean otherc omp an y’
s
problemsal ongwi thi tsas se ts,itmayc hoo s
egr een
-f i
e l
dde vel
o p men tan dbu ildits
ownman uf
ac turingp lan tan ddi stributions ystem.
● Produ ctio
nSh aring:Co ine dbyPe terDr u cke r
,t hetermp rodu c
tions haringme anst he
proces so fc ombi ningt h eh i
gh erl abors killsan dt echnologyav ailablei nde v eloped
countr i
eswi t hthel owe r-c ostl abo rav ailablei nde vel
o pi
ngc oun tries.Of tenc alled
outsour ci
ng .
● Turnke yOp eratio
n s:Tu r nke yo perat i
onsar et ypi
call
yc o n
tr actsf o rt hec onstruc ti
on
ofop eratingf acil
itiesi ne xc hangef oraf ee .Thef aci
lit
iesar et ran sfer r
e dtot heh ost
countr yorf irmwh e nt heyar ec omp lete.
● BOTCo ncep t:TheBOT( Bu i
ld,Op erate,Tr an sfer)conceptisav ar i
at iono ft hetur nkey
operat i
o n
.I nsteado ft urnin gt hef acil
ity( usuallyap owe rp lanto rt ollr oad)o vert o
theh ostc oun t
rywh enc o mp leted,t hec omp anyo peratest hef acil
ityf o raf ixedp er i
od
oftimedu ringwh ichi tear n sbac ki tsinvestme ntp l
usap rof
it.
● Man age me ntCo ntr acts:Al ar gec o rporationo perati
n gt h
ro ughou tt hewo rl
di sl i
ke l
y
tohav eal argeamo unto fman ageme n
tt ale ntatitsdisp o
sal .Man age me ntc o
n tracts
offerame an sthro ughwh ic hac orpo r
at i
o nc anu sesomeo fi t
sp er s
o nneltoas si
sta
fi
rmi nah ostc ount ryf oras pe ci
fiedf eean dp e
r i
odo ftime.
Div
e r
sif
icati
on
Accordi
ngt ostrategi
stRic
hardRu mel
t,compani
esbeginthin
kingabou
tdivers
ifi
cati
on
whent h
eirgr o
wt hhasplate
auedan doppo
r t
uni
ti
esf o
rgr owthintheori
gin
albusin
ess
have been deplete
d.Th et wo basi
c di
versi
fi
cati
ons tr
ategie
sar ec o
ncentr
ic and
congl
omer at
e.

Concentri
c( Related)Di v
er s
ific
ation.Growtht hr
ou ghc oncent
ricdiver
sif
icatio
ni ntoa
rel
atedindustrymaybeav e
r yappropri
atecorporat estrat
egywh enaf i
rmh asas tron
g
competit
ivep os
iti
onbu ti ndustryat t
racti
venessisl ow.Thes earchisfors ynergy
,t h
e
conce
p tthattwobu s
ine
s seswillgener
atemo r
ep rofi
t stogeth
er
th
ant heyc o
u l
ds e
p aratel
y.Th ep o
intofcommon al
itymaybes i
milarte
chnolo
gy ,cust
ome r
usage,di
stri
bu t
ion,man agerialski
ll
s,orproductsi
mi l
arit
y .

Con
glome
r at
e(Unrel
ated)Di
ver
sif
icat
ion
.Wh e
nman age
mentreal
iz
esthatthec
urr
ent
i
ndust
ryisunat
trac
tiv
ean dt
hatthefi
rmlac
kso u
tst
andi
ngabi
l
iti
esors
kil
lst
hati
tcoul
d

31
 MGT406STRATEGI
CMANAGEMENT

e
asil
yt rans
fertorel
ate
dp ro
ductsorservi
cesinotheri
ndust
rie
s,themostl
i
kel
y
s
trategyiscon
glo
mer
atediv
ersi
fi
cati
on—di
vers
ify
ingi
ntoanin
dustryu
nrel
ate
dtoit
s
c
urrentone.

Stabi
li
tyStr
at e
gies
Acorporati
o nmayc hoosestabi
li
tyovergro
wt hbycont
inui
ngit
sc u
rre
ntact
ivi
ti
es
wi
t ho
utanysigni
ficantchangeindi
recti
on.Someofthemorep
opularofth
esest
rat
egi
esare
th
ep ause
/proceed-with
-c aut
ion,n
o-change,an
dprofi
tstr
ate
gies.

1
.Pau se/ProceedwithCau t
ionSt r
ategy
Ap ause/proc
e ed-with
-cautions t
rategyis,inef
fe c
t,at imeout
—ano ppo
rtuni
tyt o
res
tbe f
o r
ec ontinu
ingagr owthorr etr
enchmentstrategy.I
tisav er
yde l
iber
at e
att
e mptt omakeo nl
yincreme nt
alimp ro
vement
su n
tilap arti
cul
arenvi
ronmental
si
tuatio
nc hange s
.Itistypicall
yconceiv
edasat emp orar
ys tr
ategytobeu s
edu nti
l
th
ee n
vironmentbe comesmo reh os
pit
ableo rtoenableac ompanytocon
soli
dat
ei ts
res
o urcesafterprolon
gedr apidgrowth.

2.No-Chan geStrate gy
An o-changes trategyisade ci
si
ontodon ot
hingnew—ac hoic
et oc on
tinu
ec urrent
operatio
n sandp o l
ici
esfort hefores
eeabl
efu t
ure.Rar el
yar t
icul
atedasade fi
n i
te
str
at e
gy ,an ochan gestrategy’
ssucces
sdependsonal acko fsi
gni
f i
cantchangeina
corporation
’ss ituati
on.Th er el
ati
ves t
abili
tyc reated by t hef ir
m’s mo dest
competiti
vep osi
tioninani ndus
tryfaci
ngli
ttl
eo rnogro wthencouragesthecomp any
toco n
t i
nueo nitsc urren
tc ourse,maki
ngonlysmalladjustmentsforinfl
atio
ni nits
sal
esan dp rofi
to bject
ive
s .

3.Profi
tSt r
at e
gy
Ap r
o f
itstrategyisade c
isi
ontodon o
thi
ngn ewinawo r
seni
ngsit
uatio
nbu ti
nst
eadto
actast hought heco mpany’sproblemsareo nlytemporary.Th
ep rofi
tstrat
egyisan
attemptt oar tifi
ciall
ys uppor
tp rof
itswh e
nac ompany’ssal
esar ede c
li
ningby
reduci
nginvestme ntan dshortt
e rmdiscret
ionaryexpendit
ures
.Ratherthanannounc
e
th
ec omp any’spoorp osit
iontos harehol
dersan dtheinvest
mentc o
mmu ni
tyatlarge,
to
pman ageme ntmaybet emptedt ofol
lo
wt hi
sv er
yse duct
ives
trategy.
Ret
renchmentStrat
egies
Ac ompanymayp ursuer et
renchments trate
gieswh enith asawe akc omp e
titi
ve
po
siti
oninsomeorallofitsproductli
nesresul
t i
nginp oo
rp erforman c
e—s al
esar edownan d
pr
ofit
sar ebecominglo
sses.Th e
ses tr
ategie
si mposeagr eatde alofp ressu
ret oimprove
per
formance.I
nanat t
emp ttoeli
minatethewe akness
e sthataredr aggin
gt hecompanydo wn,
managementmayf o
ll
owo neofs ev
eralretren
c hmentstrategies,rangi
ngf ro
mt urnar
o undor
beco
mingac apt
ivecompanytos el
li
ngout,bankruptcy,orli
quidati
o n
.

32
 MGT406STRATEGI
CMANAGEMENT

1
.Tu rnar ou
ndStrategy
Turnar ou
nds t
rategye mphas
ize
st heimp ro
ve mento fope
rat
ionalef
fici
enc
yan di s
pro
babl ymo s
tappr o
priat
ewh enac orporati
on’sproble
msarep er
vasi
vebutn o
ty et
cr
iti
c al.Anal
ogou
st oawe igh
tr edu
c ti
ondiet,thetwobasicphaseso
fat urnarou
nd
st
rate gyarecontr
ac t
ionandconsol
idati
on.

Contr
act
ioni
stheini
ti
ale f
for
ttoqui
ckl
y“ s
toptheble
edin
g”wit
hage ne
ral
,ac
ross-
th
ebo ar
dc u
tbackins i
zeandcost
s.Thesecondphase,c
ons
oli
dat
ion
,impl
ement
sa
progr
amtostabi
l
izethenowlean
ercor
porati
on.

2.Capti
veCo mpanyStrategy
Acaptiv
ec omp an
ys tr
at egyinvo
lvesgivi
ngupinde
pendenceinexchan
geforsecu
rity
.
Acompan ywithawe akc ompetit
iveposi
tionmaynotbeabletoengageinaful
l
-blown
tur
naroundst r
ategy.Th eindust
rymayn otbesuff
ici
entl
yattr
ac t
ivetoju
sti
fysuch
aneffortfro
me i
the
rt hec u
r r
entman agementori
nvest
ors.

3.Sel
l-Out/DivestmentStrategy
I
fac o
rp or
ationwithawe akc ompeti
tiveposi
ti
o ni
nanindustryi
sunabl
eeith
ert opul
l
i
tselfupbyi t
sbo otst
rap sort ofin
dac usto
me rtowh i
chitcanbe c
omeac apt
ive
company ,i
tmayh avenoc hoic
ebu ttos el
lout.Thesel
l-outstr
ategymakessenseif
manag ementc anstil
lobtainago odpri
c eforitssh
arehol
dersandtheemploye
e scan
keepthe i
rj o
bsbys e
ll
ingt heenti
rec o
mp anytoan o
therfir
m.Ifthecorp
orationhas
multi
plebu si
nessli
nesan ditc hoo
sestos el
loffadi vi
si
onwithlowgrowt
hp otent
ial
,
th
isiscalleddives
tme nt
.

4.Bankrup
tcy/Li
quidati
onStrategy
Wh enac ompanyf i
ndsitse
lfinthewo rstposs
iblesit
uati
onwi t
hap oorcompeti
ti
ve
posi
ti
oni n an i ndustr
y wi thf ew prospects, managementh as onl
ya f ew
al
ternati
ves—alloft h
emdi st
asteful
.Becausenoo neisinter
estedinbuy
ingawe ak
companyinanun att
racti
veindustr
y,thefir
mmu stpurs
ueaban krup
tcyorli
qui
dati
on
str
ategy.Bankruptcyinvol
vesgivingupman age mentoft hefirmtothec ou
rtsin
retur
nfors o
mes ettl
ementoft h
ec or
porati
on’
so bli
gati
ons.

I
nc ontrastt
oban krupt
c y
,wh i
chseekstoperpetuateacorpo
ratio
n,li
quidati
onisthe
ter
mi nati
onofthefirm.Wh entheindu
stryisunattr
acti
veandthec o
mp anytoowe ak
tobes oldasago in
gc oncern,managementmayc hoos
et oconv
ertasman ysale
able
ass
e tsasp os
sibletoc ash,whic
hist he
ndi s
tribut
edt oth
es hareh
oldersaf t
erall
obl
igation
sarep ai
d.
Port
fol
i
oAnal
ysis
Inp
ortfo
li
oanal
ysi
s,t
opmanagementv
iewsi
tsprodu
ctlin
esandbu
sin
essuni
tsasa
se
riesofi
nve
stment
sfromwhic
hitexp
e c
tsaprofi
tabl
eretur
n.Thep
rodu
ctlin
es/
busi
nes
s
33
 MGT406STRATEGI
CMANAGEMENT

uni
tsf
ormap ortfo
li
oofin
vestmen
tsthattopmanagemen
tmu stc
ons
tan
tlyjuggl
etoens
ure
th
ebestretu
rno nth
ecorpo
rati
on’
sin
veste
dmo ney
.
Twooft hemostp
opularpo
rtfol
i
otechni
quesaretheBCGGro
wth-Sh
ar eMatr
ixand
GEBus
ines
sSc r
een.

BCGGr owth-ShareMat ri
x
UsingtheBCG( Bost
onConsul
ti
ngGr o
up)Growth-ShareMatri
xdepicte
di nFi
gur
e3.3is
thes imples
t way t op ortray a corp
orati
on’
sp ortfo
lioo finve
stments.Eacho ft he
corporati
on’sproductli
neso rbus
inessuni
tsi
sp l
otte
do nt hematri
xacc o
rdingtoboththe
growthr ateoft heindustryinwhichitcompet
e sanditsr el
ati
vemar ketshare.Au n
it’
s
rel
at i
vecomp e
t i
ti
vep os
iti
onisdefi
nedasitsmarketshareinthei
ndustr
ydi v
idedbythatof
thelargestoth
e rcompeti
tor.

Fi
gur
e3.3
BCGGr
owt
h-Shar
eMat
rix

TheBCGGr owth-ShareMat
rixhasaloti
ncommonwi
thth
ep r
oductl
i
fecyc
le.Asa
p
rodu
c tmovesthr
ou ghit
slif
ecycl
e,iti
scat
egor
ize
dint
ooneoff
ourtyp
esfort
hepurpos
e
o
ffundin
gdecis
ion
s:

● Questi
o nmar ks(some t
imesc all
ed“ p
roblemchil
dren”o r“wil
dc ats”
)ar enewp rodu ct
s
withthep o
te nti
alforsuccess,bu tth
eyn e
edal otofc as hforde vel
opme nt
.
● Starsar emar ketl
e adersthatar etypi
call
yatt hepeako ftheirproductli
fec ycleand
areabl etoge ner
at ee nou
ghc ashtomai nt
aint hei
rh i
ghs hareo fth emar ketan d
usual
lyc ont
ributetot hecomp any’spro
fit
s.
● Cashc owsty pi
call
ybr inginf armo r
emo neythani sne ededt omai nt
ainth ei
rmar ke
t
share.Inthisdecli
nings t
ageo fthei
rli
fec yc
le,thesep roductsar e“milked”fo rc as
h
thatwillbeinveste
di nnewq ue st
ionmarks.
● Dogsh avelowmar kets harean ddon oth avethep ote nt
ial(becauset heyar ei nan
unattracti
vei ndustry)tobr ingi nmuchc ash.Accor dingtot h
eBCGGr owth-Share
Mat r
ix,dogss houl
dbee ith
ers o
ldofforman age dcar efull
yf orthes mallamo untof

34
 MGT406STRATEGI
CMANAGEMENT

c
asht
heyc
ange
ner
ate
.

GEBusines
sScreen
Gener
alElectr
ic,wit
ht h
eas si
stanceoft heMc Kin
sey&Co mpanyco n
sult
ingfi
r m,
devel
opedamo recompli
catedmatrix
.Asde pic
tedinF igure3.4,t
heGEBu sine
ssSc r
e en
i
nclu
desn inec el
lsbasedo nlong-termindustr
yat tractiv
enessand bu
sinesss t
rength
competi
ti
vep os
iti
on.TheGEBu s
ines
sSc re
en,incontr
as ttot h
eBCGGrowth-ShareMatr i
x,
i
nclu
desmu chmo redatai nitstwoke yf actor
st hanj ustbusi
nes
sgr owthr atean d
comparabl
emar ketshare
.

F
igure3.
4
Ge
ner
alEl
ectri
c’
sBusi
nes
sSc
ree
n

Cor
p or
at ePlanni
ng
Corporatepar
ent
ing,i
ncont
ras
t,vi
ewsac o
rporat
ioni
nt e
rmsofre
sou
rcesand
capabi
lit
iesthatcanbeusedtobu
il
dbusi
nessu
nitval
ueaswellasge
nerat
esyne
rgi
esacr
oss
bus
inessu n
its.

Deve
lopingaCorporateParent
ingStrategy
Campbel
l,Gool
d,andAlexan
derr ecomme
ndt
hatt
hes
ear
chf
orap
pro
pri
atec
orp
orat
e
st
rategyinv
o l
vesth
r e
ean al
yti
calste
p s
:

1
.Ex amineeachbusi
nes
sunit(
ortargetfi
rminthecaseofacq
uisi
ti
on)i
nter
msofi
ts
s
trategicfact
ors:
Peopl
einthebusi
nes
su n
itspro
bablyi
dent
ifi
edthest
rat
egi
c
f
ac t
orswh enth
eyweregenerat
ingbus
ines
ss t
rategi
esfo
rthei
runit
s.

2. Ex
amin
eeachbus
ine
ssun
it(
ortar
getfi
rm)i
ntermsofar
easinwhi
c hp
erf
orman
ce
canbeimp
rove
d:Thes
earec
ons
idere
dtobepar
enti
ngoppor
tuni
ti
es.Apar
ent

35
 MGT406STRATEGI
CMANAGEMENT

co
mp anyh
av i
ngworl
d-cl
asse
x p
erti
sei
nt he
seareascou
ldimpr
ovethatun
it’
s
per
formance.Th
ec o
rpor
ateparen
tcouldal
sotrans
fersomepeop
lefromone
bus
ines
sunitwhohavet
hedesi
redski
ll
stoanot
he ru
nitt
hatisi
nneedofthos
eski
l
ls.

3.Anal
yzehowwe l
lthepar e
ntcorpo
rati
onfi
tswi
tht
hebusi
nessuni
t(ort
argetf
irm)
:
Corp
orateheadquarte
r smustbeawareo
fitso
wnstr
engthsan
dwe akn
esse
sinter
ms
ofreso
urces
,skil
ls,andcapabi
li
ti
es.

Bal
anceSc or
ecar dApp
r oach
Th ebalancedsco r
ecardcombin
esf i
nanci
almeasur
esthattel
lther es
ult
so facti
ons
al
readytake nwithoperatio
nalmeasuresonc u
stomersat
isf
acti
on,i
nternalproce
sses,and
thecorporati
on ’
sinn
ov ati
onan dimprove
me ntacti
vi
ti
es—thedrive
rso ff ut
uref i
nanci
al
perf
orman ce
.Th usstee r
ingcontr
olsarec ombin
edwithoutputcontr
ols
.Int hebalanced
scor
ecard,man agementdevelo
psgoal
so robj
ecti
vesi
neachoffourareas:

1.Fi
nancial
:Howdoweap peartoshareh
olders
?
2.Cust
ome r:Howdocus
tome rsv
iewus?
3.I
nternalbusi
nes
sperspe
c ti
ve:Whatmu stweexce
lat?
4.I
nnovatio
nan dl
ear
ning:Canwec on
tinuetoimp
roveandc
reat
eval
ue?

Ref
erence
:
Wheel
enTh o
masL .
,Hunge
rDavi
dJ.(2012)
,Strat
egi
cManage
men
tan
dBu
sin
essPo
li
cy.1
3th
Edi
ti
on.Pears
on,Geo
rgeWashi
ngt
onUniv
e r
sit
y
MODULETESTGUIDE

GENERALDI
RECTI
ONS
Afte
rt h
edi scus
sionoft h
et opi
csinmoduleforMo dul
e3,t hisoftestwil
lasse
ssy ou
r
l
earningaboutt heprevi
o usl
esson.Accompli
shalltherequi
reme ntsandc o
n s
oli
dateallyou
r
answersinasingl
e( 1
)wo rddocume n
to nl
yusi
ngt hi
sformat{Ar i
al,12,Jus
tifi
ed,Al
l1Mar gi
n,
Si
ngleSpacing} .Pleasep ro
videac opyo fthequesti
oninyou rwo rki
ngdo c
ume n
ttoav oi
d
confus
ionandfo rmatto“ BOLD”yourf i
nalanswers
.Kindl
yuploady ourworkwi t
haf i
l
en ame
(L
as tName ,Fi
r s
tName ,Secti
on,Mo dul
e3Te s
ts)ino u
rGo ogleClassro
om.Go odluckand
Godble
ss!

DI
SCUSSI ONQUESTI ONS
1.Howdo eshoriz
o n
talgrowthdi f
ferfromv e
rti
calgrowthasac or
poratestrate
gy?
Fr
omc oncentri
cdiversi
fi
cation
?
2.Howiscorporatep aren
tingdiff
erentfr
omp or
tfol
ioanal
ysi
s?Howisitali
ke?Isita
us
efulconcepti
nagl obalin
dustry?
3.I
sstabil
i
tyr e
allyas t
rategyorjustater
mf ornostr
ategy?
4.I
sitpossi
bleforac ompanyo rbusi
nessun
ittofol
l
owac ostle
ade
rshi
pstrategyanda

36
 MGT406STRATEGI
CMANAGEMENT

di
ffe
renti
ati
onstr
ategysi
mul
taneousl
y?Wh
yorwhyno
t?
5.I
sitp o
ssi
blefo
rac omp
anytoh aveasus
tai
nabl
ecomp
eti
ti
veadv
ant
agewh
eni
ts
i
ndust
rybecomeshyp
ercompe
tit
ive?

Modul
e4
STRATEGYIMPLEMENTATI
ON
We e
k8
I
ntroducti
on
Envi
ro n
me ntal scannin
g an d strategy f ormulati
on ar e c ruci
al tos trategic
manageme ntbu tareonlyt h
ebe gi
nn i
ngo fthepr o
ce s
s.Th efai
luret ocarryastrategi
cp l
an
i
ntot h
eday -t o
-dayo perationsoft hewo r
kp l
acei samaj o
rr easonwh ystrat
egicp l
anni
n g
oft
enf ai
lstoac h i
evei
tso bjecti
ves.Thischaptere xpl
ainshowj obsan dorgani
zati
onalunits
canbede signedt os upporta c hangei ns trategy.F ora s trategytobes uccessf
u l
ly
i
mp l
eme n
ted,itmu stbemadeac ti
ono ri
ented.Th i
sisdon ethro
ughas eri
esofprogramsth at
arefundedth roughspe
cificbudgetsan dcontai
nn ewde tail
edproce dure
s.

L
ear
nin
gObj
ect
ive
s:
•Unde
rstan
dme ani
ngofstrat
egyimple
me n
tati
on
•I
denti
fyande
nu merat
etheleve
lsofstrat
egy
•I
denti
fyth
estrate
giesfo
rt h
ediffe
rentfunc
tio
nsi
nth
eor
gan
izat
ion

37
 MGT406STRATEGI
CMANAGEMENT

WHATI SSTRATEGYI MPL EMENTATI ON?

Strategyimp l
e mentationisthesumt otaloft heacti
vi
t i
esandchoice srequir
e dforthe
execut
iono fas trategicp l
an .Itisthep roce
s sbywh i
chobjecti
ves,st
r ategies,andp oli
ci
es
areputintoac ti
ont hrought hede vel
opme ntofpr ograms,budgets
,andp r
o cedures.Alth
ough
i
mp l
eme n
tationisu suall
yco nsi
de redafterstrategyh asbeenformulat
ed,i mp l
ement ati
onisa
keypartofs trategicman age men t
.Strategyformu lati
onands t
rategyimp l
e mentationshoul
d
th
usbec on s
ideredast wosideso fthesamec oin.
Poori
mp l
eme ntati
o nh asbee nblame dforan umbe ro fs
trategi
cfail
ures.

Tobegi
nth
eimpl
ementat
ionpr
o c
ess,strate
gymake rsmustconsi
de rthe
seq u
esti
ons
:
● Whoarethepeop
lewhowill
c arr
yo utth
es t
rategi
cp l
an?
● Whatmustbedonetoali
gnth ecompany’
soperati
onsinthen e
wi nt
endeddi
rect
ion
?
● Howise
veryo
nego i
ngtoworkt o
ge t
hertodowh ati
sne e
de d?

WhoImp lementsStrategy?
Dependingo nh ow ac orpo
rati
oni so r
gan i
zed,t hos
ewh oi mplementstrategywi ll
pro
babl ybeamu chmo r ediversesetofp eopl
et hanth os
ewh oformu l
ateit.I
nmo s
tlar ge,
mul
t i
-indust
ryc o
rporat i
ons,t heimplementersar ee very
onei nt heo rgani
zation
.Vi c
e
pre
s i
dentsoff uncti
onalar easan ddir
ectorso fdivi
sio
n sors t
rategi
cbu si
nessun i
ts(SBUs )
work witht hei
rs ubordinatest op utt o
ge t
herl arge-scaleimplementati
onp lans.Plan t
manage rs
,p r
o j
ectman agers,andu ni
th eadsp u
tt ogetherp l
ansf o
rt hei
rs p
ecifi
cp lants,
departments,an du ni
ts .Ther e
fore,everyo perati
o nalman agerdo wnt ot hef i
rst-lin
e
su
pe rv
isoran deverye mp l
oyeei si
nvol
vedi nsomewayi nt heimpl
eme nt
ationofc orporate,
busi
ness,andfu n
ction
al strategi
es.

WhatMu s
tBeDo n
e?
Theman age r
so fdivi
si
onsandf unc
tio
nalareaswo r
kwi ththe
irfell
owmanager
sto
dev
elopprograms,bu dge
ts,andproceduresforth
ei mpl
eme n
tatio
no fstrat
egy
.Theyals
o
worktoachie
v esynergyamo ngth
edivisi
onsandfuncti
onalareasinorde
rt oes
tabl
i
shand
mai
ntainacomp any’
sdisti
nct
ivecomp
et e
nce.

Devel
opingPro gr
ams,Budgets
,an dProc
e dures
Strategyimple
me nt
atio
ni nvo
lvese s
tabli
shi
ngp
rogr
amstocreatease
rie
so fne
w
organ
izati
o n
alac ti
vi
ti
es,budgetstoall
oc at
ef un
dstoth
enewac
tiv
iti
es,an
dpr
ocedu
resto
handl
et h
eday -t
o-daydetai
ls.

Programs
Thepurpo
seofap rogr
ami stomakeas t
rategyacti
o nori
ent
e d.Forexample
,when
XeroxCo rp
orati
onunderto
okat urnaro
unds t
rategy,i
tn eededtosignifi
can
tlyreduceit
s
cos
t sandexpens
es.Managementint
roduce
dap rogramc al
l
edL eanSi
xSi gma.Thi
sp ro
gram
wasde ve
lopedt
oident
ifyandi
mp r
oveap oo
rlyperf
ormingprocess
.

38
 MGT406STRATEGI
CMANAGEMENT

One wayt oe xaminet helikel

yi mp actn ewp rogramswi l
lh aveo n an e xi
sti
n g
organizati
oni st ocomp arep roposedp rogramsan dac tivi
ti
eswithc ur r
entp rogramsan d
acti
v i
ties
.Br ynjol
fsson
,Re ns
h aw,an dVanAl sty
n eprop o
sedamat rixo fc hanget oh elp
man agersdec i
deh owquicklychanges houl
dp rocee
d,inwh atorderchange ssh
ou l
dt akeplace,
whet hertostar tatan ews it
e ,andwh ethert h
ep ropos
eds yste
msar es tabl
ean dc oherent.
Assh owninFigure4.1,targetp ract
ices(newp rograms)foraman u
factu ri
ngplantar edrawn
ont hev er
ticalax i
sande xi
sti
n gpractic
es( currentacti
v i
tie
s)aredr awno nt heh ori
zontal
axis
. Asshown ,anynews trategywillli
kel
yi n
vo l
veas e
quen ceofnewp r
o gramsan dac ti
vi
tie
s .

Fi
gure4.
1
Th
eMatr
ixofChan
ge

Th
emat
rixo
fchangec
anbeuse
dt oaddre
sst
hef
oll
owi
ngtype
sofque
stio
ns:
● F
easi
bil
i
ty:Dothepr
opose
dp rogr
amsan
dac t
ivi
ti
escon
sti
tuteac o
her
ent
,st
abl
e

39
 MGT406STRATEGI
CMANAGEMENT

system?Ar et h
ec urrentac ti
viti
esc ohe
rentan ds table?I
st h
et ransi
ti
onlikel
ytobe
di
fficul
t?
● Sequenceo fexecuti
on:Wh er eshoul
dt hechangebe gi
n?Ho wdoesthese q
uenceaffect
success?Ar ether
er easonables to
pp i
ngpoints
?
● Locatio
n:Ar ewebe tt
ero ffi nsti
tuti
ngt henewp r o
gramsatan ews it
e,o rcanwe
reorganizetheexist
ingfacili
tiesatar easonablec ost?
● Pacean dn atur
eo fchange: Shoul
dt hechangebes l
o worfast
,incrementalorradi
cal
?
Wh i
chblo cksofcurrentactivit
iesmu stbechan gedatt hesametime?
● Stakeholderevalu
ations:Hav eweo verlo
okedan yimportan
tac t
ivi
tiesorint
eracti
ons
?
Shouldwege tfur
therinpu tf r
o minterest
eds take hol
ders
?Wh i
chn ewp r
ogramsand
currentac ti
vi
ti
eso f
fert heg reatestsourc
eso fv alue?

Th
emat
rixo
ffe
rsu
sef
ulg
uide
li
neso
nwh
ere
,wh
en,
andh
owf
astt
oimp
leme
ntc
han
ge.

Budgets
Af
terprogramshavebeendevel
oped,t
h ebudgetproc
essbegins.Plann
ingabu dgeti
s
th
el astrealcheckacorporat
ionhasonth
ef easi
bil
it
yo fi
tssel
ectedstrategy.Anide
al
st
r ategymightbefoundtobec o
mp l
ete
lyi
mp r
ac t
icalonl
yaftersp
ec i
fi
ci mpl
eme n
tati
o n
programsar ecostedi
ndetail
.

Procedu res
Afterthep rogr am,divis
ional,andcorp o
r atebudgetsar eap pr
oved,pro ceduresmu st
bede ve l
oped.Of t
enc all
edSt andar dOperati
n gPr oc
edures( SOPs),theytypicall
yde tailthe
vari
ou sac t
ivi
tiesthatmu stbec arriedouttoc omp l
eteac orporatio
n’sprograms .Alsokn o
wn
aso rgan i
zationalr ou ti
nes,p roceduresaret h eprimaryme ansbywh i
cho r ganiz
at i
ons
accomp li
shmu cho fwh attheydo .On cei
np l
ac e,procedur
esmu stbeu pdatedt or efl
ectan y
changesi nt echnol
o gy aswe l
lasi ns trategy.F ore xamp le
,a c ompanyf oll
owinga
dif
fere nti
atio
nc o
mp e tit
ivestrategyman agesi tssalesfor
c emo rec l
osel
yt hando esaf i
rm
fol
lowingal ow-c os
ts trategy.Di f
ferenti
ationr equi
reslong -termc usto
me rr e l
atio
ns h
ips
createdo uto fc losei nteracti
onwi t
ht h
es al
e sforce.Ani n-de p
thu nderstandingo ft he
custome r’
sn eedsp ro videst hef oundat
ionf orp roductde velopmentan dimp ro ve
me ntt o
el
iminat edupl
icatec ommu ni
catio
n sandstreamlinewo rkprojects.

St
ructur
eF o
llowsStrategy
Inac lass
icstudyo fl
argeU. S.corp
oration
ss uchasDu Pont
,GeneralMo t
ors,Sears
,
andStandardOi l,AlfredChandl
e rc oncl
udedt hats tr
uct
u ref o
ll
owsst rat
egy—t h
ati s
,
ch
angesinc orp
orates trat
egyle adt oc hangesino rgan
izati
onalstru
c tur
e.16Heal so
co
nclu
dedt hato r
ganizati
onsfol
lo
wap atte
r nofde v
elopmentfromo n
eki ndofs t
ructur
al
arr
angementt oan o
therast heyex pand.Accordi
ngt oChandler
,t h
esestructur
alc h
anges
oc
curbe c
auset heoldstruct
ure,hav i
ngbeenp ush
e dtoofar,hascausedi
n eff
ici
enci
esthat

40
 MGT406STRATEGI
CMANAGEMENT

havebecometooobv
iou
slyde
tri
men
talt
obe
ar.Ch
andl
er,t
her
efo
re,p
rop
ose
dth
efo
ll
owi
ng
asthese
qu e
nceofwhat
occ
u r
s:

1.Newstr
ategyiscreated.
2.Newadminis
trati
veproblemsemerge.
3.Ec
onomicperfor
man c
ede cli
nes.
4.Newappropri
atestruc
t u
reisinven
ted.
5.Pro
fitr
e t
urnstoit
sp r
e vi
ousle
vel.

Lev
elsofStrategy
Asdis
cussedinMo dule1,t
hetypic
albu
sin
essf
irmu
sual
l
yco
nsi
der
sth
reet
ype
sofs
trat
egy
:
cor
porate,busi
ness,andfunc
tio
nal.

1. Co rpor
at estr ategyde scri
be sac ompany’
so veralldirectio
ni nt ermso fi tsge neral
attit
u det owar dgr owt han dt heman age mentofi t svar i
ou sbu si
nessesan dp rodu c
tl i
ne s
.
Corpor ates trategi
est yp
icall
yf i
twi thi
nt hethreemai nc atego r
iesofs tabili
ty,gr owth,an d
retren chmen t
.
2. Busi
n esss t
rat egyu suallyo ccursatt hebu si
ne ssu nito rp roductl eve l
,an di t
emp hasizesimp roveme ntoft hecomp eti
tiveposi
ti
o no fac o r
p orati
on’sp r
o ductsors ervicesin
thes pe ci
ficindustryo rmar kets egme ntservedbyt hatbu si
n es
su nit.Bu s
inesss trategies
mayf itwi thi
nt het woo verallcatego ri
es,comp e ti
ti
vean dc ooperatives trategies.F or
examp le,St aples,theU. S.o ffi
c es uppl
ys torec hain,h asu sedac ompe t
iti
ves t rategyt o
di
ff e
r entiateitsr etailstoresfromi tsc ompeti
torsbyaddi ngs ervicest oitsstore s,suchas
copying,UPSs hippi
n g,an dh ir
ingmo bil
et echni
cian swh oc anf ixc omp utersan di nstal
l
netwo rks.Br i
tis
hAi rway sh asf ol
lowedac ooperatives trategybyf ormin ganal liancewi th
Ame ricanAi rl
inesino rdert op rovi
degl obalserv
ice .Coop erati
v estrategymayt h
u sbeu sed
top ro vi
deac ompet i
tiveadv antage.Intel,aman ufactu rero fc ompu termi cropro cess
or s
,
usesi tsal l
i
an ce( c
o operativestrat e
gy )withMic rosoftt odi f
f er
entiatei ts
elf( comp eti
tive
st
r ategy )fromAMD,i t
sp ri
mar ycomp etitor
.

3. F uncti
onalstrat
e gyistheapproachtakenbyaf unc
t i
onalareatoachie
vec orpo
rate
andbu sines
su nito bj
ec t
ivesands trategi
esbymax i
miz
ingr esour
cep roduct
ivi
ty.Itis
concer
ne dwithde v
elopi
n gandn u
rturi
ngadi sti
ncti
vecompetencetop r
ovi
deac o
mp anyor
busi
nessu ni
twithac ompetit
iveadvantage.Examplesofresearchanddevelop
me nt(R&D)
fu
n c
tionalstrategi
esar etechnol
ogi
calf ol
lo
we r
ship(i
mit
at i
ono fthep r
oductso fo t
her
compani
e s)andtechnol
ogicall
eadershi
p( p
ione
eringanin
novati
on).

Busi
nessfi
rmsuseal
lthreetypesofst
rategysimul
tan
eo u
sly.Ahi
erar
ch yofst
rategy
i
sagro
upin
go fst
rate
gytypesbyleve
lintheorgani
zati
on.Hi
erarchyofs
trategyisanes
ting
o
fonest
rategywi
thi
nanoth
ersot h
attheycomplementandsuppor
to n
eanoth
er .

41
 MGT406STRATEGI
CMANAGEMENT

Figu
re4.
2
L
eve
lsofSt
rate
gy

St
age sofCorporateDevel
opment
Succe
ssfulcorpor
ation
st en
dt of ol
l
owap atte
rno fs t
ruc t
uraldevel
opmentasthey
gro
wan dexpand.Beginn
ingwiththes i
mplestructu
reo fthee ntrepre
neuri
alfir
m( i
nwh i
ch
ever
ybo dydoese ver
ythi
ng),suc
ces s
fulcorporat
ionsusuall
yge tlargerando r
gani
zealong
fu
nctionalli
nes,withmar keti
ng,p rodu
ction
,an df i
nan c
ede partment
s.Wi t
hc onti
nui
ng
su
ccess,thecomp anyaddsnewp roductl
inesindif
ferentindust
riesando r
ganiz
esits
elfin
to
i
nterconnec
teddivisi
ons
.

StageI:Si
mp l
eStructu
re
StageIistypi
fi
edbytheentrep
reneur,wh
of o
undsac o
mp anytopromoteanidea(a
productoras erv
ice)
.Theentr
epre
neurtendstomakeallth
eimportantdec
isi
onsperso
nall
y
andisinvolv
edine v
erydetai
landphaseoftheorgani
zat
ion
.TheSt ageIcompanyhasli
ttl
e
formalstructu
re,whic
hall
owstheentrep
reneurt
odirect
lysuper
v i
setheacti
vi
ti
esofe ve
ry
emp l
oyee.

StageII
: F
u n
ctio
nalStru
c t
ure
StageIIist
h epointwhentheen
trepre
ne u
ri srepl
acedbyateamo fmanager
swh o
havefunction
alspe
c i
ali
zati
ons.Thet
ran
sit
iontothi
ss t
ager e
qui
resasubs
tant
ial
manageri
al
styl
ec hangeforthec hi
efo f
fice
rofthecomp any,esp
ecial
lyi
fh eo
rs hewastheStageI
entrep
re neur
.

StageII
I:Div
isi
onalStructu
re
StageIIIisty
p i
fi
edbyt hecorporat
ion
’sman agi
ngdiverseproductli
nesinnumero
us
i
ndu s
tri
es;itde cen
trali
zesthede c
isi
on-makingauthori
ty.StageIIIorgani
zati
onsgrowby
di
v e
rsif
yingtheirproductli
nesandexpandi
ngtoc ov
e rwidergeogr
ap hi
calareas.Th
eymove
to a divisi
onals t
ru c
ture witha c entr
alh eadquart
e r
s an d decentr
ali
zedo per
ati
ng

42
 MGT406STRATEGI
CMANAGEMENT

di
vi
si
ons—wi
theachdi
vi
sio
no rbusi
nessun
itafu
ncti
onal
l
yor
gani
zedSt
ageIIcompany
.The
y
mayal
souseac o
ngl
omeratestr
ucturei
ft o
pmanageme
ntc
hoo
sestokee
pi t
sc o
ll
ecti
onof
St
ageII
subs
idi
ari
esope
rati
ngautonomou
sly.

StageIV: BeyondSBUs
Evenwithitsevolut
ioni nt
oSBUsdu ringthe197 0san d1 980s,thedivisi
on als tr
uc t
ureis
notthel astwordi norgani
z ati
ons tr
u ctu
re .Theu s
eo fSBUsmayr e sul
tinar edt apec ri
si
sin
whicht hec orporati
onh asgr ownt oolar gean dc o
mp lext obeman age dt hroughf ormal
programsan drigidsystems ,andp rocedur e
st akep re c
e de n
c eoverp roblems olving.Under
conditi
o nsof( 1)increasi
n ge nvi
ron mentalu ncertai
n ty,( 2)gr e
at erus eo fs o ph
isti
cated
te
c hnologic
alprodu c
tionme thodsan dinformationsy stems ,(3)theincreas i
ngs i
z ean dscope
ofwo rldwidebu si
nessc orporation
s,( 4)agr e
at ere mp has i
so nmu l
ti-i
n dustr yc omp et
iti
ve
st
r ategy,an d(5)amo reedu catedc adreo fman ager san de mployees,newadv ancedf orms
ofo rgan i
zati
onals t
ructurear eeme rgi
ng.Th e s
es t
r uct
u rese mp h
asizec ollabo rati
o nover
compe ti
tionintheman agingo fano rgani
zat i
on’
smu ltipl
eo v erl
appingproje c
tsan dde velopi
ng
busin
e sses.

43
 MGT406STRATEGI
CMANAGEMENT

Tabl
e4.1
F
act
orsDi
ffe
ren
tiat
ingStageI
,II
andI
II
Comp
ani
es

Organi
zation
alLif
eCy cle
Theo rganiz
ationalli
fec ycl
e desc
r i
be sh owo rgani
zati
ons grow,de ve
lop,an d
event
uallydecl
ine.I
ti stheor
ganiz
ation
alequival
en tofth
ep roductli
fec y
cleinmarketi
ng.
ThesestagesareBirth(StageI)
,Growth(StageII),Maturi
ty(StageII
I),Decl
ine(
StageIV),
andDe ath(StageV) .Theimpactoft h
eses t
age so nco
rp or
ates t
rategyan dst
ructur
ei s
su
mmar i
zedinTable4.2.

Tabl
e4.2
Or
gan
izati
onal
Lif
eCy
cle

Reen
gin
ee r
ingandStr ate
gyImp l
ementat
ion
Reenginee
rin
gi stheradicalr
edesignofbus
ine
ssproc
ess
estoac
hie
vemajorgain
sin
co
st,se
rvice,orti
me .Iti
sn o
ti ni
tse
lfat ypeofs
truct
ure
,buti
tisane
ffect
ivep
rogramto
i
mplementat u
rnaroundstrategy.

Mic
haelHamme r,whopopul
ariz
edt heconceptofreengi
neeri
ng,suggest
st hefoll
owi
ng
p
rin
cip
lesforreengin
ee ri
ng:
● Organi
zear oundo ut
comes,nottasks:Desi
gnap e
r s
on ’
sorade p
ar tment’
sjobar ou
nd
ano bj
ecti
v eoro ut
comeinste
ado fas i
ngl
et askorseri
esoftasks.
● Havet ho
sewh ou s
et heoutp
uto fthep roc
e s
spe r
formt h
ep rocess:Withc omputer
basedinformations y
stems,processescann owber eengi
neereds othatt h
ep eopl
e

44
 MGT406STRATEGI
CMANAGEMENT

whone edt her es

ultoft heproc e
ssc andoitthemselves
.
● Subsume i nformat i
on-p ro
c essi
ng wo rki ntother ealwo rkt hat p roduce st he
i
nformat i
o n:Peopleo rdepar t
me ntsthatp r
oduceinformati
o ncanal sop roces sitfor
usein
s teado fjustse ndi
ngr awdat atoo th
ersintheo r
ganizati
ont oin t
e r
pre t
.
● Treatge ographic
allydi sp
e rs
e dr eso
urcesast ho
ught heywe rec ent r
alized:Wi th
moderni nf ormati
ons yst
ems ,c ompaniescanp rovi
def lex
ibles ervicel ocal
lywh i
le
keepi
n gtheac t
ualre sourc
e sinac entr
aliz
edlocati
onf orcoordi
n ati
o np u
rpo s
e s.
● Li
nkp arallelac ti
viti
e sinstead ofi ntegrati
ngt hei
rr es ul
ts:In stead o fh av i
ng
separateu nitsperformdi fferentacti
viti
esthatmu stevent
u al
lyc o
met ogethe r,have
themc ommu nicatewh il
et h
e ywo rksothattheycandot heintegrati
n g.
● Putthede c i
sionpointwh erethewo rkisperformedan dbuil
dc ontrolintothep rocess
:
Thepe oplewh odot hewo rks h
o ul
dmaket hede ci
si
onsan dbes el
f-co ntroll
i
n g.
● Capturei nformationo ncean datt hes o
urce:Inst
eado fhav i
nge ac hun i
tde ve l
opits
owndat abas ean dinformat i
onp rocess
ingac t
ivi
ti
es,theinformat i
onc anbep utona
networks ot hatallcanac cessit.

Si
xSigma
Origi
nallyc on
c eiv
edbyMo t
orol
aasaq u
ali
t yimpro
vementprograminthemi d-1980s,
Si
xSigmah asbe comeac ost-savi
ngprogram fo
ral ltypesofmanufacturers
.Br i
efl
y ,Six
Si
gmai sanan al
yti
c alme t
hodf orachiev
ingn ear-per
fectr e
sul
tso nap roduc
tionl i
ne.
Al
thought hee mp h
asisisonreducin
gp r
oductvari
an ceinor
dertoboostquali
tyandeffic
ie n
cy,
i
tisi
n creasinglybeingap pl
i
edt oaccount
srecei
vable,sal
es,andR&D.Instati
sti
cs,theGr ee
k
l
ettrs
e igmaden otesv ari
ati
onint hest
andardbe l
l-shap
edc u
rve.Thep roc
esso fSixSigma
en
comp ass e
sf ivesteps.

1.Defin
eapr oce
sswh er
er es
ultsarepoor
erthanaverage
.
2.Me asuret
heprocesstodetermineex
actcurrentp
erformance.
3.Analyzeth
einformati
ontop i
npoi
ntwherethi
ngsaregoi
ngwr o
ng.
4.Improvetheproc
e s
sande l
iminat
etheerror.
5.Establi
shcon
trol
st opre
ventf ut
uredefec
tsfromoccurri
ng.

Desi
gningJobstoI mpl
eme ntStrategy
Organiz
ingac ompany ’
sac t
ivi
t i
esandp eopletoimp le
me ntstrategyin
vol
ve smorethan
si
mp l
yrede s
igni
ngac o
rporation’
so veral
lstructure;italsoinvol
vesr edesi
gni
ngt hewayjobs
aredon e
.Wi tht h
ei n
creasinge mphasisonr eengineeri
n g,manyc omp ani
esarebe ginn
ingto
reth
inkth e
irwo rkp r
ocesseswithane yet owardp hasingu nneces
saryp eopl
ean dac t
ivi
ti
es
outofthep rocess.Jobdesignre f
er stothes tudyofi ndi
v i
dualtasksinanat tempttomake
themmo rerelevanttothec ompanyan dtothee mp l
oyee (
s).Tomi ni
mizesomeo ftheadv e
rse
conseq
u e
n ce
so ftasks pec
iali
zation,corporati
on shavet urnedton ewj obdesi
gnt echni
ques
:
jo
ben largement( combini
ngt askst ogi veawo rkermo reo fthes amet ypeo fdu t
iesto
perfo
rm) ,jobrotatio
n( movingwo rkerst hr
o u
ghs ev e
ralj obstoinc r
e as
ev ari
ety),andjob
enri
chmen t(alteri
ngt hej obsbygi vi
ngt he wo rkermo re autonomyan dc ont
rolover

45
 MGT406STRATEGI
CMANAGEMENT

ac
tiv
iti
es) ej
.Th o
bch
arac
ter
ist
icsmo
del
isago
ode
xamp
leo
fjo
ben
ric
hme
nt.

ORGANIZATIONALSTRATEGI ES
Funct
ionalStrat egy
Functi
on alstrategyistheapproachafuncti
onalareatake stoachi
evec o
r p
orateand
busi
nessunito bjective
san ds tr
ategie
sbymax imi
zingresour
cep roduct
ivi
ty.Iti
sc oncer
ned
wit
hde vel
opingan dnurturi
ngadi st
inct
iveco
mp et
encetop rov
ideac ompanyo rbusi
nessuni
t
wit
hac omp et
itiveadv antage.Justasamu l
ti
div
isi
onalcorpo
rationhassever
al busi
nessuni
ts,
eachwithitsownbu sinessstrat
egy,eachbusi
nessunithasit
so wns eto
fde partments,e
ach
wit
hitsownf un ction
alstrategy.

Busi
n e
s sStr at
e gy
Asme n
t i
onedi nMo dule3,bu si
nessstrategyf ocusesoni mprovi
n gthec ompet i
ti
ve
posi
tiono fac o mpany’so rbu si
nessunit
’sproduct
so rs e
r vi
ceswithi
nt h
es pecif
icindustryor
marke ts egmen tt h
att hec ompanyo rbusin
e s
su ni
ts erves.Busi
nesss t
rat e
gyi sextreme l
y
i
mp ortantbe causer esearc hshowst hatbu si
nessun i
te ffect
sh avedo ubletheimp ac ton
overallcomp anyp erfo
r man cethandoe it
herc o
rporateo rindu
strye f
fects.Busi
nessstrategy
canbec omp etit
ive(bat tl
ingagai ns
tal lcompetit
or sfo radvantage)an d/orc o
o p
er ati
ve
(workingwi thon eormo rec ompan i
estogainadvantage
againstoth erc ompeti
tors )
.Ju stascorporatestrategyas kswhatindustr
y (i
es)thecomp any
shoul
dbei n,businessstrategyas kshowt h
ec ompanyo ritsuni
tsshouldcomp et
eo rcooperate
i
ne achi n
du stry.

Corpo
rat eStrategy
Corporates t
rategyisp ri
mari
lyaboutth
ec h
oiceofdire
ctionforaf i
rmasawh ol
eand
theman agemento fitsbu si
nessorproduc
tp o
rtfol
i
o.Thisistruewhetherthefirmisasmall
companyo ralargemu l
ti
n ati
onalco
rporati
on(MNC).Inalargemu l
ti
pl
e -busi
nessco
mpany,i
n
part
icular,co
r p
or atestrategyisconc
ernedwithmanagi
ngv ari
ousproductli
nesandbus
ines
s
uni
tsformax imumv alue.

Ref
erence
:
Wheel
enTh o
masL .
,Hunge
rDavi
dJ.(2012)
,Strat
egi
cMan
age
men
tan
dBu
sin
essPo
li
cy.1
3th
Edi
ti
on.Pears
on,Geo
rgeWashi
ngt
onUniv
e r
sit
y

46
 MGT406STRATEGI
CMANAGEMENT

MODUL
ETESTGUI
DE

GENERALDI
RECTI
ONS
Afte
rt h
edi scus
sionoft h
et opi
csinmoduleforMo du
le4,t hisoftestwil
lasse
ssy ou
r
l
earningaboutt heprevi
o usl
esson.Accompli
shalltherequi
reme ntsandc o
n s
oli
dateallyou
r
answersinasingl
e( 1
)wo rddocume n
to nl
yusi
ngt hi
sformat{Ar i
al,12,Jus
tifi
ed,Al
l1Mar gi
n,
Si
ngleSpacing} .Pleasep ro
videac opyo fthequesti
oninyou rwo rki
ngdo c
ume n
ttoav oi
d
confus
ionandfo rmatto“ BOLD”yourf i
nalanswers
.Kindl
yuploady ourworkwi t
haf i
l
en ame
(L
as tName ,Fi
r s
tName ,Secti
on,Mo dul
e4Te s
ts)ino u
rGo ogleClassro
om.Go odluckand
Godble
ss!

DI SCUSSI ONQUESTI ONS

1.Howshouldacorpor
ationatte
mp ttoachi
e v
es yner
gyamo n
gf unct
ionsandbusi
nessuni
ts?
2.Hows ho
uldanown e
r-man agerprepareac ompanyfo
ritsmo vementfromStageItoStage
I
I?
3.Ho wcanac orpo
ratio
nke epf r
oms li
di
ngintot h
eDec l
i
nes tageoft h
eo r
ganiz
atio
nalli
fe
cycle
?
4.Isree
nginee
rin
gj u
stano t
herman agementfad,ordoesi
to f
fe rs
omethingofl
asti
ngvalue
?

47
 MGT406STRATEGI
CMANAGEMENT

Modu
le6
STRATEGYIMPLEMENTATI
ON
Week9-10
I
ntro
du cti
on
Thesecrettoent
e r
pris
e’ssuccessisi
tswell
-execute
ds trategyimpl
e men
tati
on.
Cl
earlylai
do utp
r o
grams,budgets,andprocedure
ssupportthec ompany’scompet
iti
ve
st
rategybymaki ngent
erpris
es t
an doutinthemindofthecon s
ume r
.On ekeyto
i
mpleme nt
atio
nate nt
erpris
eisstaffin
g—h ir
ingandpro
mo ti
ngac er
tainkindofperso
n.
Vi
rtuall
ye v
eryenterpr
iseemployeeisac ol
le
gegraduate,usuall
yfromt hebott
omh al
foft
he
cl
ass.

L
ear
nin
gObj
ect
ive
s:
Unde r
standt h
el i
nkbe t
we enstrat
egyands t
affi
ngdec
isi
ons
Mat chtheap propri
ateman agertothestr
ategy
Un derst
an dhowt oimplementane f
fecti
vedownsi
zi
ngprogram
Di
sc ussimportantissuesineffecti
vel
ystaffi
nganddire
c t
inginte
rnati
onal
ex
pans ion
As
s essan dman agetheco r
poratecult
ure’
sfitwi
thanews t
r ate
gy
Dec i
dewh enan difp rogramss uchasMBO an dTQM ar eapprop
riate
methodso fstrategyimple
me ntati
on
Fo
r mu l
ateac t
ionp l
ans

WHATI
SSTAFFI
NG?
Theimp
lementat
ionofn
ews t
rategi
esandp
oli
cie
softe
nc al
l
sforn e
wh umanre
sourc
e
man
age
me n
tp r
ior
iti
esan dadif
feren
tu seofpers
onnel
.Suchstaf
fin
gi ss
uescaninv
olv
e

48
 MGT406STRATEGI
CMANAGEMENT

hi
rin
gn ewp eoplewithn ewskil
ls,fir
ingp e
oplewithinap
propriateors ubstandards ki
ll
s,
and/ortraini
nge xis
tingemploy
ee stol earnnews ki
ll
s.Ifgr owthstrategi
e sar etobe
i
mp l
emented,newp eopl
emayn e
edt obeh i
redandtrai
ned.
Experi
enc
e dpeoplewithth
enecessaryskil
lsneedtobefoundforp romot
ionton e
wlyc r
e at
ed
manageri
alp osi
ti
ons.Wh e
nac o
rp o
ratio
nf ol
lo
wsagr owtht h
rou ghacqui
sit
ions t
rategy,it
mayf i
ndthatitneedstorepl
aceseveralmanagersinth
eac qu
iredc omp
an y
.

I
tison ethingt olo
see xc
e s
se mployee
saf terame r ger,butitissomethingelsetolose
hi
ghlyskil
ledp eop l
ewh oar edi f
ficul
tt oreplace.Inas t
udyo f40me r
ge rs
,90% o ft he
acqui
rin
gc omp aniesinthe15suc c
e s
sfulmergersidentif
iedke ye mploy
eesan dtargetedthem
fo
rr etent
ionwi thin30day safterthean nouncement.Inc ontrast,thi
staskwasc arri
edo ut
onl
yi none-thirdo ft heunsuccessfulacqui
sit
ions.Tode alwithi n
tegrati
oni ssu
ess uchas
th
e se
,somec omp ani
esar eap poi
nti
ngs peci
alintegrati
onman age r
st oshepherdc ompanies
th
ro u
ght h
ei mp l
eme ntati
onp rocess
.Th ejobo fthei ntegratorist oprepareac ompeti
tive
profi
leofthec ombinedc ompanyint ermso fitsstrengthsan dwe aknesses,draftani deal
profi
leofwh atth ec ombi
nedc ompanys ho
uldlooklike,de vel
opac ti
onp l
anst oclosethegap
betweentheac t
ual i
tyandt heideal
,an destabli
sht rai
ningp rogramst ounitethec ombin
e d
companyandt omakei tmo r
ec ompeti
tive.

I
fac orp
o r
ati
onado
ptsaretren
chme n
tstrate
gy,h o
we ver
,alargenumberofpeopl
e
maynee
dt obelai
dofforf
ire
d(inmanyinst
ances
,beinglai
do ffist
hesameasbe i
ngfi
red)
;
andt
opman agement
,aswel
lasthediv
isi
onalmanagers
,n eedstospec
ifyt
hec r
ite
riat
obe
us
edinmakingt
h e
seper
son
nelde
c i
si
ons
.

STAFF
INGF OLLOWSSTRATEGY
Asi
nt h
ec as
eofstru
ctur
e,staf
fingre
qui
rement
sareli
kel
ytofoll
owac han
gein
str
ategy.F
o rexampl
e,pr
omoti
onsshou
ldbebasednoton
lyoncur
rentjo
bp er
formanc
ebut
al
soonwh ethe
rap ers
onhasth
es ki
l
lsandabi
li
ti
estodowhati
sneededtoimpl
ementthen
ew
str
ategy.

ChangingHi ri
ngan dTrainin
gRe qui
reme nt
s
On ewayt oimplemen tac o mp any’
sbu sines
ss trategy,suchaso veralllowc ost
,is
throught raini
n gan dde velopme nt.Ac cordingt oth eAme r
icanSo c
ietyo fTr aini
ngan d
Developme nt,t heav er
agean nu
ale x
penditur
ep ere mp l
oyeeonc orporatet raini
ngan d
developme ntis$1 ,
000p ere mployee.As t
udyo f51c orporatio
nsintheUKf o u
n dthat7 1
%o f
“l
eading”c omp ani
esr ateds t
affl e arni
ngan dtraini
n gasi mportanto rv eryimp or
tant
compar edt o62%o ftheo th ercomp ani
es.An ot
hers tudyo f155U.S.man ufacturi
ngfirms
revealedt hatthosewithtrainingpro gramsh ad19%h igherproduct
ivi
tythandidt hosewit
hout
suchp r
o grams.An othe
rs tudyf oundt hatado ubli
ngo fformaltrai
ningpere mp l
oyeeresul
ted
i
na7 %r eductioninscrap.Tr ai
ningi se s
pe c
iall
yimp ortantforadi ff
erentiati
ons t
rategy
emphas i
z i
ngq uali
tyorcustome rserv i
c e.

Tr
ain
ingi
sal
soi
mpo
rtan
twh
eni
mpl
eme
nti
ngar
etr
enc
hme
nts
trat
egy
.Ass
ugge
ste
d

49
 MGT406STRATEGI
CMANAGEMENT

earl
i
er,suc
ce s
sfuldown
siz
ingmean
sthatacompanyhastoin
vestinit
sremain
inge
mplo
yees.
Gener
alElectr
ic’
sAircr
aftEngi
neGroupus
edt r
aini
ngtomaintainit
ss h
areofthemarke
t
eve
nt ho
ughithadc u
tit
swo r
kfo
rcefr
om42,000to33,
000inthe1990s.

MatchingtheMan agertot heSt rategy

Executiv
ec haracterist
icsi nfl
u encestr ategico utcomesf orac orporati
on.
1 6I tis
pos
siblethatac u rrentCEOmayn otbeap propr i
atet oimp l
eme ntan ews trategy.Re search
i
ndicatesthatthe remaybeac areerlifecyclef ort o
pe x
e c
utives.Duringthee arlyyear sof
executi
ves’tenure ,fore xamp l
e ,theyt endtoe xperime ntinte
ns iv
elywithp r
oductlinest o
l
earnabo utt hei
rbu siness
.Th isist hei
rlearnings tage.L ater,the i
rac cumulatedkno wledge
al
lowst h
emt or educee xperi
me n t
ationan dinc
r easep erforman ce.Thisisthei
rh arves
ts tage.
Theye nterade c l
in
es tagei nt hei
rl aterye ars,wh e nt h
eyr e ducee xperimentat
io ns ti
l
l
fur
th e
r,an dperforman cede cl
ines.
Thus,thereisani nvert
e dU-s hapedr elati
onshi
pbe twee ntopexec uti
vet enureandt h
ef irm’s
fi
nancialperforman ce.Somee xe c
utivesr e
tirebe forean ydecli
n eo c
cu r
s.Ot hersstaveo ff
decl
inelongerthant heircoun t
e rparts.Becauset hel e
n gthoftimes pentine achstagev ar i
es
amongCEOs ,iti
su pt othebo ardt odec i
dewh enat opex ecuti
vesh oul
dber e
p l
aced.

Th emo s
tap propri
atet y
peo fge ner
al man agern ee
de dt oe ffectivelyimple mentan ew
cor
porateo rbu si
nessstrategyde pendso nth ede si
reds t
r ate gicdirectiono ft hatf irmo r
busi
nessun i
t.Ex ecut
iveswithap articul
armi xo fskill
sande xp erie
n cesmaybec l
assifi
edas
anexecutivet ypeandp aire
dwi thas pecif
icc orporatestrat egy .Fore xamp l
e ,ac or p
oratio
n
fo
ll
owingac once n
trati
ons tr
ategye mp hasi
zi
n gv erti
calorh or i
z ontalgrowt hwo u l
dp robabl
y
wantanagg ressivenewc hiefexe c
u t
ivewithagr eatde alo fe xperi
en ceint hatp arti
cul
ar
i
ndustr
y — ady namicindustr
yex pert.Adi ve
r si
f i
catio
ns trate gy,inc ontrast,mi ghtc allfor
so
me onewi thanan aly
t i
calmindwh oish i
gh l
ykn owle
dgeabl ei no t
heri ndus t
r i
e san dcan
managedi versep roductline—anan
s alyti
calpo r
tfoli
oman ager .Ac orporationc hoosi
ngto
fo
ll
owas tabil
itystrategywo ul
dp robabl
ywan tasi sCEOac
t au tiousprofitplann er,ap erso
n
wi
thac on s
er vati
ves t
y l
e,ap roducti
ono re n gi
nee r
ingbac kgr ound,an de xperiencewi t
h
cont
rol
lingbu dgets,capit
alexpenditures,i
nvento ri
es,andst andar dizationp r
oc edu res.

We akc o
mp ani
esinar elati
velyattr
ac t
ivei n
dustr
yt endtot u
rnt oat ypeofchall
enge
or
ien te
de xecut
iveknownasat urnaroundspeciali
sttosaveth ecomp any.Forexample,when
fo
r me rIHOP( I
n t
ernati
onalHo useo fPancake s)waitressJu l
iaSt ewartl eftApplebee’
s
restaurantchai
nt obecomeCEOo fIHOP,shewor kedtorebuil
dt h
ec ompan ywithbet
terf o
od,
betterads ,andbe tt
erat mo s
p h
e r
e .Si
xy earsl ater
,amu chimp rovedIHOPac qui
re dthe
st
r uggl
ingApplebee’
srestaurantc h
ain.CEOStewar tvowedtot urnaroundApp l
ebee’
swithi
na
yearbyi mp r
ovi
n gserv
ice,foodq uali
tyandf ocusingtheme nuonwh att herestaur
an tdoes
best:r i
blets
,bu rgers
,an ds al
ads .She wan ted Applebee’
st o again be t hef ri
endly
,
nei
gh borh
oodbaran dgril
l t
hatito ncewas.

Ifaco
mp an
ycannotbes
aved,apr
ofess
ion
alli
qui
dat
ormigh
tbecal
l
edonbya
ban
kru
ptc
ycour
tt ocl
osethef
irm an
dli
qui
dateitsass
ets
.Thi
siswhath
app
ene
dto

50
 MGT406STRATEGI
CMANAGEMENT

Mon t
gome r
yWar d,I
nc.,t
h en ati
on’sf
irs
tc atal
ogret
ail
er,wh
ichclo
sedi
tsst
ore
sf orgoodi
n
2001,afterde cl
ari
ngban kruptcyfort hes e
c o
ndt i
me.Researchte
ndstos u
pp o
rtt h
e
concl
usio
nt hatasafi
rm’se nv i
ronmentchanges,i
tte
ndstochangethet
ypeoft
ope xecu
tiv
e
toimple
me ntanewstrategy .

SELECTIONANDMANAGEMENTDEVEL OPMENT
Sel
ecti
onanddevel
opmentar
ei mpor
tantnoto
nlytoe
nsu
reth
atpeo
p l
ewit
ht h
eri
ght
mixofs ki
ll
sandexpe
rie
ncesareini
ti
allyhi
redbu
talsotohe
lpth
emgro
wo nthejo
bs ot
hat
theymightbepre
paredforfut
urepromoti
ons.

Executi
veSu c ces
sion
:Insi
dersversu sOu tsi
ders
Execu ti
ves uccess
ionisth ep roc es
so fr epl
aci
ngake yt opman age r.Theav er age
tenur
eo fac hi
efe xe
cu t
iveofalar geU. S.companyde c
li
ne dfromn earlyni
ney earsin198 0t o
si
xy earsin2006.Gi v
e nthattwo -thi
r dso fallmajorc o
r por
ationswo rl
dwider epl
ac et heir
CEOatl easto nceinaf i
ve-yearpe ri
od,i ti
simp o
rtantthatthef i
rmp lanfort h
iseventuality.
I
tise speciallyimportantforac omp anyt hatu s
uall
yp romotesf r
o m wi
thint opreparei ts
curre
n tman age r
sf o
rp romoti
on.F ore xample,compani
esu si
ngr el
aye xecut
ives uccessi
on ,in
whic
hac an di
datei sgr oo
me dt ot akeo vert heCEOp osi
ti
o n
,h av esi
gn i
ficantl
yh igh er
perfo
r mancet h
ant hosethathires ome onef ro
mt heo ut
sideo rholdac omp eti
tio
nbe twe en
i
nternalc an di
dates.Th ese“heirsap parent”ar ep r
ovideds peci
alas si
gn mentsinc l
udin g
membe rshi
po no therf i
rms’boar dso fdirectors.Neve rt
heless
,o nlyhalfo fl argeU. S.
compan i
esh aveCEOs uccessi
onplansinp l
ace.

I
dent i
fyingAbil
it
iesandPot en
tial
Ac o
mp anyshoul
de xamineit
sh umanr es
o u
rces ys
temt oensurenoton l
ythatp eo
ple
arebe inghiredwith
outr egardtothei
rr aci
al,ethn
ic,orreli
gi
ousbackground,butalsothat
th
eyar ebe ingidenti
fiedf ortrai
nin
gan dp r
omo ti
onint hesameman n e
r .Man agement
di
ver s
ityc oul
dbeac ompetit
iveadvantageinamu lti
-ethni
cwo r
ld.Withmor ewome ninthe
workplace,ani n
creasi
n gnumbe rar
emo vi
ngintotopman agement,bu
tarede man
dingmo re
fl
exiblecareerladderstoallowforfamilyres
ponsi
bil
iti
es.

Jo
br otati
on—movi
ngp eo
plef romo n
ej obtoan ot
her
—i sal
souse
dinman yl
arge
c
orp
o r
ati
onst oe n
sureth
ate mpl
oyeesar egai
ningtheappropr
iat
emixofexpe
rie
ncesto
p
reparethe
mf o
rf ut
ureres
ponsi
bil
i
ties.Rot
ati
n gpeo
pleamongdivi
si
onsi
son
ewayt h
ata
c
orp
o r
ati
onc animpro
vethel
eveloforgani
zati
onall
earni
ng.

Probl
emsinRe trenchment
Down si
zi
ng(someti
me scall
ed“rightsi
zing”or“resi
z i
ng”)r
eferstotheplanned
el
imin
at i
ono fp osi
ti
onso rjobs.Th i
sp r
ogram i softenu se
dt oimp l
ementr et
renchment
st
rategies.Becausethefi
nan c
ialcommu ni
tyisl i
kel
ytor eactfavor
ablytoannouncementsof
downsi
zingf rom ac ompanyindi ff
iculty
,s uchap ro
gram mayp rovi
des o
mes h
ort-term
benefi
tssu chasrais
ingthec o
mp any’
ss tockpr i
ce.I
fnotdo neproper
ly,ho
we ver
,down s
izi
ng
mayresultinless
,ratherthanmo re
,pro ducti
vi
t y.

51
 MGT406STRATEGI
CMANAGEMENT

Astudyo fdo wnsi

zingatau tomobil
e-relatedU.S.industri
alc omp aniesrevealedt h
at
at20o utof30c ompanies,ei
therthewr ongjobswe ree l
iminate
do rblanke toffersofe arl
y
reti
rementpromp tedman agers,eventhoseconsideredinval
uable,toleav e.Afterthelayoffs,
theremaini
nge mp l
oyeeshadt odon otonl
ytheirwo rkbutalsothewo r
ko ft hep eo
plewh ohad
gone.Becauset hesurvivorsoftendidn’tknowh o
wt odot hede parteds’wo rk,mo r
alean d
product
ivi
typ l
umme ted.Do wn si
zi
ngc an seriousl
y damage t hel e arningc apacityo f
organi
zati
ons.Cr eati
vitydr o
p ssigni
fic
antly(af f
ectingn ewp roductde vel
o p
me nt
),an dit
becomesverydifficul
ttoke eph i
ghpe rf
orme r
sf romleavingthec ompan y.55Inadditi
on,c ost
-consci
ouse xecuti
vest endt ode fermai n
tenan ce,ski
mpo nt raini
ng,de l
ayn ewp rodu ct
i
ntroducti
ons,andav oi
dr i
skyn ewbus i
ness
es—al lofwhichleadstolowe rs alesandeventuall
y
tolowerp r
of i
ts.Thesear es omeo ft h
er easonswh ylay o
ffswo rryc ust o
me rsandh avea
negati
veeffecto naf i
rm’sreputati
on .

Co
nsi
dert
hef
oll
owi
nggu
ide
li
nest
hath
avebe
enp
rop
ose
dfo
rsu
cce
ssf
uldo
wns
izi
ng:

● Eli
mi nat eu n nece ssarywo rkinsteado fmaki ngac ross-t he
-bo ardc uts:Sp endt het ime
tor ese arc hwh eremo neyi sgoingan de li
minatet het as k,notthewo rker s,i
fitdo e sn ’
t
addv alu et owh att hef irmi sp rodu cing.Re ducet hen umbe rofadmi nistrati
v ele ve l
s
rath ert hant h en umbe ro findividu alp osi
tions.Lo okf orinterde pende ntr el
at i
ons hips
bef oree limi natingac tivi
t i
es.Identifyan dpr ot
e ctco rec omp et
en ci
es.
● Con trac to u two rkth ato thersc andoc h
e aper:F ore xamp l
e,Ban ke rsTr usto fNe w
Yo rkc ontr acte do uti tsmai l
r ooman dp ri
ntings ervice san dso meo fi tsp ay r
ollan d
acc oun tsp ay abl eac tivi
tiestoadi v isi
ono fXe r ox.Ou tsourcingmaybec heap ert han
ver ti
c alint egrat i
on .
● Planf o rlon g-r une fficiencies
: Don ’
ts imp l
ye li
minateal lpostponablee xpe nses,suc has
mai nte nanc e,R&D,an dadv er
t i
sing,i ntheu njustifi
ableh opethatt hee n vi
ronme ntwi l
l
bec omemo res uppo rtive.Cont i
nuet oh ir
e,g row,an dde velop—p arti
c ularlyinc ritical
are as.
● Commu nicat et her eason sforac tio ns:Telle mp l
oy eesn oto nlywh yt hec omp an yi s
down s i
zingbu tal sowh att hec o mp an yist ryingt oac hieve.Pr omo tee ducat i
o nal
pro grams .
● I
n ve s
ti nt her emain i
nge mp loyees:Be causemo st“ surv i
v or
s”inac orpo ratedo wn sizing
willpr obabl ybedo ingdif ferentt as ksf romwh att h eywe redo ingbe for et hec han ge,
fi
r msn eedt o dr aftn ewj obs p ecifi
cations,p e rforman ces t
an dar ds,ap pr aisal
tech niques ,an dc o
mp ensationp ackage s.Additionalt raini
ngi sn eede dt oe nsuret h at
eve ryo neh ast hep rope rs kil
lst ode alwi the xpan dedj obsan dr espons i
bil
ities.
Emp owe rke yin div
idu als
/gr oupsan de mp hasizet eambu il
ding.Identify,p rotect,an d
me n t
o rp eo plewh oh av eleade rshi
pt alent.
● De velopv alu e-adde dj obst obal an ceo utj obe li
min ation:Wh e nnoo th e
rj obsar e
cur ren t
lyav ailablewi thintheo rgan izati
ont ot ransf ere mp l
oyeest o,man ageme nt
mu stc on sidero t hers taffingalter nat i
ves.F orex amp l
e ,Har l
ey-Dav idsonwo rkedwi th

52
 MGT406STRATEGI
CMANAGEMENT

t
hecomp
an y
’suni
onst
ofindothe
rwo r
kf o
rsu
rpl
usempl
oye
esbymo
vin
gin
toHar
ley
p
lan
tsworkthath
adprev
ious
lybeendon
ebysu
ppl
ier
s.

I
NTERNATI
ONALI
SSUESI
NSTAF
FING
Becaus
eo fcul
turaldifferen
ces,man agerialsty
leandhumanr esourcepracti
cesmu st
betailor
edt ofitthepar ti
cularsitu
ationsino therc ou
ntri
es.Becauseo nl
y1 1%ofh uman
re
sou r
ceman agershavee v
erwo r
kedabr o ad,mo sthaveli
ttl
eu nderstandi
ngo fagl obal
ass
ignment’suni
quepersonalan dprof
essio
nal chall
engesandthusfailtodevel
opthetraining
necess
aryf orsuchanas si
gnme nt
.Ni n
etyp erc
e ntofc omp
an i
esse l
ecte mpl
oyeesf o
ran
i
nternati
onalassi
gnmentbas edo nth
eirtechn i
calexperti
sewhi
leignori
ngo t
herareas.Alack
ofkn owle
dgeo fn ati
onalan de t
hnicdiffe r
enc e
sc anmakeman agin
gani ntern
ational
operati
onextremel
ydiff
icult.
Toi mproveo rganiz
ationallearning,man yMNCsar ep rov
idi
ngt heirman age rswi th
i
nternat ionalassi
gnme ntslasti
ngasl ongasf iveyears.Upontheirreturntoh eadq uarte r
s,
thesee x patri
ateshav eani n-depthu nderstandingoft hecompany’so p
erationsinan other
parto ft hewo rl
d.Th ishasv aluet ot hee xtentthatt heseemp l
oyeesc ommu nicatet h
is
understan din
gt oo thersi nde cisi
on-maki ngp osi
ti
ons.Re s
earchi ndi
catest hatanMNC
performsatah i
gherl evelwheni tsCEOh asi nt
ernati
onale x
perience.
65Gl obalMNCs ,in
parti
cu lar,emp h
asizeinternati
onale xperience,haveagr eaternumbe rofs eni
orman age rs
whoh av ebe enexpatriates,andh aveas t r
on gfocusonleadershi
pde vel
opme ntt h
ro ught he
expatriate e xperien
c e. Un fo
rtunately,n ot allc o
rporati
ons ap propri
ately man age
i
nternat ionalassi
gnme nts.Wh il
eo uto ft hec ountr
y,ap e
rsonmaybeo verlookedf oran
i
mp ortan tpromotio
n( outofs i
ght,outofmi nd).Uponhisorherreturntot h
eh omec ount ry,co
-worke rsmayde precatet heou t
-o fcoun t
rye xperi
enceasawas teo fti
me .Thep e rceived
l
ac kofo rgani
zati
onals upportforinternationalassi
gnmentsincre
asest heli
keli
ho odt hatan
expatriatewi l
lretur
nh omee arly.
Fro
mtheirstu
dyof750U.S.
,Jap
ane
se,andEu
r op
eancompan
ies
,Blac
kan dGrege
rsen
fo
undthatth
ec ompani
est
h atdoagoodj
obo fmanagi
ngfo
re i
gnass
ign
me nt
sfoll
owthre
e
gene
ral
p r
acti
ces:

● Whenmaki nginternati
onalassi
gnments,the
yfocusontr ans
fer
rin
gkn owl
edgeand
dev
e l
opi
nggloballe
ade rs
hip.
● Theymakef ore
ignas si
gnmentst op e
oplewhosetech
nicalski
ll
sar ematchedor
ex
ce e
dedbyt hei
rc r
o s
s-cult
uralabil
i
ties
.
● Theyendf orei
gnas si
gnme n
tswi t
hade l
ibe
raterep
atriati
onproces
s,withcare
er
gu
idance andj obswh eret hee mploy
eesc anappl
ywh attheylearn
e dinthei
r
as
signments
.

Anot
herappr
oachtostaf
fingth
eman ageri
alpos
iti
onso
fMNCsistousepeo
plewit
han
“
int
ern
atio
nal
”orie
ntat
ion
,regardl
esso
ft he
ircou
ntryofori
gi
norh
ostco
un t
ryass
ign
me n
t.

53
 MGT406STRATEGI
CMANAGEMENT

Thi
sisawides
preadpract
iceamongEurop
e anfi
rms.Forexample
,Electr
o l
ux,aSwedi
shfi
rm,
hadaF r
enchdi
recto
rinit
sSingap
or ef
actory.Usi
ngthi
rd-count
ry“ n
ational
s”canall
owfor
moreoppor
tuni
ti
esforpromoti
onthandoesUnil
ever’
spol
icyofhiri
nglocalpeop
le,bu
titcan
als
oresul
tinmoremisu
nderst
andi
ngsandco n
fli
ctswi
ththeloc
al e
mp l
oyeesandwiththeh
ost
count
ry’
sgover
nment.
MNCswi t
hah ighlevelofintern
ation
alinter
dependenc
eamo ngactiv
iti
esneedtopro
vide
t
hei
rman agerswithsigni
ficantint
ernati
onalassi
gnmentsande x
perien
cesasp artofthei
r
t
rain
ingandde v
elopme n
t.Su c
has si
gnmentsprovi
def u
turecorpor
ateleaderswit
has eri
es
o
fv alu
ableinternat
ionalc ont
actsinaddi ti
onaltoabe t
terp ers
onalu n
derst
andi
ngo f
i
nte
rnatio
nali
ssuesandgl o
bal l
in
kagesamo ngcorpo
rateacti
vit
ies
.
Si
nceani ncr
easingn umbero fmu l
ti
natio
nalc o
rporati
o n
sar eprimari
lyorgani
zedarou
nd
busi
nessunit
san dprodu c
tlinesi
n s
teado fgeographi
car eas,pr
o ductandSBUman ager
swho
arebas ed atc orpo
r ateh eadquartersar eo ft
ent raveli
ngar oundt hewo rl
dt owo r
k
perso
nallywithc o
untryman agers.Theseman agersan do thermo bil
ewo rkersarebei
ng
cal
ledsteal
thexpatri
at esbecauset he
yar eeit
herc r
oss-borderc o
mmu ters(es
peci
all
yinth
e
EU)orth eacci
dentale xpatr
iatewh ogoesonman ybu si
nesstri
p sortempo r
aryassi
gnments
duetooffshor
ingand/o rint
ernatio
nal j
ointvent
ures.
L
EADI
NG
Impleme ntationalsoinvolvesle adin gthroughc oac h
ingpeo pl
et ouset hei
rabi l
it
iesan d
skil
lsmoste f
fe cti
ve l
yan de ff
icientlyt oac hieveorgan i
z ati
onalobjectiv
es.Wi thoutdirecti
on,
peopletendt odot hei
rwo rkac c
o rdingt ot heirperson alviewo fwhatt askss houl
dbedo ne,
how,an dinwh ato rder.Th e
ymayap p roac htheirwo rkast he
yh aveint hep astore mphas i
ze
thosetaskst h
att heymo stenjoy—r egar dlessoft h
ec o rporati
on’spriori
ti
es .Thiscancre ate
realp r
oblems,p ar ti
cularl
yi fthec omp an yiso peratingi nte
rnationall
yan dmu stadjustt o
customsan dtr aditi
o n
si notherc oun tries.Th i
sdirec t
ionmayt aket heformo fman ageme nt
l
e adershi
p,c ommu nicatedn ormso fbe h avi
orf romt hec orporatec ult
ure ,oragr eeme nts
amo ngwo rkersinau tonomouswo r
kgr oup s
.Itmaybeac compli
shedmo ref ormall
yt hr
o ugh
ac t
ionplanni
ngo rt hroughp r
ogr ams ,s uc hasMan ageme ntByObj ecti
vesan dTo talQu ali
ty
Man agemen t
.Pr o ceduresc anbec han ge dtop rovidei ncenti
vest omo tivatee mployeest o
alig
nt h
e i
rbe h
av iorwithc orporateo bje ctives.
MANAGI
NGCORPORATECUL
TURE
Becaus
eano rgani
zati
on’scul
turecane xer
tap o
werfulin
fluenc
eo nthebehavi
orof
al
lemp l
oye
es,itcans tr
onglyaf f
ectac ompany’
sabi l
it
ytos hi
ftitsstrate
gicdir
ecti
on.A
pr
oblemforas tr
ongc ul
tureisthatac h
angeinmission
,obje
ct i
ves,s
trategi
es,orpol
ic
iesi
s
no
tl i
kel
yt obes uccess
fulifitisino pposi
ti
ontot heacceptedc ul
tureoft h
ec ompany.
Cor
poratecul
tureh asas tr
ongt endencytor es
istchangebe causeitsveryr e
asonf o
r
ex
iste
nceofte
nr est
so npreserv
ingstabl
er e
lati
onshi
psandpatternsofbehavi
or.
Ther
eisn
oo nebes
tcorp
oratecult
ure
.Anopt
imalc
u l
turei
son
ethatbes
ts up
port
s
t
hemi
ssi
onandstr
ategyoft
hec o
mp an
yo fwhi
chi
tisap art
.Thi
smean
st h
atc o
rporat
e

54
 MGT406STRATEGI
CMANAGEMENT

cult
ures ho
ulds upportthes tr
ategy.Unles
ss trategyisinc ompleteagree
me ntwiththe
cult
ure,anys igni
fic
antc hangeins tr
ategys h
o ul
dbef ol
l
o wedbyamo difi
cati
ono fthe
organi
zati
on’sc u
ltur
e.Althou
ghc or
poratecult
urec anbec hanged,itmayoftentakealong
ti
me ,anditr e
q ui
resmu cheffort
.Ake yj o
bo fman age
men tinvo
lvesmanagingcorp
orate
cult
ure.I
ndo i
ngs o,manageme ntmusteval
uatewh atap art
icularchangei
nstrategymeans
tothec o
rporatec ul
ture
,as s
esswh et
herac hangeinc ul
tur
ei sneeded,an
dde ci
dewh et
her
anat t
empttoc hangethecultur
eisworththeli
kelycosts.

As
ses
sin
gSt
rat
egy
-Cu
ltu
reCo
mpat
ibi
l
ity
Whenimple
me n
tin
gan e
ws t
rategy,acomp
anyshou
ldtaketheti
met oass
essstr
ategy
-
cu
ltu
rec ompati
bil
it
y.(SeeF i
gure 6.
1.
)Cons
ide
rt hefol
lo
wingq u
esti
onsregar
dinga
co
rporat
ion’
scul
ture:
1.I
st hep ropo s
eds trategyc omp ati
blewi ththec omp any ’
sc ur re
n tcu l
ture ?Ify es,ful
l
steamah ead.Ti eo r
gan i
z ati
o nalchange sintothec omp any’sc ul
tu r
ebyi de ntif
yingh ow
thene wstrat egywillachievet hemi ssi
o nbettert h
ant h ec urrents t
rate gydo es.Ifnot
...
2.Cant hecu l
t u
rebee asil
ymo difi
edt omakei tmo recomp ati
blewi tht h
en ews tr
at egy?
I
fy es,mo vef orwardc are ful
lybyi nt
ro duci
ngas etofc ulture-c hangingac tivi
ti
e ssuch
asmi nors tructuralmo dific
at i
o ns
,trai ni
ngan dde velopme n tac ti
vi
t i
es,an d/orh iri
ng
newman age rswh oar emo r
ec ompatiblewitht hen ews t r
at egy.Th ecu ltureadap ted
tothesemo di
ficatio
nso ve rac o u
pleye arsan dprodu c
t i
vityinc r
e ased.Ifn ot...
3.I
sman ageme ntwilli
ngan dabl et omakemaj oro rganizational changesan dac cep t
probablede l
aysan dal ike l
yin creaseinc osts?Ify es,man agear ou n
dt hec ul
tureby
establi
shingan ews tructu r
alu nittoi mpleme n
tt hen ews t
r ategy.Car ef ul
lyselected
emp l
oyeesr e
c ei
vedf rom1 00t o7 50h ourso ftraining,an dawh ol
en e wc ulturewas
buil
t,piecebyp i
ece.Ifn ot.. .
4.I
sman age me ntstil
lc ommi ttedt oi mp le
me nti
ngt h es trat egy?I fy es,f i
ndaj oi
nt
venturep artnero rc ontractwi t
han otherc ompan ytoc arryo utt hestr ategy.Ifn ot
,
formulateadi fferents trategy .

55
 MGT406STRATEGI
CMANAGEMENT

F
igure6.
1
St
rat
egy
-Cult
ureComp
ati
bi
li
ty

Managi
ngDi ver
seCult
uresFoll
owi
nganAc q
uis
iti
on
The r
ear efou
rge n
eralmethodsofmanagi
ngt wodif
feren
tc ul
tur
es.(SeeFi
gure6.2.
)
Thechoi
ceo fwhic
hme th
odtou sesh
o ul
dbebasedo n(1)howmuchmember softheacqui
red
fi
rmvaluepr es
ervi
ngthei
ro wncul
tureand(2)h o
wat tract
ivetheyper
ceivethecul
tur
eo f
th
eac q
uirertobe.

1.I
nte grat i
o ni nvo l
vesa r elatively balan ced giv e-an d-take o fc ul
turalan d
man age rialp racticesbetwe ent heme r
g erp artner s,an dn os t
ro n
gi mpositi
ono f
cul
t uralc han geo ne i
therc omp any.Itme rgest het woc ul
tu r
esi nsuchawayt h
at
thes epar atec ulturesofbo thf i
rmsar ep reservedi nt here sul
tin
gc ult
u re.
2.Assimilationi nvo l
vest hedo minati
o no fo neo rgan i
zat i
ono vert heo ther.The
domi nationisn otf orced,buti tiswe l
come dbyme mbe rso ftheac quiredfirm,who
mayf eelf orman yr easonst hatt hei
rc ult
u r
ean dman age ri
alp racti
cesh aven ot
produ ceds ucc ess.Theac quiredf i
rms urrende rsitsc ulturean dado pt
st hecultur
e
ofth eac q u
iringc ompan y
.
3.Separ ationisc haracteri
zedbyas eparat i
ono ft het woc omp anies’cultur
es.They
ares truc turall
ys eparated,wi thoutcult
u ralexc h
an ge .
4.Decu l
t urationi n
v ol
vest hedisintegrati
ono fonec omp any’sc ul
turer esul
tingfrom
unwan te dan de xtremep ressu refromt heo th
e rtoi mp oseitscu l
turean dpractic
es.
Thisist hemo stc ommo nandmo stde s
tructiveme tho do fde al
ingwi t
htwodi fferent
cul
t ures.I tiso ftenac comp aniedbymu chc onfusion,c on f
li
ct,r esentment,and
stress.Th isisap rimaryr easonwh ysoman ye xecutivest endt oleaveaf terthei
r
fi
rmi sac quired.Su chame rgert ypicall
yr esul
tsi np oorp erforman cebyt he
acqu i
re dc omp anyan ditseve ntualdives
t ment.

56
 MGT406STRATEGI
CMANAGEMENT

F
igure6.
2
Me
tho
dso
fMan
agi
ngtheCul
tur
eofanAc
qui
redF
irm
ACTIONPL ANNING
Activ
iti
escanbedi rectedt oward acco
mpli
shi
ngs tr
ate
gicgo al
st hr
oughac t
ion
pl
an ni
ng.Atami ni
mum,anac t
ionplanstat
eswh atacti
onsaregoi
ngtobet aken,bywhom,
duri
ngwh attimeframe,an
dwi t
hwh atexpecte
dr es
ult
s.Afte
rap ro
gramh asbeensel
ected
toimplementap ar
tic
ulars
trategy
,anac ti
onplanshou
ldbedevel
opedtoputthep r
ogr
ami n
pl
ac e.

Taket heexampl
eo fac omp anyc h
oosi
ngforwardvert
icalin
tegrat
ionthro
ught h
e
acqu
isi
ti
onofar et
ail
ingchai
nasi tsgrowths t
rate
gy.Oncei
town sit
so wnret
ailout
let
s,it
mustint
egrateth
es tore
si n
tot h
ec o
mp any.Oneofthemanyp rogramsitwouldhaveto
dev
elopisanewadv er
tis
ingprogramf orthes t
ores
.Theres
ulti
ngac ti
onpl
ant odevel
opa
ne
wadv ert
isi
ngpr
ograms houl
dincl
udemu chofthefol
lo
wingi
nfor
mat i
on:

1.Sp ecificac tionstobet ake ntomaket hep rogramo perati

onal:Oneac tionmi ghtbet o
cont actt hre er eputableadv ertis
ingage n ci
e san daskt hemt op re
par eap roposalf or
an e wr adi oan dn ews paperadc amp aignbas edo nthet heme“ JonesSu rplusisn owa
par to fAj axCo ntinental.Pricesar elowe r.Selectionisbe t
ter.
”
2.Dat est obe gi
nan de nde achac ti
on :Timewo u l
dh avet obeallottedn oto nlytos el
e ct
an dc on t
ac tt hreeage ncies,butt oal l
owt h ems uffici
entt i
met op repar eade tail
ed
prop osal.F ore xamp le,allowo newe ekt os el
e ctan dc ont
actt heage nciesp lu
st hree
mo nth sfort h
e mt op reparede tail
edp r
op osalstop resenttoth ecomp any’smar ke ti
ng
direc tor.Alsoal l
ows omet i
met odec i
dewh i
chp roposaltoac cept.
3.Pe rson( iden ti
fiedbyn amean dtitl
e )res ponsi
blef orc arryi
ngo ute ac hac ti
on:L ist
some o ne—s uc hasJanL ewis,adve rti
singman ager—wh ocanbep utinc har geo ft h
e
progr am.
4.Pe rsonr espon si
blef ormo nit
oringt het ime l
inessan de ffecti
venesso fe achac tion:
I
n dicat et hatJanL ewisi sr esponsi
blef ore nsuri
ngt hatt hep roposalsar eo fgo od
qualityan dar ep ri
c edwi thinthep lannedp rogram bu dget.Sh ewillbet hep ri
mar y
comp anyc ontactf ort headage nciesan dwi llreporto nthep rogresso fth eprogr am
onceawe e kt othec omp any’smar ke ti
ngdi rector.
5.Ex pec tedf i
nan ci
alan dp hysi
calc onsequen ceso fe ac hac ti
on:Es timat ewh ena
comp l
e tedadc amp aignwi l
lber eadyt os howt opman ageme n
tan dh o
wl on gitwilltake
afte rap p rovalt obe gint oairt heads .Es ti
mat eal sothee xpectedin creaseins to r
e
saleso v erth es i
x-mo nthp eriodafte rtheadsar ef i
rstaired.Indi
catewh ether“re call
”

57
 MGT406STRATEGI
CMANAGEMENT

measureswil
lbeusedtohelpasses
stheadc ampaign’
se f
fect
ive
nesspl
ushow,whe
n,
andbywh omtherec
alldat
awillbecol
le
ctedandan al
y z
ed.
6.Cont
ingenc
yp l
ans:I
ndi
catehowlongitwil
ltaketoge tanaccept
ableadcampai
gnto
sh
owt opmanagementi
fn o
neo fth
eini
ti
alpropos
alsisaccept
able.

Actionplansareimport
an tf
orsever
alreason
s.Fir
st,acti
onp l
anss er
veasal in
kbe tween
str
ate gyf o
r mulat
ionande val
uati
onan dcontr
ol.Second,theac tio
np lans p
ecifi
eswh at
needst obedo nedif
ferent
lyfromthewayoperati
onsarec u
rrentl
yc arri
edo ut
.Third,dur
ing
thee valuat
ionan dc ont
rolp r
oces
st hatcomesl at
er,anac ti
onp lanh el
psi nbo ththe
appraisalofp erfor
mancean dintheident
ifi
cati
ono fanyr emedialaction
s,asn e e
ded.In
addit
ion,t h
ee xpl
ici
tassi
gnme ntofrespo
nsibi
l
iti
esf orimpl
e mentingan dmo ni
toringthe
programsmayc ontri
but
et obett
ermoti
vati
on.

MANAGEMENTBYOBJECTIVES
ManagementByObj ect
ives(MBO)i sa te c
hniquethate n
cour
agesp art
icip
ative
deci
si
onmakingthr
oughsharedgoals ett
ingatallorgani
zat
ionall
eve
lsandp er
formanc e
ass
essmentbasedont he achi
evemen tofstate
do bje
cti
ves.MBO li
nkso r
ganizati
onal
obj
ecti
vesandthebe h
avi
oro findiv
iduals
.Becauseitisas y
stemthatl
inksp l
answi th
per
formance
,iti
sapowerf
ul i
mple
me ntati
ontec
hni
que.

TheMBOp roces
sinvol
ves:
1.Establi
shi
ngandc ommu ni
cati
ngo r
gan i
zati
onalobjecti
ves
.
2.Se ttin
gi ndiv
idualo bjecti
ves( t
hrough superior
-subordi
nateint
erac
tio
n )that he
lp
i
mp l
eme ntorgani
zation
al o
nes.
3.Dev el
opi
nganac ti
onp l
ano facti
vi
tiesneededtoac hi
evetheobj
ect
ive
s.
4.Per i
odi
call
y(atleastquarterly
)reviewin
gp er
fo r
man ceasitre
lat
estotheobje
cti
vesand
i
n cl
udingtheresul
tsintheann u
alperformanceapp r
aisal
.

Oneofther ealbenef
itsofMBOi sthatitcanr educetheamo untofinter
nalpoli
ti
cs
o
perati
ngwithi
nal argecorporatio
n.Po l
it
icalacti
onswi thi
naf ir
mc anc auseconfl
ic
tan d
c
reatedivi
si
onsbe tweenthev eryp eopl
ean dgr oupswh os ho
uldbewo r
kingtogetherto
i
mpl
eme ntst
rategy.Peop
learele s
slikel
ytoj ocke
yf orp o
siti
onifthecompany’smis
sio
nan d
o
bjecti
vesareclearandtheyknowt hatther e
wards yst
e misbasedn o
to ngamep l
ayi
ng,but
o
nac h
ievi
ngcle
ar l
ycommu n
icated,me as
urableobjec
tives.

TOTALQUALITYMANAGEMENT
TotalQual
it
yMan ageme n
t( TQM)i sanoperati
onalph
il
osophycommit
tedtoc ustomer
sat
isf
acti
onan dco n
tinuousimprov ement.TQM iscommittedtoq ual
i
ty/ex
cell
encean dt o
bei
ngthebestinallfun
ct i
ons.Becau s
eTQMai mstor educecos
tsandimprovequali
ty,itcan
beusedasap r
ogramt oimplementano v
erall
low-cos
to radi
ffere
ntiat
ionbusi
nessstrategy
.

TQMh
asf
ouro
bje
cti
ves
:

58
 MGT406STRATEGI
CMANAGEMENT

1.Be
t t
e r,le
ssvar i
ablequal
ityofthepr
oductandservi
c e
2.Quicker,les
sv ari
ableresponsei
nproce
ssestocustomernee
ds
3.Great erfl
exibi
li
tyinadjusti
ngtocus
tomers’
shif
tingrequ
ire
me n
t s
4.Lowe rcostthroughquali
tyimpro
vementandeli
minati
onofnon-val
ue-addi
ngwo
rk

AccordingtoTQM,f au l
typr
ocesses,n
otpoorlymotivatedemp l
oyees,ar
et hecau seof
defectsi
nq uali
ty.Thep r
ogr aminvol
vesas i
gni
fic
antc hangei ncorpor
atec ul
ture,requiri
ng
st
r o
ngl eadershipfromt opman agement,employeetraini
n g,empowermen toflowe r-lev
el
employee
s( gi
v i
ngpe o
plemo recontr
oloverthei
rwo rk)
,an dt eamworkinordertos ucceedin
ac ompany.TQM e mphasi
zesp reven
tio
n ,notcorrect
ion.Inspecti
onf orqual
itys ti
l
lt akes
pl
ace,butt hee mphasi
sisoni mpro
vingtheproces
st opreven terror
san ddefi
cie
nc i
es.Th us
,
qual
ityci
r cl
eso rquali
tyi
mp rovementteamsaref or
me dtoi denti
fyprobl
emsan dt osuggest
howtoimp rovetheprocess
e sthatmaybec ausi
ngtheproblems .

TQM’ se ssenti
al ingredientsar e:
● Anin tensefoc uso nc ustome rsatisfaction:Ev eryon e(notj u
stp eopleint h
es alesand
mar ketin
gde part me nt
s)u nderstandst hatt h ei
rj obse xistonlybe causeo fcustome r
needs .Thusal ljo bsmu s tbeap pr o
ac hedi nt ermso fho wt heywi l
laf f
e ctcustome r
sati
s facti
on.
● I
n t
er nalaswe l
lase xt
er nalcustome rs:Ane mp loye eint hesh i
ppi
n gde partmentmay
bet h einternalc ustome ro fan othere mp l
oyeewh oc omp l
etest heas semblyo fa
produ ct
,j u
stasap ersonwh obu yst hep roducti sac us
to mero fthee ntir
ec omp any.
Ane mployeemu stbej u stasc on c
e rnedwi t hp l
e asin
gt heinternalc ustomerasi n
sati
s fyi
ngt hee xte r
n alcustomer.
● Accu rateme as ure me n
to fe v
eryc ri
ticalv ariablei nac o
mp any’so peratio
ns:Th is
mean st hate mp l
o yeesh avet obet rai
n edinwh att ome asure,howt ome asure,and
howt ointerpre tth edat a.Ar ul
eo fTQMi st haty ouo nl
yimp rovewh aty oume asure.
● Continuousimp rov eme nto fproduc t
san ds ervi
ce s:Ev er
y oner e
ali
z esthato perations
needt obec on ti
nu ouslymo nit
oredt of i
ndway st oimp rovep roduct
san dservices
.
● New wo rkr elationsh i
psbas edo nt rustan dt eamwo rk:Imp ortanti st heideao f
emp owerme nt—gi v i
nge mp loyeeswi del atitudei nh owt heygoabo u
tac hi
evi
ngt h
e
comp any’sgo als.Re sear chindi
cat est hatt heke yst oTQM s ucc
e sslieine xecutiv
e
commi tme n
t,ano p enorgan i
zatio
n alculture,an de mp loy
e eemp owerme nt.

I
NTERNATI
ONALCONSIDERATIONSINL EADING
I
nmeasuri
ngthedif
ferencesamongt hes
edimens
ion
so fnat
ion
alc
u l
turef
romcoun
t r
y
t
ocount
ry,hewasabletoexplai
nwhyac e
r t
ainmanagementpr
acti
cemightbesuc
ces
sfuli
n
o
nenati
onbutfai
linano
ther:

1
.Po werdi
stance(PD)i
st h
ee xt
enttowhi
chasocie
tyacceptsanunequaldi
str
ibu
tiono
f
po
we rinorgani
zati
ons.Malaysi
aandMe xi
coscoredhigh
e s
t,whereasGermanyand
Aust
riasc
o r
edlowest.Peop
leinthos
ecoun
trie
ss co
rin
gh i
gho nt
hisdimens
ionten
dto

59
 MGT406STRATEGI
CMANAGEMENT

p
ref
erau
toc
rat
ict
omo
rep
art
ici
pat
iveman
age
rs.

2.Un cer taint yav o idan ce( UA)i st hee xt

e ntt owh i
chas oci
e t
yf e elst hreat enedby
unc ertai nan dambi gu ouss ituati
o ns.Gr e ecean dJap ans co r
e dh ighe s
to ndi s
liki
n g
ambi gu ity,wh ere ast heUn itedSt ate san dSi ngap ores coredl owes t.Pe oplei nth ose
nat i
o nss co ringh igho nt hi
sdi men si
ont endt owan tc areers tabil
it
y ,fo rmalr ules,an d
clear -c utme asu re so fp erforman ce.
3.I
n dividu ali
s m-c olle cti
vism( I-C)i st hee xte ntt owh i
chas o
c i
etyv aluesi ndividual
free do m an din de pe nden ceo fac tionc o mp ar edwi that ights ocialf rame wo rkan d
l
o yaltyt ot hegr o up.Th eUn itedSt at e
san dCan adas coredh ighesto nindiv idualis
m,
wh ere asMe xicoan dGu at emalas coredl owe st.Pe o pl
ei nn ationss coringh i
gho n
i
n dividual i
s mt e ndt ov aluei ndi
v i
duals ucc esst hrou ghc omp eti
ti
o n,wh ereasp eople
scor i
n gl owo ni n dividualism( thush igho nc oll
ectivi
s m)t endt ov aluegr oups ucc ess
thro ughc oll
e cti
v ec o operat i
o n.
4.Mas culinity-femi n ini
t y(M-F )isth ee xten tt owh ichs ociet
yi sorient edt owar dmo n
e y
an dt hings( whichHo f stedel abelsmas cul
in e)o rto war dpeo p
le( whichHo fste delabe ls
femi nine ).Jap anan dMe xi
c os core dh ighe sto nmas cul
ini
ty,wh ere asF r an cean d
Swe de ns cor e
dl owe st( th ush i
ghesto nf emi nini
ty).Pe opleinn ation ss coringh i
gho n
mas c uli
n i
tyt en dt ov aluec l
earlyde fi
ne ds exr o l
eswh ereme ndo mi n
at e ,an dt o
emp hasizep erfo rman cean di ndepe ndence ,wh er
e asp e op
les cori
ngl owo nmas culi
nity
(an dt hu sh i
gho nf emi nini
ty)t endt ov al
u ee qu al
ityo ft hesexeswh er ep owe riss har ed,
an dt oe mp hasi
z et heq ualit
yo fli
f ean dint erde pende nce.
5.Lon g-t ermo rien tat i
o n(L T)ist hee xtentt owh ichs oc i
etyiso ri
ente dt owar dt hel o
n g
vers ust h es hort-t er m.Ho ngKo ngan dJap ans coredh ighestonl on
g -te rmo r ientat i
on,
wh ere asPaki st ans co redt h elowe st.Al on g-termt imeo rientatione mph as i
zest h e
i
mp ortan c eo fh ar dwo rk,e ducat i
on ,an dp ersi
ste nceaswe l
last hei mp or tanc eo f
thrift.Nat i
onswi thal ong-t ermt i
meo rien tationt endt ovalues trat egicplan n i
ngan d
othe rman ageme n tte chniqueswithal ong-t er mp aybac k.

Ref
erence
:
Wheel
enTh o
masL .
,Hunge
rDavi
dJ.(2012)
,Strat
egi
cMan
age
men
tan
dBu
sin
essPo
li
cy.1
3th
Edi
ti
on.Pears
on,Geo
rgeWashi
ngt
onUniv
e r
sit
y

60
 MGT406STRATEGI
CMANAGEMENT

MODUL
ETESTGUI
DE

GENERALDI
RECTI
ONS
Afte
rt h
ediscus
sionofthetop i
csinmo dul
ef orMo dul
e6,t histestwil
las se
ssy ou
r
l
earningabouttheprevi
ousl
esson.Accompli
shallther eq
uire
me ntsan dconso
lidateallyou
r
answersinasin
gle(1
)worddocume n
to nl
yusi
ngt hi
sf or
mat{Ar i
al,12,Justi
fi
ed,All1Mar gi
n,
Si
ngleSpacing}.Pleas
ep ro
videac opyo ftheque s
tioninyourwo rki
n gdocume n
tt oavoi
d
confus
ionandformatto“BOLD”yourf i
nalanswers.Kin
dlyupl
oady ourwo rkwithaf i
lename
(L
as tName ,Fi
rstName,Secti
on,Mo dul
e6Te st
s)i nourGoogleClassroom.Go odluckand
Godble
ss!

DI
SCUSSI ONQUESTI ONS
1.What ski
ll
ss houldap erso
nh avef or managi
ng a bu si
nessu n
itf ol
l
owinga
di
ffer
enti
atio
ns trategy?Wh y
?Wh ats h
ouldac ompanydoi fn ooneisav ai
labl
e
i
ntern
all
yandt hecomp anyhasap o l
i
c yofpromo
t i
onfromwithi
n?
2.Whenshoul
ds omeonefr o
mo utsi
deac ompanybeh i
redtoman agethecompanyoro n
e
ofi
tsbusi
nessunits
?
3.Whatares o
meway stoimp l
ementar etrenc
hmentstrate
gywi th
outcreat
ingaloto f
res
entmentandc onf
li
ctwi t
hlaboru nion
s?
4.Howcancorporateculturebechan ged?
5.Whyisanunderstandin
go fnati
onal cult
uresimp
o rt
antinstr
at e
gicmanagement?

61
 MGT406STRATEGI
CMANAGEMENT

Modul
e7
STRATEGYEVALUATIONANDCONTROL
We e
k1 1
I
ntr
oductio
n
Thee val
uat
ionandcont
rolpro
cessensur
esthatacompanyisach
ievin
gwhatitseto
ut
t
oac c
o mpli
sh.Itcomparesperfo
rmancewithde s
iredres
ult
san dprovidesth
ef ee
dback
n
ecess
ar yformanagementtoeval
uater
e s
ult
san dtakec
orrect
iveact
ion,asne
eded.

L
ear
nin
gObj
ect
ive
s:
Underst
andthebas iccontr
olprocess
Ch
o o
seamo ngtr adi
tion
alme asures
,s u
chasROI ,ands hareh
o l
derv al
ue
me
asures,suc
hase co n
omicvalueadded,toprope
r l
yassessperfo
rman ce
Us
et hebalanceds cor
ecardapproachtodevelopkeyperfor
man ceme as
u r
es
Appl
yt h
ebe nch
mar kingproces
st oafuncti
onoranac ti
vi
ty
Underst
andtheimp actofproblemswithmeasurin
gp e
rformance
Devel
opap pr
opriatecontrols
ystemstosupportspeci
fi
cstrategi
es

WHATI SEVAL UATIONANDCONTROLPROCESS?

Evaluati
onan dcontrol
informati
onc o n
sistsofperf
o rmancedat aan dac t
ivi
tyreport
s.
I
fu nde s
iredp erformancer esu l
tsbec auset hes t
rategic manage me n
tp ro
cesse
swe re
i
nappropr i
atel
yu sed,oper
ationalmanage rsmu stknowabo utitsoth att h
e ycancorrectthe
employeeac t
ivi
ty.Topman ageme ntne
edn o tbein v
olve
d.If,however,u n
de si
redperfo
rman ce
resu
ltsfromt hep r
o ces
sesthems el
ves
,to pman age r
s,aswe l
lasop erationalmanagers,must
know abo utits ot hatt h
eyc ande v
e l
opn ewi mplementati
onp ro gramso rp rocedur
es.
Eval
uationan dcont r
olinf
ormat i
onmu stber el
evanttowh atisbe i
ngmo nito
red.Oneo fthe
obst
ac l
est oe ffectivecontrolist hedi ffi
cultyinde velop
ingap p ropri
ateme asureso f
i
mp or
tan tacti
vit
iesan doutpu
ts.

F
igu
re7
.1

62
 MGT406STRATEGI
CMANAGEMENT

Ev
alu
ati
onan
dCo
ntr
olPr
oce
ss
Anappli
cat
iono fthecon t
r o
lp r
ocesstostrategicman agementisdepi
ctedi
nF i
gur
e
7.
2.I tprov
idesstrategicman agerswi thas er
ieso fq u
esti
onst ou seineval
uati
ngan
i
mp l
eme n
teds t
rategy.Su chas tr
ategyr evi
ewisu su al
lyinit
iatedwh enagapap pears
betweenac ompany’sfinanci
alo bjec
tivesandthee xp ecte
dr esult
so fcurr
entacti
vi
ti
es.
Aft
e ransweri
ngthep r
o p
o s
edse tofq ues
tio
n s
,aman age rshoul
dh aveagoodideaofwher
e
th
ep robl
emo r
igi
natedan dwhatmu stbedo netoc
or r
ec tthesit
uation.

Fi
gur
e7.
2
Ev
alu
ati
nganI
mpl
eme
nte
dSt
rat
egy

63
 MGT406STRATEGI
CMANAGEMENT

MeasuringPerformance
Performanceisthee ndresul
tofac t
ivi
ty.Sel
ectme as u
rest oassessperf
ormance
basedo ntheo rgani
zati
onalunittobeap pr
aisedandt heo bjecti
vestobeac hi
eved.The
obj
ectivesthatwe reestabl
ish
ede ar
li
erinthes t
rategyformu l
ationpartofthes t
rategi
c
manageme ntp r
ocess(deali
ngwithprof
itabi
l
ity
,mar ketshar e
,an dc o
str e
ducti
on,among
oth
ers)shouldcertai
nl
ybeu sedtomeasurecorpo
ratep e
rforman ceoncethestr
ategi
eshave
beenimplemented.

APPROPRI
ATEMEASURES
Someme asures,suchasr e
turno nin
v e
stme nt(ROI
)an de arni
ngsp ershar e(EPS),ar e
appropri
atef orevaluati
ngac o r
poration’
so radi vis
ion
’sabili
t ytoac hi
e veap rofi
tabili
ty
object
ive.Thi
st ypeofme asure,however,isinadequatefore v
al uati
ngaddi ti
onalco r
p orate
object
ivessuchass oci
alresponsi
bil
it
yo remp l
o ye
ede vel
o p
me nt.Event ho
u ghp rof
itabil
ityis
ac o
rporation
’smaj o
ro bje
c t
ive
,ROIan dEPSc anbec omputedo nl
yaf terpr o
fitsaret otaled
forap eri
od.I
tt e
ll
swh athappenedafte rthefact—n otwhatishap peni
ngo rwh atwillhappen.
Af i
rm,t heref
ore,n eedstode vel
opme as
u r
est hatp redi
ctlikelyp ro
fitabil
ity.Thes ear e
refer
r e
dt oass teeri
n gcontr
o l
sbe causet heyme asurev ari
abl e
st hati nflu
e n
cef uture
profi
tabil
it
y.
TYPESOFCONTROL
S
Contro
lsc anbee stabl
i
shedt ofocuso nactualperfo
rmancer es
u l
ts( o
utput),the
act
ivi
ti
est h
atge n
e r
at ethep erformance(behav
ior
) ,oronr eso
urcest hatar eu s
e din
per
formance(inp
u t)
.Ou tputcontr
o l
sspeci
fywhatistobeac compl
ishedbyf ocus
ingont he
endresul
to fthebe havi
orsthrought h
eu seo fobject
ive
san dp erf
orman cetarget sor
mil
est
ones.Behaviorco nt
rolsspeci
fyh o
ws omethi
ngi stobedo nethroughp ol
ici
es,rule
s,
st
andardo per
atingp r o
cedures,an dordersfrom as uperi
or.Inpu
tc ontrol
se mp hasi
ze
res
ource
s,suchaskn owledge,s
kil
ls,abi
li
ti
es,val
ues
,an dmoti
vesofemploy
e e
s .
Output
,behav i
or,an dinputc ontrol
saren otint
erchan geable.Outputc o
n t
rols(s
uc has
salesq uotas,specifi
cc ost-reductiono rp rofi
to bjectives,an ds u r
ve yso fc ustomer
satisfac t
ion)aremo stap p ropri
at ewh e
ns peci
fi
co utputme asu reshavebe enagr eedonbu t
thec au se–effec
tc onnec tionbet weenac ti
vit
iesan dresultsisn otc l
ear.Be havi
orc ontrol
s
(suc hasf oll
owi
ngc omp an ypro cedures,makings alesc al
lst op otenti
alc u s
tomers,an d
gett i
ngt owo rkont i
me )ar emo stappropri
at ewh enp erfo r
man cer esul
tsar eh ardt o
me asur e,butt hec ause–e ffectc onnecti
onbe tweenac tivi
t i
esan dr esultsisc l
ear.Inp u
t
cont rol
s( suchasn umbe ro fy e
ar so feducati
onan de x
perien ce)aremo stap propri
atewh en
outp uti sdiffi
cul
tt ome asurean dtherei snoc learc aus e–effectrelatio
n s
hipbe tween
beh avioran dperforman ce( suchasi nc o
lle
get eachi
ng).Co r
p orati
onsfo l
lowingthestrategy
ofc o
n glomeratediversi
f i
c ati
ont endt oe mphasiz
eo utputc on t
rolswitht hei
rdi v
isi
onsan d
subs i
diaries(presu
mabl ybe causet heyareman agedindepe nde nt
lyofe acho ther
),wher eas,

64
 MGT406STRATEGI
CMANAGEMENT

cor
p orat
ionsfol
lowingconcentricdi
versi
fi
cati
onu seallt
hreetypesofc on
trols(pr
esumably
becausesynergyisde s
ired).Ev eni
fallthr
eet y
p e
so fcontr
olareu s
ed,oneo rtwooft he
m
maybee mphasi
zedmo ret hanan oth
erde pendi
ngo nt hecircumstances
.F ore x
amp l
e,
Murali
dharanan dHami lt
o np r
oposethatasamu lti
nati
onalcor
porationmove sth
roughits
st
age sofde v
e l
opme nt
,itse mphasi
so ncontr
olshouldshi
ftfrombe i
ngp ri
mar i
lyoutpu
tat
fi
rst,tobehavi
oral,andfinal
lytoinputcon
trol
.
ACTI
VITY-BASEDCOSTI
NG
Acti
vi
ty-basedc os
ting(ABC)isare c
entlyde vel
o pedac c
ou nt
ingme thodfo rall
ocati
ng
i
ndi
rectan df i
xedc oststoindiv
idualproductsorp roductlinesbas edont h ev al
ue-added
act
ivi
tiesgoi
ngintothatp r
oduct.Thisaccount
ingme t h
o disthusv e
ryu se
fu l
indo ingav al
ue-
ch
ainan alys
iso faf i
rm’sac ti
viti
esformaki n
go u
t s
our c
ingde cis
ions.Tr aditi
onalcost
accou
nt i
ng,inco n
trast,focusesonv al
uingac omp any’sinventoryforf inancialreporti
ng
pur
pose s
.Too btai
nau ni
t’
sc ost
,costacc o
untantst ypicall
yadddi rectlabo rtot hecostof
materi
als.Thentheyc omputeoverheadfromr entt oR&De xpenses,basedo nt hen umberof
di
rectlaborhoursittakestomakeap ro
du ct
.Too btainu nitcost,the
ydividet het o
talbythe
nu
mbe ro fi
temsmadedu r
ingthep e
riodunderconsiderat i
on.
ENTERPRI
SERI
SKMANAGEMENT
Enterp
r i
seRi sk Man age ment( ERM)i sa c or
poratewi
de,integratedpr o
cessf or
managingtheu nce r
tainti
est h
atc oul
dn egati
velyorp osi
ti
vel
yinflue
ncet heachi
eveme n
to f
th
ec orporati
on ’
so bje
c ti
ves.Int hepas t
,man agingriskwasdo neinaf ragmentedman ner
wi
t h
inf u
n c
tio
n so rbus i
nessunits.Indi
v i
dualswo ul
dman agep roc
essrisk,safet
yr is
k,and
i
nsurance,financial
,an do theras sortedr i
sks.Asar esul
to fthi
sf r
agme nte
dap p
roach,
companieswo uldt akeh uger i
sksi ns omear easo ft h
ebu sin
esswh il
eo ver-managin
g
subst
an t
ial
lys mall
err is
ksino th e
rar eas.ERM isbe in
gado ptedbecauseo fth
ei ncr
easin
g
amounto fenvi
r o
nme ntaluncertaintythatcanaf fectanenti
recorporat
ion.
Th
epr
oce
sso
frat
ingr
isksi
nvo
lve
sth
rees
tep
s:
1.I
dent
ifyther
isksu
sin
gsc
enar
ioan
aly
siso
rbr
ain
sto
rmi
ngo
rbyp
erf
ormi
ngr
isks
elf
ass
ess
me n
ts.
2.Ran
kth
eri
sks
,us
ings
omes
cal
eofi
mpac
tan
dli
kel
i
hoo
d.
3.Me
asu
ret
her
isks
,us
ings
omeagr
eed-u
pons
tan
dar
d.
PRI
MARYMEASURESOFCORPORATEPERF
ORMANCE
Theday swhens implef
inanci
almeasure
ss u
chasROIo rEPSwe reusedalonet oass e
s s
overal
lcorporateperfo rmanc
ear ecomin
gtoane nd.Anal
y s
tsnowr ecommendabr oadr ange
ofme thodstoe val
uat et hesucces
so rfai
lur
eo fas trategy.Someo ft h
e s
eme thodsar e
stakehol
derme asures,shareh
o l
derval
ue,andthebalancedscorecardapproach.Event hough
eac hoftheseme thodsh assu p
porter
saswe llasde t
ractors
,t h
ec u
rrenttrendi sc learly
toward mo r
ec ompli
c atedfinanci
alme as
uresan d an increasin
gu s
eo fn on-financial
me asu
resofc orpor
atep er
formance.

65
 MGT406STRATEGI
CMANAGEMENT

Tr
adi
ti
onal
Fin
anc
ial
Meas
ure
s
Themostcommo n
lyusedme as
ureo fcorpor
ateperfo
rmance(inter
mso fpro
fits
)is
Retur
nOnI nve
stment(ROI)
.Iti
ssimpl
yt heresul
tofdiv
idi
ngnetinc
omebe f
oretaxe
sbyt he
tot
alamou n
tinve
stedinthecompany(ty
p i
cal
lymeasur
edbyt ot
alasse
ts)
.Alth
oughusi
ngROI
hassever
aladvantage
s,ital
sohasseveraldi
sti
nctl
imi
tati
ons.
EarningsPe rSh are( EPS),wh ichi nvolvesdi vidi
ngn ete ar ni
ngsbyt heamo un to f
commo ns tock,alsoh ass everal defi
cienciesasane v al
u ati
o no fp as tandf ut
urep e rforman ce.
Fi
rst,be cause al ter n
at ive ac countingp ri
ncipl
e sar e av ailable ,EPS c an h av es ev eral
di
ffere ntbu te qu ally ac cep t
ablev alues,de pe ndingo nt hep ri
ncipl
es electe df o ri ts
comput ati
o n.Sec ond,be causeEPSi sbas e do nac cr u
ali ncome ,th ec o
n ve
rsiono fin comet o
cashc anben eart er mo rde laye d.Ther e
fo re,EPSdo esn otco nside rthet i
mev alueo fmo ney.
ReturnOnEq u i
ty( ROE) ,wh i
chi nv o
lvesdividingn e
ti ncomebyt o tale qui
ty,als
oh asl i
mi t
at i
on s
becaus eitisal sode ri
ve df romac counting-bas eddat a.I naddi ti
o n,EPSan dROEar eo f
te n
unrel
at edt oac o mp any ’
ss tockp r
ice.Op eratingcas hf lo
wi st heamo untofmo neyge nerated
byac omp an ybe foret hec osto ff i
nan ci
n gan dt ax es,isabr oadme asureo fac omp any’s
funds.Th i
si st h
ec omp an y’sn etincomep lusde prec i
at i
on,de pletion,amo rt
ization,inte rest
expense ,andi ncomet axe xpe nse.Somet ake overs pec i
ali
stsl oo katamu chn arr owerf re e
cashf l
o w:th eamo unto fmo neyan ewo wne rcant akeo u to ft hef irmwi th
ou th armingt h e
busin
e ss.Th isisn eti n comep l
usde preciati
on,de pleti
on ,an damo rtiz
ationl essc apital
expendituresan ddi vide nds.Th ef reec ashf l
owr atioi sver yu sef ulinevaluati
ngt h estabi l
i
t y
ofane n tr
e preneur i
al ven t
ure .Althoughc ashf l
owmaybeh ar de rtoman ipu
latet hane arn i
ngs,
then umbe rc anbei n c
r easedbys el
li
ngac countsr ece i
vable ,c l
as sify
ingo ut
stan dingc hecks
asac co unt
sp ayable ,tradings ecuri
ties,an dc apitali
z i
ngc e rtaine xpenses
,su chasdi rect-
responseadv ert
ising.
St
ake
hol
derMe
asu
res
Eachst
ake hol
derhasi
tso wns e
to fcri
ter
iatodete
rminehowwe l
lthecorp
orati
onis
per
formi
ng.Thesecrite
riaty
picall
yde alwi
ththedire
ctandindir
ectimpactsofcor
porat
e
act
ivi
ti
eso ns takehol
derinte
r est
s.To p managements h
oulde s
tabli
sho neo r mor
e
st
akehol
derme asuresf o
re achs takehol
derc at
egorysot hatitc an kee
pt racko f
st
akehol
derco
nc ern
s.
Sh
are
hol
derVal
ue
Becauseo fthebe li
eft hataccount
ing-basednumbe r
ss u
c hasROI,ROE,andEPSar e
notr el
iabl
ei ndi
cat or
so fac orpo
rati
o n
’se cono
micv alue
,man ycorporati
onsar eu si
n g
sh
ar ehol
dervalueasabe tterme asur
eo fcorporat
ep erf
ormancean dstrat
e gi
cman ageme nt
effect
iveness.Shareholderv aluecanbede fi
nedast hep res
en tvalu
eo ft hean t
icip
ate d
futu
res treamo fc ashf l
owsf romt hebusi
nessp l
usthev al
ueo fthecomp anyifli
quidated.
Argui
ngt hatthep urposeo fac ompanyistoincreasesharehol
derwe al
th,shareho
lderv alue
analy
sisc oncent
rat e
so ncas hflo
wast heke yme asureofp erfor
man ce
.Th ev alu
eo fa
corpor
at i
onist h
ust hev al
ueo fitscashflowsdiscoun
tedbac ktot h
eirpresentvalue,usi
n g
th
ebu siness’
sc ostofc apitalasthediscountrate.Aslongast her et
urnsf r
omabu siness

66
 MGT406STRATEGI
CMANAGEMENT

e
xceedit
scosto
fcap
ital
,th
ebu
sin
esswi
l
lcr
eat
eval
uean
dbewo
rthmo
ret
hant
hec
api
tal
i
nve
stedi
nit
.
Econo
micValueAdded( EVA)h asbe c
omeane x
tre
me l
yp opu
larshare
holde
rv al
ue
methodofme as
uri
ngc orp
oratean ddi vi
si
onalperf
ormancean dmaybeo nitswayt o
repl
aci
ngROIasthestan
dardp erfor
man cemeasu
re.EVAme asu
resthedif
feren
cebe t
ween
th
ep rest
rat
egyandp os
t-str
ate gyv aluesforthebusi
nes
s.Simplyput
,EVAi safter-t
ax
oper
atin
ginco
meminusthetot
al annual c
ostofcapi
tal
.Theformul
atome as
ureEVAis:
Ec
ono
micv
alu
eadde
d(EVA)
=af
ter
-taxo
per
ati
ngi
nco
me–(
inv
est
men
tsi
nas
set
s*we
igh
tedc
osto
fcap
ital
)
MarketValueAdde d(MVA)i sthedif
ferencebe t
weent hemarketv al
ueo fa
c
orporat
ionandth
ecap i
talco
ntri
but
e dbys
hareho
ldersandlen
de r
s.Li
kenetpres
entval
ue,
i
tme asu
resthestockmar ke
t’sest
imateofthen e
tp res
entv al
ueo fafir
m’sp as
tand
e
xpectedcapi
tali
nves
tme ntpr
oje
cts.Assu
ch,MVAi sthepresentval
ueoffutu
reEVA.To
c
alc
ulateMVA,
1.Addal lthec ap i
t althath asbe enp utint
oac o
mp any—f roms harehol
de rs
,bon dhol
de r
s,
andr etainede ar nings.
2.Reclassifyc ertainac cou nti
nge xpenses,suchasR&D,t orefle
c tthatt h
eyar eac tual
ly
i
n v
es tme ntsinf uturee arnings.Thisp r
ovidesthefirm’stotalcapital
.Sof ar,thisisthe
sameap proac ht akeninc al c
u l
ati
ngEVA.
3.Usin
gt hec urren tstockp rice,totalthevalueo falloutst
an di
n gstock,addingittot he
comp any ’
sde bt.Th isist hec ompany ’
smar ketv al
ue.Ifthec omp any’
smar ke tvalueis
greate rt h
anal lthec ap i
talinvestedinit,thef i
rmh asap os
itiv
eMVA—me an in
gt hat
man age men t(an dthes trategyiti sfollo
wing)h asc reatedwe al
th.Inso mec as e
s,
howe ver,themar ketvalu eo ftheco mpanyisac tual
lylessthant hec api
talpu tintoit
,
whichme anssh ar eh
o l
de rwe althi
sbe ingdestroyed.
Bal
anc
edSc
ore
car
dAp
pro
ach
:Us
ingKe
yPe
rfo
rman
ceMe
asu
res
Th ebalan c
eds core c
ar dc ombinesf i
nanci
alme asuresthattelltheresul
tsofacti
ons
al
readytake nwi t
ho perationalme asur esonc u
stomers ati
sfacti
on,intern
alproces
ses,and
th
ec orporatio
n ’
si n
novat i
onan di mprov e
me ntactiv
iti
es—t hedriverso ffutur
ef i
nanci
al
perf
orman ce.Th u
ss teeringc on tr
olsar ec ombine
dwi tho utputcontrol
s.Inthebalanced
sco
recard,man ageme n
tde v
elop sgoalsoro bj
ecti
vesineacho ffourar e
as:
1.Financial
:Howdoweap peart osharehol
ders?
2.Cu sto
me r:Howdoc usto mersviewu s
?
3.Internalbusine
s spersp ecti
ve: Whatmu stwee x
c e
lat ?
4.Innovationandle arning:Canwec onti
nuetoimprovean dcreatevalue
?

Eachgo ali
neacharea(fo
re xampl
e,avoi
di
ngban kr
uptc
yinthefinan
cialare
a)is
t
henas
sign
e doneormoremeasur
es,aswellasatarge
tan danini
ti
ati
ve.Thes
eme asur
es
c
anbethoughtofaske
yp e
rfor
man c
eme as
u r
es—measur
est h
atareess
enti
alforachi
evi
ng

67
 MGT406STRATEGI
CMANAGEMENT

ade
sir
eds
trat
egi
cop
tio
n.
Ev
alu
ati
ngTo
pMan
age
men
tan
dth
eBo
ardo
fDi
rec
tor
s
Chai
rman-CEOFeedbac kInstrument.Ani n
c r
easingn u
mbe rofc o
mp ani
esaree valuatin
gt he
ir
CEObyu si
nga1 7
-itemq ue st
ionnairede v
e l
opedbyRamCh aran,anau t
horit
yo nc o r
porate
gove
rnance.Thequestionnairefoc usesonf ourke yar eas
:( 1)companyp erforman ce,(2)
l
eadershi
po ftheo rganiz
at i
on,( 3)t eam-bu i
ldi
ngan dman agements uc
c es
s i
on,an d( 4)
l
eadershi
pofexte
rnal consti
tuencies.Aftertakinganh ourt
oc omplet
et hequesti
on nai
re,the
boardofKeraVi
si
on,I nc.
,u seditasabas i
sf o
ral engt
hydiscussi
onwitht h
eCEO,Th o
mas
Loar
ie.Theboardcritici
zedL oarief or“nott emperingenthusi
asmwi t
hr eal
ity”an du rged
Loar
ietodevel
opac l
e arman ageme nts uc
c es
sionplan.Thee v
aluati
oncausedL oarietomo re
cl
osel
yinvol
vetheboar dins etti
ngt hec o
mp any’sprimaryobjecti
vesanddi s
cu ss
ing“ where
weare,wherewewan ttogo ,andt heoperatinge n
vironment
.”
ManagementAudit
.Man ageme ntaudi
tsareveryusefultoboardso fdi
rectorsinevaluati
ng
management
’sh andl
ingo fv ari
ousc or
porat
eac tiv
iti
es.Man ageme ntauditsh avebe en
devel
opedt
oe v
aluateactiv
iti
e ssuc
hasc or
poratesoc
ialrespon
sibi
li
ty,fun
c t
ionalareassuch
asthemarketi
ngde part
me nt
,an ddivi
si
onssuchasthei nt
ernatio
naldivi
si
on .Thesecanbe
hel
pfuli
fth
ebo ardhasselec
te dparti
cul
arfunct
ion
alar e
aso racti
viti
esforimprovemen t
.
Strat
egicAudit.Thes tr
ategicaudi
tprovi
desac heckl
istofq ue
sti
ons,byar eaori s
sue,that
enabl
esas ystematicanalys
isofvari
ouscorporat
ef un
ctionsandac t
ivi
tiestobemade .I
tisa
ty
p eo fman ageme ntau di
tan di se xt
reme l
yu sefu
lasa di agn o
stict o
olt op inp
oint
corpor
atewidep roble
mar easan dtoh i
ghl
ightorgani
zatio
n alstr
engthsan dwe akness
es.A
st
r at
egicauditcanh el
pdeterminewhyac ert
ainareaiscreatingproble
msf orac orpor
ation
andh el
pgen e
r at
es olut
ion
st otheprobl
em.Ass uch,i
tc anbev eryu sef
u li
ne v
aluati
ngt he
perfor
man c
eo ftopman ageme nt
.
PRI
MARYMEASURESOFDI
VISI
ONALANDF
UNCTI
ONALPERF
ORMANCE
Re
spo
nsi
bi
li
tyCe
nte
rs
Contro
lsystemsc anbee st
ablishedtomo ni
torspecif
icf uncti
o n
s,projects,ordivis
ions.
Budge t
sar eo n
et yp
eo fc ontrols yst
emt hati st ypi
call
yu s
edt oc ont
rolt h efinancial
i
ndicato r
so fperformanc e.Re s
ponsibil
it
yc ent
ersar eusedt oisol
at eau ni
ts oth atitcanbe
evaluatedse p
arat el
yfromt heresto fthecorporatio
n.Eachr espons i
bil
i
tycent e
r ,therefore,
hasi t
so wnbu dge tandi se val
uat e
do nit
su seo fbudgetedr esou rces
.Itish eade dbyt h e
man agerr espo
nsiblefort hec ent
e r
’sp erf
ormanc e.Thecente ruse sresourc
e s(me asuredi n
termso fc o
stso rexpenses)t oprodu ceas er
viceo rap ro
duc t(me asuredintermso fvolume
orre venues)
.Th erearef i
v emaj ortypesofr es
po nsi
bil
i
tyc enters.Thet yp
eisde ter
minedby
thewayt h
ec orporati
on’
sc o n
t r
olsystemme asurest h
eser e
sou rcesan dservi
ceso rp ro
du cts.
1
.St an
dardc ostc ent
ers:St
andardcostcent
ersarep r
imaril
yu s
edi nmanuf
acturi
ng
faci
l
iti
es.St
an dard(orexpec
ted)cos
tsarecompute
df oreachoperati
ononthebasi
s
ofhis
tori
caldat a.Ineval
uati
ngthecent
er’sper
formance,it
st ot
alstan
dardc ost
s
aremu l
ti
pli
edbyt heuni
tsprodu
ced.Theresu
ltisthee x
pectedcostofproduct
ion,

68
 MGT406STRATEGI
CMANAGEMENT

whi
c histhenc omp aredtot heac tualco s
to fp rodu cti
on.
2.Reven uecenters:Wi thre venuec enters,pro duction,usu all
yi ntermso fu ni
to rdo l
lar
sal
e s,isme asuredwi thoutc on si
derationo fr eso u
r c
ec osts( fore xamp l
e ,salaries)
.
Thec ent
eri st husj udgedi nt ermso fe ff ectivenessr at hert hane ff
iciency.Th e
eff
e ctive
ne s
so fas alesre gion,fore xamp l
e ,isde termi nedbyc omp aringi t
sac t
ual
sal
e stoi tsp r
ojec t
e dorp r evi
ousy ear ’
ss ales.Pr ofi
t sar en otc onsidere dbe cause
sal
e sdepartme ntshav everyl i
mitedi n
f l
uenceo v erthec o stoft h
ep r
odu ctst h
e ysell
.
3.Expen s
ec enters:Res o
urc e
sar eme asuredindo llars,with outconsiderationf ors erv
ice
orp roductc osts.Th usbu dge tswi l
lh avebe enp repare df ore ngineerede xpenses
(co
s tsthatc anbec al
culated)an df ordiscre ti
on aryex pen s
es( coststh atc anbeo n l
y
est
imat ed).Ty picale xpen sec en te
rsar e admi ni
strat i
v e,s er
v i
ce,an dr esearch
depar t
me nts.The yc ostac ompan ymo ney ,bu tt heyo nlyindirectlyc on tr
ibutet o
revenues.
4.Profitcenters:Per f
o r
man cei sme asuredint ermso fthedi fferencebe twe enr evenues
(whichme asu r
ep r oducti
on )an de xpenditures( whichme asurer e s
ou rces).Ap rofi
t
centerist ypi
call
ye st
ablishedwh e neverano rgan i
zationalu nithasc on trolove rboth
i
tsr esourcesan ditsp roductso rs ervi
ces.Byh av i
ngs uchc en t
ers,ac omp anyc anbe
organ i
zedintodivisi
ono fsep aratep roductlines.Th eman agero fe achdi v
isionisgiven
autonomyt ot hee xtentt hath eo rs heisabl et oke epp rofitsatas at i
sfac t
o ry(or
better)level.
Tr
an s
ferpri
ci
n gisco
mmo nl
yu s
edinv erti
cal
lyintegratedc or
por
atio
nsandcan
workwel
lwh enapri
c ecanbeeasil
yde te
rmi n
edf o
rade signatedamountofpro
duct.
Event
houghmostex
pe rt
sagreeth
atmar ket-basedtransf
e rp ri
cesareth
ebe s
tchoi
ce,
on
ly30%–
40%o fco
mp ani
esusemarketpri
cet osetth
et r
ans f
e rpric
e.
5.I
nves
tme ntcenters:Be c
au s
eman ydi v
isi
onsinlargeman uf
acturi
ngcor
porati
onsu
se
s
ign
ifi
cantas s
etst omaket heirproducts,thei
ras se
tbases ho
uldbefacto
redint
o
t
hei
rp erf
o r
man cee valuati
on.Thusitisin
suffic
ienttofocuso
nlyonpro
fit
s,asint
he
c
aseo fprofi
tc e
n ters.Aninvestmentc ente
r’sperformanc
eisme as
uredi
nt er
msof
t
hediffe
re n
cebe twee nitsreso
urcesan di
tss e
rvic
e sorpr
oducts
.

Us
ingBe
nch
mar
kin
gtoEv
alu
atePe
rfo
rman
ce
Accor
dingtoXe roxCo rp
orati
on,t h
ec ompanyt hatp i
oneeredt h i
sc onceptint he
Uni
tedStat
es,benchmarki
n gi
s“thec o
ntinualprocessofme asuri
ngp rodu cts
,se r
vice
s,an d
pr
acti
cesagainstthet oughe
stc ompeti
torso rt hosec omp aniesr e
co gnizedasi ndustry
l
eaders
.”Benchmarki
ng,ani n
creasi
nglypop ul
arp ro
gram,i sbas e
do nt hec o
nc ep
tt hatit
makesnosensetoreinv
e n
ts o
me t
hingthats omeonee l
seisal readyu si
ng .Itinv
o l
vesop e
nly
l
earni
nghowothersdosomethi
ngbetterthano ne’
sownc omp anys othatth ecomp anynotonly

69
 MGT406STRATEGI
CMANAGEMENT

c
ani
mit
ate
,bu
tpe
rhap
sev
eni
mpr
oveo
nit
ste
chn
iqu
es.
I
NTERNATI
ONALMEASUREMENTI
SSUES
Thethr
eemo stwi
del
yusedtechniq
uesforint
ern
ation
alp e
rformanceeval
uat
ionare
ROI
,budgetan
aly
sis
,andhis
tor
icalcompari
son
s.Inonest
udy,95%o fthecorpo
rat
eoffic
ers
i
nterv
iewedst
atedthatth
eyuset h
es amee v
aluat
iontec
hniqu
esf orfor
eignanddomesti
c
ope
ratio
ns.

● Cur
r e
n c
yEx c
hangeRate
s
● I
nfl
ation
● TaxLaws
● I
nternati
onaltr
ansfe
rpri
ci
ng
● Repatri
ati
onofp r
ofi
t
● Pi
racy

St
rat
egi
cIn
for
mat
ionSy
ste
ms
Beforeperfor
man ceme asurescanh avean yimpactonstrategicmanageme nt,they
mus tfirstbec o
mmu ni
catedt ot hepeopler es
p ons
ibl
ef orfor
mu l
atingandi mpl
e me nt
ing
strategicp l
ans.Strategi
ci nfor
mat i
ons ys
t emsc anp er
formt hi
sf unct
ion.Theyc anbe
comp uterbas edo rman ual,formalo rinformal.On eoft h
eke yr easonsgive
nf ort he
ban kruptcyofInt
ernati
onalHar v
esterwast heinabil
i
tyofthecorporati
on’
stopman age ment
top recis
elydetermineinc
o mebymaj o
rc l
as sofs i
mil
arp r
oduct
s.Be caus
eo fthi
sin abil
i
ty,
man ageme ntkepttryi
ngtof ixail
in
gbu si
nessesan dwasunabletorespondflex
ibl
yt omaj or
chan gesandu n
expectedevents.
ENTERPRI
SERESOURCEPL
ANNI
NG(
ERP)
Man ycorpor
at i
onsaroun
dt hewo rl
dh aveadoptedent
erpri
seresourceplanni
ng(ERP)
so
f tware.ERPu n i
tesallofac ompan y’
smajo rbusi
nessacti
vi
ti
es,fromo rderprocessi
ngto
producti
o n,wit
hinas in
glefamil
yo fsoftwaremo dul
es.Thesy
stemprovidesinst
antac c
essto
cr
iticalinformati
ontoe veryo
neint heorgani
zation
,fromtheCEOtothef actor
yf l
oorworker.
Becau s
eo ftheabili
tyo fERPs oftwaret ouseac ommo ni
nformati
ons yste
mt hroughouta
comp any’smanyo perati
onsaroundt h
ewo rl
d,iti
sbe comi
ngthebusi
nessinfor
mat i
onsystems
’
gl
obal standard.

RADI
OFREQUENCYI
DENTI
FI
CATI
ON(
RFI
D)
Radiofrequen
cyiden
tif
icati
on(RFI
D)isanelec
troni
ctaggi
ngtec
hnol
ogyusedina
nu
mbe rofc o
mp an
iestoimpro
ves uppl
y-c
hai
neffi
ci
ency.Bytaggi
ngc
ontai
nersandit
ems
wi
tht i
nyc h
ips,compan
iesuset h
et agsaswire
les
sbar -c
odestotr
ackinvent
orymo r
e
ef
fic
ientl
y.
DI
VISI
ONALANDF
UNCTI
ONALI
SSUPPORT

7
0
 MGT406STRATEGI
CMANAGEMENT

Atthedi
vis
ionalorSBUlev
elofac or
p orat
ion,t
heinformat
ionsys
temshoul
dbeused
t
osupport
,r ei
nfo
rce,o renl
argeitsbusi
ness-le
velstrategythr
oughitsdec
isi
onsupp
ort
s
yst
em.AnSBUp ursui
ngas t
rategyofoverallcostleadersh
ipcoul
du sei
tsinfor
mati
on
s
yst
emt oreducecostseit
herbyimprov
inglaborp r
oducti
vi
t yori
mprovi
ngth
eu seofot
her
r
esour
cessuchasinv
e nt
oryormachin
ery.
Pr
obl
emsi
nMe
asu
rin
gPe
rfo
rman
ce
Themeasureme
n to
fperfor
man cei
sacruci
alpartofeval
uati
onandc o
ntro
l.Thel
ack
o
fquant
ifi
abl
eo bj
ect
ivesorperfor
man c
es t
andardsandt h
einabil
i
tyo ftheinfor
mati
on
s
yst
emtoprov
ideti
melyandval
i
dinformati
onaretwoobvi
ouscont
rolpro
blems.
SHORT-TERMORI
ENTATI
ON
Tope xecuti
vesr epor
tt h ati nman ys i
tuati
o ns
,t heyan aly
zen eith
ert helong-term
i
mp l
icat i
onso fpresento per
at i
on so nth estrategyt heyhav eado ptedn o
rt heoperati
onal
i
mp acto fas trategyo nthec orp oratemission.Long-rune val
uat i
onsmayn o
tbec onducted
becau s
ee xecutives( 1) don’tr eali
zet hei
ri mp or
tance,( 2) beli
evet h
at sh o
rt-run
consi
de rati
onsar emo reimp ort antt hanl ong-runc onsi
de r
at i
ons,(3)ar en’tpersonall
y
evaluatedo nal ong-termbas is,o r(4)do n’thavet hetimet omakeal on
g-runan al
ysis
.83
Therei sn or ealj us
tifi
cati
o nf o rt h
ef i
rstan dl as
tr eas o
ns .Ife xecut
ivesreali
zet he
i
mp ortanceo flong-runevaluati
o ns,theymaket hetimene e
de dt oconductthem.Eventhough
man yc hi
efe xecuti
vesp oi
ntt oimme di
atep ressure
sf romt hein ves
tme ntcommu n
ityandt o
sh
o rt-terminc e
nt i
vean dpromo tionp l
anst osupportthes econdan dt h
irdreasons
,e vi
dence
doesn otalwayssu ppo
rtt h
eirclaims .
Manyac coun
ting-bas edme asures
,suchasEPSan dROI,e ncour ageas h o
r t
-t e
rm
o
rientati
oninwhichman age rsconsi
deronl
ycu rr
enttacti
caloro pe
rat i
onali ss
uesan dignore
l
ong-terms t
rategi
co nes.Be causegro
wthinEPS( earni
ngspershare )isani mportantdr i
ver
o
fn ear-termstockp ric
e ,topman agersarebiasedagainstinv
estme ntst hatmightr educe
s
hortt ermEPS.Th i
si sco mpo un
dedbyp res
s u
refr o
mf inanci
alanal y
stsan din
ve s
torsf or
q
uarte r
lyearni
ngsguidanc e,thatis
,est
imatesoffuturecorpo
ratee arnings.

GOALDI
SPL
ACEMENT
I
fn o
tc arefu
ll
ydo ne,moni
tori
ngan dme as
uringofperfo
rmancecanac tu
all
yr esu
lti
n
adecli
neino v
e r
allcorpo
r ateper
formance.Goaldis
p l
acementi
stheconfus
ionofme answit
h
endsan do cc
u r
swh enac t
ivi
ti
eso ri
gin
all
yi nte
ndedt oh el
pman ager
sat tai
nc orporat
e
obje
ctive
sbe comee ndsint he
mselves—orar eadaptedt omeetendsotherthant hos
ef o
r
whic
ht heywe reintended.Twot yp
e sofgo aldis
placementarebe h
avi
ors ubsti
tuti
onand
subopt
imiz
ation.
Be
hav
iorSu
bst
itu
tio
n

7
1
 MGT406STRATEGI
CMANAGEMENT

Behaviorsu bsti
tutio
nr e
ferstoap henomenonwh enp e
o plesu bsti
tuteac ti
vit
iesthatdo
notl
eadt ogo alac compli
shmentforactiv
iti
est h
atdol e adt ogo alac compli
shme ntbecause
th
ewr ongac tivi
ti
e sarebe ingrewarded.Man agers,li
kemo sto th erpeople,tendt of o
cus
moreo ftheirat t
en ti
ono nbehavi
orsthatarec l
earlyme asurablet h anonth o
s ethataren ot.
Emplo
y eeso f
te nre ce
ivelitt
leornorewardf orengagingi nhar d-to -measureac ti
viti
essuch
ascoo pe
rat i
onan diniti
ativ
e.However,eas y
-to-me asureac t
ivi
tiesmi ghth avelitt
leo rno
rel
ati
o ns
hipt othede siredgoodperfor
man ce.Rati
onal peopl
e ,neve rthel
ess,tendtowo rkfor
th
er ewar dst hatt hes y
s t
emh astoo ff
er.Th eref
or e
,p eoplet en dt osubstitut
ebe havio
rs
th
atar er ecogn i
zedan dr ewardedforbe havi
orsthatar eigno r
e d,wi t
houtr egardtot hei
r
cont
ributi
o ntogo alac c
omp l
ish
ment.
Su
bop
timi
zat
ion
Su boptimizati
o nr eferstot hep henome nonofau n
ito ptimizi
ngitsgo alac complishme n
t
tot hede trime nto ft heo rgan iz
at i
onasawh ol
e.Th ee mp hasi
si nl argec orporat i
on son
develo
p i
ngs ep arater espo ns
ibil
ityc enterscanc reates omep roblemsf ort heco r
p o
r ationas
awh ol
e .Tot h ee xt
en tt hatadi v
isi
o norf uncti
onalu ni
tv iewsi ts
e l
fasas eparatee nt i
ty,i
t
mightre f
u set ocoope ratewi tho t
h erunitsordivisi
onsint hes amec orp orati
onifc oop erati
on
coul
di ns omewayn e gativelyaf fectitsp erforman cee valuation.Thec ompe t
iti
onbe tween
divi
si
onst oac h i
eveah ighROIc anr esul
tino nedivisi
on’sr efusaltos harei t
sn ewt ec hnol
ogy
orwo rkp roce ssimpro veme nts.On edivi
sion’sattemp ttoo p
timizet heac comp l
ishmen to fit
s
goalscanc auseo therdi v i
si
onst of allbeh i
ndan dt husne gativel
yaf f ecto veral
lc orporate
performan ce.On ec ommo ne xamp l
eo fsubo pti
mizatio
no cc urswh enamar keti
ngde par tme n
t
approvesane arlyshipme ntdat et oac ustome rasame anso fge tti
ngano rderan dfor cesthe
man uf
ac turingde partme ntintoo vertimep roducti
onf orth ato neorder .Productionco stsare
rais
ed,wh i
c hr educest heman ufacturin
gde partmen t
’so v
e ral
le ffi
cienc y
.Th ee ndr esul
t
mightbet h
at ,althoughmar ketingac hie
ve sitssalesgoal,t hec or
p or
at io
nasawh olef ail
sto
achiev
ei tse xpectedp ro f
itabil
ity.
Gu
ide
li
nesf
orPr
ope
rCo
ntr
ol
I
ndesigni
ngac o
ntrolsys
tem,topmanagements h
ouldr
eme mberthatcont
rolsshou
ld
f
oll
owstrat
egy.Unl
esscontro
lsensu
retheu s
eo ftheprope
rstrategytoachi
eveobject
ives
,
t
hereisas tro
ngli
keli
hoodt h
atdy s
funct
ionalsi
dee ff
ectswil
lc ompl
etel
yundermin
et he
i
mpleme
ntati
onoftheobje
ctives
.Thefol
lo
wingguidel
in
esarerecomme n
ded:
1.Cont
rolshouldinvolveo n
lythemi ni
mum amo un
to finfo
rmati
onn eededt ogivea
rel
i
ablepic
tureo fevents.
2.Cont
rol
ss hou l
d mo ni
toro nly meani
ngfulactivi
ties andresul
ts,r egardl
esso f
measur
eme ntdiffi
cul
ty.
3.Cont
rol
sshouldbet i
me l
ys oth
atc o
rrect
iveacti
oncanbet akenbef
o r
ei ti
stoolate
.
4.Lon
g-terman dshort-termcontrol
sshoul
dbeu s
ed.
5.Cont
rol
sshouldaimatp inpoi
nti
ngexcept
ions.
6.Emphasi
zether ewardo fmeeti
ngo rexc
ee di
ngstandardsrat
herthanp uni
shmentfor
fai
li
ngtome etstandards.

7
2
 MGT406STRATEGI
CMANAGEMENT

St
rat
egi
cIn
cen
tiv
eMan
age
men
t
Toe n
sureco
ngruencebetweenth
eneedsofac or
porati
onasawh ol
eandt h
en eedsof
t
hee mplo
yeesasindivi
dual
s,managementandt heboardo fdi
rectorsshou
ldde vel
opan
i
ncen
tiveprogramthatrewardsdesi
redperf
ormance.Thefoll
owin
gt hre
eap proac
hesar e
t
ail
oredtohelpmat
chme asur
eme n
tsandrewardswit
he xp
li
ci
tstrategi
cobje
ctiv
esan dtime
f
rames:
1.We igh ted-fac to rme thod:Th ewe ighted-f ac torme th o
di sp ar ti
cu larl
yap prop riate
forme asuri
ngan dr ewar dingt hep erforman ceo ftopSBUman ager san dgr oup -le v
el
exe cu tiv
eswh enp erf o
r man cef act o
rsan dt hei
ri mp ortancev aryf ro
mo neSBUt o
ano the r.
2.Long-t erm e v aluation me thod:Th el ong-t erm e v al
uat i
on me th odc omp ensat es
man ag ersf orac hiev i
ngo bjectivess e to ve ramu lti
yearp er i
od.Ane xe cutivei s
promi s eds omec o mp anys tocko r“ pe rforman ceu nits
”( c onvertiblei ntomo neyo r
stoc k)i namo u ntst obebas edo nlong-ter mp erforman ce.Abo ardo fdi rectors,f or
examp l
e,migh ts etap ar ti
cularo bjectivei nt ermso fgr owthi ne ar ni
n gsp ers h are
durin gaf ive-y earp eriod.Th e givi
n go fawar dswo ul
d be c o nti
nge nto nt he
corp or ati
on’sme etingt hato bjectivewi thi
nt hede signat e
dt ime .An yex ecutivewh o
le
av est h
ec orp orationbe foret h
eo bjectiv eisme tr ece i
vesn oth i
ng.Th et yp i
cal
emp h as i
so ns to ckp rice smake sth i
sap pro ac hmo reap pl
icablet ot opman age me nt
thant obu si
ne ssu nitman agers.
3.Strat e gi
c-fun dsme th od:Th es trategic-fun dsme t
h ode ncourage se x ecutiv
e st ol ook
atde v elo
pme n tale xp ensesasbe i
n gdi f
fe re ntfrome xp ensesr equ ir
edf orc urr ent
ope rat io
ns.
4.Theac counti
n gs tate me ntf orac orporateu nitenterss trategicf un dsasas e par ate
entr ybe l
owt hec urr entROI .Itis,ther efore ,possi
blet odi sti
ngu i
shbe twe ene xpe nse
dollar sc onsume dint hege nerationo fc ur rentr even uesan dt hosei nvestedi nt he
futu reo fabu sines s.Th erefore,aman agerc anbee valuatedo nbo thas hort-an da
lo
n g-t e rmbas isan dh asani ncentivetoi nves tstrategicfu ndsint hef utur e
.
Aneffec tivewayt oac hievet hede s i
reds trate gicresultst hroughar e war ds y
s t
e mi st o
c
ombi
neth et h r
eeap p roac hes:
1.Segr e gates trat egicf undsf roms hort-termf u n
ds,asi sdo neint hes t
rat egi
c -fu nds
me th od.
2.Dev elo pawe igh ted-f act orchar tfore achSBU.
3.Me as u reperfo rman c eo nt hreebas es
:Th ep retaxp ro f
itindicat edbyt hes trate gic-
fundsap pro
ac h ,thewe ightedf actors,an dt h elong-te r
me valuationo ft heSBUs ’an d
thec orporation ’
sp er forman ce.

Ref
erence
:
Wheel
enTh o
masL .
,Hunge
rDavi
dJ.(2012)
,Strat
egi
cMan
age
men
tan
dBu
sin
essPo
li
cy.1
3th
Edi
ti
on.Pears
on,Geo
rgeWashi
ngt
onUniv
e r
sit
y

7
3
 MGT406STRATEGI
CMANAGEMENT

MODUL
ETESTGUI
DE

GENERALDI
RECTI
ONS
Afte
rt h
ediscus
sionofthetop i
csinmo dul
ef orMo dul
e7 ,thistestwil
las se
ssy ou
r
l
earningabouttheprevi
ousl
esson.Accompli
shallther eq
uire
me ntsan dconso
lidateallyou
r
answersinasin
gle(1
)worddocume n
to nl
yusi
ngt hi
sf o
rmat{Ar i
al,12,Justi
fi
ed,All1Mar gi
n,
Si
ngleSpacing}.Pleas
ep ro
videac opyo ftheque s
tioninyourwo rki
n gdocume n
tt oavoi
d
confus
ionandformatto“BOLD”yourf i
nalanswers.Ki
ndlyupl
oady ourwo rkwithaf i
lename
(L
as tName ,Fi
rstName,Secti
on,Mo dul
e7Te st
s)ino urGoogleClassroom.Go odluckand
Godble
ss!

DISCUSSIONQUESTI ONS
1
.Whatar
esomee
xamp
leso
fbe
hav
iorc
ont
rol
s?Ou
tpu
tco
ntr
ols
?In
putc
ont
rol
s?

7
4
 MGT406STRATEGI
CMANAGEMENT

2.I
sEVAani
mpr
ove
men
tov
erROI
,ROE,o
rEPS?
3.Ho
wmu chf
ait
hcanamanage
rp l
acei
natran
sfe
rpr
iceasas
ubs
tit
utef
oramar
ketp
ric
e
i
nme as
uri
ngaprof
itc
ent
er’
sperf
orman
ce?
4.Ist
hee val
uat
ionandco
ntro
lp r
oce
ssappr
opri
atef
orac
orp
orat
iont
hate
mph
asi
zes
cre
ati
vi
ty?Arecont
rol
andcr
eati
vi
tyco
mpat
ibl
e?

No
te:
Mai
nTo
pic8wasal
readyi
ncl
ude
dint
hec
ont
ento
fMo
dul
e1
MainTop
ic9i
sin
ten
dedf
oran
aly
zin
gcas
est
udi
esan
dap
pli
cat
iono
fst
rat
egi
cman
age
men
t
model
Mai
nTo
pic1
0an
d11we
real
readyi
ncl
ude
dint
hec
ont
ento
fMo
dul
e4

7
5