MGT680 INTELLIPATH

UNIT 1
Strategic Management Process 99%

Strategy is not a new concept but rather one that has been around
for thousands of years. The concept of strategy was originally
developed from the writings of Sun Tzu, a notable military
strategist. Just as military strategy has developed over time as
technology and the needs of the military have changed, so has
corporate strategy developed and changed over time. Developed
from the original strategy used by the military the same basic
concepts have been modified to fit into the organizational setting.   (Hinio, 2009)
Understanding the origins of strategic management allows a more
holistic understanding of the concept. Just as the original military
strategy was developed to win a war, organizations today use
strategic management to win the competitive advantage within their
field.
 Learning Materials
Origins of Strategy

The  origins of strategy  can be traced as far

back as the writings of Sun Tzu, which were
later expounded upon by Thucydides, who
wrote History of the Peloponnesian War (431
B.C.), and strategy has been adopted by military
leaders throughout history. Leaders within
organizations have adapted the concepts for
their own use, learning from history that
through strategy, goals can be achieved that may
have been unthinkable before. The basic
concept of strategic management encompasses
the ideology that there will always be a situation
within an organization of what should be, what
is, and what will be the state of operations.
Johnson, Scholes, and Whittington (2005)
described strategy as “the direction and scope of
an organization of the long term, which
achieves advantage in a changing environment
through its configuration of resources and
competencies with the aim of fulfilling
stakeholder expectations” (p. 9).
  Sun Tzu

Corporate strategy was inspired by military

strategy, which was devised over 2,500 years
ago by Sun Tzu. The word strategy derives
from Ancient Greek στρατηγία (strategia,
“office of general, command, generalship”),
from στρατηγός (strategos, “the leader or
commander of an army, a general”), from
στρατός (stratos, “army”), and ?γω (ago, “I
lead, I conduct”) (Strategy, n.d.). Since the
(File:Bamboo book - closed - UCR, 2007)
Renaissance, many schools of military strategy
have emerged, covering a large set of topics,
such as economy, revolution, geopolitics, air
warfare, and nuclear deterrence.

Sun Tzu's The Art of War is the oldest writing on strategy. Written around 400 B.C., it has been
very influential in East Asia. It was a major source of inspiration for Mao Zedong’s Long March.
The maxims contained in The Art of War remain today as the basis for many Chinese companies.
Su Tzu emphasized the importance of knowing the enemy and the place of the battle and gave
much attention to the use of ploys. He is considered the founder of strategic thinking. A foreign
company with ambitions to penetrate China and develop its business in the long term in the
Chinese market should study Sun Tzu’s writing very closely.

Thucydides

Over 1,000 years after Sun Tzu, the Athenian historian Thucydides
provided a historical account of the Peloponnesian War, which was
fought between Sparta and Athens, in his History of the
Peloponnesian War (431 B.C.). Thucydides is perceived today as
the founder of political realism. Great leaders, such as Richelieu,
Bismarck, Roosevelt, De Gaulle, and Churchill, were strongly
influenced by the principles underlying Thucydides’ writings. The
insightful look that the Athenian historian provided at the war from
both sides highlighted the relationship between politics and power,
as well as the balance of power underpinning international
relations. Thucydides based his analysis upon what contemporary
strategists call the hard power:

 the economic
  diplomatic
(Shakko, 2008)  military powers

The economic dimension of power (wealth) is critical to victory. Archidamus, King of Sparta,
argued that war was much more dependent on money than on weapons. The quest for alliances
(soft power) was also considered by Archidamus and Pericles as a major source of power. For
the Spartans, alliances were a source of military power, while they represented a source of
finance for the Athenians. Pericles insisted on the importance of having allies and asked the
Athenians to rein them in, arguing that Athens’ power came from the subsidies they were
receiving from their allies. The third dimension of Power—the military power—was based on
the earthly power or the maritime power. (Thucydides & Radice, 1954)

Quantified the Power of Potential

Thucydides' principles relating to hard power and soft power appear as the hallmarks of today’s
international and global strategies. In 1975, Ray Steiner Cline, the chief Central Intelligence
Agency (CIA) analyst during the Cuban Missile Crisis quantified the power potential of a nation
with equation

Pp = (C + E + M) x (S + W)

where Pp is perceived power, C is critical mass, E is economic capability, M is military

capability, S is strategic purpose, and W is will to pursue national strategy. The variables critical
mass, economic capability, military capability, strategic purpose, and will to pursue strategy are
key components of winning corporate strategies.

Carl Von Clausewitz 

Carl Von Clausewitz (1780–1831) should also be mentioned as a

founder of modern military thinking. In his masterwork On War,
written in the aftermath of the Napoleonic Wars, he studied the
essence and the goals of war and sought to rethink military strategy
(Carl Von Clausewitz). The cornerstone of his analysis is that strategy
should be based on flexibility and creativity. Clausewitz argued that
strategy relies upon basic building blocks, which are used in attack,
defense, and maneuver.

 
  (Wach, n.d.)

Strategy formation consists in finding and implementing new combinations of these blocks. In
the past, (i.e., before Napoleon), military strategy was thought to be a problem-solving activity.
Napoleon changed all of the prevailing rules. He innovated. His strategies were disruptive. His
wars were full of surprises; they would bring about new combinations. His victories were both
military and intellectual. (Von Clausewitz, Howard, & Paret, 1976)

To read more about Carl Von Clausewitz, click on the button below.

http://www.clausewitz.com/

Strategy is about reinventing the future, driving change, creating blue ocean markets, identifying
the source of value creation, and rethinking and rebuilding the organization resulting from the
strategic choices.
Strategic Management Begins with the End

Strategic management begins with the end in mind. The process of setting goals can be daunting
for an organization that may be facing a disadvantage in the competitive market. The safe route
to take is to set goals that align with the current operations, capabilities, and resources. However,
if this course of action is pursued, the company will become noncompetitive in its specific
market and thus be at a competitive disadvantage. Another issue that organizations face while
setting goals is to not only set goals that align with the values and mission but to also set a clear
message to the employees and customers. The goals, however, must align with the customers’
needs without catering to the customer. The purpose of setting stretch goals is to propel the
company forward.

For this to transpire, the leadership must be:

 proactive
 dynamic
 audacious 
Strategy is an art and a science. It is a proactive, dynamic, audacious, and creative field that is
incompatible with narrow mental models.

Leaders within an organization who possess the fortitude to take the company to a different level
have the ability to see the end goal as one that is unimaginable or out of reach for the current
operations. Ireland and Hitt (2005) explain strategy used by a leader as “a person’s ability to
anticipate, envision, maintain flexibility, think strategically, and work with others to initiate
changes that will create a viable future for the organization” (p. 48). Taking a company to the
next level can be difficult if the stretch goals are not properly planned.

Ideas for strategic planning do not always flow from the top down in a company. Encouraging
the utilization of the knowledge and skills of lower-level employees can create an environment
where all available input is synthesized into the process. 
   Anticipation and planning are cornerstones of strategy.
The Process of Strategic Planning

The process of strategic planning is not a single occurrence within

the lifespan of an organization. As technology, consumer demands,
and competitive advantage evolve, so must the process of constant
strategic planning. The cycle involves determining what possible
  end goals exist. This is done through synthesizing all available
information to determine viable stretch goals for the organization.
The process is started by eliciting ideas from all levels of an
organization, identifying internal and external environments, and
determining the best way to align the strategic plans with the vision
and mission of the organization. The next step is to determine the
ideal strategic plan that fits into these areas.

Strategic plans must be well-thought out and planned accordingly, taking into consideration the
variables of the internal and external environment. Implementation is not a one-step process, but
one that must be evaluated and scrutinized to determine if the plan is being implemented as
planned or if obstacles have arisen. When an implementation process has issues, it does not mean
it should be discarded; however, modifications may be necessary. A common misconception
could be that if a plan does not go according to the original specifications that it was not a good
plan to implement. This could not be further from the truth. Remember, strategic planning
involves setting stretch goals that take a company further than current operations, capabilities,
and resources dictate as possible.

Once the strategic plan has reached full implementation, the results should be reviewed to
determine the new direction this implementation has taken the company. The evaluation should
not only take into consideration the end result but also the intricacies of the process. The
employees need to understand the vision and mission the company set forth for successful
implementation, so there must be a control in place to determine the effectiveness of
communication through execution. Did the plan delineate the process in a manner that made it
comprehendible to all involved? Or do changes need to be made in these areas for future plan
implementation? The important thing to remember at this phase is to not only celebrate the
accomplishment but to also begin the process again. 
    Strategists have a special gift for transforming closed cages into open spaces.

Imagine life today if strategists had not existed. The technology that is enjoyed today as
commonplace would not exist. The computer, smart phone, television, airplanes, and even cars
would not be in existence. Strategists have the ability to see what has yet to come and to make it
a reality. Strategic management has evolved from the original strategy as written by Sun Tzu
over 2,500 years ago. The military adopted the strategy as a way to win wars, and corporations
have adopted the concepts and built it into strategic management as a way to win in the
competitive market. As a leader, it is important to realize that ideas for strategic planning will not
only come from the top echelon of a company but also the middle and lower levels. Taking into
consideration all reasonable ideas of the employees allows a leader to see outside the realm of
the perceived norms. 
Strategic Management

Since the 1960s, strategic management has

undergone several changes. Forty and fifty years
ago, strategic planning was at the center of the
management schools, which led to the creation of
corporate planning departments. It was the perfect
illustration of Woody Allen's words in Shadows
and Fog: "I was in a warm bed, and suddenly I’m
part of a plan" (Allen, 1991). In this planning
school, strategy formation appeared as  
a formal process.

 
In the following decade, the focus was
placed on the positioning of the firm. Tools
of strategic analysis were industry analysis,
market segmentation, and the experience
curve. In this positioning school, strategy
formation stood as an analytical process.

In the 1990s, the quest for competitive

advantage became the benchmark. Tools of
strategic analysis included analysis of resources
and capabilities, shareholder value
maximization, restructuring and re-engineering,
and alliances. In this competitiveness school,
strategy formation stood as a process
of negotiation.  

 
With the emergence of technological start-ups
from the year 2000 onwards, strategy for the
new economy focused its attention on
innovation, new business models, and
disruptive technologies. In this entrepreneurial
school (strategy for the new economy), strategy
formation stands as a visionary process.
 Over the past 4–5 years, strategic
management has prioritized the
global strategies, together with ethics,
corporate social responsibility, and
local content topics. In this
compliance school, strategy
formation stands as a process
of transformation. (Grant, 2013)

 
 

 
 

Since the 1990s, the strategic management schools have

emphasized vision, change, innovation, transformation,
and resilience. The role of company leaders is to drive the
transformation of their firm. Hence, the backgrounds and
profiles requested for the strategists have become
multifaceted.
Additional Resource

The following longer video applies Sun Tzu to a current business example.

http://www.youtube.com/watch?v=YpCFGO2wDBw

Summary

The concept of strategic management has evolved from the original writings of Sun Tzu and the
adaptations of the military. Today, strategic management is a means to attain competitive
advantage in a market that is often saturated. Through researching historical data, it is evident
that strategic management is necessary for an organization to achieve and maintain competitive
advantage. Strategy is the process of reinventing the future of a company—deciding what
direction the organization will go in and the steps needed to achieve the end goal. A leader must
have the fortitude to take the company through the process for it to be successful. Strategic plans
involve extensive planning, research, and the buy-in of all stakeholders. When successful, a well-
laid out strategic plan will propel the company forward rather than allowing it to become
stagnant in the industry.

References

Allen, W. (Director). (1991). Shadows and fog [Motion picture]. United States: Orion Pictures.
bluefootedbooby. (2007, January 12). File:Bamboo book - closed - UCR.jpg  [Image]. Retrieved from
the Wikimedia Commons Web site: http://commons.wikimedia.org/wiki/File:Bamboo_book_-
_closed_-_UCR.jpg

entrepreneurdex. (2013). The art of war: Extraordinary speed: Sun tzu applied to business [Video].
Retrieved from http://www.youtube.com/watch?v=YpCFGO2wDBw

Grant, R. M. (2013). Contemporary strategy analysis. Hoboken, NJ: John Wiley & Sons.

Hinio. (November 7, 2009). File:Enchoen27n3200.jpg [Image]. Retrieved from the Wikimedia

Commons Web site:http://commons.wikimedia.org/wiki/File:Enchoen27n3200.jpg

Ireland, R. D., & Hitt, M. A. (2005). Achieving and maintaining strategic competiveness in the 21st
century: The role of strategic leadership. Academy of Management Executive, 19(4), 63–77.

Johnson, G., Scholes, K., & Whittington, R. (2005). Exploring corporate strategy (7th ed.). Essex: Prentice
Hall.

Shakko. (December 26, 2008). File:Thucydides pushkin02.jpg [Image].Retrieved from the Wikimedia

Commons Web site:http://commons.wikimedia.org/wiki/File:Thucydides_pushkin02.jpg

Strategy. (n.d.). Retrieved from the Princeton Web site:

http://www.princeton.edu/~achaney/tmve/wiki100k/docs/Strategy.html

Thucydides, & Radice, B. (Ed.). (1954). History of the Peloponnesian War. London, UK: Penguin.

Von Clausewitz, C., Howard, M. (Ed.), & Paret, P. (Ed.). (1976). On war. Princeton, NJ: Princeton
University Press. 

Wach, K.W. (n.d.). File:Clausewitz.jpg [Image]. Retrieved from the Wikimedia Commons Web site:
http://commons.wikimedia.org/wiki/File:Clausewitz.jpg
Questions
Strategic management begins with the end in mind. How does an organization determine the
goals that should be set? (Choose 2)
Set goals that align with historical data and trends.
Set goals that align with what the competition is currently doing.
Align goals with the current operations, capabilities, and resources.
Set stretch goals that align with the values, mission, and goals.

When creating strategic goals, they should be short-term and long-term.

Thucydides wrote of the Peloponnesian War which showed the strategy used by the military and
inspired the corporate strategy today. Who fought in the war Thucydides wrote about? (Choose
2)
Syria
Sardinia
Athens
Sparta

Which of the following are the cornerstones of strategy? Anticipation and planning

Strategic management has progressed through several schools of thought since the 1960s. What
is the order of processes strategic management appeared as?
Formal, Analytical, Negotiation, Visionary, Transformation

Place the following steps in order for completing a strategic initiative:

At the completion of a strategic initiative, the results are reviewed for what purpose? (Choose 2)
To determine if any changes need to be made with the process in the future
To ensure the end result aligns with the original goal
To understand why the goal was a smart one
To analyze the external environment

Companies often set goals that are in line with the current operations, capabilities, and resources.
When making this choice, what is the outcome the organization is facing? (Choose 2)
Competitive advantage
Competitive disadvantage
Safe growth
Uncompetitive in the market

Thucydides based his analysis upon what contemporary strategists call the hard power. What
does hard power consist of? (Choose 2)
Authoritarian power
Economic power
Positional power
Diplomatic power
Military power

When creating strategic planning ideas, they should be formulated from the bottom up and top
down.
Strategic Management Concepts 97%
Introduction

Understanding the need for strategic management is a complex process. Organizations need to
analyze where they will be if no changes are made in the next 1, 5, 10, or even 20 years. Chances
are, any competitive advantage will be lost over time if everything remains the same. This is why
strategic planning is so important to all organizations. The risk of making changes is also
present, so the specific actions decided upon must also be scrutinized. Strategic management is a
complex process that takes the cooperation of the entire organization. Budgets, current
operations, capabilities, and resources must be evaluated prior to, during, and at the completion
of the strategic management process. 
 “Strategy is the direction and scope of an organization of the long term, which achieves
advantage in a changing environment through its configuration of resources and competencies
with the aim of fulfilling stakeholder expectations” 
(Johnson, Scholes, & Whittington, 2005, p. 9).
Basic Concepts of Strategic Management

The basic concepts of strategic management include:

Importance of Analyzing the External Environment

Although it may seem like an unending process to the untrained eye, it is necessary for a
company to understand the need to be constantly vigil in analyzing the external environments to
determine if a sustained competitive advantage can be maintained. It may sound like an easy
process, but a lot goes into the actual implementation of strategic management as a whole. An
organization must have clearly defined goals that include the vision, mission, and objectives. As
those evolve because of the external environment, so must the strategic management goals.
Trends, technology changes, and consumer demands create a never-ending cycle of change for
an organization. Organizations that have a competitive advantage and do not pay attention to the
changing trends have historically become extinct.

Taking a look at the basic concepts in strategic management allows a beginning

understanding of the process.
Goals, Vision, and Mission

The first step an organization must take in the strategic management

process is to set clearly defined goals. The process of setting a goal
is to determine where the company is today and where it wants to be
at a given point in time. This is done by clearly defining the vision,
mission statement, and values, through which the objectives and
overall goals of the organization can be more clearly defined.

A vision is a clearly defined statement of what the organization wants to accomplish.

The mission statement is the purpose of the organization, which serves as a guide for the actions
and decisions. The mission statement is the foundation of what the organization wants to do—
essentially the sole purpose for its existence. An organization’s mission statement can focus on
customers, products or services, or a combination. Values are the cultural and ethical norms that
are present in the organization and society as a whole.

Financial Planning and Forecasting

The purpose of the goal-setting process is to determine not only how revenue will be generated
and measured, but also how the company will compete in the local, national, and global market.
Financial planning, forecasting, and externally oriented planning are integral parts of the
planning process. Financial planning is the process of managing finances so that goals can be
achieved. Forecasting is predicting the future events or outcomes.

Externally Oriented Planning

Externally oriented planning is using the external environment to form strategic plans to create a
successful organization. Taking these three things together into a holistic view of how they play
an integral part in the strategic planning process reveals the relevance each plays in the process.
An organization will set stretch goals as part of strategic planning. In other words, it will
evaluate the current operations, capabilities, and resources and then plan just beyond the current
scope. This allows growth to occur rather than the company staying stagnant. When the stretch
goals are created, the financial planning comes into play because the organization must fund the
strategic plan. If the goals are too far out of the current scope, the ability to fund the process will
be absent. By forecasting the needs of the process, the plan will have a more realistic time line,
cost, and probability of success ratio. The external environment is important because if it is a
fast-paced change environment and the strategic plan is long-term with a slow turn-around, the
strategy must be aligned accordingly. 
 SWOT Analysis

Formulating a strategy should begin with a strengths,

weaknesses, opportunities, and threats (SWOT) analysis.
Looking at the strengths and weaknesses is a key step in the
process of strategic management formulation. When evaluating
the internal and external environments, goals and objectives are
created that address the weaknesses and build them into
strengths. The internal and external analysis will also address
changing trends, competition for comparable or substitute
products or services, and emerging markets. This analysis is
imperative to ensure that the organization is going in the right
direction and not blindly creating strategies that will, in the
end, result in the organization failing in the market.
Strategy Formulation

Think of strategy formulation like a road map. When planning

a road trip, many things are taken into consideration such as
mileage to destination, amount of miles traveled per day, cost
and availability of lodging along the way, supplies needed both
on the trip and at the destination, as well as other small steps
that must happen along the way to successfully make it to the
destination. Strategy planning is very similar to this.

The plan begins with the end goal in mind. Determining what needs to happen to get the
organization to the final goal is the strategic plan that must be thoroughly planned out. The
current state of operations, capabilities, and resources of the organization are evaluated to
determine the starting point of the plan. The final stage, or end goal, should also state the desired
state of operations and the capabilities and resources that are needed to achieve success of the
strategic plan.

Formulating the strategy involves determining not only the end goal
but also the intricate steps that each employee, team, or department in
the organization needs to make in the process. Having a well-laid out
plan is important because this will allow each person to not only
understand his or her role in the process, but also the importance of
that role in the overall plan. Communication to all levels of the
organization allows understanding and buy-in to occur. Bennis (2007)
espoused “among the existing disciplines that must contribute if
modern leadership is to be understood are those related to
communication” (p. 4). Communication of the actions that each
employee must complete for the strategy to succeed is important, but
the strategy must also be communicated to the employees to ensure
full understanding of the reason behind the actions.
Strategy Implementation

During strategy implementation, the planned strategy is put into action. Goals are met by
meeting the various financial, operational, and management goals that were determined during
the formulation process. Controls are put in place to monitor and determine the effectiveness of
the plan. Although stretch goals are used during the strategy planning process, the achievement
of the goals must also be realistic. This is monitored along the way to determine if the results are
what were anticipated or if the plan needs adjustments.

Summary

The basic concepts of strategic management include external and internal environmental
scanning, determination of the best strategy to pursue, formulation, implementation, evaluation
and control, and then starting all over again with the process. Through constant vigilance, an
organization is able to obtain and maintain competitive advantage in its industry. Effective
strategic management does not begin with just deciding a new plan; many steps must be put in
place. Before a strategic plan can be formulated, the organization must have clearly defined goals
that have been developed with the mission statement, values, and objectives in mind. The
stakeholders must be taken into consideration because these are the individuals and entities who
will either support or oppose the new course of action. Determining the strengths and
weaknesses within the external and internal environment allows the organization to pinpoint the
areas that need the greatest attention. 

Key Terms
Competitive Advantage

An advantage a company has that gives it the ability to outperform its competitors.

Goals

Broad ideas of what a company would like to accomplish over the long term.

Mission

An abstract statement that describes an organization’s highest ideal.

SWOT Analysis

For each a company’s products or product lines, a situational analysis section might also include
a detailed assessment of strengths, weaknesses, opportunities, and threats, referred to as a SWOT
analysis. Strengths and weaknesses constitute internal elements of the analysis, while
opportunities and threats are external elements. When considering internal strengths and
weaknesses, marketers might look at costs, channel relationships, customer loyalty, brand image,
and available technology. When considering external factors, they might look at the
 competition’s strengths and weaknesses, technological changes, political or economic changes,
and social changes.

A SWOT analysis can be captured in a diagram like this one:

Values

The principles that guide the business’s conduct.

References

Bennis, W. G. (2007). The challenges of leadership in the modern world. American Psychologist, 62(1),

2–5.

Education-Portal (2013). How internal and external factors drive organizational change. [Video]

Retrieved from the YouTube Web site: http://www.youtube.com/watch?v=RiaiSpKFlcw

Johnson, G., Scholes, K., & Whittington, R. (2005). Exploring corporate strategy (7th ed.). Essex:
Prentice Hall.
Questions
The  vision and mission are a key part of an organization's goals.

What changes will the external environmental analysis address that will become part of the
SWOT analysis? (Choose 2)
Competition for comparable or substitute products or services
Changing trends
Competition among suppliers
Emerging industries

When evaluating strategic plans, financial goals are one type of goal which needs to be met and
evaluated. 

What is the purpose of goal setting? (Choose 2)

Determine how revenue will be spent.
Determine how the company will compete in the local, national, and global market.
Determine how many employees will be hired in the next year.
Determine how revenue will be generated and measured.

The mission statement is the purpose of the organization and the values statement defines what
the organization holds important. Understanding the aspects of each is important. Which of the
following are parts of the value statement’s focus?  (Choose 3)
Societal norms
Cultural norms
Services
Ethical norms
Customers

List the basic steps of strategic management:

1. Analyze the external environment
2. Analyze the internal environment
3. Determine the best strategy to pursue
4. Formulate the strategy
5. Implementation
6. Evaluation and control
7. Repeat the process

Why should the external environment always be monitored? (Choose 2)

To determine if competitive advantage can be maintained
To ensure the operational effectiveness of the company remains at acceptable levels
To determine the organizational culture trends to stop any issues before they arise
To see when emerging trends and companies begin to materialize
The needs of a strategic plan are forecast to create a realistic time line.

What is involved in formulating a strategy? (Choose 2)

Determine the steps needed that each employee, team, or department in the organization needs
to make in the process
Determining the end goal
Determining the effect historical data had on strategic plans
Determining how the competitors will react to the strategic plan

The mission statement is the purpose of the organization, and the values statement defines what
the organization holds important. Understanding the aspects of each is important. Which of the
following are parts of the mission statement’s focus? (Choose 3)
Services
Products and services
Societal norms
Ethical norms
Customers

Communication to all levels of the organization does which of the following? (Choose 2)

Allows the executives to hide information without it being obvious
Allows the employees to understand the justification of the plan
Encourages employees’ buy-in into the process
Lessens the likelihood of speculation and doubt

What purpose does the mission statement serve for an organization? (Choose 2)

Defines the purpose of the organization
Provide the ethical norms for the organization
Serves as a guide for the actions and decisions
Provides a clearly defined statement of what the organization wants to accomplish

The process of setting a goal is to determine where the company is today and where it wants to
be at a given point in time. What is one way that goals are defined?
By the edicts of the Board of Directors.
The executives determine what goals will best fit their vision for the future.
Objectives and overall goal of the organization is defined.
The vision is used to create the goals.
Clearly define the vision, mission statement, and values.

An organization will use stretch goals to formulate a strategy. What is a stretch goal? (Choose 2)
Expanding the current scope to reach higher than what is being done
Just beyond the current operations, capabilities, and resources
Stretching the company past the comfort zone
Having employees do more with less so the company can make a profit

Financial planning determine(s) if the current resources can accommodate the strategic plan so
goals can be achieved.
What causes the cycle of change for an organization to be continuous? (Choose 2)
Sales and revenue figures
Consumer demands
Trends and technology changes
Problems and issues that arise
Formulating Business and Corporate
Strategy 97%
Introduction

An organization uses a business strategy to outline how it will compete within an industry or
sector and outperform its competition. A standard business plan will include a business strategy
to determine the steps that will be pursued to achieve the goals. The purpose of a business
strategy is to gain and maintain competitive advantage in the market. This is done by
determining the major issue that need to be addressed, whether it is to increase revenues, the
scope of activities, growth, retrenchment, or globalization. The essential factor is to create value
for the customer by providing a good or service at a comparable price with higher quality or at
comparable quality with a lower price. This is known as increasing differentiation (higher
quality) or lowering cost (same quality).
 Corporate Strategy

In the last decade, the term strategy has become a sort of gold

star in managers' day-to-day language. Corporate strategy, in
particular, is mainly considered to be the summit of managerial
activity and the gate toward high-end careers.

The word strategic is also enjoying a terrific fate in the world of

business (e.g., a strategic project, a strategic customer, a
strategic place, a strategic file). In many cases, the term strategic
is used inappropriately: it means important, but it has nothing to
do with strategy. There are numerous misunderstandings,
particularly in middle management, with respect to the nature
and the depth of strategy.
 

Learning Materials
Core Determinants of Strategy

Strategy is the long-term directional focus, as well as resource allocations decisions, aimed at
creating a unique value for the clients that the firm chooses to serve and winning the battle for
supremacy in the marketplace. Jack Welch, who was the iconic chairman and chief executive
officer (CEO) of General Electric (GE) between 1981 and 2001, said that "strategy means
making clear-cut choices about how to compete" (2005).

Strategy about War

Strategy is about war. It implies a vast array of weapons to be

leveraged in the economic, political, geopolitical, diplomatic, and
social spheres. It concerns the battle for uniqueness, for supremacy,
for sustainable growth, and for superior profitability. The German
philosopher Friedrich Nietzsche epitomized the strategic intent by
arguing that "We want freedom as long as we do not have the power,
but if we have the power, we want supremacy." This implies that
strategy is an escalating process. There is always a next step to be
thought of and built. It is like climbing the mountain. The goal is the
summit of the mountain (leadership and supremacy). This will be
made possible only if your focus and drive keep your firm a step
ahead of your rivals. Napoleon's assertion could serve as a warning
and as a guiding principle for many leaders: "A general-in-chief
should ask himself frequently in the day, 'What should I do if the (Jökullinn, 2012)
enemy's army appeared now in my front, or on my right, or my left?'"
Make the Following Clear

Based on this core principle, a corporate strategy should make the following clear:
 1. What the firm really wants to do
2. What it should not do
Corporate Strategy is Centered

Corporate strategy is centered on stability, growth, and retrenchment. By implementing a

corporate strategy, an organization is able to achieve and sustain competitive advantage by
overcoming the challenges within the industry. Understanding the industry trends and integrating
actions that provide a good or service the consumer desires will propel the organization in the
right direction. An organization must determine where it is today, where it wants to be, and how
it is going to get there. Through this analysis, the process can begin to take shape.

Changes Must Happen

For a company to maintain sustainability within a market, changes must occur. Whether the
company increases the products or services being offered or creates a better product or the same
product at a lower price than what is being offered within the market, change must happen. 

This is possible through an external environmental analysis that determines not only what
customers want but classifies them into smaller groups. This allows each group to be analyzed to
determine not only what each group wants but to determine if there is a cross-group similarity.
Once the analysis is complete, the process of developing or modifying a strategic plan can occur.
The first step in completing the strategic plan is to create a business plan. 

Business Plan

Before a company can compete, a business plan is

created to establish the parameters that the business
will operate within. A business plan is the road map
that will take the business from where it is to where
it wants to be. Just as an entity will create a
business plan as part of the business formation
when a strategic initiative is planned, the business
plan outlines the business in a manner that will give
meaning to the visualization created as the end
goal. The business plan consists of the executive
summary, company description, business structure,
market analysis, product or service, marketing and
sales structure, financial projections, and an overall
end result of the strategic plan results.
Executive Summary

An executive summary encompasses all aspects of the business plan, delineating the mission
statement, basic company information, the strategic initiative that is planned and how it will
restructure the organization, the projected growth, financial projections, and the product or
service that will be offered or altered as appropriate. 

Mission Statement

The mission statement explains what the organization is about. It encapsulates the vision of what
the company stands for and it is in existence. A description of the strategic initiative is included
to explain not only what the end goal to be achieved is but a summation of who or what will be
involved in the initiative. 

A Reason to be Implemented

Along with the strategic initiative, it is important to outline what growth or transformation is expected to come of the actions. A
strategic plan must have a reason to be implemented rather than just having an organization change for the sake of changing. Part
of change being planned is the financial projections that must be thorough and complete to avoid implementing a strategic
initiative that cannot be completed because of lack of financial backing. When completing this phase, it is a best practice to
consider all alternative and roadblocks that could alter the financial implications. Although a projection is an educated guess, a
business plan must include the purpose for the change and the desired outcome of the strategic plan. Outlining what the company
will look like at the completion of the strategic plan to achieve a competitive advantage gives a visual representation of the final
goal. 

Company's Description

The company description is a high-level view of the different aspects of the business. Though
brief, the description gives an overall view of the nature of the business, the product or service
being offered, and how it satisfies the needs of the consumers. When developing the company
description, it is important to have a market analysis completed because this is the research that
has been done to determine if there is a need for what the company wants to do as part of the
strategic plan. Whether it is to increase differentiation or to lower cost, the purpose must be
evident and supported by the market research to determine the consumer demand. Think of this
description as the elevator speech that would be given to explain what the beginning, middle, and
end of the strategic plan process will entail. 

When writing a business plan for a strategic initiative, it is important to delineate what the
different parts of the organization will look like through an analysis of the current operations,
capabilities, and resources, along with how each will be affected by the change. This is done by
analyzing the current business structure and the end result of the plan. In thoroughly examining
these areas, each person directly affected by the change will have a better idea of the role that
will be played during the change. The stretch goal that is being sought through the strategic plan
is the overall end result of the strategic plan. Giving the stakeholders a visualization of that end
result allows deeper understanding of the need and the competitive advantage that is being
pursued. Through completion of the business plan, the organization is able to fully explore all
aspects of the business strategy to determine if it will have a positive effect on the competitive
advantage the company currently has in the market.

Analyzing the Market

Analyzing the market allows an organization to determine the current trends in the market but also the current obstacles and
threats to the competitive stance of the company within the market. The business strategy will include an analysis of the obstacles
and threats within the market, the resources available, and how they can be used to overcome the obstacles and threats. If a new
product or service is planned or an improvement of an existing product or service for a lower price, there has to be a consumer
demand present. A market analysis is not only what is currently offered by competitors but also what the consumer is demanding.
The emerging products or services must also be analyzed to determine if the direction the organization is going in is the right one.
The time line for integration needs to be one that will be ahead of the competition, rather than on pace or behind.

Marketing and Sales

Marketing and sales is an integral aspect of any new initiative a company is implementing. A new product or service is good to
increase or maintain a competitive advantage but only if the consumer knows it is being offered. Budgeting for marketing and
sales allows an organization to reach the target consumers and should be an important aspect of the financial projections. The
determination must be made to include this in the return on investment (ROI) for the cost of implementation. The net present
value (NPV) should also be considered even though it will present an unknown because all of the data will be projected and not
known.

Summary

Formulating a business or corporate strategy is not simply putting ideas down and going with
them. A lot of preparation and research is needed to have a specific plan that will be meaningful
and appropriate. The business strategy outlines how a company will compete within an industry
or sector and outperform the competition. The corporate strategy is centered on stability, growth,
and retrenchment, when necessary. When making a decision for either the business or corporate
strategy, it is important to determine the end goal. This is not always as easy as it sounds. To
simply say a company wants to be more competitive in the industry is not enough. The
organization has to determine how it will increase its competitive stance in the industry. This is
done by determining what the consumer wants or needs and whether or not the company has the
 ability to provide the product or service at a reasonable cost. Through careful planning, the end
result of the business, and corporate strategies, the company is able to obtain or maintain
competitive advantage in the industry.

References

Jökullinn. (December 12, 2012). File:Friedrich Nietzsche-1872.jpg [Image]. Retrieved from the

Wikimedia Commons Web site: http://commons.wikimedia.org/wiki/File:Friedrich_Nietzsche-
1872.jpg

Welch, J., & Welch, S. (2005). Winning. New York, NY: HarperBusiness/Harper Collins.
Questions
The company description is a high-level view of the business. What does it cover? (Choose 2)
The job descriptions of the employees
The product or service offered and how it satisfies the need of the consumer
The sales figures and statistics for the fiscal year with year over year changes
The overall nature of the business

What is meant by segmentation in strategic management? (Choose 2)

Determining how the company will be broken into segments based on department
Understanding how the jobs are being allocated by department or division
Defining prospective customers by marketable groups
Defining the current customers by marketable groups

Strategy is the long-term directional focus as well as the resource allocations aimed at what
purpose? (Choose 2)
Winning the war against the competitors
Creating a unique value for the clients that the firm chooses to serve
Winning the battle for supremacy in the marketplace
Creating a better internal environment for the employees

Which of the following describes the corporate strategy? (Choose 3)

The manner in which the company competes with the competition
How the company will outperform the competition
Transformation
How the company will outperform in the marketplace and industry
Competitiveness
Strategic segmentation
Governance practices
Scope
Reach
Management
Sustainability

Development of the business plan and the executive summary are important prior to beginning a
strategic planning process. Which of the following are elements of the business plan? (Choose 4)
Sales structure
Market analysis
Business plan
Overall end result of the strategic plan results
Strategic initiative
Product or service offered
Business structure
Company description
Marketing structure
Financial projections
Executive summary

Why does an organization use business strategy? (Choose 2)

To determine how it will outperform the competition
To change for the sake of changing
To outline how it will compete within an industry or sector
To determine how employees will complete the job requirements

When completing an external analysis of the customer base, what can be accomplished? (Choose
2)
It can be determined what the customers want.
The customers can be classified into smaller groups so they are easier to target.
The competitors can be placed into segmented groups according to customer base.
The emerging trends can be identified.

Which of the following describes the business strategy? (Choose3)

Sustainability
How the company will outperform the competition
How the company will outperform in the marketplace and industry
Governance practices
Transformation
The manner in which the company competes with the competition

Segmentation in strategic management is defining the current or prospective customers

by MARGET GROUPS.

An organization achieves and maintains COMPETITIVE ADVANTAGE by overcoming

challenges in the industry.

When developing a strategic plan, why is it important to outline what the company will look like
at the completion of the strategic plan? (Choose 2)
This gives a visual representation of what the company will look like so people will understand.
This provides the justification for adding positions that do not currently exist.
This allows the management to make sure the end result is something that is favorable to them.
By communicating the end result, the level of fear employees have for the unknown is reduced.

A company will determine from the market analysis the next steps that are necessary to create
competitive advantage. How is competitive advantage achieved? (Choose 2)
Offering a comparable product at the same price
Discrediting the competitor’s products
Offering a comparable product at a lower price
Offering a better product at the same price
Based on the core determinants, what does corporate strategy make clear? (Choose 2)
How to battle with the competitors
What the competition is doing
What the firm should not do
What the firm really wants to do

Taking a company global is an opportunity to increase the FOOTPRINT AND REVENUE of

the organization.
Implementation of Strategy 97%
Introduction

Implementation is more than simply deciding on the strategic plan and then carrying it out. A
great deal of planning and organization must take place so the strategic plan will be implemented
with a level of smoothness and clarity. When creating the strategic plan, it is important to have
more than an end goal in mind. Imagine deciding to drive from Atlanta to Chicago and getting in
the car and just driving in the general direction. Eventually you may get to Chicago, but it would
not be the fastest, most cost-effective route, and a lot of money would be spent trying to correct
mistakes along the way. This is the same outcome an organization will have if the strategic plan
does not have clearly defined actions associated with the requirements for each step that must be
completed through to the end goal. Each step along the way to completion must also be tied to a
control.

A strategic plan does not exist without change being an integral part. The
mantra may be “change is good,” but there will always be resistance to
change somewhere within the organization. To be prepared for the
implementation, it is a best practice to plan for the problems that may arise
along the way. Action items should be measurable and accountable,
allowing the employees to understand the importance each one plays to
the overall goal.

Learning Materials
Read the following article on a middle management perspective on strategy implementation: 
Open file: A Middle Management Perspective on Strategy Implementation
 
When creating an implementation plan, a best practice is to start with
the end in mind. Determining what the end goal is before creating the
steps to complete it allows the focus to stay on the goal. The external
and internal environment analyses must be evaluated to determine
how they will affect the strategic plan, along with the opportunities
and threats that the analyses have uncovered. The strategic plan must
be scrutinized to determine if the competitive advantage the plan will
provide is worth the cost of implementation.  Because change does
come with a cost, both real and relative, the impact on the
organization should also be evaluated.  The current operations,
capabilities, and resources should be compared to those needed by
completion.

This involves a cost of time and money for the organization to implement. Controls must be put
in place to ensure the projected target cost is not exceeded outside of the buffer zone. This is
done by closely aligning the operations and resources to the steps within the strategic plan with
the budgetary line item and then placing a control to monitor the progress.
Just as the actions are aligned with the strategic plan, so must the budget and the
performance of employees be specific and measurable. Change can be difficult for some
people, so creating performance measurements, new standard operating procedures, and
following through with monitoring adherence allow the effectiveness of the plan to be
gauged. Leaders within the organization must ensure the employees are following the
implementation strategy because “for every successful corporate transformation, there is at
least one equally prominent failure” (Ghoshal & Bartlett, 2000, p. 195). By measuring the
outcomes at different intervals, it is possible to fix an error in planning before the entire plan
derails.

Any compensation or bonuses that are tied to the success of the strategic implementation must also be closely aligned with the
steps and overall success. Although the budget is projected without all of the possible variables being known prior to
implementation, it is still important for it to be specific, allowing little deviation or misunderstanding of mission requirements. 

The organizational structure should be evaluated to ensure that

it is appropriate for the new strategy. A strategic plan is one that
takes the organization to a different level in the market. If the
organizational structure is not evaluated and changed as needed,
the plan will have a harder time being successful. Within the
structure, the employees must be engaged in the process of
strategy implementation. Without the buy-in of the employees,
the change initiative has little hope of success. The process for
engaging the employees will change the structure if the
employees have not played an active role in the communication
and implementation phases in the past.
Prior to implementation, the employees need to
be prepared for what to expect. It is a good idea
to include the leaders (those employees with
influence among the teams) in the planning
process. The employees who work in the areas
that must be changed have first-hand
knowledge that the executive team may not
know or understand. This knowledge can be
beneficial during the planning process as the
contingency plans are being integrated into the
plan. The employees who will be responsible
for the implementation will have additional
knowledge of what issues could arise as part of
the change. By getting the buy-in of these
leaders, the implementation phase will have a
champion for the purpose as the difficulties
arise and employees lose faith in the success.
The most important aspect within the strategic
implementation plan is communication.
Although executives may belong to the school
of thought that only the pertinent information
needs to be shared with employees on an as-
needed basis, this could lead to poor employee
buy-in and commitment to the process.
Communication is often misunderstood, but as
Bennis (2007) stated, “among the existing
 disciplines that must contribute if modern
leadership is to be understood are those related
to communication” (p. 4).
Add this to what Muller (2006) asserted, that
“the people and so-called ‘soft’ issues are what
can make the difference between success and
failure” (p. 203), and it is easy to understand
why communication is so important. When an
organization is preparing to embark on a
strategic plan, it is imperative that the vision
and mission of the goal be communicated to not
only help the employees understand why the
company is making a change but to also
communicate the importance each employee
will play in the successful completion of the
plan.

Going back to the road trip scenario, imagine along the route there is construction and a detour is
needed. The detour and modification to the plan would not make you give up and go back to
Atlanta. The route would be adjusted, along with other variables, and the trip would continue as
planned. The same can be said for strategy implementation. No matter how much brainstorming
goes into the planning of a new strategy, there will always be variables that weren’t considered.
By closely monitoring the process of implementation and adapting as necessary, the plan can
proceed to completion. Throughout the process, a best practice is to document the integration
process. Learning from things that went well is just as important as learning from things that
went terribly wrong. Strategic planning is not a one-time occurrence, so it is important to learn
from both the mistakes and successes for future planning.

Summary
Implementing a strategy is more complicated than just deciding a change must be made to either
maintain a competitive advantage or to create one. The implementation plan takes into
consideration all of the analyses that have been completed and determines the impact they will
have not only on the organization but on the plan itself. Like a road trip, all variables along the
path must be taken into consideration to determine the best method of overcoming the obstacles
that will come along the way. Not only must the steps be delineated within the implementation
plan, they must also be communicated in a manner than helps the employees understand the
purpose for the strategic plan and also each person’s role in the plan. Giving the feeling of
ownership of the success is an important aspect of obtaining employee buy-in into the plan and
thus, the plan’s success. Financial data and employee performance must be tied to control
mechanisms to ensure all aspects are implemented successfully.

References
Bennis, W. G. (2007). The challenges of leadership in the modern world. American Psychologist, 62(1),
2–5.

Muller, N. (2006). Mergers and managers: What's needed for both to work? Reflections on a merger of
two higher education libraries in KwaZulu-Natal. South African Journal of Library &
Information Science, 72(3), 198–207.
Questions
During the __________, the actions of the employees must be specific and measurable.
planning process
process
evaluation phase
implementation phase
strategic plan implementation

Strategic planning is not a one-time action taken by an organization. What is important to learn
from the process? (Choose 2)
Mistakes
Hazards
Successes
Oversights

Change can be difficult for some people to adjust to. What should be created to assist with the
adaptation process? (Choose 2)
Performance measurements
New standard operating procedures
Nothing; the employees will do what they are told
General guidelines for everyone to follow
Following through with monitoring adherence

Why is it important to completely outline the implementation process as a part of the planning
process? (Choose 2)
It allows the process to be broken down into manageable parts that can be monitored and
controlled.
It allows the entire strategic plan to be scrutinized to determine if the current operations,
capabilities, and resources will support the endeavor.
The steps needed for implementation are only needed in broad terms so there is plenty of room for
employees to make changes as they see fit.
It allows the exact steps needed to be outlined so no modification or deviation will be needed.

Which is one way that the implementation can be evaluated?

After completion of the plan so it can be evaluated for success of the plan overall and the
processes that were completed
Only after the plan is completed so time is not wasted second guessing the process
The implementation should be evaluated at every small step that is taken so problems can be spotted
and fixed
There is no need to evaluate the implementation, only the success of the plan

Having the end goal in mind when creating a strategic plan allows for which of the
following? (Choose 2)
The needed steps to be delineated in a way that shows each person/department what is required
of them.
Keeps the company from starting too many initiatives.
Allows the employees to forecast the overtime that needs to be allocated.
Allows the process to proceed in the correct direction with well-defined steps.

Controls are used for ____________. (Choose 2)

ensuring the implementation steps are completed and monitored for adjustment
micromanaging the implementation process
setting standards
ensuring the projected target cost is not exceeded outside the buffer zone

Which is one way that the implementation can be evaluated?

There is no need to evaluate the implementation, only the success of the plan
The implementation should be evaluated at every small step that is taken so problems can be spotted
and fixed
After completion of the plan so it can be evaluated for success of the plan overall and the
processes that were completed
Only after the plan is completed so time is not wasted second guessing the process

External environment analysis illuminates the OPPORTUNITIES AND THREATS the

organization will face during implementation.

During the Implementation phase of the Strategic Process, the actions of the employees must
be specific and measurable.

The budget should be tied directly to the strategic plan and be _________. (Choose 2)
measurable
wide-ranging
common for all aspects
specific

Communicating the vision and mission of the plan to be implemented will do which of the
following? (Choose 2)
Communicate the importance each employee will play in the successful completion of the plan
Alleviate all concern about a change being implemented
Help the employees understand the vision and mission of the company
Help the employees understand why the company is making a change
Social Responsibility 97%
Introduction
Leaders within organizations are becoming increasingly aware
that they do not exist in a vacuum. The needs of the consumers
and stakeholders must be taken into consideration when running
a business and when developing strategic plans. By including
the consumers and stakeholders into consideration when making
decisions, the organization and the external environment can be
more closely aligned, thus creating a benefit for both internal
and external stakeholders.

Incorporating social responsibility into the strategic plan demonstrates the concern an
organization has for its stakeholders and the community. Social responsibility encompasses not
only the stakeholders but also the economic, legal, and ethical responsibilities the organization
has to the community and the environment at large.

Learning Materials
Social responsibility is affected by organizational factors such as
leadership; employee–employer relations; and the mission, vision,
and values of an organization. When developing a strategic plan, the
social responsibility factors faced by the organization must be taken
into consideration. For the strategic plan, it is important to take into
consideration the impact on the stakeholders, along with the
economic, legal, and ethical responsibilities. An organization has the
moral responsibility to not cause harm to the stakeholders and to
support and not deplete the economic growth of the area where
operations are maintained. Depending on the location of the
operations, different legal ramifications may play a pivotal role in the
strategic planning process.

This is especially true when taking into consideration the global market. Research must be
completed to determine if the laws and regulations differ in the new location and how that will
play a role in the planning process. Above all, the organization has an ethical responsibility to do
no harm. Many organizations have embraced a philanthropic stance within the community to
assist where they are able.

There is a trend within organizations to sustain social initiatives such

as sustainable energy, recycling material or resources, and green
construction. Environmental factors play a role in the strategic
planning because they allow the organization to reach the goal while
giving back to the community and the environment. Philanthropy is
giving of time or money to the community. Understanding the impact
on stakeholders allows the environmental scanning to include the
social responsibility aspects of the strategic planning process.
Click on the following icon to watch a video about a technology company's effort towards social
responsibility:

http://www.ted.com/talks/chade_meng_tan_everyday_compassion_at_google#t-339819

Stakeholders are anyone who affect the

company or are affected by the operations of
the company. Conducting a stakeholder impact
analysis is instrumental in understanding the
external environment. Through understanding
the economic, legal, ethical, and philanthropic
responsibilities the organization has to the
stakeholders, the opportunities and threats to
the organization can be identified. Remembering
that a strengths, weaknesses, opportunities, and threats (SWOT)
analysis is completed throughout the strategic planning process,
this step allows the analysis to be used in another unique
manner. Understanding the threats the stakeholders could pose
if the strategic plan is implemented allows modification of plans
if necessary.
Focusing on for-profit companies, economic
responsibilities encompass making a profit,
paying applicable taxes, and creating economic
growth while producing an affordable good or
service for the consumer. The goal of an
organization is to make a profit. Investors in a
company want to see a return on investment for
the capital. Making a profit allows the return on
investment to stimulate future growth and
potential. When a company pays applicable
taxes for a location, creates jobs, and increases
operations, the process creates economic
growth within the region the company conducts
operations.

Being socially responsible for the natural resources and showing stewardship for the area shows
a dedication to sustainability. Equally important in the economic responsibilities is to produce an
affordable good or service for the consumer. Market research allows a company to evaluate the
plausibility of the economic responsibilities that are being met.

Legal responsibilities include the local, state, federal, and

international laws that are applicable to an organization dependent on
the location of operations, to include branch or satellite locations. A
company is responsible for not only knowing the laws and
regulations but to follow them and show due diligence in applying
them to the daily operations and strategic planning process. These are
the “rules of the game” that must be followed to stay in compliance.
Laws include labor, consumer, environmental, and reporting.

A common law, the Accounting Reform and Investor Protection Act of 2002, otherwise known
as the Sarbanes-Oxley Act of 2002 or SOX was enacted to protect stakeholders. The reporting
and auditing requirements are strict and place more responsibility on the chief executive officers
(CEOs) and chief financial officers (CFOs) of an organization to take ownership of the actions of
the company. 

When a company makes the decision to begin global operations, the applicable laws and regulations may change dramatically.
Leadership must make the determination to not only follow the laws of the host country but to also maintain the ethical standards
set forth by the U.S. laws and regulations. This may be confusing, but consider the minimum wage in the United States, which
was $7.25 per hour as of February, 2014. In India, it was $0.28 per hour, and in Australia it was $16.88 per hour, showing the
vast difference that is evident in the global market. Not only must the minimum wage be taken into consideration, but the cost of
doing business in the new country and also the standard labor laws. If the laws are in conflict with the socially acceptable
behavior in the United States, consumers may find doing business with the company unfavorable. Regardless of where an
organization chooses to conduct business, legal responsibilities will be present. Understanding and applying the laws to the
business is imperative for continued operations. 

The goal of an organization is to be profitable while fulfilling its economic and legal
responsibilities. The decisions that are made will be scrutinized by the stakeholders and
consumers to determine if the ethical responsibilities are being met. As a part of the process
of operations, leadership will define the ethical issues present, gather assumptions, validate
the assumptions based on facts, and make a decision based on those facts. To consider the
ethical issues that are present, an analysis of the internal and external environment must be
thorough. Only through this action can the issues be uncovered and examined to determine
the rank of impact and importance. Each person may have a different interpretation of the
issues with associated assumptions.

The assumptions collected must be analyzed not only for validity but also for applicability to the specific ethical issue. The facts
that emerge through the analysis are used to make a decision.

Part of the decision-making process is to focus on the consequences of the decision. A determination must be made as to whether
the decision will have a positive or negative impact on the organization and society as a whole. This may seem extreme, but an
organization has the moral responsibility to maintain social responsibility in the decision-making process. The duties, obligations
and principles of strategic management as it applies to social responsibility are the process of using ethics and integrity in
decision making. A responsibility of leaders is to understand that even though an action may be legal, the ethical implications and
assumptions could cause a detriment to the stakeholders, community, and consumers. This knowledge should encourage an
organization to fully analyze the risk to determine the assumed outcomes of the decision. 

Socially responsible organizations have an obligation to participate in philanthropic activities within the community. Voluntarily
giving back to society shows a commitment not only to the shareholders and profits but also to the community that sustains and
supports them. Philanthropy includes donating time, money, and services to local community organizations, improving the
natural environment and giving back to the community at large.

The following article highlights America's 100 Best Corporate Companies in 2014:

 http://www.forbes.com/sites/susanadams/2014/04/24/americas-100-best-corporate-citizens-in-
2014/

The following video discusses two social responsibility perspectives: shareholder and
stakeholder

http://www.youtube.com/watch?v=vD9XJKZmXEs
 Summary

Companies are in existence to make a profit but the economic responsibilities do not stop there.
The company must pay the applicable taxes, create economic growth for the community, and be
mindful of the social responsibility aspects of doing business. Social responsibility encompasses
the economic, legal, and ethical responsibilities that an organization has to the stakeholders and
community. Social initiatives, such as sustainable energy, using or conserving recyclable
materials or resources, and green construction demonstrate a commitment to the environment
and the community where operations are maintained. 

Key Terms
Philanthropy

Is giving of time or money to the community.

Stakeholders

Anyone who affect the company or are affected by the operations of the company.
Questions
An organization has the moral responsibility to not do which of the following? (Choose 2)
Cause consumers to pay higher prices
Create competition in an area that was ruled by a monopoly
Deplete the economic growth of the area
Cause harm to the stakeholders

Decisions are analyzed to determine if they will have a negative or positive impact on
whom? (Choose 2)
The organization
The shareholders
The society as a whole
The board of directors

Strategic assumptions are collected and then examined for validity and applicability.

The goal of an organization is to _____________. (Choose 2)

fulfill the economic and legal responsibilities
recycle
reduce waste
be profitable

What is a stakeholder? (Choose 2)
Shareholders
The executive team
Anyone who affects the company
Anyone who is affected by the operations of the company

The Accounting Reform and Investor Protection Act of 2002 (SOX) creates more reporting for
public companies. What benefit does it have? (Choose 2)
Creates more awareness for the executives of how the company is doing
Protects stakeholders
Allows the public to view the financial statements and details about a company
Creates job security for accounting professionals

The goal of an organization is to be profitable while fulfilling the economic and legal
responsibilities. Which of the following are elements of economic responsibilities? (Choose 3)
Produce an affordable good or service
State laws
Make a profit
Creating economic growth
Due diligence
Paying applicable taxes
Making a positive return on investment benefits the local community by stimulating
future GROWTH.

What types of responsibility reflect the active role of the organization in the community?  social
and corporate 

The internal and external environments must be analyzed to thoroughly consider the ethical

issues present. 

What benefit does making a positive return on investment do for the local community?
Create more jobs
Allow the company to continue operations
Create a competition to drive prices down
Stimulate future potential
Stimulate future growth

When considering operations in a new location, what legal aspects must be taken into
consideration? (Choose 2)
What are the statistics for legal proceedings in the new region?
How socially responsible are the competitors in the region?
What laws and regulations differ in the new location?
How will the different laws and regulations affect the company?

When a decision is judged to be legal, what is the other test it must pass before being
implemented? (Choose 2)
Is it ethical?
Is it moral?
Will it succeed?
Is it likely to create value for the company?
Corporate Governance 97%
Introduction
Corporate governance is the system used by organizations to
ensure accountability and fairness when dealing with the
stakeholders and the government. The framework of the
corporate governance includes a distribution of rights,
responsibilities, and rewards. A major aspect of corporate
governance is the control of conflicting interests when
delegating duties and roles within the company and between the
company (and stakeholders) and the community—essentially a
checks and balances between successful and legal.

Proper control, supervision, checks and balances, as well as the flow of information being
closely governed are necessary. Governmental regulations and laws have been enacted in recent
years because of the unethical acts of individuals. The laws and regulations within the realm of
corporate governance help increase the level of security in preventing gross abuse of power in
using the company for individual gain.

As companies become more segmented and when they enter into the global market, the need for
more controls on the corporate governance structure occurs. Depending on the country chosen
for cross-border operations, the laws can range from slightly different to vastly different than
those in the United States. Corporate governance is the set of standards and controls the
company will have in place to ensure all applicable laws and regulations are adhered to.

Learning Materials

Corporate governance is a checks and balances used by an

organization to ensure it is conforming to the set rules and procedures
that have been put in place. Corporate governance is structured to
specifically distribute rights and responsibilities among different
employees. Rules and procedures pertaining to the decision-making
process are clearly defined to ensure there is accountability and
control.

Within corporate governance, a set of standards is put in place to control the principal–agent
transactions. To put it simply, the principals own the company, and the agents make decisions
on their behalf. Even though the shareholders own the company, they do not make the day-to-
day operational decisions. This is left up to the managers and directors who perform the daily
tasks. The role of corporate governance is to ensure that the agents act in the best interest of the
company rather than their own. When a manager makes a decision that is in his or her own best
interest rather than in the interest of the company, he or she is outside the realm of ethical, and
possibly legal, actions. It is important to note that a decision must be weighed on the legal versus
ethical scale. An action that is legal does not necessarily mean it is ethical; conversely, an ethical
decision is not guaranteed to be legal. The corporate governance structure puts guidelines in
place to monitor and control the decisions made by the agents on behalf of the principals to
ensure the legality of decisions can be tested.

The article below discusses how Asian countries are looking to reform their corporate
governance:

http://online.wsj.com/news/articles/SB10001424052702303939404579532883189537684?
mg=reno64-wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle
%2FSB10001424052702303939404579532883189537684.html

There are clearly defined rules and regulations that a publicly traded company must adhere to.
Organizations are required to follow the Generally Accepted Accounting Principles (GAAP) for
financial statements that are then audited by an outside source and filed with the Securities and
Exchange Commission (SEC). 

Activity

Go to http://www.sec.gov.

Select “Filings.”

Click on “Search for Company Filings.”

Click on “Company or fund name, ticker symbol, CIK (Central Index Key), file number, state,
country, or SIC (Standard Industrial Classification).”

Type in a company name.

Click “Search.”

Select the correct entry if more than one appears.

Locate and open the most recent 10-K report.

From this page, you can search all the filings the company has submitted to the SEC. The most
common report used for researching a company is the 10-K report, which will not only contain
all of the financial data of the company but also risk factors, legal proceedings, and disclosures.

Audits and government regulations have clearly

defined requirements for organizations to
follow. Accounting principles, rules, and
regulations have been changed since 2002 with
the enactment of the Sarbanes Oxley Act to
help minimize the instance of fraud and abuse.
Even though there are still a tremendous
amount of reporting requirements, fraud and
 abuse still exist in some companies. Corporate
governance structures are put in place not only
to show compliance in reporting but to
minimize harm to the employees, shareholders,
and the community.
As markets become saturated in the United
States, many organizations turn to the global
market for growth opportunities. In 2010, the
value of the over 11,719 reported global
mergers and acquisitions was over $2,088
billion (Bagshawe, Chau, & Wilke, 2011, p. 3).
Taking a company global is a real opportunity
to increase the footprint of the organization and
increase revenues. However; there is an
increased risk with this course of action as well.
Global mergers and acquisitions have a 60–80%
failure rate (Marks & Mervis, 2001).
Globalization opens another proverbial can of
worms when you consider corporate
governance.

Take, for example, a U.S.-based company that has principals in the United States. The agents
handling the day-to-day operations are in the host country and are either expatriates (U.S.
citizens working abroad) or host country nationals. The customs, ethics, and morals, along with
the local laws could be vastly different than those in the United States. A well-planned corporate
governance structure for globalization determines the standard operating procedures for the
cross-border operations in addition to having a clearly defined set of controls in place to monitor
adherence.

Summary

Corporate governance is the set of standards and controls for a company to ensure compliance
with applicable laws, regulations, and ethical standards that an organization must follow. As
demonstrated through the activity, the financial statements yield a plethora of information that is
useful for strategic planning. Understanding not only the information but how it is integrated into
the planning process allows a leader to understand the importance of not only the data but the
laws and regulations that govern the reporting of the data.

Key Terms
Corporate governance

The set of standards and controls the company will have in place to ensure all applicable laws
and regulations are adhered to.
 Principals

Own the company.

Agents

Make decisions on behalf of the principals.

References

Bagshawe, H., Chau, M., & Wilke, F. (2011, January 5). Mermermarket M&A round-up for year end
2010 [Press release]. Retrieved from the Mergermarket.com Web site: http://
www.mergermarket.com/pdf/Press-Release-for-Financial-Advisers-Year-End-2010.pdf

Marks, M., & Mirvis, P. (2001). Making mergers and acquisitions work: Strategic and psychological
preparation. Academy of Management Executive, 15(2), 80–92.

U.S. Securities and Exchange Commission. (n.d.). Retrieved from http://www.sec.gov

Questions
Who supervises the evaluation of the effectiveness of the disclosure controls and
procedures? (Choose 2)
Shareholders
Chief Executive Officer
General Manager
Chief Financial Officer

Rules and procedures pertaining to the decision-making process are clearly defined to ensure
which of the following? (Choose 2)
Understanding
Accountability
Fewer mistakes
Control

The purpose of corporate governance structures is to do which of the following? (Choose 2)

Minimize harm to employees, shareholders, and the community
Show compliance in reporting
Make sure the public knows what is going on in the company
Create more work

Information relevant to stockholders is found in parts 2 and 3 of the 10-K report.

Corporate governance is the system used by organizations to ensure accountability and

fairness when dealing with the stakeholders and the government.

Risk factors are listed in part __________ of the 10-K report.

1, Item 1A
2, Item 9A
4
3
1

Why is corporate governance put in place? (Choose 2)

To cause hardship on the employees
To ensure the decisions made by agents are legal
So the actions of the agents can be tested
To increase the positive image of the organization

When a manager makes a decision that is in his or her own best interest rather than in the interest
of the company, he or she is _______________. (Choose 2)
making a possible illegal action
creating a promotion opportunity
making a smart decision
outside the realm of ethical actions

A major aspect of corporate governance is the control of conflicting interests when

delegating DUTIES within the company.

Why was the Sarbanes-Oxley Act enacted in 2002? (Choose 2)

To create more accounting jobs
To minimize the responsibility of executives
To reduce the instance of fraud
To minimize abuse
External Environmental Analysis 98%
Introduction

Understanding the external environment is more than simply knowing there are outside forces
that will have an impact on an organization. Research must be conducted that will illuminate not
only what forces are at play but the effect each will have on the success of the business.

There are many tools a company can utilize to determine

the opportunities and threats within the external
environment. Completing an analysis of the political,
economic, sociocultural, technology, ecological, and legal
(PESTEL) factors within the geographical area of
operations allows opportunities and threats of the
environment to be examined in great detail. Understanding
the competition within a market is imperative for a
company to gain and maintain a competitive advantage.

Whether a company decides to begin operations in another country, embark on a cross-border

merger or acquisition, or simply have suppliers in different countries, globalization affects every
company in some manner. There has been an abundance of research on the global market,
barriers to entry, and threats that are present. When a company makes the determination to
actively participate in the global market, in any manner, the research should be consulted to
ensure mistakes of previous companies are not repeated. In this lesson the concepts within the
external environmental analysis will be discussed. This basic information will assist in analyzing
the benefits and challenges of completing the external analysis along with the opportunities and
threats that will be discussed in further lessons.

Learning Materials

The political, economic, sociocultural, technology, ecological and legal (PESTEL) analysis
should be completed prior to and during operations in any geographical region. When a company
becomes complacent and does not evaluate the external environment along with the competition,
the likelihood of losing competitive advantage in an industry increases. Completing an analysis
of the PESTEL factors within the geographical area of operations helps determine the
opportunities and threats that are present.

The political climate in a geographical area will

have many similarities to the industry but also
some major differences. Knowing the laws and
regulations of an area prior to beginning
operations allows the company to determine if
the political climate will be welcoming to the
type of business. The government plays
different roles in businesses depending on the
 location. For this reason, it is important to know
the role and level of involvement that the local
government plays in trade unions. The level of
bureaucracy and corruption of the local
government will help determine the
involvement that it will have in the company
once operations are established.
The economic health of a region where
operations will be established is determined by
the type of industry and the target customers.
Take into consideration a rural area with low
economic growth and income level. This may
be an ideal area for a manufacturing plant that
has the goal of cheaper labor, provided the
transportation alternatives are abundant.
However, if a large supermarket were to target
this area, the sales may be low with little to
stimulate sales other than the employees who
also shop there. Other factors to take into
consideration for the economic health of a
target location are the growth and inflation
rates, the consumer’s disposable income, price
fluctuations, and credit availability. The
weather and climate changes have a direct
effect on the economy as well as the labor costs.
When evaluating the sociocultural aspects of a region, an analysis of
the demographics of the population is taken to a deeper level. Not
only are the areas of age distribution, population growth rate, gender
distribution, and family size evaluated, but the list of areas to take
into consideration is must more in-depth. The education level,
attitudes about such things as work and leisure, product or service
quality, and buying habits are also integral facets to be considered.
When looking at the average income level and span, it is also
beneficial to analyze the social class distribution and the lifestyles of
each group.

The technological analysis includes not only the basic infrastructure within the region of
operations but also the level within the industry. The availability of technology integration into
the area of operations can be instrumental in the maintenance of a competitive advantage once it
is achieved. Because most industries rely heavily on the Internet, the availability and current
infrastructure in the area is of paramount importance.
Some analyses stop with the political, economic, social,
and technological (PEST) analysis; however, taking the
analysis to the next level allows a more thorough
illustration of the geographic region. Analyzing the
environmental aspects such as weather, climate change,
recycling, waste management, and how each one will
affect operations allows the planning to be preemptive.
The legal analysis takes an in-depth
view at the local laws and
regulations that could assist or
hinder operations and growth.

When the areas of political, economic,

sociocultural, technology, environmental,
and legal are evaluated, the results must
also be cross-referenced to determine if
any of the findings have a direct effect on
another area.
When thinking about barriers to entry, it is common
to think only of a new company being created in an
established industry. However, this can also be a
factor in the creation of an existing company in a
new area. Not only must the PESTEL be completed
for the region, but the competitors in the area must
also be evaluated. If a market is saturated, the
likelihood of being successful in the sales life cycle
is diminished. The company would have to have a
better product or service at the same price range or a
comparable product or service at a lower cost.

Porter’s Five Forces Model is a valuable tool for determining the threat of entry, the power of
suppliers, the power of buyers, the threat of substitutes, and the rivalry among the existing
competitors. The Five Forces Model ties into the PEST analysis by pulling in an evaluation of
the industry within the region where operations are proposed.

Competition comes in many forms. Whether there is perfect

competition, a monopolistic competition, an oligopoly, or a
monopoly, the industry must be monitored using the Five Forces
Model to anticipate any emerging threats. In a perfect world, every
industry would have a perfect competition model. There would be
many firms offering comparable products and prices with an easy
entry for new companies.
No one company would have a competitive advantage in the industry but would attain
competitive purity, allowing the customer to make a choice based on personal preferences and
price, even though it would be comparable. Few companies strive for this type of competition
because the likelihood of making a large profit is nonexistent. A monopolistic competition, on
the other hand also has many companies in the industry, but there is product differentiation.
Barriers to entry exist, but as companies are able to provide a unique product or service that goes
above the industry standard, entry is obtained.

An oligopoly exists when there are few competitors in the market

and the companies are interdependent. A good example of an
oligopoly is the airline industry. If one of the major airlines lowers
the rates or offers a perk that customers want, the other airlines
follow suit to save the customer base. Differentiation has to be major
enough to make the customer sway from a commitment to another
company. Small differences made by airlines such as the snacks and
meals offered on flights probably would not draw customers from a
competitor. On the other hand, the cost for additional baggage may,
depending on the type of customer (business versus leisure).

Changes made by one company in an oligopoly are often replicated by the competitors at a rapid
pace, which causes the competitive advantage to be short lived. When a company is the only
supplier of a good or service, a monopoly has been created. This could be as huge as one
company having the only operating system on a personal computer or as small as an area only
allowing one utility provider such as electricity, gas, cable, or phone service.

The following article discusses an oligopoly in mobile advertising:

http://digiday.com/platforms/mobile-advertising-oligopoly/

 The following video reviews the key components of evaluating external environments:

http://digiday.com/platforms/mobile-advertising-oligopoly/

Summary
When evaluating the external environment for opportunities and threats, it is imperative that a
company use all of the available tools. A thorough analysis helps make the determination if an
area is suitable for operations prior to establishing the company in a geographical region or
country. The analysis does not stop when operations start, though. Throughout the life cycle of
the organization, the external environment must be monitored for emerging competitors, industry
trends, and customer demands. Using the PESTEL, Porter’s Five Forces Model, and an analysis
of the competitive nature of the industry and region allow a company to achieve a competitive
advantage in the industry or to make the choice to investigate other alternatives.
 PESTEL Analysis Porter's Five Forces Model

Key Terms
Oligopoly

Exists when there are few competitors in the market and the companies are interdependent.
Questions
A monopoly exists when _______________. (Choose 2)
many firms offer comparable products and prices
one company is the only supplier of a good or service
barriers to entry are too high for competitors to emerge
a company can offer a unique product or service and standard entry to the industry is easily attained

An oligopoly exists when there are fewer competitors in the market.

The economic and sociocultural aspects of the PEST analysis illustrate a great deal about the
target markets for operations. Which of the following characteristics are elements of
economic? (Choose 3)
Consumer’s disposable income
Population growth rate
Labor costs
Credit availability
Age distribution
Gender distribution
Weather and climate changes
Target customers
Price fluctuations
Type of industry

After the PESTEL data are gathered, what analyses should be conducted? (Choose 2)
Use the data only if necessary for completion of the strategic initiative.
Determine if there is any cross-relevance of data that will affect the organization.
Apply the information only to the strategic plan.
Determine the effect each will have on the organization and the strategic plan.
Determine if the country is a good target for operations.

The economic and sociocultural aspects of the PEST analysis illustrate a great deal about the
target markets for operations. Which of the following characteristics are elements of
sociocultural? (Choose 3)
Average income level
Education level
Weather and climate changes
Type of industry
Growth rates
Buying habits
Population growth rate

In a monopolistic competition, which of the following statements are true? (Choose 2)

When a company can offer a unique product or service, standard entry to the industry is easily
attained.
Many firms offer comparable product and prices.
Product differentiation is high.
Price is even, allowing customers to choose based on personal preference.

Understanding the LAWS of an area prior to operations beginning allows the company to

determine if the political climate will be welcoming.

A perfect competition exists when ___________. (Choose 2)

barriers to entry are high
the price and quality of products and services is varied
price is even, allowing customers to choose based on personal preference
many firms offer comparable products and prices

To evaluate the technology for a proposal of a new location, what must be taken into
consideration? (Choose 2)
The current level of technology being integrated within the industry
The current basic infrastructure within the region of operations
The ability of the company to surpass the technology being used in a region
The technology available in other regions

Porter’s Five Forces Model should be used to determine which of the following when entering a
new region? (Choose 2)
The likelihood of pulling employees from competitors in the region
The barriers to entry for the region
The rivalry among the existing competitors
The management structure needed for the new operations
Internal Environmental Analysis 98%
Introduction

When operations are running smoothly, the external environment is being vigilantly scanned for
opportunities and threats, and a company has attained competitive advantage, the company can
become overconfident that all is as it should be. An internal analysis is the process of reviewing
the aspects of a company’s operations, vision, mission, leadership, capabilities, and value chain.

The aspects of the SWOT (strengths, weaknesses,

opportunities, and threats) analysis that are analyzed in the
internal environment are the strengths and weaknesses of a
company. The resources of the organization, whether
tangible or intangible, have a direct effect on the success of a
company today and in the future.

Just as an organization can be equated to a living thing, the internal culture will morph as the
mission and vision of company’s operations change in response to the changing need of the
consumers. As the culture within an organization changes, so does the organizational behavior.

Learning Materials
A common mantra in the business world today is that
the employees are the greatest asset for a company.
This is a good ideology to have; however, it is
important to understand the core competencies of not
only the organization but of the employees.

As the company changes through strategic initiatives, the competencies of the employees must
also be revisited. Training and development of new products and services takes time, money, and
energy of all involved. Existing resources may not be sufficient to bring all employees up to the
level required by the new systems and procedures. Making this evaluation a part of the strategic
planning process allows a smoother transition during the implementation phase. Although it may
seem tedious, the evaluation of the core competencies should be completed according to
position, function, or through a value chain analysis.

A value chain analysis involves the evaluation of

every step of operations.

According to Porter (1985), the value chain consists of inbound logistics, operations, outbound
logistics, marketing and sales, and services, with support activities such as procurement,
infrastructure, human resource management, and technological development. The basic outline
that Porter provided can be applied to any company’s operations. This value chain is used as a
means for gaining competitive advantage through strategic planning. A common mistake that a
company can make is to cater to the consumer. Although it is important to satisfy the needs of
the consumers, it is dangerous to make this the focal point of strategic planning. The value chain
analysis takes Porter’s model and applies it to the functional areas of an organization to ensure
that it is optimizing the resources within the organization. Analyzing each of the functional areas
allows the organization to determine if the resources are being properly allocated and utilized for
optimal performance.

Resources of an organization, both

intangible and tangible, provide a source of
benefit for a company. Intangible resources
are sometimes difficult to identify because
they lack physical form.

Intellectual property, patents, trademarks, and goodwill provide a source of income over time
and can aid in the achievement of competitive advantage in the industry.

Intangible resources contribute to the

differentiation of a company among the
competitors. Intangible resources or assets are
those things that a company possesses that cannot
be seen or felt but could be the thing that tips the
advantage in the competitive market.

Consider the brand names that are most popular. It is common for a consumer to purchase a
product or service based solely on the brand because of the reputation for quality associated with
the company. The technology and skills of the organization can be measured but are also
intangible. Leveraging the intangible resources within the organization aids in the fight for
competitive advantage.
 Tangible resources are assets and are easier to
identify because they can be seen on the financial
statements of an organization. These resources are
not sold to customers but used in operations.

Equipment, land, vehicles, and buildings are all assets that a company uses in the process of
production. Although emerging technology and resources can cause the need for updating and
replacement, these types of items are valuable to a company. The internal analysis allows the
intangible and tangible resources to be evaluated to determine if they still meet the needs of the
changing organization. The physical and financial assets of an organization are used to produce
the product or service for consumers and to gain leverage among the competition.

Strategic planning requires the current assets,

capabilities, and resources to be analyzed. The analysis
of the capabilities of an organization to maintain
current operations is not sufficient when a strategic
initiative is being planned.

If a company chooses to maintain current operations without change, the likelihood of attaining
or maintaining a competitive advantage in the industry is not guaranteed and not likely. When
planning a strategic initiative, the goal should be to create a stretch goal that allows the company
to grow into the new entity that it envisions. The difficulty comes when trying to envision the
end result. When the current assets, capabilities, and resources are seen as line items on a
financial statement and the budget is restrictive, the growth can seem hindered. This requires an
objective analysis of the change that is needed.

The organizational culture must support the

vision and mission of the organization.
Change initiatives can have detrimental
effects on the culture of the organization.
Communication, or lack thereof, can lead to a
change in the organizational culture.

Bennis believed that “among the existing disciplines that must contribute if modern leadership is
to be understood are those related to communication” (2007, p. 4). The culture of an organization
is determined by the communication between the executives and the employees. When planning
a strategic initiative, the communication must be evaluated to determine if it will help or hinder
the initiative. Communication has many forms and effects on the culture. Evaluating the existing
modes of communication allows a determination to be made of not only the effectiveness of
current standards, but also those that will be needed throughout the process.

Summary
 The internal environment should not be overlooked when completing the SWOT analysis. The
strengths and weaknesses of an organization play a pivotal role in the success or failure of a
strategic plan. The core competencies, resources, capabilities, value chain, culture, organizational
behavior, and goals should be effectively communicated to the employees to allow their buy-in
into the strategic plan. However, these areas should not only be analyzed as a part of the plan but
on an ongoing basis to determine if changes must be made to create and maintain a competitive
advantage in the industry.

Key Terms
Internal analysis 

The process of reviewing the aspects of a company’s operations, vision, mission, leadership,
capabilities, and value chain.

References

Bennis, W. G. (2007). The challenges of leadership in the modern world. American Psychologist, 62(1),

2–5.

Porter, M. E. (1985). Competitive advantage. New York, NY: The Free Press.

Questions
An external analysis of existing TECHNOLOGY resources allow the estimation of the
integration cost of new or current technology.

An analysis that is focused on the local operational environment is called

an EXTERNAL analysis.

Why is it important to know how many suppliers are present in the region where operations are
planned? (Choose 2)
If there are multiple suppliers, the cost may be lower because it can be negotiated.
This is irrelevant information to gather.
If competitive purity has been reached by the suppliers, the cost will be higher to obtain the resources
needed for production.
If there is a monopoly, the cost may be higher or prohibitive for the projected cost.

The __________ analysis will allow an organization to know if the positions needed for
operations can be filled by local inhabitants. (Choose 2)
attitude about work
life span
inflation rates
education level

The taxes imposed as well as tax credits for businesses __________. (Choose 2)

do not have an effect on a business
should be evaluated prior to beginning operations
are difficult to understand so a consultant should be used
will have a direct impact on the company’s operations

When new operations are planned for an area where a competitor has established operations, it is
recommended to put distance between the two companies to _________. (Choose 2)
minimize the comparison
minimize the ability to lure customers to the organization
prevent logistic jams
prevent market saturation

When considering operations in new locations, the tax credits and levies __________. (Choose
2)
are good to know and understand but should not have an effect on the decision for new operations
should be a determining factor on operations as they apply to the resource allocation of the
organization
are beneficial to know if time permits the gathering of data and analysis
should be compared between locations to determine the most beneficial location for the company
The sociocultural analysis gives valuable information about the ability to hire qualified
employees based on what analysis criteria? (Choose 2)
Attitude about leisure
Attitude about work
Buying habits
Education and skill level

Understanding the labor costs and  allow an organization to forecast future growth potential.
GROWTH RATES

Analyzing the economic aspects of the proposed location allows an organization to understand
the __________. (Choose 2)
price fluctuations in comparable industries
family size
buying habits
cost of labor
Benefits and Challenges of an External
Analysis 98%
Introduction
Imagine being a college student with an amazing idea for a new
product or service that has never before been introduced to
consumers. As you sit with your classmates discussing this new
innovation, the thought occurs to the group that a new company
should be formed to introduce this to the public. Of course,
customers will flock to purchase your idea because it has never been
available before. You’ll all be millionaires before you know it, and
not only will everyone be set for life, but so will your children and
grandchildren. You’d be crazy to not charge ahead and take the
market by storm.

There have been a few companies that started in just this manner. Think of the popular social
media Web sites and large software companies. Do you think an external analysis was completed
during the conceptualization of these companies? Although a formal analysis, as you have
learned through this course, may not have been a part of the development process, it is most
likely that an informal analysis was indeed a part of the planning process. Completing an
external analysis of the industry and market is an integral part of any organization’s strategic
planning process. Understanding the benefits and challenges that a company will face in strategic
planning is part of the battle to attain and maintain competitive advantage in the industry.

Learning Materials
There are many reasons for completing
an external analysis, such as introducing
a new product or service to consumers,
helping a company support change
initiatives, generating profits, or creating
a competitive advantage in an industry.

But there are also challenges in gathering the data necessary to complete an external analysis.
The tools to complete the external analysis are well-documented, allowing a company to follow
the pre-set doctrine that many companies have used over the years. The benefits to completing
the analysis should be evident, because without the analysis, a company would be making a
decision blindly. However, the benefits and challenges should be examined closely to fully
understand the process.
When an analysis tool is used, the data will be tailored to the environment where operations are
to be established. The research will be completed differently in a cross-border transaction than it
would in a domestic one. Global transactions add a new dimension to the process that requires a
more intense amount of research. In the United States, the research will begin with the area in
which operations are either currently being conducted for a change process or in the proposed
area for new operations.

The political affiliation along with the bureaucracy that entails will be common knowledge and
can be researched easily. Local, county, and state laws and regulations are public record and can
be obtained without issue. The taxes imposed as well as tax credits for businesses will have a
direct impact on the company’s operations. What is not always common knowledge that will
require closer scrutiny is the level of involvement that the local government plays in businesses,
such as trade unions and influence on decisions. The level of corruption within the government
must be taken into consideration because it could hinder operational decisions. Obtaining this
type of information is a challenge because it can be speculation or a smear campaign between
governmental parties.

Knowing and understanding the economic

health of a region is a benefit to a
company. The growth rate of the area
allows a company to forecast future
growth potential for the area. This
information should include the
sociocultural data to determine whether
the area has possible candidates for
employment.
This information should be detailed by position, so if
the company requires educated or skilled labor, the
regional data should support the needs of the
company. If the area does not have the skilled labor
needed for operations, the results will determine
whether or not operations should be considered in the
region or if the budget should include relocation
packages to bring the employees to the area. This ties
back into the tax breaks given to companies in many
areas that are designed to stimulate growth.
Although age and gender are not used for a basis of employment, these sociocultural aspects play
a role in the decision to locate in an area. Again, if the population does not support the needs of
the organization, alternate locations should be considered.

Technology plays an integral part in most companies in

today’s industries. The external analysis of the existing
technology resources allows an estimation of the cost of
bringing the technology to the area.

Depending on the existing technology in the area, the cost could outweigh the benefit. The
analysis of the competition for technology providers in the area could result in knowledge that
there is a monopoly for service providers, thus increasing the cost and decreasing the availability
of affordable integration.

Rounding out the PESTEL (political,

economic, social, technological,
environmental, and legal) analysis, the
environmental analysis is used to determine
the climate and weather patterns for the area.

If the company relies on transportation, the climate could affect the availability of shipping and
receiving, causing a decrease in operations and thus a loss in revenues during extreme weather
conditions. Local laws and regulations could also affect every aspect of the company or have
little to no effect. Understanding the implications of the laws governing local companies allows
an analysis of whether the laws will hinder or assist in operations.

When looking at competition in the region where operations are being considered, it is important
to look further than just competition for the company. As mentioned earlier, the providers of
services needed by a company to conduct operations may have a range of little competition
(meaning higher cost to the company) or a multitude of providers, which would allow a cost
comparison and overall savings for the company. Of course, competition within the same
industry is an integral part of an external analysis. Distance between competitors allows
operations to not equate to market saturation.

The disposable income of the inhabitants of a region

should not be split in a manner that will prevent any
company from maximizing profits.

In other words, operations should not be established so close to a comparable company that it
would be difficult to lure customers to the company. Remember, to gain competitive advantage,
a company must provide a good or service that is better quality for a comparable price or a
comparable product or service for a lower price. When competitors are too close in a small
market, the battle for competitive advantage could cause the companies to decrease the profit
margins to a point that continued business would not be cost effective.
Through an analysis of the external environment to include the competitors in the region, along
with the providers of products and services needed for operations, a determination of the barriers
to entry and threats to successful operations can be analyzed. Through this analysis, the company
can decide if the proposed location for operations will not only be cost-effective but profitable
over the course of time. When completing the external analysis for a strategic plan, the
opportunities and threats of the region will be instrumental in making the final decision.

Summary
Completing an external analysis allows a company to weigh the benefits of establishing
operations in an area. There will be challenges in compiling some of the information needed for
the analysis, but the process is necessary to ensure that the region being considered for
operations is conducive for a profitable venture. The PESTEL factors allow a company to look
not only at the competition in the area, but also the providers of the products and services needed
within the company.

Just as you would not want to enter a market where a monopoly exists for competitors because
the loyalty factor would hinder the profit margin, the competition for providers of the goods or
services needed to conduct operations will also play a pivotal role in the decision.
Questions
The availability of technology in an area can be instrumental in the maintenance of competitive
advantage once it is achieved. What two aspects are most important for an organization to
consider for technology? (Choose 2)
Technology integration
Current technology resources
Natural resources
New competitors

Weak barriers to entry can do which of the following? (Choose 2)

Make it easier for other competitors to emerge after competitive advantage is reached
Make it easier for the organization to enter the market
Ensure no other competitors enter the market
Make it harder to enter a new market

Unstable government entities as well as changing laws and regulations can affect an organization
by ______________. (Choose 2)
creating the need to expand operations
increasing the cost of compliance
causing the organization to alter operations to be in compliance
causing the organization to shift lobbying efforts

The external environment ____________. (Choose 2)

should be thoroughly researched and analyzed
should be given a cursory review
should be monitored for changes
should only be analyzed when time permits

When entering a market, the __________ are known. (Choose 2)

new threats that could emerge
levels of threat
future laws
existing competitors

Porter’s Five Forces Model should be used to determine the opportunities and threats of the
competitors in a region. What are some facets of competition that are important in the
model? (Choose 2)
The likelihood of pulling employees from competitors in the region
The barriers to entry for the region
The internal environment needed in the new region
The rivalry among the existing competitors

Competitive advantage is attained in a new market by which of the following? (Choose 2)

Discrediting the competition
Offering a comparable product at a lower cost
Copying the competition exactly
Offering a better product at the same cost

When are customers a source of an opportunity? (Choose 2)

When an unfilled need exists that a company can fulfill
When the customer becomes loyal to the organization
When a competitor is able to offer a better product at the same cost
When a comparable product or service can be provided at a lower cost

New entrants into a market can cause which of the following? (Choose 2)

The market to become hostile
The existing companies to break out of complacency
A shift in the competitive advantage
Customers to become confused
External Environmental Opportunities and
Threats 98%
Introduction
When evaluating the opportunities and threats within the
external environment, it is important to understand the
implications of both factors. An opportunity is anything
that can be exploited by a company to aid in achieving a
competitive advantage. A threat within the external
environment is anything that will have a negative effect
on the company and could hinder the achievement or
maintenance of a competitive advantage in the industry.

Opportunities and threats exist in the external environment regardless of how vigilant or
lackadaisical a company is. The external environment of an organization is constantly changing.
The change could be subtle or dramatic, but it requires a company to be vigilant in observing and
acting on the changes. Leaders must understand the effect that the external environment has on
the organization and adjust operations as necessary.

PEST Analysis

The PEST analysis should be completed regularly by monitoring the external environment for
changes in the political, economic, sociocultural, and technology arenas.

   

   

Being a part of an open system means interacting with the external environment, adapting as
necessary to the changes that emerge. By being aware of the opportunities and threats posed by
the external environment, a company has the ability to recognize and adapt as necessary. Being
able to monitor and predict the emergence of an opportunity or threat allows a company to stay
competitive in the industry.

Learning Materials
Prior to beginning operations in a region, or when making a
strategic change that will alter the business, an organization
must be aware of the new and existing laws and regulations for
the region where operations are planned.
Unstable government entities as well as changing laws and regulations may have a direct effect
on an organization, causing either an opportunity or threat, depending on the outcome. As new
regulations are created, a company can be required to invest in changes to maintain compliance
with the new acceptable standards of operations. Depending on the financial health of an
organization, this could be a threat to maintaining competition in the market.

When entering a market, the existing competitors are known.

The level of threat that exists is known and evaluated on a
regular basis.

The need for companies to gain competitive advantage in a market led to the research and
development of ways to produce a comparable product at a lower cost or developing new
products or services that surpass the competition in providing a benefit to the consumer. The
threat exists when there is a weak barrier to entry and new competitors can enter the market.
New competitors pose an unknown risk to the existing companies in the industry, which must be
vigilantly monitored. Threats to the existing product or service and the existing customer base
can have a detrimental effect on the strategic plan currently in place.

An interesting twist can take place when new competitors enter the
market, because it can cause the existing companies to alter from an
existing complacency within the market. When a competitive
advantage is achieved, it is far too dangerous to not take competitors
seriously.

Consider companies such as the popular video rental store that had the competitive advantage in
the movie rental business for many years.  Click on the following icon to read the article:

http://abcnews.go.com/Technology/blockbuster-shut-remaining-stores-dvd-mail-service/story?
id=20805588

Today, the company has gone out of the traditional business of brick-and-mortar stores because
emerging technology introduced by competitors. Today, this company only offers digital
downloads such as those offered by other movie providers. Just as new ideas emerge and
companies form, the competition in many industries moves to a level that existing companies
cannot maintain the competitive advantage in the industry.

Technology is constantly changing, creating new advancements on a

regular basis. A threat exists to the organization when the technology
that emerges makes a product or service obsolete.

Staying vigilant in the external analysis of current, emerging, and new technologies that have an
effect on the organization allows the rapid adjustment needed. This is not saying that a company
must, or even should, implement new technologies immediately. However, each one should be
evaluated to determine the effect that it will have on the product or service being offered by the
company.
Just as this once popular video company tried to enter into the mail-order movie business when
other companies entered the market, adjusting operations to a new product or service does not
always equate to offering a comparable service or product that will maintain a competitive
advantage.

Customers are the reason for a company to be in business, and they

are the source of many opportunities and threats. An opportunity
exists when there is an unfilled need that a company can satisfy.

As new technologies emerge, the demand for more advanced products and services becomes
ever-increasing. When a company is able to satisfy the need for advancement, competitive
advantage can exist. The threat comes into play when competitors are able to offer a comparable
product or service at a lower price or a more advanced product or service at the same cost to
consumers. This can cause a shift in customer base that requires research and development to
push the company to a new level.

As evidenced in Porter’s Five Forces model, the external

environment illustrates the opportunities and threats in the external
environment as threat of new entrants, bargaining power of suppliers,
bargaining power of customers, threat of product substitutes, and the
intensity of rivalry amongst the competitors.

When the barriers to entry are low and new competitors can easily enter the market, the threat to
existing competitors is higher. Take for example a coffee pot that uses a small pod of coffee for a
single brewed cup of coffee. When the product was introduced, it was a new product that had
never been in the industry. Today, there are many different manufacturers of a system that can
use the same pods. The new coffee systems are far cheaper than the original one, allowing
consumers to either buy the original brand or a comparable system for a lower cost. The
consumers wanted the convenience at a lower cost, and several companies were able to satisfy
this need. Today, the threat of substitutes is present for the original brand as the other
manufacturers are able to provide a substitute, causing a rivalry amongst the competitors.

Summary

There are many advantages to completing an external analysis on an ongoing basis.

Understanding the external environment is only half the battle for leaders, however. The
implications and effects that the opportunities and threats pose to the company must also be
evaluated. Research and development of new or improved products or services does not require a
dedicated research and development team. The only requirement is a leadership team that
understands that the political, economic, sociocultural, and technological factors in the external
environment must be monitored for opportunities and threats. The evaluation and analysis is not
only completed prior to beginning operations in a new area or when a strategic initiative is being
planned and implemented. The process is ongoing and should never be ignored.
 References

Stern, J. (2013). Blockbuster to shut down all remaining stores. Retrieved from the ABC New Web site:
http://abcnews.go.com/Technology/blockbuster-shut-remaining-stores-dvd-mail-service/story?
id=20805588
Questions
When seeking sources of benefit for a company, you evaluate tangible and
intangible resources.

Porter’s Value Chain analysis involves many components. Which of the following are
components of operations? (Choose 3)
Warehousing
Support activities for processing
Transformation of inputs into the final product
Order fulfillment
Value-creating activities
Pricing

How do intangible resources help a company? (Choose 2)

They are fringe benefits of being in business.
They provide a source of income over time.
They are used in operations.
They create differentiation among competitors.

Why do organizations set goals? (Choose 2)

To keep the employees from becoming complacent
To keep the current operations, capabilities, and resources current
To have a focal point for a strategic initiative
To stretch the current operations, capabilities, and resources to the next step

When considering the customers serviced by an organization, it is important to remember

____________. (Choose 2)
that customer needs are not important
to make the customer the focal point of operational decisions
that it is dangerous to ignore the customers’ needs
that it is a mistake to cater to the customer

Resources of an organization, both intangible and tangible, provide a source of benefit for a
company. Classify the following into the correct category:
Tangible Resources: Buildings, Equipment, Land, Vehicles
Intangible Resources: Goodwill, Intellectual property, Patents, Trademarks

When providing a product or service to a customer, what increases the value to the customer?
Operations
Support
Marketing and sales
Customer service
Porter’s Value Chain analysis involves many components. Which of the following are elements
of outbound logistics? (Choose 3)
Warehousing
Order fulfillment
Procurement
Transporting final product to customer
Firm infrastructure
Technology development

Communication has many forms and affects the culture of an organization. What must be
considered when planning a strategic initiative? (Choose 2)
Which employees do not understand the information communicated
Only the strategic initiative because employees will be told what they need to know
The existing modes of communication
The effectiveness of the current standards

__________ activities are focused on the transportation of goods.

Service
Operations
Marketing and sales
Outbound and inbound logistics

If a company decides to maintain current operations without change, what is the likely
result? (Choose 2)
The probability of the company going through the lifecycle faster is increased.
The company will continue to be successful.
Competitive advantage will be maintained.
Attaining or maintaining competitive advantage is not likely.

Why is it necessary to understand organizational culture for a strategic initiative? (Choose 2)

If the employees are understood, they can be controlled.
Understanding the culture allows the leaders to communicate effectively across all departments.
Organizational culture has no bearing on a strategic initiative.
The support of the vision and mission by the employees helps support a strategic initiative.
UNIT 2
Strategy Formulation in the Global Market
97%
Introduction
Formulating a strategy to gain or maintain competitive
advantage in a market is a difficult task that requires a
tremendous amount of research, analysis, and planning. When
taking strategy formulation to the global market, the task
becomes increasingly complex. The variables in the global
market can be complicated to understand without a great deal of
research. When a company decides to become a multinational
enterprise (MNE), the risk increases for the strategic plan to be
successful. The advantages and disadvantages have to be
weighed to determine the value of the risk.
 Learning Materials

The days of looking at the global market as

unattainable are long gone. Technology has
changed the way a company does business,
eliminating the need for costly and long trips to do
business in person. Technology allows
organizations to have teams that are cross-border
and functional.

Although entering into the global market can be

risky, there are many reasons why a company
makes the decision to expand into the global
market. Such factors as increasing the consumer
base because of market saturation in the United
States or to be closer to the suppliers, thus reducing
cost are two of the major reasons a company will
make the choice. When the MNE makes the
decision to begin business in a foreign market, the
strategic plan will be more multifaceted than a plan
that is based only in the United States.
The first step that an organization must take
after making the determination to go global
is to perform a PEST analysis, which is to
examine the political, economic,
sociocultural, and technological trends of
target countries.

Even when a company chooses to go global to be closer to the suppliers and thus lower the cost,
that country should not be the only choice examined.

The organization also needs to reevaluate and change the mission statement to one that reflects
the global mission of the company. The organization must also have a clearly defined set of
objectives for globalization.

Finally, the company must have a marketing strategy that is not only effective at gaining a
consumer base but also one that is appropriate for the location and that targets the consumer
demand.

A PEST analysis is a tool used by organizations to identify

external environmental factors that will have an effect on
operations. This tool is an integral part of the external
environment analysis that can be used in any situation; but for
this example, the focus will stay on the global environment.

The PEST tool allows an organization to determine if the target country is a good fit for
operations. Examining multiple countries allows a comparison of the opportunities and threats of
each country to determine the best choice to make.

The political climate in the world is not always stable.

Examining the political structure of a country, the laws and
regulations that are present, and the amount of corruption (if
any) is just the beginning. Because political unrest does happen
in the world, it is important to gauge the likelihood of future
changes in the political climate.

Employment laws vary based on country, so it is important to not only know and understand
them but to also analyze the social impact that operating in that country would have on the
United States-based consumers. Some countries are seen as unethical in labor practices. It would
be detrimental to a U.S.-based company to operate in a country that would reflect poorly on the
overall reputation. The tax, trade, and tariff laws could prove to be costly, thus reducing the
return on investment. The political evaluation needs to be thoroughly examined to ensure the
company is not starting operations in a country that could be facing a major change, thus causing
a costly remedy for the organization.

Evaluating the target country’s economic state allows a

projection of the economic growth of the region to include the
inflation and interest rates. Using historical data, the analysis
can help determine the current economic growth patterns, along
with the trends for future change.

The available labor supply is taken from unemployment rates, along with the demographic data
collected related to the education and skill levels of the population. Remembering that labor
costs vary greatly depending on the country, the normal wage structure for a company may be
vastly different in the target country.

Take India, for example, where the minimum wage is $0.28 per
hour. If an organization were to establish operations there and
pay the workers the U.S. minimum wage of $7.25/hour (as of
2013), it would create an unfavorable economic impact on the
region.

Conversely, if operations were begun in Australia, where the minimum wage is $16.88 per hour,
the U.S. standard could not be applied because it would be against the labor laws. Taking into
consideration the impact the company will have on the economic environment allows the
company to be socially responsible. The technology the company will bring to the area must also
be supported by the local economy to effectively sustain operations.

Sociocultural evaluations determine the social and cultural

norms in the country. The population rate, age profiles, and
education of the population will help determine the availability
of a suitable workforce.

The standards of health and hygiene are considered to determine the absenteeism and medical
issues that could arise. The dedication and loyalty of employees to companies vary just as much
as the minimum wage. The social attitudes and cultural norms must be examined to determine if
changes to standard operational guidelines need to be altered. Take, for example, a culture that
requires multiple breaks throughout the day for prayer. This is a religious requirement that would
cause the workday to be altered to accommodate this need. The dedication and attitude toward an
employer as the social norm will affect the turnover rate and thus the cost of maintaining a
workforce.

Technology is the catalyst for globalization; however, some

countries are not as advanced as others. The technological
environment is examined to determine not only what is
currently available but also what technologies are emerging.
When operations are begun in a country that is technology-deficient, the impact of the company
establishing operations may be more than the culture can handle. A main factor in technology is
that it must be supported by the environment where operations will be conducted. If the cost of
adapting to the area is too high or not feasible, the cost of operations could prove to be too great.

Based on the data collected through the PEST analysis, an

organization can make the determination of whether or not a
target country is suitable for operations. Another decision that
must be made is whether or not local nationals will hold all of
the positions of the global entity or if expatriate employees will
be used in some key roles.

The PEST will also need to be used to determine the effect that the relocation will have on the
employees sent to that country. The preparation and education of those employees will need to
include the aspects from the PEST analysis that will have a direct effect on them. Companies
must prepare the employees who are sent overseas, especially if it is their first expatriate
assignment. There has been a lot of research on how to properly prepare employees for this type
of assignment, but the variables change because of the emerging PEST criteria. Employees must
be evaluated for the suitability for an overseas assignment as well as their family members, if
they will also be going. It is not a normal procedure to consider the family members for a
position in the United States, but when entering the global market, the family will also be
expatriated and deeply affected by the assignment.

Worked Example

When Katie was invited to an operations meeting a few months ago, she was excited. Katie
had just found out that she would lead a global strategy to expand her eyewear company into
the Asia Pacific region. She remembered her experience from more than a year ago when she
was the associate director of operations, opening a new plant in Latin America. Although the
plant had been busy, working two shifts daily, sales were sluggish, and the business
development team had been researching new global locations for another plant to stabilize and
increase company sales in the long-term.

The company's headquarters are located in the United States in Minneapolis, MN. It is a 60-
year-old manufacturer of contact lenses and eye care products. During the past decade, Katie's
company had implemented a global strategy that included some centralized control related to
product development, but decentralized control with local decision making in each country’s
local market. The overriding advantage of this strategy is cost efficiencies and faster product
development.

As the meeting to discuss the opening of the new plant began, Katie’s supervisor, Jane, the
president of worldwide operations, announced the time line for opening a new plant in
Hangzhou, China. Ultimately, it would take about 18 months for operations to begin for the
plant in this region.
Brainstorming Session

In this brainstorming session, Jane set out the corporate and global objectives at the business
level as follows:

 Operations currently being conducted in the Dallas, TX facility will be moved within the
next year to Hangzhou.
 Employees in Texas will be offered a relocation package to move to China as trainers.
 U.S. managers from the Operations department in the California and New York offices
will be offered a relocation package to begin recruiting local employees from the
surrounding towns and in Hangzhou.
 Effective today, the strategy officially begins.

Jane displayed a slide on the screen that recounted the success of the Latin America global
strategy implementation and some of the initiatives that she wanted to follow for China, along
with some of the failings that needed to be reworked. The list on the slide was as follows:

This slide was all-telling because it reminded the team of the overall success of implementing
the global expansion strategy in Latin America, but there were several important benchmarks
that needed advance attention to make the China plant’s implementation successful. Next, Jane
displayed a “Lessons Learned” summary slide, as follows:
Jane moved to the next slide, showing notes on competitive advantage. She asked Katie to
update the team on the strengths, weaknesses, opportunities, and threats analysis that was
conducted.

In this example, Jane asked Katie to update the team on the strengths, weaknesses, opportunities,
and threats analysis that was conducted.
An analysis that shows strengths, weaknesses, opportunities, and threats analysis, is also known
as  SWOT

“The marketing and business development teams have conducted massive research on why our
company should move operations into China,” explained Katie. “The primary tool to determine
if China is a viable endeavor is a SWOT analysis.”
In the analysis tool, which quadrant represents Strengths? TOP LEFT
The marketing and business development teams have conducted massive research on why our
company should move operations into China. 
Read each description then match the description to the correct label.

“Surprisingly,” explained Katie, pointing at the slide, “based on the SWOT analysis, we
determined that there is potential to start a partnership with over-the-counter drug and
eyeglass and eye care companies to promote our products online. We identified this as a
growth opportunity that can most likely yield at least $1 million in revenue during the first two
years of opening the plant.”

Three Es of Operations

In implementing a global strategy in China, Katie's company was considering economic viability
based on its three Es of operations in China, as follows:

 Economies of scale in producing lens care products for the entire Pacific Region
 Efficiencies in using China’s resources and labor
 Extending the product life cycle of older products by recasting them for the Asia Pacific
markets for first-mover advantage in these emerging markets

Summary
Deciding to begin operations in a foreign country is an important step in a company’s growth.
Regardless of the reason for the decision, it requires a lot of research and analysis of the results.
A good tool for companies to use is the PEST tool, which allows the political, economic,
sociocultural, and technology to be thoroughly examined.

The use of historical data, along with projection of trends, allows each target country to be
examined and compared to determine which avenue is the best to pursue. Through this external
analysis of the global market, a company can make the determination of whether or not to begin
global operations or if the cost of entry will be too great. If globalization is the answer, the
company has to prepare any employees who will be assigned to the new location. Areas of
consideration that would not be normal in the United States will play an integral role for the
employee and the company.
Questions
What should the organization do to the mission statement? (Choose 2)
The mission statement should be changed to include the global mission statement.
There should be a mission statement for every location the company serves.
There should be a separation of all locations and they should each have an individual mission
statement.
The mission statement should be reevaluated to ensure it encompasses the new global mission.

What is a reason companies decide to enter the global market?  

Because the competition is going global
To increase brand recognition
To increase the consumer base due to market saturation in the United States
To increase costs
To reduce cost by locating closer to suppliers

What benefit exists for conducting a historical analysis of the target location’s economic
state? (Choose 2)
The trends for future change can be projected.
Only current data is analyzed.
There is no benefit to conducting a historical analysis.
The current economic growth patterns can be evaluated.

What aspects of organizational culture must be taken into consideration in a global

venture? (Choose 2)
How to create the U.S. based culture overseas
Local customs and culture
How to create instant buy-in to the organization
Integration of the U.S. expatriate employees into the foreign culture

What is the process for PESTEL factor analysis in the global market?  List the process in order:
Political, Economic, Sociocultural, Technology, Ecological, Legal

After the PESTEL data are gathered, what analysis should be conducted? (Choose 2)
Determine if the country is a good target for operations.
Use the data only if necessary for completion of the strategic initiative.
Determine the effect each will have on the organization and the strategic plan.
Apply the information only to the strategic plan.

When considering a global venture, what should the company do? (Choose 2)

Consider multiple regions to determine the best fit for the strategic goal.
Pick a country based on low barrier to entry.
Consider minimal choices to save time and money.
Consider multiple regions to determine the best fit for operations.
Why should the standards of health and hygiene be analyzed for the target location? (Choose 2)
The absenteeism and medical issues that could arise can be analyzed.
The organization can determine if additional resources should be included in the plan to
decrease medical issues.
To determine if excess employees should be hired in case employees get sick.
To determine the danger expatriates will be in if they are used in the location.

To evaluate the technology for a proposal of a new global location, what must be taken into
consideration? (Choose 2)
The technology available in other regions
The integration cost of bringing the technology needed into the region
Only the technology being used by the organization at the current locations is necessary to evaluate
The current basic infrastructure within the region of operations
Management By Objectives 98%
Introduction
Management by objectives (MBO) can also be referenced as
management by results or even goal management. These
components are assumed to bring employee involvement and
commitment into the organization, because it will motivate the
employee to achieve organizational goals along with setting
standards of measurement of performance towards achieving
those goals.

Learning Materials

Management by objectives (MBO) [Results based management that sets standards for

performance measurement] is a systematic and organized approach that allows management the
opportunity to focus directly on obtaining organizational goals. This allows management the
opportunity to evaluate their resources that will assist with obtaining those goals. It will align the
organization’s goals, coupled with the subordinates’ objectives, which leads to increased
organizational performance. The employees should expect to receive time lines, as well as
effective feedback and ongoing tracking of performance to reach their identified objectives.

Peter Drucker

In 1954, Peter Drucker outlined MBO

in his book The Practice of
Management. During the 1990s, Peter
Drucker decreased the significance of
this organization management
method. He stated “It’s just another
tool. It is not the cure for
management inefficiency.
Management by Objectives works if
you know the objectives; 90% of the
time you don’t.”

 (Management by Objectives, 2009). http://commons.wikimedia.org/wiki/File:Drucker5789.jpg

Core Concepts of MBO

Drucker stated that managers tend to get absorbed in their day-to-day activities, and they tend to
forget their overall purpose, or the objectives that have been set for the organization. Drucker
categorized this as “avoiding” the activity trap. This concept should apply to all managers, not
just a few managers who appear at the top of the chain. The managers should always participate
or be active in all of the strategic planning processes. This will ultimately improve the
implementation of the plan, as well as provide a multiple range of performance systems that will
keep the organization aligned and assist with staying on the right track.

The MBO Process

The six stages of the MBO process consist of identifying the corporate objectives, analyzing
management’s objectives, and aligning them with the organization and their jobs.

This includes the specifications to allot the responsibilities and decisions down to each individual
manager. Managers must then set the specific objectives, agree and identify on those specific
objectives, align individual task with the company’s objectives, and create a management
information system (MIS) to make sure that the assigned task are being monitored and objectives
are being met.

Managers must also make sure the following resources are in alignment of understanding what
the objectives are and what is to be expected: finance, marketing, human resources, social
responsibility, physical resources, productivity, and profit requirements.

Managerial Focus

MBO managers should focus on the results, and not the activity. MBO is about setting specific
objectives and then taking those objectives and breaking them into more detailed specified goals
with key results. MBO mangers also delegate specific tasks by negotiating a contract goal with
their subordinates without providing a detailed roadmap for implementation.
The Main Principle of MBO

MBO should be utilized to ensure that everyone in the organization has a clear understanding of
where the organization should go and what the objectives are. MBO is also used to make sure
that all individuals associated with the organization are totally aware of what is expected of them
in their current roles and what they are responsible for in achieving those goals.

The entire MBO concept is to allow the managers the opportunity to support and empower their
employees to achieve their plans, which, in turn, will allow them to achieve the goals of the
organization.

MBO should be utilized in organizations that are knowledge-based enterprises. It can also be
utilized in situations where the manager wants to create leaders in the organization. The
managers will be able to build their team members’ self-leadership and management skills.

The managers would use this concept to assist in building their creativity, initiative, and tacit
knowledge. MBO is also used by the chief executives of various multinational corporations for
their managers that are residing abroad.

Setting Objectives

MBO should be created for all levels of an organization. This gives all employees specific tasks
and goals. This will give each individual a full understanding of where the organization is trying
to go and what the organization is trying to achieve.

It also gives a clear understanding or expectation of what part of the employee’s organization has
to achieve to meet those aims, and how, as an individual, they are expected to help.

For MBO to be effective, all managers must be knowledgeable of the objectives for it to fit into
the overall company objectives that have been communicated by the company’s board of
directors. MBO is not just for the mangers.

Each individual associated with the organization has a responsibility or an objective that needs to
be met. MBO creates a link from the top management’s thinking strategy all the way down to the
lower-level managers and their strategies’ implementation processes.

Communicating Objectives

Objectives are communicated all the way down to individual members. When the objectives
have reached the individual member, the following questions have to be asked:

1) What should we hold each employee accountable for?

2) What information will that employee need?

3) What information would that employee need to provide to the company? These are questions
that are normally asked by the organizations that are MBO-run.

There are other components that affect the overall MBO process. The major MBO principles
consist of participation, decision making, explicit time period, specific objectives for each
members, cascade of organization goals and objectives, and performance evaluation and
feedback. There are specific types of objectives associated with MBO: routine, innovation, and
implementation. These objectives must be consistent, specific, measureable, related to time,
attainable, and focused on an actual result rather than an activity.

Advantages of Implementing MBO

With any newly implemented approach, there will always be advantages and disadvantages
associated with it. The advantages are the following:

 MBOs will continuously communicate what is to be expected of each organization.

 The MBO process will secure constant commitment from the employees of the
organization, which will assist with meeting company objectives.
 The manager, along with the subordinates, will consistently know that is to be expected
in regards to their performance, and they will know that there is no role uncertainty or
confusion.
 The managers are able to establish targets that are measureable (MBO is results-oriented
and concentrates on specifically setting and controlling goals).
 It motivates the manager to work on a detailed plan.
 MBO often identifies areas that employees will need additional training, which will assist
with career development.
 It makes the employees more aware of the company goals that have been set, which
improves employee morale and commitment.
 A system of periodic evaluation allows the subordinates to know how well they are
performing
 It improves the communication channels between the management team and the
subordinates.
Disadvantages of Using MBO
 It is viewed as being time-consuming. This gives the managers less time to focus on the
objectives.
 The in-depth written goals and the detailed employee performance evaluations create a
vast amount of paperwork that will need to be retained.
 MBO has the propensity of being resented by the organization’s subordinates. Those
subordinates may endure undue pressure because they are expected to collaborate with
their management team when setting goals and objectives, and they may view those goals
as being unrealistically high, and this, in turn, will lower the employee morale and cause
suspicion to arise.
 Some managers may resist the MBO program because of the increased paperwork.
 The emphasis of MBO would be more of a short-term goal, because that most of the
goals are viewed as being quantitative in nature.
  It tends to be a bit more difficult to conduct long-range planning because of the various
variables that could possibly affect the planning process.
 Most managers may not be skilled enough in interpersonal interaction.
 The migration of MBO with other systems could cause issues (e.g., forecasting and
budgeting).
 Setting group goal achievement has been proven to be challenging when the goals set for
one department are dependent on another department.

Summary

The only way that MBO can be successful in any organization is by having full support of the
upper management team. Without this commitment, the MBO tends to be a bit more challenging
and unattainable. The MBO should be an overall philosophy of upper management as well as all
other organizations involved.

The emphasis that has been put into employing the MBO system is based off of quantifying the
organizational goals and objectives, and those goals should constantly be reviewed and modified.
Some employees may sense that the MBO is just another maneuver or ploy that will push the
subordinates to work even harder in an effort to become even more devoted and involved with
the goals and objectives that have been set for the group. This is why all personnel should be
involved in the planning process.

Key Terms
Management by Objectives

A systematic and organized approach that allows management the opportunity to focus directly
on obtaining organizational goals.

Managerial Focus

Managers should focus on the results, and not the activity.

Setting Objectives

Created for all levels of an organization, which gives all employees specific tasks and goals.
Questions
MBO should be utilized to ensure that everyone in the organization has a clear understanding of
which of the following? (Choose 2)
What the employees are expected to do
What the overall mission entails
What the objectives are
Where the organization should go

Which does not belong in the six stages of the MBO process?
Addressing the corporate missions
Analyzing management’s personal development plan
Identifying the corporate objectives
Identifying the corporate strategy
Analyzing management’s objectives

The disadvantages are that the MBO objectives are which of the following? (Choose 2)
Not very time-consuming
The in-depth written goals and the detailed employee performance evaluations create a vast
amount of paperwork that will need to be retained
Causing the managers to use more time to focus on the objectives
Viewed as being time-consuming

The advantages of MBOs include which of the following?

The manager along with the subordinates will not know what is to be expected with regard to their
performance
Unsecure constant commitment from the employees of the organization
Will communicate less what is to be expected of each organization
Secure constant commitment from the employees of the organization

MBO managers should focus on the OUTCOME, and not the activity.

The major MBO principles consist of which of the following? (Choose 2)

Specific objectives for each members
Nonspecific objectives for each member
Extended period of time
Explicit time period
For MBO to be effective, all managers must be knowledge of the OBJECTIVES for it to fit into
the overall company objectives that have been communicated by the company’s board of
directors.

The MBO should be an overall philosophy of upper management, as well as, all
other ORGANIZATIONS involved.

When it comes to setting objective, MBO should be created for which of the following?
The employees only
The executive management team
All levels of an organization
The mid-management level

MBO objectives should be which of the following? (Choose 2)

Measureable
Focused on the activity rather than the result
Measurable but not necessarily specific
Focused on an actual result rather than a activity

Management by Objectives is a systematic and organized approach that allows management the
opportunity to focus directly on obtaining organizational goals.

MBO should be created for all levels of an organization, which gives all employees
___________ tasks and goals. 
focused
group
Specific
small
detailed
Strategy Formulation 97%
Introduction

Corporations need to understand the importance of implementing a new strategy within their
organizations. While attempting to adjust the organizational objectives, it is imperative that the
companies address the factors that will have a detrimental impact on the set objectives. Once
those objectives have been identified, along with the factors that influence those objectives,
formulating the strategy will be more simplified.

Strategy formulation can be broken down into three basic questions, as follows:

How will the company create and effectively manage its strategy?
How will the strategy transmute into initiatives that are executable?
How will the company regulate, manage, and resource initiatives?

Learning Materials
Strategy Formulation

Strategy formulation [Pushes an organization to review and observe the effects of a changing

environment] is known as the process to which an organization implements the appropriate
course of action to achieve an organizational goal. Strategy formulation is needed for an
organization to be successful because it allows the actions of the organization to lead toward the
anticipated results. Strategic plans should be discussed in depth with all the employees. This will
ensure that they have a full understanding of where the organization is headed, the overall
mission, the objectives, and the purpose.
Strategy formulation pushes an organization to review and observe the effects of the changing
environment so that it is totally prepared for the changes that are most likely to occur. The
strategic plan also allows an organization to evaluate the resources that it has in place, determine
the most effective plan to maximize return on investments (ROI), and allocate the budget.

Strategic formulation includes an organization creating a vision and a mission and identifying the
organization’s internal strengths while identifying new strategies to pursue and establish long-
term objectives.

Some of the issues that may need to be addressed include deciding on what new businesses to
enter, what businesses need to be abandoned, how the resources will be allocated, whether the
business should look into expanding its operations or diversifying, whether the business should
merge or consider a joint venture, how to avoid a hostile takeover, or whether to enter
international markets.

If a company does not take the time to review its strategic plan, it will not be able to
communicate its intentions, direction, or focus to its employees. If an organization finds itself not
having a strategic plan in place, it will ultimately find itself being reactive instead of active. This
will make the organization vulnerable to added pressures, and it will place the organization in the
position of being at a competitive disadvantage.

Six Steps to Strategy Formulation

Define the Organization

This step identifies the company’s customers. A company without a strong customer base that
fulfills the needs of its customers will not be successful. The company must be attentive to the
components that the customers value.

Define the Strategic Mission

The strategic mission will allow a company to offer a long-range perspective in regard to where
the organization is ultimately trying to strive. A mission that is clearly defined will present a
guide to how the plans should be carried out. The mission should incorporate the values to what
that organization stands for, the nature of the business, or any unique qualities that the
organization builds in the marketplace. The mission should also encompass where the company
wants to see the organization in the future.

Define the Strategic Objectives

This step in the strategic formulation requires the organization to communicate the performance
targets that will assist the company in reaching the overall objectives. The targeted objectives
could include the production of the goods and services, the market share, the market position
with regard to the competitor, corporate expansion, improved customer service, advanced
technology, and an increase in sales.

The objectives must be communicated to all employees and the stakeholders involved. If
everyone is on board with what is expected, the organization can and will be successful. Each
member must also be aware of the overall purpose in meeting the organizational objectives.
Aside from that, those members should also have their own personal objectives and performance
goals in place.

Define the Competitive Strategy

This strategy formulation allows an organization to analyze where it fits into its specific
marketplace. This just does not apply to the organization, but to the individual unit that is
associated with each department within the enterprise. Each department must identify its roles
and specifically how that role will assist the organization in gaining a competitive advantage.
Another process or step in the competitive strategy forces the organization to be more proactive
when developing responses that will allow it to respond to the constant changes that occur in the
marketplace.

An organization must try to stay abreast of the reoccurring changes rather than waiting for those
changes to happen. The final step in addressing the strategy competition would be for an
organization to identify how it will utilize the resources that it has. Each section or department
will have its own specific set of needs, and it must determine how it will allocate those resources
to meet those needs.
Implement Strategies

The organization is not only required to develop a strategy, but most importantly, it must
implement that strategy within the organization. The organization takes the time and effort to
analyze the marketplace, define itself, and identify the competitor. If it did not implement the
strategy, the work put into the organization will have no meaning or no value. Implementing the
strategy is known as the organization deploying tactics to allow for the organization to build a
foundation for implementation. This allows the company to point out which tactics are more
successful and if any new methods are necessary.

Evaluate the Process

With a plan that has been implemented into an organization, there must be an evaluation stage to
determine if the processes are working effectively or successfully. The organization must keep
abreast of the progress and make sure it is aligned with the strategic plan. If the organization
determines that the plan is not working, it must then determine what changes need to be put into
place.

During the evaluation process, the following questions need to be asked in an effort to
continuously evaluate the process:

 Have the market conditions changed?

 Are there new potential threads that have entered the marketplace?
 Has the organization properly communicated its strategy into actionable steps?

If these questions are asked, the organization will have a higher potential of being successful
when it implements its strategy initially and in the future if it continues to analyze the feedback
that is being provided.

A strategic plan will continue to change based off of the changes that may occur in the
marketplace. If an organization keeps in mind that it must be flexible and incorporate change at
any given time, it will then place itself in the position to adapt to these changes and increase its
chances of being successful.

Summary

Strategic formulation should be viewed as a course of action that most companies utilize to
achieve a specific goal. All employees must be aware of the changes that are being implemented
when it comes to the company’s objectives, mission, and purpose.  If a company does not have a
strategic plan in place, it will ultimately result in that company having no direction or focus.  A
strategic plan allows the company to evaluate its resources, distribute a budget, and maximize on
its return on investment (ROI).  A company that defines its strategic mission will show that it is
capable of identifying its value, competitive advantage, the reason the business exists, and the
future of the company.
 Key Terms
Evaluate the Process

This helps to determine if the processes are working effectively or successfully.

Competitive Strategy

This allows an organization to analyze where it fits into its specific marketplace.

Implement Strategies

These are known as the organization deploying tactics that allow the organization to build a
foundation for implementation.

Strategic Formulation

This is known as the process to which an organization implements the appropriate course of
action to achieve an organizational goal.

Strategic Mission

This allows a company to offer a long-range perspective in regard to what the organization is
ultimately trying to strive toward.

Strategic Objectives

The strategic formulation requires the organization to communicate the performance targets that
will assist the company in reaching the overall objectives.
Questions
Define the strategic objectives is a strategic formulation that requires the organization to do
what? (Choose 2)
Communicate the performance targets
Evaluate their overall strategic plan
Communicate the performance objectives
Identify their weaknesses

The competitive strategy is a formulation that allows an organization to analyze where it fits into
its specific MARKETPLACE.

A company must take the time to review their strategic plan to be able
to COMMUNICATE their intentions.

Strategy formulation __________.
does not assist the organization with meeting their identified goals
is needed for an organization to be successful
is not needed for an organization to achieve success
not discussed in depth with the employees

An organization must try to stay abreast of the REOCCURING changes, rather than waiting for
those changes to happen.   

If an organization finds itself not having a strategic plan in place, it will ultimately find itself as
being REACTIVE versus active.

One of the six steps of strategy formulation is to implement STRATEGIES.

During the evaluation process, which of the following questions need to be asked in an effort to
continuously evaluate the process? (Choose 2)
Do the customers need to be informed of this evaluation process?
Has the organization properly communicated its strategy into actionable steps?
Are the market conditions important?
Have the market conditions changed?
Are there new potential threads that have entered the marketplace?
Strategic formulation includes an organization that does which of the following? (Choose 2)
Creates a Mission
Creates a vision
Identifies the organization's external strengths
Identifies the organization's internal weaknesses

The final step in addressing competition strategy would be for an organization to identify how it
will use its tax RESOURCES.

The company objectives must be communicated to all which of the following? (Choose 2)

All employees
Only those individuals that choose to know
The stakeholders
Only the nonessential employees

When clearly defined, the __________ will present a guide to how the plans should be carried
out.
marketing plan
declaration of work
plan
mission

Defining the strategic objectives is a step in the strategic formulation that requires the
organization to communicate the performance targets that will assist the company in reaching the
overall objectives. The targeted objectives could include production of the GOODS AND
SERVICES.

Strategy formulation pushes an organization to do which one of the following?  

Observe the behavior of the employee
Review the company mission
Review the organizational goals
Observe the effects of the changing environment

The mission should incorporate the __________ to what that organization stands for and the
nature of the business.
objectives
facts
values
reason for the strategy
Types of Strategies 98%
Introduction
Corporate strategies are generated to set the direction for
where the company ultimately wants to end up. They also
provide organizational direction when these strategies are
decided upon.

Within most organizations, the strategic management

model is used in various ways, as one or more strategies are
implemented simultaneously. When strategies are
combined, this can be a potential risk if pursued for a long
period of time.

Learning Materials
Types of Strategies

There is not one organization that can effectively pursue multiple strategies at one time; priorities
must be put in place because most organizations have limited resources. Most organizations have
the potential to spread themselves thin trying to utilize their talents and resources, which will
allow the competition to gain a competitive edge. The only time multiple strategies are used is
when large multinational corporations have multiple divisions within the organization pursuing
different strategies.

The strategy of the business can be broken down into three generic strategies: cost leadership,
differentiation, and the focus strategy. 

Cost Leadership Strategy

This is a known strategy that a firm utilizes when it is trying to become the lowest cost producer
in its industry. The firm’s ultimate goal of this strategy is to produce or provide its services at a
lower cost than the competitor. If the firm effectively leverages on this strategy, it will have the
capability of selling its products or services at the same price as its competitor while making a
substantial profit. The firm also has the potential of lowering the sale price in an effort to
underbid the competitors to make a profit. Emphasis should be put on lowering the costs, not on
lowering the selling prices.
Differentiation Strategy

This is when a firm is known as being different than every other firm. This strategy puts great
emphasis on branding advertising, quality, design service, and new product development. Any
firm that chooses to utilize this strategy is looking to be seen as a unique commodity within its
industry. The product or service that it will be offering should have uniqueness that carriers a
premium price tag. Although the product or service is being seen as a unique attribute, it does not
necessarily have to be an eccentric product; it can actually be seen as a simple product by the
consumer. The firm ultimately wants to use this particular strategy so that it can maximize on
profitability.

Click on the link below to view a video on building strategic differentiation:

http://www.youtube.com/watch?v=o1xUaL6iYSc

(Quadrictube, 2012)

Focus Strategy

This strategy focuses more on a specific niche rather than on the product or service market. The
niche could be comprised of a particular buyer group, geographic market, and segment of the
product line. For example, there are companies in the automobile industry that concentrate on
manufacturing vehicles for individuals who are physically handicapped. These particular
companies would not necessarily compete with an actual dealership because the dealership does
not focus on this specific type of vehicle. The focus is on addressing those individuals who have
extenuating circumstances.

Any firm that chooses either one of these generic strategies has the likelihood of becoming very
profitable. According to Michael Porter (Porter’s five forces model) some firms become stuck in
the middle and are likely to obtain a low profitability. They will also not have any type of
competitive advantage and may be annihilated by those firms with a greater market share and
competitive advantage.

Various Types of Strategies

Organizations and individuals combined have alternative strategies to avoid any unwarranted
debt. Some organizations that seem to struggle will look at implementing multiple strategies to
survive (e.g., liquidation, acquisition, or divestiture).

There are multiple types of strategies that corporations use: forward integration, backward
integration, horizontal integration, market penetration, product development, related
diversification, unrelated diversification, retrenchment, divestiture, and liquidation.
Forward Integration

The forward integration strategy involves gaining ownership or increased control over
distributions or retailers. Manufacturers, better known as the suppliers, are actively utilizing the
forward integration strategy. They are effectively pursuing this strategy because it allows them to
use Web sites to sell and distribute their products.

Backward Integration

When it comes to this particular method, both retailers and manufacturers are in need of
materials from their suppliers. The backward integration strategy is when a firm is seeking
ownership or increased control of a firm’s supplier. Most firms utilize this strategy when their
current supplier appears to be unreliable, expensive, or cannot meet the expectations of that firm.

Horizontal Integration

This strategy is used when a firm is seeking ownership of or looking for increased control over
its major and minor competitors. This strategy is one of the most significant trends utilized in
strategic management today. Corporations are constantly going through mergers or acquisitions.
Competitors are actively looking into taking over other companies because this will allow for
increased economies of scale and enhanced transfer of resources and competencies.

Retrenchment

When an organization re-evaluates its costs and asset production in an effort to reverse declining
sales and profits, this is known as retrenchment. This strategy was designed to fortify an
organization’s basic distinctive competence. During this phase, strategists are forced to work
with limited resources and are receiving constant pressure from the shareholders, employees, and
the media.

Market Penetration

When it comes to firms utilizing market penetration, the company is striving to increase its
overall market share for its newly designed products or services by presenting a greater
marketing presence. This strategy is normally used alone or in combination with other strategies.
When a firm decides to use this particular strategy, it must dramatically increase its sales reps,
advertising, and expenditures, while utilizing and presenting new sales and promotions and
increasing publicity efforts.
Product Development

One strategy that has been utilized to seek increased sales by improving or modifying present
products or services is known as product development. This particular strategy will encompass
massive research and development expenditures.

Divestiture

This is another defensive strategy that is employed in regard to selling a specific division or part
of an organization. This strategy is heavily applied as an overall retrenchment strategy to
dissipate an organization that appears to be unprofitable, and when an organization is causing
issues with capital.

Liquidation

This strategy entails the firm having plans to sell company assets. This strategy is known as
accepting defeat and tends to be a bit more emotional at some point.

Diversification Strategies

When reviewing diversification strategies, there are normally two types: related and unrelated.
Most companies favor related diversification to capitalize on synergies.
Related Diversification

Unrelated Diversification

This is a strategy that favors capitalizing on a portfolio of businesses that have the capacity to
present a favorable financial performance in their industry, versus striving to capitalize on the
value chain strategic fits among the businesses. 

Summary

Depending on the type of strategy that the firm chooses to pursue, the strategy type should be
one that assists with developing a sustainable competitive advantage within that specific industry
and, most importantly, throughout the organization. Even though most of the decisions will be
based off of the industry and the organization, the competitive advantages could encompass key
technological advances or initiatives. Those firms could also work on developing their core
competencies, which would include product development, marketing, process improvement,
being innovative, or even sales; these can all lead to competitive advantage.
 Key Terms

Cost Leadership Strategy

This is a known strategy that a firm utilizes when it is trying to become the lowest cost producer
in its industry.

Differentiation Strategy

This is when a firm is known as being different than every other firm.

Focus Strategy

This strategy focuses more on a specific niche, rather than on the product or service market.

Forward Integration

This involves gaining ownership or increased control over distributions or retailers.

Backward Integration

This is when a firm is seeking ownership or increased control of a firm’s supplier.

Horizontal IntegrationThis is when a firm is seeking ownership of or looking for increased

control over its major and minor competitor

Retrenchment

This is when an organization re-evaluates its cost and asset production in an effort to reverse
declining sales and profits

Market Penetration

This is the company striving to increase its overall market share for its newly designed products

Product Development

This is utilized to seek increased sales by improving or modifying present products or services

Divestiture

This is a strategy that is employed in regard to selling a specific division or part of an

organization

Liquidation
 This is when the firm plans on selling the company assets

Related Diversification

This demonstrates and supports that the business will achieve a return on the investment

Unrelated Diversification

This is a strategy that favors capitalizing on a portfolio of businesses that have the capacity to
present a favorable financial performance in their industry, versus striving to capitalize on the
value chain strategic fit among the businesses

References

David, F. R. (2011). Strategic management. Upper Saddle River, NJ: Prentice Hall.

Freitas, C., & Hoffmann, V. (2012). The perception of the stakeholders influences strategies and its
relation with the generic strategy: Case study in small business enterprises of the north coast of
Santa Catarina State. Brazilian Business Review (English Edition), 9(2), 1–25.

Gurǎu, C. (2007). Porter's generic strategies: A re-interpretation from a relationship marketing

perspective. Marketing Review, 7(4), 369–383.

Quadrictube (2012). Building strategic differentiation. Retrieved from: http://www.youtube.com/watch?

v=o1xUaL6iYSc

Shah, A. (2007). Strategic groups in retailing based on porter's generic market based
strategies. Marketing Management Journal, 17(1), 151–170.

Udayasankar, K., & Das, S. S. (2004). Competitive institutional strategies: A new generic
typology. Academy Of Management Proceedings, 1–6. 
Questions
Gaining control through purchase or merger of a supplier or service provider is referred to
as backward integration.

Which of the following are known as a type of strategy? (Choose 2)

Market Integration
Market Penetration
Retrenchment
Forward Retrenchment
Liquidation
Divestiture
Forward Integration
Product Development

Focus strategy focuses more on a specific niche.

The differentiation strategy puts great emphasis on branding advertising, quality, design service,

and new product development.

The liquidation strategy entails when the firm has plans on selling the company’s ASSETS.

A strategy that favors capitalizing on a portfolio of different businesses is unrelated

diversification.

Market penetration is when ___________.  (Choose 2)

the company decreases its market share
the company analyzes the market share
the company increases the market share for newly designed products
the company is striving to increase its overall market share

Related diversification may be an effective strategy when __________. 

old but related products are marketed at highly competitive prices
a firm decides to present new products
the firm's organization has a weak management team
the life cycle of a product is increasing
a firm is competing in a no-growth or slow-growth industry
Retrenchment is when an organization reevaluates its cost and __________ production in an
effort to reverse declining sales and profits. 
products
profit share
services
asset

Product development is used to __________.  (Choose 2)

assist with company strategic planning
increase sales
modify present products
decrease competitor sales

Divestiture is another defensive strategy that is employed with regard to selling of a DIVISION.

Horizontal integration is used when a firm is seeking ownership of or looking for increased
control over its major and minor competitors.

What are the two types of diversification strategies? (Choose 2)

Unrelated diversification
Retrenchment
Divestiture
Related diversification

Which of the following are known as a type of strategy?  (Choose 2)

Related Diversification
Market Integration
Product Development
Organizational Integration
Strategies in the Nonprofit Sector 98%
Introduction
Various nonprofit organizations are effectively utilizing the
strategic management process. Those nonprofit
organizations could range from scouts to educational
institutions, medical institutions, chambers of commerce,
libraries, government agencies, churches, and public
utilities. Over the years, the nonprofit sector has expanded
and is now one of the largest employers in the United
States.

Learning Materials
Strategies in the Nonprofit Sector

When comparing a nonprofit to a for-profit institution, nonprofit entities (along with

governmental organizations) rely totally on outside donations for funding. There are some
nonprofit and government agencies that outperform for-profit agencies. They also outperform
for-profit organizations when it comes to increased productivity, motivation, being innovative,
and strategic management. Strategic management provides an excellent resource when nonprofit
organizations are developing and justifying requests for financial backing.

Nonprofit organizations evaluate and engage the staff and the organizational stakeholders when
it comes to the strategic planning process. This is done to evaluate the current state of the
organization to determine whether any changes are needed and to assist with adequately planning
for the organization’s future. The value and assessment will need to be clearly articulated, along
with the strengths, weaknesses, and any external environmental factors that could potentially
harm the operator of the organization.

Action plans, coupled with strategies, need to be created to aid in accomplishing the overall
desired goals and objectives that have been identified through the planning process. Click on the
link below to learn more about non-profit enterprise:

http://www.youtube.com/watch?v=jCESh2UqdpM&t=2m7s

(notredamebusiness, 2013)

Strategic Planning Committee

Most nonprofits start off by creating a strategic planning committee. This special committee will
recruit individuals from management and nonmanagement parts of the organization. These
individuals should be motivated, possess critical thinking skills, and have an energetic spirit to
assist with the decision-making process. Some organizations may choose to bring in outside
resources to assist with facilitating the conversations throughout the process. They should have
the ability to move the process along and provide a draft of the final plans while seeking
approval from the staff and the board.

The first thing that should be addressed by the strategic planning committee is accessing the
organization’s current situation while reviewing the company’s mission. The committee should
also devise a plan that communicates the planning process outcome, issues to be addressed, any
planning activities, and the time it will take. It is critically important for the strategic planning
committee to involve the board and staff because strategic planning is iterative, and the overall
comprehension of the board and staff coupled with the internal and external research can alter
the course of the planning and is likely to question the earlier assumptions and conclusions.

The strategic planning committee should also provide a summary of the organization, listing
what has been accomplished since the last planning process. Empirical data should be utilized,
such as fundraising efforts, budget, and program trends, which would give some direction on
how to proceed during the planning process.

The following main components of a strategic plan should be addressed by the planning
committee:
Government Agencies

Governmental entities such as the federal, state, and county municipalities are entities that utilize
the taxpayers’ dollars to provide services or create programs. Those entities could include the
health departments, chambers of commerce, police departments, and so forth. They are
responsible for formulating strategies that support the taxpayers. Government agencies embrace
strategic management concepts in a more effective and efficient way.

Employers that are affiliated with most government entities are willing and excited about
participating in a strategic management process. Most government entities using the strategic
management approach justify and develop a formal request in a quest to obtain additional
funding.

Educational

Educational entities are beginning to leverage strategic management techniques and concepts.
Online institutions are becoming more of a threat to the traditional college and university. The
competitive climate in the educational arena is consistently trying to attract high school
graduates and first-generation adults.

Medical Institutions

The medical industry is constantly pursuing alternative methods for taking care of patients. Most
hospitals are looking into bringing their services to the patient versus the patient coming into one
of their facilities. The health care industry is focusing more on bringing patient assistance into
the home, as well as the residential communities. Chronic care will entail having a day treatment
facility, ambulatory services, electronic monitoring at home, laboratory testing, and decentralized
services networks.

For the medical facility to incorporate a successful strategic plan, it will require renewed and
deepened collaboration with physicians who are able to access the physical location in a timely
fashion. A reallocation of resources addressing acute to chronic care in the home and community
settings will also be a requirement.

Medical institutions are continuously finding alternative methods of providing medical

assistance. They are building more nursing homes, in-home health care, and rehabilitation
facilities. More and more individuals who are seeking medical care are resorting to the internet
for services. Along with locating medical assistance online, people are constantly referencing the
internet for medical assistance or trying to diagnose themselves or family members.

Most people feel that if they have a pre-diagnosis going into the medical facility, they could
assist or accelerate the process of being diagnosed. It has been found that some patients will
enter into the doctor’s office with the most current research because some feel that most doctors
have not kept up with all of the research that has been conducted.
Requirements for Strategic Planning for Nonprofits

The overall requirement for nonprofit strategies should be developed to address two main
factors: bringing overall success to the organization and avoiding failure at all costs when things
are not tracking as they should be. Nonprofit strategies must allow the organization the ability to
hit its targets of satisfactory performance, and the nonprofit style must not place the organization
in the position of being subjected to a risk that could possibly make that organization susceptible
to performance failure.

The nonprofit should be strictly practical and relevant to the

strategic situation so that it can be inventive, and so that it is
seen as capable of engaging the staff in the implementation
process. This will allow the company to stand among other
nonprofits, and not be looked upon as an imitation of what
other nonprofits are doing. Organizations must understand that
strategic plans do not and cannot predict the future. The steps
should not articulate the exact implementation steps out into
the future.
Generating Options for Nonprofits

Nonprofits are required to meet general specifications that involve generating a list of strategic
options. These strategic options should entail the key issues that were acknowledged in the
foregoing target setting and the SWOT analysis that was created during the stages of the strategic
planning process. There are multiple strategies that a nonprofit can take advantage of. In some
situations, some nonprofits will ride the bandwagon and just mimic what other nonprofits are
implementing as the strategy of the month.

Nonprofits should avoid the extremity of being overwhelmed with all of their responsibilities and
should limit their attempts to do multiple tasks at one time. They should also not avoid the hard
work that comes along with strategic decision making by simply shadowing the current industry
trends in strategic thinking.

Nonprofit organizations need to ensure that the strategies that have now emerged are relevant to
their organization’s strategic situation. If a nonprofit organization accepts the truth of how the
organization needs to be run in the earlier planning stages, it is more likely to accept its general
strategic direction that is relevant to its particular strategic plan. 

Summary

The planning team will have completed the most critical part of their work when an agreement
materializes around the strategies. A nonprofit organization must remember that there are three
critical tasks that must be performed. They must continue to evaluate the organization’s strategy
on a regular basis, put those action items into play, and monitor them. The managers must
continue to show that the identified strategies are significant enough to uplift the nonprofit’s
performance.
 Key Terms

Strategic Planning Committee

This committee provides a summary of the organization, listing what has been accomplished
since the last planning process.

Government Agencies

Governmental entities such as the federal, state, and county municipalities are entities that utilize
the taxpayer’s dollar to provide services or create programs.

References

Akingbola, K. (2006). Strategic choices and change in nonprofit organizations. Strategic Change, 15(6),

265–281.

David, F. R. (2011). Strategic management. Upper Saddle River, NJ: Prentice Hall.

Knox, S., & Gruar, C. (2007). The application of stakeholder theory to relationship marketing strategy
development in a nonprofit organization. Journal Of Business Ethics, 75(2), 115–135.

McGovern, E. (2012). An international social-marketing strategy for a nonprofit organization:

Determining the path for continued success. Journal Of Case Studies, 30(1), 27–43.

Notredamebusiness. (2013). Roxanne Spillett - The necessity of priorities and strategies in today's nonprofit
sector. Retrieved from: http://www.youtube.com/watch?v=jCESh2UqdpM.

Rhodes, M., & Keogan, J. F. (2005). Strategic choice in the nonprofit sector: Modelling the dimensions
of strategy. Irish Journal Of Management, 26(1), 122–135. 
Questions
The health care industry is focusing more on bringing patient ASSISTANCE into the home.

Nonprofits should use empirical data for which of the following? (Choose 2)

Evaluating program trends
Fundraising efforts
To assess the economy
To assess other nonprofits

Nonprofits should avoid the extremity of being overwhelmed with all their responsibilities
and RESPONSIBLY limit their attempts to do multiple tasks at one time. 

GOALS should define what the organization is trying to achieve organization-wise and

programmatically.

The planning team will have completed the most critical part of their work when an agreement
materializes around the strategies. A nonprofit organization must remember that there are three
critical tasks that must be performed, including which of the following?
Evaluate similar competitors
They must ignore those action items
They must put those action items into play
They must decrease the monitoring process
They must continue to evaluate the organization’s strategy on a regular basis

Nonprofits should also exploit any _________ rated opportunity that can enhance the nonprofit's
performance. 
low risk
newly
highly
government

Nonprofits are required to meet general specifications that involve generating a list of
__________ options.
limited
relevant
unique
strategic

Educational entities are beginning to LEVERAGE strategic management techniques and

concepts.
It is critically important for the strategic planning committee to involve the _________ and
__________ in the communication process. (Choose 2)
competitors
board
staff
suppliers

A special committee is established to perform particular studies or investigations.

Most people feel that if they have a prediagnosis going into the medical facility, they could
assist or accelerate the process of being diagnosed.

Nonprofit organizations need to ensure that the strategies that have now emerged are
__________ to their organization's strategic situation. 
Non-Relevant
Imperative
Vital
Relevant

Medical institutions are continuously finding alternative methods of providing medical

assistance. They are building more nursing homes, in-home health care, and rehabilitation
facilities. 
Open Systems Theory 98%

Open systems theory (OST) [This is a way of assessing the specific active systems, or the
systems that interrelate with their environments.] is known as a contemporary systems-based
improved management theory that is intended to create vigorous, inventive, and pliable
organizations and communities in today’s rapidly changing and capricious environments.
Various organizations and communities are continuously conducting and influencing businesses
while addressing their external environments. Although all companies will unremittingly be
affected by the factors that influence the external environments, it is an ongoing process that they
will need to continue to address in regard to the external changes in the local and global
environments. 

For an organization to ensure viability, the company must confirm that the open system has an
open and vigorous adaptive association with its external environment. A healthy, viable open
system has a direct correlation to those changing values and expectations within a certain period
of time in regard to the external environment. If the company’s values, along with its
expectations, are found to be out of sync with those factors that affect the external environment,
then that particular company or community has a potential of becoming unhealthy and unviable. 

Learning Materials
Open Systems Theory

The open system theory [This is a way of assessing the specific active systems, or the systems
that interrelate with their environments.] principally addresses problems of relationships,
structures, and interdependence, rather than the constant attributes of objects. The open systems
theory is a way of assessing the specific active systems and the systems that interrelate with their
environments. All businesses are perceived as dynamic systems that evolve and make any
necessary modifications from the feedback given. This system is very valuable to various
businesses because it provides a framework for thinking about the processes such as change,
which is a regular component needed to run a business.

Systems Thinking

Open systems are often looked at as being non-living things or a set of concepts, propositions, or
definitions that provide an explanation or prediction of a set of events or situations by
determining the relationship between the components. It is also known as systems
thinking versus traditional thinking. It also provides the foundation for the analysis and
modeling of systems, while providing an analytical framework for comprehending dynamic
interrelated operating systems.

Holistic Approach to Solving Problems

Open system can also be looked upon as a holistic approach to solving problems, demonstrating
how to reflect on how the organization relates to its business environment, and the factors that
could ultimately affect the organization. The open system theory also believes that all large
organizations are created with various or multiple subsystems. Each subsystem receives input
from the other subsystems, which allows the outputs to be utilized by the other subsystems. The
subsystems associated with the organization are not necessarily represented by a specific
department within the organization, but could possibly mimic patters of activity.

Difference Between An Open System and Traditional Organizational Theories

Of course, there is a distinct difference between an open system and the traditional
organizational theories. The former theory is based on a subsystem hierarchy. This basically
means that all of the identified subsystems are not necessarily equal or important. If one
subsystem fails, it doesn’t necessarily impede the entire system. By dissimilarity, the traditional
theory implies that a malfunction in any part of the system would cause an equally debilitating
impact.

Ludwig Von Bertalanffy

In the 1960s, biologist Ludwig von Bertalanffy developed what is known was an open system
between 1930 and 1956. Ludwig felt that it was not a theory of management, but a new way of
conceptualizing and studying various organizations. During this time frame, the holistic and
humanistic ideologies emerged. The concept of open systems addressed the belief that all
organizations, in some way, are very unique because of the environment in which they operate.
The concept also allows organizations to restructure themselves to accommodate those unique
problems in regard to the opportunities presented.

Environmental Factors that Affect Open Systems

There are multiple environmental factors that will affect open systems, such as government
agencies, distributors, suppliers, and competitors with a business enterprise. 
Causes of Problems for Open System

There are occurrences that could cause problems for an open system; the flow of interaction to
the organization providing inputs and the environment could cause potential issues. No
organization should be viewed as being autonomous. For example, if raw materials are not
provided in a timely fashion, the organization will ultimately fall behind and be late in the
production process, which causes the outputs to be delayed and impacts the external inputs. The
alignment is thrown off, which causes inefficiency and ineffectiveness. Another factor that may
come into play in regard to the open system is that it causes flexibility, which could be a
potential issue as well. This means the open system needs to be proactive so that it can adjust to
the conditions of the environment.

Individuals and groups can be viewed as an open system as well. They would require exchange
processes with their environments in order to survive. From the employee’s perspective, an
organization is viewed as being an immediate external environment. This influential effect
/change between individuals, their communities, and their organizations to which are known as
socio-ecological change. Socio-ecological change is increasing exponentially. The primary
reason for this change is based off the individual’s beliefs, value and their expectations in the
external environment.
Change

Change in the open systems is known as the process of adapting to irregular circumstances. The
open systems theory provides the necessary tools to assist with any plans that are being discussed
within the organization, (e.g., explanations and descriptions of the general patterns or obstacles).
To be successful in a dynamic change, attention to feedback and integrating information is
critical, versus proceeding with an unyielding idea of how this change should occur. A business
that often tends to change its product line by focusing on the products that have made the
company most successful is ultimately effecting the dynamic change. This is shifting the
response to information about customer demand.

Boundaries

Organizational systems will always have some type of boundaries, or some type of separation
from the environment that they normally interact with. Because of this reality, they will continue
to intermingle with their environments, but their boundaries must be absorbent or capable of
letting information in and out. The may consist of the company’s culture or the set of shared
references along with assumptions that aid its employees and management in working toward the
shared goals. It must be understood that the boundary has to be permeable. It has to be flexible
enough to the point that the employees can amend their conduct and set their expectations in
response to the customers’ needs.

Organizational Learning

For an open system to work effectively in providing change, it must employ organizational
learning. This will involve the various parts of the learning system and then build on the
improved knowledge by spreading information throughout the system. A business implements
organizational learning in an attempt to possibly institute a new product, monitors the effect of
an assortment of market factors on its success, and then utilizes those lucrative components of
the undertaking when launching the next product. Organizational learning will encompass
identifying opportunities and providing individual members the opportunity to grow and be more
knowledgeable within the entire system.

The open system speculates that an individual or group, coupled with the organization, can
demonstrate upward levels of complexity and the similar basic structural principle, each
described as an internal world, external environment, and boundary function that is responsible
for the two elements connecting. As time progresses, organizations and local communities will
continue to conduct business, and they will continue to influence and impact their external
environments while being impacted by the external changes that come from the local and global
environments.

Organizations and communities are constantly influencing one another over a period of time,
which is why they are seen as open systems—also known as an active adaptive change
[Multiple communities continuously influencing each other over a period of time.]. The open
system must have an active relationship with the external environment to be viewed as an open
system. An open system must have a direct correlation to those values and expectations that
change in time because of the external environment. 

Summary
The open systems theory has been recognized as the body of knowledge that was designed
specifically to assist an organization and its communities in an effort to produce an adaptive
relationship with external environments. Organizations and communities that are adaptive and
active cannot operate as a closed system by ignoring what is going on in the world surrounding
them.

They are open systems that:

 Influence the environment for a sustainable future

 Are driven to respond instantaneously to leverage on the opportunities presented
 Support emergent changes, as well as opportunities in the external environment

Key Terms
Open Systems Theory

This is a way of assessing the specific active systems, or the systems that interrelate with their
environments.

Cultural Values

This molds the view on ethics while discussing the importance of various issues.

Economic Conditions

This includes components such as a recession, geographic unemployment, economic upswings,

and other factors that may affect a particular region.

Legal and Political Environment

This enforces the laws that have been put into place and assists with allocating power within a
society.

Quality of Education

This pertains to the technology industry, along with the other industries that are required to have
an educated workforce. 
 References 

Gavetti, G., Greve, H. R., Levinthal, D. A., & Ocasio, W. (2012). The behavioral theory of the firm:
Assessment and prospects. Academy Of Management Annals, 6(1), 1–40.

Valentinov, V. (2012). System-environment relations in the theories of open and autopoietic systems:
Implications for critical systems thinking. Systemic Practice & Action Research, 25(6), 537–54

youtube video. 
Questions
Which is not the primary reason for individual change? 
Religion
Organizational expectations
External environment
Beliefs

Change in the open systems is known as the process of ___________________.

modifying regular circumstances
adapting to irregular circumstances
eradicating irregular circumstances
amending irregular circumstances

Biologist Ludwig von Bertalanffy developed the concept of the open system.

An open system must have a direct correlation to those values and expectations that change in
time because of the external environment.

Organizations and communities are constantly influencing one another over a period of time,
which is why they are seen as examples of open systems.

Organizations and communities are constantly influencing one another over a period of time.
These are examples of active adaptive change. 

A business may implement organizational learning in an attempt to institute a new product.

Open systems are often looked at as __________________.

related to traditional thinking
living things and concepts
nonliving things or concepts

An open system is a system that interfaces and interacts with its environment.

Organizational systems will always intermingle with and be effected by their environments.

Managing Conflict 98%
Introduction
In most situations, conflict is inevitable; and
it will continue to transpire in the
workplace. Every individual has his or her
own set of goals and expectations, which
may be the root cause of why conflict
occurs in multiple organizations. The fact
that most organizations will encounter
conflict is not always a bad thing; it just
needs to be resolved in a timely fashion. If
handled appropriately, it can possibly lead
to personal and professional growth.

In most cases, conflict resolution can be the difference between a positive outcome and a
negative outcome. When conflict arises, it provides the opportunity to successfully address the
root cause of the problem.

Learning Materials
Dealing With the Theory

In the 1970s, Kenneth Thomas along with Ralph Kilmann acknowledged five specific styles of
dealing with conflict. They conveyed that individuals typically have a variety of preferred
conflict resolution styles. They also stated that the effectiveness of each style depended upon the
context of the situation. They ultimately developed the Thomas-Kilmann Conflict Mode
Instrument (TKI) that assisted people with identifying the specific style that they tend to embrace
when it comes to dealing with a conflict. Thomas and Kilmann’s styles were known as
competitive, collaborative, compromising, accommodating, and avoiding.

Conflict Resolution

When dealing with conflicts, some may encounter certain situations where neither party is right
or wrong. Various situations may be viewed at different perceptions, and those perceptions could
possibly collide, creating disagreement. On the other hand, conflict could be seen as a positive,
depending on how the situation is being handled. If the situation is dealt with in an open manner,
a manager has the ability to strengthen the work unit by addressing and rectifying the problem
that caused the conflict.

What is Conflict?

Conflict can be defined as a disagreement that two or more parties encounter when dealing with
a particular issue. Conflict can also arise when an organization starts establishing annual
objectives, because those individuals can and will have different perceptions and or expectations.
The schedule could possibly create undue stress or pressure. Personality clashes, as well as any
misunderstandings between line managers, could possibly occur.

When it comes to establishing objectives, conflict occurs within management because the
managers and strategists must find a way to conduct trade-offs to discuss short-term profits along
with long-term growth, market share, profit margin, market development, market penetration,
social responsiveness, or profit maximization. Trade-offs are beneficial because no firm has the
capacity or bandwidth to pursue all the strategies that could possibly benefit the firm.

Addressing Conflict - The 5 Steps

When addressing conflicts, there are five steps that can be taken into consideration: analyze the
conflict, determine the management strategy, prenegotiation, negotiation, and postnegotiation.

The answers that are derived from these questions will be based on the experience of the
manager, the team, and the individuals involved. Most of the team members involved will need
to be interviewed to assist with coming to a resolution.
Once the manager has gathered an understanding of the conflict, it must then be determined how
to select the most appropriate strategy to resolve the conflict. In certain situations, having a
neutral party involved will help to move toward a plan of action. The management strategy
consists of five options: collaboration, compromise, competition, accommodation, and
avoidance.

 Collaboration: This strategy is usually helpful when taking all individual concerns into
consideration. This approach will assist and build commitment while reducing individual
ill feelings. The individuals who fit into this category tend to be highly self-assured, but
unlike the competitor, they will cooperate efficiently and recognize that everyone is
essential. The negative side of this approach is that it is time-consuming. In some
circumstances, the trust and openness of others may be taken advantage of. The overall
objective of the collaboration is coming to a general consensus.
 Compromise: This situation is used when a manager is trying to provide a temporary
solution preventing power struggles, or when time is of the essence. This outcome is
normally a “win some/lose some.” In this circumstance, everyone is expected to
surrender something, and the compromiser is expected to relinquish something. There is
one drawback to using this approach. The individuals involved can lose focus on their
objectives and create a contemptuous climate.
 Competition: This strategy encompasses an attempt to bargaining. It is normally used
when basic rights are at stake, or to possibly set a precedent. It does have a propensity to
escalate the conflict to where the losses will have a tendency to retaliate. Individuals who
tend to lean towards this approach usually derive from a status of power (e.g., rank,
persuasive ability, and expertise). This style is very useful when a decision needs to be
made expeditiously, when a decision is found to be unpopular, or when defending against
someone who is trying to take advantage of the situation uncaringly.
 Accommodation: This strategy is used when the issues are not directly associated with
the manager and when the issues are more important to the other parties. It may be seen
as a “good will gesture.” The person in this role tends to not be assertive, but highly
cooperative. The drawbacks would be that the manager’s own ideas aren’t taken into
consideration, which could cause that manager to lose respect and creditability and
tarnish future influences. The outcome is usually a “lose/win” situation.
 Avoidance: This strategy is generally used when the issue is being viewed as trivial, or
when other issues are presented as more pressing. It is also utilized when the conflict has
a high probability of confrontation, or when additional information is needed. This
concept can be used if victory seems impossible, when the controversy is seen as trivial,
or when someone else has the ability to address the problem because they are in a better
position to provide resolution to the problem. The negative aspect is that the decisions
that may need to be made or defaulted.
Once an individual understands the multiple styles, he or she can then use them to determine
which method is appropriate for the situation being addressed.

To begin the pre-negotiation process, the following steps need to be taken. The ground work
must be done; starting with initiation. A trusted facilitator can come in to encourage each
individual to reach an agreement. Once a facilitator has been identified, then comes the
assessment. All parties involved would come together to determine which issues are negotiable
and which issues are not negotiable. The ground rules should be identified, and the objectives
should be agreed on with regard to the negotiation process. It would also be helpful to create an
agenda of issues that need to be addressed during this phase.

 Organization: Notes should be taken and distributed so that everyone is on the same

accord. This information should be disseminated before and after all meetings.
 Joint-fact finding: This method is needed to generate answers to the questions being
asked.
 Written agreement: This documentation will aid in keeping everyone clearly informed
on what has been communicated.
 Commitment: This will hold each person responsible and accountable for their
commitments.

it comes to negotiating, open communications must be present, rather than a stated position. The
satisfaction of interest should be the common goal. Options must be presented, judgment should
not be passed on any suggestion or idea presented, and creativity should be highly encouraged.
The evaluation process should then come into play, which allows all individuals to work together
to determine which ideas are best suited for the situation.

Once the negotiation phase is complete, the decisions that were made will need to be
implemented. During this process, the following steps should be taken: 1) Ramification: Support
must be obtained from all of the parties involved in the agreement. The individuals should also
have been included in the negotiation proves. Each group will review and adopt the agreement.
2) Implementation: Clear communication and collaboration will need to continue throughout this
phase. Progress will need to be monitored, documented, and, if need be, renegotiated to stay on
the road to success.

Summary
Conflict is unavoidable, so it is imperative that conflict be managed and handled appropriately
before the issues disrupt the organizational day-to-day performance. As mentioned earlier,
conflict is not bad, but it must be handled appropriately. If an organization views that conflict is
not present, they must understand that this can trigger indifferences and apathy. Conflict could
serve as an organizational energizer to opposing groups. This will force the opposing groups into
action and assist managers with identifying the problems that are causing the conflict.

 Key Words
Accommodation

When the issues aren’t directly associated with the manager, and when the issues are more
important to the other parties.

Avoidance

When the issue is being viewed as trivial, or when other issues are presented as more pressing.

Collaboration

Defined Helpful when taking all individual concerns into consideration.

Compromise

When a manager is trying to provide a temporary solution preventing power struggles.

Conflict

Defined as a disagreement that two or more parties encounter when dealing with a particular
issue.

Management Strategy

When the manager has gathered an understanding of the conflict and must select the most
appropriate strategy to resolve the conflict.
 References

Curzer, H. J., & Santillanes, G. (2012). Managing conflict of interest in research: Some suggestions for
investigators. Accountability in Research: Policies & Quality Assurance, 19(3), 143–155.
doi:10.1080/08989621.2012.678685

Fiol, C., Pratt, M. G., & O'connor, E. J. (2009). Managing intractable identity conflicts. Academy of
Management Review, 34(1), 32–55. doi:10.5465/AMR.2009.35713276
Questions
Joint-fact finding is a method needed to GENERATE answers to the questions being asked..

Competition is a strategy that encompasses an attempt to BARGAIN. 

When it comes to negotiating, __________ communications must be __________, rather than a

stated position. 
closed; approved
open; negotiable
closed; present
open; present

Place the steps of addressing a conflict in order from 1 to 5.

Which of the following is comprised of the determine the management strategy? (Choose 2)

Acquisition
Collaboration
Organizational development
Accommodation

Conflict can be defined as which of the following? 

When two or more groups agree with a specific topic
When one person disagrees with the specific topic being discussed
When multiple parties are in disagreement when discussing a specific topic
When multiple parties disagree about the objectives being set for the organization

Collaboration is a ___________ and is usually helpful when taking all individual concerns into
consideration. 
business plan
group thought
policy
strategy

When it comes to addressing conflict, FIVE steps need to be taken into consideration.

The accommodation strategy is used when the issues are not directly associated with the
manager, and when the issue is more important to the other parties. It may be seen as a GOOD
WILL GESTURE.

When it comes to establishing OBJECTIVES, conflict occurs within management because the

managers and strategist must find a way to make trade-offs.

Once the manager has gathered an understanding of the conflict, it must then be determined how
to select the most appropriate STRATEGY to resolve the conflict.

Various situations may be viewed at different __________ and those could possibly
__________, creating disagreement. 
perceptions; deteriorate
levels; deteriorate
perceptions; align
perceptions; collide

Avoidance is a strategy that is generally used when the issue is being viewed as trivial.
Managing Resistance to Change 98%
Introduction
It is normal for an organization to experience
resistance to change, whenever this change occurs.
Understanding the resistance to change will assist
managers in anticipating that resistance. This will
allow them to proactively identify the sources and
the reasons and possibly modify their efforts to
change to ensure success when the change has been
implemented. When an organization endures
resistance, it does not necessarily mean that it is a
bad change. It could even be looked at as being a
healthy move for the organization.

Mangers must remember that being on the defensive could be viewed as a negative. The manager
must thoroughly analyze the objectives to determine the real root cause behind the resistance.
Most of the time, resistance comes from fear.

Learning Materials
Managing Resistance

The leaders of an organization must take the time to thoroughly evaluate the resistance to
compile multiple assumptions before they are able to overcome the resistance. The manager must
understand how his or her employees are feeling as well as what they are thinking.

Eliminate or Reduce the Resistance to Change

There are ways to eliminate or reduce the resistance to change, including the following:
Capacity to Adjust to Change

Organizations will need the capacity to adjust to change in a timely fashion. Resistance tends to
rise when a large-scale change is occurring within the organization, which brings about the
possibly of encountering significant problems and challenges. Change can also transpire on a
personal level. Most individuals have a set pattern of behavior that they are not willing to
change, or they have a defined relationship with other individuals that they associate with in
other organizations. They also tend to be more settled in their current roles and work practices.
Changes do not only occur on a personal level but on the organizational level as well (e.g.,
policies, procedures, organizational structure, and work flows).

Change Management

Although most organizations will encounter resistance within their organizations when change is
being implemented, most of the resistance can be avoided if an effective change management
program is in place and discussed at the beginning stages of the project. Human resistance is to
be expected when the time comes for the change to take place. If an organization has a good
change management plan in place, it can possibly alleviate the resistance that is to be expected.
Change management should be viewed as a tool that will assist with managing resistance when it
transpires.

This change management tool would be most effective when stimulating and engaging the
employees who are involved in the change. Encapsulating and influencing the positive emotions
that are pertaining to a change may possibly prevent any type of resistance from occurring.
Utilizing an effective change management process provides leverage for the project if it is
initiated at the beginning stages.

Resistance should be expected even if the solution being provided presents an improvement to
the problem that has beleaguered the organizations employee. Comfort with the status quo is
astonishingly influential, but the fear of possibly moving into an unknown state will bring about
fear, anxiety, and stress. This is true even if the current state of the organization has been found
to be difficult. The project teams along with the change management teams should anticipate
resistance and implement a plan to address the resistance and effectively mitigate it. They must
remember to not be taken aback by it.

Change Life Cycle

The life cycle or the response to change is comprised of five phases, as follows:
Phase 1 

This phase refers to only those few individuals that see a need for change, and the resistance
appears to be massive.

Phase 2

This phase identifies the forces that are for and against the change, which become clearly
identifiable. The change is beginning to be misunderstood, and the novelty of that change has a
propensity to dissipate.

Phase 3

This phase will direct the conflict, and a possible showdown between the forces may occur. This
phrase could potentially mean life or death when it comes to accepting the change.

Phase 4

This phase occurs when the remaining resistance continues to be stubborn and there is a
possibility that the individuals causing the resistance will mobilize the support to shift the
balance of power.

Phase 5

This phase occurs when the number of resistors is becoming fewer and less alienated.

There will always be multiple components that will affect resistance to change. Those major
factors that could ultimately affect the success of change could include but are not limited to
advocates of change, the degree of change, the time frame, the impact on the culture, and the
overall evaluation of the change.

Advocates of Change

These are normally the individuals who are leading the change, and they are seen as one of the
most important forces of change. The degree of change depends on how big or how small of a
change is occurring. The more difficult the change, the harder it will be to implement. Time
frame will provide a greater chance of success. This only depends on whether or not the change
that is being done is gradual and within a longer time frame. There will be instances where a
swift change will need to be done for the organization to survive.
The impact on the culture is another key component that needs to be addressed. If the current
culture has a greater impact based off of the change that is being implemented, the resistance has
a tendency to escalate to a higher level. If this occurs, an evaluation of the culture will need to be
performed to develop standards of performance that will analyze change and measure the impact
on the organization.

When an organization implements change, it is based off of the driving forces that require an
organization to realign its overall objectives. Driving forces [An event that pushes an
organization to incorporate change] are anything that pushes an organization to incorporate
change. Those driving forces could include an organization not being satisfied with its current
situation and the external factors that require an organization to look toward change. Once this
change has been recognized and the momentum is underway, there are certain elements that push
the change forward. The individuals involved in the organization become more dedicated and
committed to supporting the change. If monetary funds have been presented to assist with the
change, then it is more likely to happen.

Restraining forces that are blocking the implementation of change can include uncertainty
regarding change. The change will always be questioned because of fear of the unknown. The
question will always be asked about why the new change is being implemented. Disruption of
the routine will occur because most individuals are used to the normal task that is required;
therefore, they are hesitant to change that known practice. A loss of benefits could also be a
strong contributing factor. The threat to security or position could be another blocking force,
along with distributing any existing social networks and conformity to the norms and culture.

When organizations look into incorporate change, they must understand that these change forces
will increase the driving forces and decrease the restraining forces. Of course, there are specific
strategies that will aid in lessening the resistance. Educating and communicating the change is a
must. Creating a clear vision is a strong factor as well. Involving other key members and asking
for their recommendations assists with lessening the resistance. Having a strong leadership team,
implementing a reward system, explicit and implicit coercion, creating a climate that is
conducive to communications, and facilitating and providing support will also aid in reducing the
resistance to change.

Click on the icon below to explore ideas that lead to resistance to change:

http://www.youtube.com/watch?v=Pu5RAzMeaRY

(Fallingwallsberlin, 2012).

Summary

When it comes to accepting or implementing new concepts and ideas into the organization, it
does not come naturally, but hard work has to be put into making the change successful. There
will always be moments where lessons will be learned by trial and error. It is important to
recognize this fact because it allows the organization to prepare and develop alternatives to
overcome resistance. Information has to be clearly distributed to all parties involved so that the
change is embraced and the overall objectives are met.

Key Terms
Change

This produces anxiety and improbability.

Life Cycle

This is the overall response to change.

Resistance

This is a normal and expected response when a new change is being implemented.

References

Fallingwallsberlin. (2012, January 3rd). Elke Weber - Breaking the wall of resistance to

change. Retrieved from: http://www.youtube.com/watch?v=Pu5RAzMeaRY
Questions
The time frame will provide a greater chance of success __________.
only if the change being done is at a fast pace
only if the change being done is within a shorter time frame
only if the change being done is within a longer time frame
only if the change is done at a fast pace and in a shorter time frame

Changes do not only occur on a __________ level, but on the ___________ level as well.
personal; management
personal; organizational
executive; management
executive; organizational

Phase TWO of the life cycle identifies the forces that are for and against the change.

Advocates of change are normally the individuals that __________. 

have no opinion of why the change is being brought about
protest the new change
are seen as one of the most important forces of change
are seen as the resistors

The degree of change depends on how BIG of a change is occurring.

Phase five of the life cycle is when the number of __________ are becoming __________ and
less alienated. 
employees; less
resistors; more
supporters; more
resistors; less

When is human resistance to be expected?  (Choose 2)

When the change does not affect one particular individual
When everyone agrees to the change being implemented
When the time comes to make the change
When the fear of the unknown is present

Change management should be viewed as a tool that will assist with managing when it
transpires. resistance

The project teams along with the change management teams should anticipate _____________
and ____________.  (Choose 2)
challenges
conflict
resistance
employee feedback

Phase three of the life cycle will direct the __________ as a possible showdown between the
forces may occur. This phase could potentially mean life or death when it comes to accepting the
change. 
engagement
business plan
conflict
organization

If mangers anticipate and evaluate resistance to change, it will allow them

to PROACTIVELY identify the sources and the reasons.

The change management tool would be most effective when stimulating and engaging the
employees involved in the change.

The impact of change on the CULTURE is another key component that needs to be addressed.

The leaders of an organization must take the time to thoroughly evaluate the RESISTANCE to
compile multiple assumptions before they are able to overcome the resistance. 
Resource Allocation 98%
Introduction

Learning Materials
Strategically Allocating Resources

Before the reduction of goals is decided, resources should be strategically reallocated by the
business strategy. The strategic initiatives should not be paralyzed by depriving them of the
resources that they require to be successful. If they are truly being looked at as a strategic
initiative, they should be properly financed. If they are not a strategic initiative, then obliterate
them from the overall process.

Funding should be set in reserve for strategic initiatives so that they have ample opportunity to
be successful. Organizations should also look into communities where the business has a
capability to grow. They should also only center their attention on the components that will make
the business successful. Relying on the organization’s previous legacy plans that no longer add
volume will turn out to be a negative. Redundancy should be completely eliminated, because it is
definitely not needed.

Tactical Reallocation of Resources

Careful allocation of resources allows the company to prioritize and add focus to specific
activities of the firm. Tactical reallocation should reinforce growth functions as well as the
support functions; which are those that are have a legal requirement or where it impacts the
growth functions.
The firm should also work on improving current headcount efficiency. By disposing non-value-
added activities, consolidating duplicative forms, and focusing on addressing the efficiencies in
what the firm is currently doing, the firm can identify inefficiencies in allocated resources.

Next, the firm should focus on the core activities. They must determine how they will evaluate
the alternatives for accomplishing non-core activities. Those non-core goals should identify the
non-core activities, while evaluating the possible alternatives to assist with accomplishing those
activities.

The firm should then identify the value-added activities that will no longer be utilized, which
begins by evaluating the value-added return. It should ensure that the value-added activities are
prioritized; this would include the revenue and headcount. The firm must also cease value-added
activities that would be considered unacceptable returns.

Lastly, the remaining cuts should be done across the remaining organizations. This will provide
for the initial projected headcount.

Technological Leverage of Resources

If a company is going to incorporate cutting resources into its organizations, it must ensure that it
has a viable alternative plan in place to make certain the work is getting done so that it does not
damage the company’s ability to survive over a long period of time. Prior to cutting cost, the
firm should evaluate the opportunity to leverage on technology, as well as the capital
investments that will improve the firm’s overall productivity.

When decisions are being determined on how to allocate resources, there are some methods that
can be taken into consideration to minimize the overall impact of that resource, which will leave
the organization in a much healthier situation than it was from the time the activity started.
Methods for reallocation could include diversification, process re-engineering, outsourcing, and
resource attrition and incentive packages.

Methods of Reallocation

Diversification [Analyzing various components of the business that can be put up for sell or
spin parts that show to not be suitable or fit strategically.] is looking at various components
of the business that can be put up for sale or spin parts that are shown to be unsuitable or fit
strategically, or that can survive effectively as a separate entity.

Outsourcing [Outside vendors are utilized to complete the work which they have the
capability of completing effectively and efficiently.] is weighing the option to utilize outside
vendors to complete the work that they have the capability of completing effectively and
efficiently internally. The firm must ask itself if there is an outside source available to complete
the task that the company wants to complete.

Process re-engineering [When a business decides to dramatically change its process while
using advanced technology and redesigns jobs so that the productivity of work increases.]
is when a business decides to dramatically change its process using advanced technology, and
redesigns jobs so that the productivity of work increases. The firm could ask, “Could the
technologies and/or methods being utilized possibly change the process of how the work is being
done? What type of investment would be required, and what new skill sets will be needed?”

Resource attrition and incentive packages [Determines how and if any cuts will be made]
will determine how and if any cuts will be made. The options need to be evaluated. These could
include incentive packages that make essential cuts in resources that are comprised of the natural
attrition process.

Managing Resource Allocation

Allocating resources strategically against the business strategy should be done prior to deciding
on goal reductions. Consider the example of growth versus enabling/supporting functions. The
organization should not immediately make cuts in the growth functions; instead, it should make
those growth functions more effective and efficient while investing in them. Organizations
should also be critical of the enabling and supporting functions. They should leverage those
functions to the highest degree and take outsourcing into consideration.

Spinning off could possibly be an alternative as well or viewed as a separate business entity.
Technology should also be used when possible. Resource allocation guidelines should be clear
and differentiated when addressing the growth, enabling, and support functions.

Ideally, most organizations want to minimize the impact of resource allocation. If those
organizations use creative methods, then the process has a potential of reinvigorating the
organization rather than being viewed as a disruption. Reallocation needs to be managed, but
some managers may find that task to be quite challenging. Most managers have more tasks than
they can handle at one time. Managers must get into the mindset of properly allocating resources,
along with managing their day-to-day tasks.

Managers must also understand that the act of cutting or allocating resources could have a
cultural impact. This impact can potentially be very damaging by providing for negative long-
term effects if not handled appropriately. Managers are held accountable for resource allocation
because managing the process is the key to effective leadership.

Click on the icon below to learn more about resource allocation:

http://education-portal.com/academy/lesson/resource-allocation-in-management-methods-
process-strategy.html#lesson

(Grimsley, 2014)

Communication and Managing the Business Impact

There are two key points in effectively managing the process: communication and managing the
business impact.
Communication

Not being able to effectively communicate during the

reallocation process is detrimental. The communication
process will dictate how all parties will react before,
during, and after the process. Most individuals want a
full understanding of what is going on within the
organization, and most importantly, how it is going to
affect them.

Until they are able to grasp the full concept of resource allocation, they will continue having
trouble dissecting the additional information that is being communicated. Once they have a full
understanding of what is happening within the organization, they will then want a full
understanding of why this occurrence is happening.

Managing the Business Impact

A system-wide view of the ramifications of resource reallocation must be taken into

consideration. The firm must make sure that it keeps an eye on the cross-system synergies as
well as the possible reductions and effects on those enterprises that could damage the long-term
health.

For an organization to be successful in implementing strategic management, the resources will

need to be allocated appropriately and consistently with the organization’s priorities that were
identified when the annual objectives were approved.

Just because an organization is capable of allocating resources to various divisions within the
company, it does not mean that those strategies will lead to a successful implementation. There
may be certain components that will prevent an organization from effectively allocating the
needed resources. Those components can include organizational politics, financial criteria,
inability to take risk, lack of knowledge, overprotection of resources, and broad strategy targets.

Summary
Resource allocation is and will continue to be an ongoing process. It must be comprised of the
strategy that is being implemented, and budgeting must be allocated so that the company can
continue to run effectively and efficiently. This will also allow the company to run on a long-
term basis. The resource allocation questions should be viewed as the most valuable component
and should be asked as a part of the customary management practice, and not as a calamity
response.

Key Terms
Communication

Will dictate how all parties will react before during and after the process.

Diversification

Analyzing various components of the business that can be put up for sell or spin parts that show
to not be suitable or fit strategically.

Outsourcing

Outside vendors are utilized to complete the work which they have the capability of completing
effectively and efficiently.

Process Re-engineering

When a business decides to dramatically change its process while using advanced technology
and redesigns jobs so that the productivity of work increases.

Strategically Allocating Resources

When resources are strategically reallocated by the business strategy.

Tactical Reallocation of Resources

Allows the company to focus on the activities that add value to the firm.

References
Birshan, M., Engel, M., & Sibony, O. (2013). Avoiding the quicksand: Ten techniques for more agile
corporate resource allocation. Mckinsey Quarterly, (4), 60–63.

Grimsley, S. (n.d.). Resource allocation in management: Methods, process & strategy. Retrieved from

The Education-Portal Web site: http://education-portal.com/academy/lesson/resource-allocation-
in-management-methods-process-strategy.html#lesson

Schmidt, J., & Keil, T. (2013). What makes a resource valuable? Identifying the drivers of firm-
idiosyncratic resource value. Academy of Management Review, 38(2), 206–228.
doi:10.5465/amr.2010.0404

David, F. R. (2011). Strategic management. Upper Saddle River, NJ: Prentice Hall.

Questions
Process reengineering is when a business decides to DRAMATICALLY change its process
while using advanced technology.

Resource attrition and incentive packages encompass which of the following? (Choose 2)

Evaluation of incentive packages
Evaluation of employee performance
Eliminating upper management positions
How and if any cuts will be made

Which of the following will determine how and if any cuts will be made? 
Employee benefits
Company financials
Resource attrition
Organizational goals
Incentive packages

Managing the business impact is a system-wide view of the ramifications

of resource reallocation that must be taken into consideration.

The managers are accountable for resource allocation because managing the process is the key to
__________ leadership. 
inadequate
effective
operative
active

Organizations can use four resources to achieve those desired annual objectives. Which of the
following are parts of the four resources? (Choose 2)
Physical
Technological
Managerial input
Marketing
Financial
Human

Allocating resources strategically against the business strategy should be done prior to deciding
on GOAL reductions.

The communication process will dictate __________.

the feedback that is given by the employees
the feedback that is given by the managers
if the plan will be an overall success
how all parties will react before the process

Managers must get into the mind-set of properly allocating RESOURCES, along with managing
their day-to-day tasks.

Diversification is looking at various components of the business that can be put up for sale or
spin parts that are shown to be unsuitable or fit strategically, or that can survive effectively as a
separate entity.

Which of the following can be labeled as part of reallocation? (Choose 2)

Resource evaluation
Funding
Technological
Strategically
tactical

Outsourcing is weighing the option to utilize outside vendors to complete the work which they
have the capability of completing effectively and efficiently. 

Just because an organization is capable of allocating resources to various divisions within the
company, it does not mean that those strategies will lead to successful IMPLEMENTATION.
Porter's Five Forces Model 98%
Introduction
Michael Porter

In the 1980s, Michael Porter wrote multiple books on competitive analysis. He

authored Competitive Strategy in 1980, Competitive Advantage in 1985, and
the Competitive Advantage of Nations in 1989.

Michael Porter’s books outlined a specific set of strategies that could be applied to all
products and services. According to Michael Porter, there are three specific strategies that
afforded opportunities to organizations, which allowed them to gain a competitive
advantage from using three generic strategies: cost leadership, differentiation, and focus.

Porter also examines five strategies that infer different organizational arrangements, control
procedures, and incentive systems.  

(File:Michael Porter,
2009)

Learning Materials
A popular competitive analysis that is widely used is known
as Porter’s five forces model. This model is uses as a
competitive analysis in an effort to develop a strategy within
multiple industries. Competition among most firms today is
becoming even more intensified. The severity among the
established firms will always exist, which leaves the newer
rivals in the position of entering into the industry with relative
ease and allows both the suppliers as well as the customer in a
prime position of exercising substantial bargaining leverage. (File:Porters Five Forces, 2007)
Who was Michael Porter?

An American born in 1947, Porter pursued his college education, graduated with a degree as an
aeronautical engineer, and worked his way through Harvard University, obtaining his doctorate
degree in economics. Porter was awarded university professorship and continues to serve in the
researcher role in the Harvard Business School. The Foundation Strategy Group—a mission-
driven social enterprise—was cofounded by Michael Porter and Mark Kramer. This organization
is focused on advancing the practice of philanthropy and corporate social events, which provide
consulting to foundations and corporations.

In 1980, Porter authored his first book, Competitive Strategy, which became a bestseller
internationally and has been viewed by others as being an influential and definitive work on
corporate strategy. This book has been published in 19 languages and has changed the face of
business leaders’ thought processes and continues to provide guidance for strategic managers all
over the world.

Porter’s Three Generic Strategies

Porter’s generic strategies are used by firms as a method to achieve a competitive advantage over
their competition.

The key factor that will lead to success in utilizing the cost leadership strategy is to out-manage
the competition. There are two key principles that will assist with achieving a successful cost
leadership strategy: increase profits by reducing cost, and increase market share by lowering
prices.

Pricing is the key if a firm decides to pursue the cost leadership strategy. The downfall of
utilizing this strategy is product price erosions, which could possibly lead that specific product to
being retired off the market. Engaging in a low-cost strategy tends to leave the company in a
vulnerable state because other low-cost companies could prevent the firm from increasing its
market share. For a company to be successful in using this strategy while optimizing its value
chain, it must first execute value chain activities within a more cost-effective manner than its
competitors and review the value chain to eradicate any excessive activities.

When performing value-chain activities in a cost-effective manner, the following needs to be

achieved: adopt labor-saving operating methods, outsourcing, investment in advanced
technology, the use of economies of scale (buy the materials in bulk if possible), and the use of
bargaining power.

Differentiation strategy takes a product or service and makes it totally different from its
competitors. Several factors should be taken into consideration when using this strategy: the
market, the industry, and the nature of the actual products and services. In this situation, the
product has to stand out beyond the competitor. The key success factors in the differentiation
strategy will either make it extremely difficult or very expensive for any of the competition to
replicate a product or service.
To accomplish this, the following must be taken into consideration: research and development,
the production and delivery of the product or service that is of high quality or that is unique in
design, and marketing and sales, which needs to generate awareness for the unique product or
service.

Companies can look more in-depth with analyzing their value chain; it will assist with
determining where they may find new opportunities. They can start by reviewing their
distribution and shipping activities to incorporate specialized services. They can review
production-, research and development (R&D)-, and technology-related activities to incorporate
specific product features that will address the buyer’s needs. A review should be done of the
sales and marketing, along with the customer service activities that will incorporate product
attributes and features.

Companies that choose to pursue this strategy can request a premium price for their products and
services. The differentiation strategy is suitable for the target customer segment that is not price-
sensitive. The greatest risk for companies that use this strategy will always be in the path of
being attacked by their competitors. To mitigate this risk, the company needs to have an agile
development process in which it is able to be innovative.

The focus strategy focuses on the niche markets. The companies that tend to frequently use this
strategy have a full understanding of that market and the unique needs of the customers in that
market. The company will be able to develop a unique pricing cost or differentiated products or
services for a specific market. These companies normally have a strong brand loyalty over their
competitors, and tend to monopolize that particular market segment making it even less attractive
to their competitors. It also lessens the opportunity for competitors to attack, new entrants, or
broad market competitors that are looking into building their customer base through product and
service specialization.

The following are keys to being successful with pursuing a cost focus strategy:

 Reduce the cost across the value chain by engaging with specialist suppliers
 Adopt the just-in-time (JIT) production
 Abolish the activities in the value chain that are superfluous in the target segment
 Make wiser investments when specializing in technology, which will increase production
efficiency and limit production to specialized products for your target segment.

Porter’s Five Forces Model 

Porter’s five forces model provides five forces that contribute to the nature of competitiveness in
any given industry: 1) rivalry among competing firms, 2) potential entry of new competitors, 3)
potential development of substitute products, 4) bargaining power of suppliers, and 5) bargaining
power of consumers.

If the forces are seen to be intense in a particular industry, (e.g.,

textiles, airlines, or even the hotel industry), it’s almost
guaranteed that no company will earn any attractive type of
returns on investments. If the forces are nonexistent, as they
tend to be in the software, toiletries, or soft drink industries,
most companies have the opportunity to become very profitable.
Although there are countless factors that can affect industry
profitability short term, (e.g., a company’s business cycle, or
even natural disasters), industry structure manifested in the
competitive forces sets the industry profitability mid to long
term

Rivalry Among Competing Firms

 When addressing this particular model, the following questions need to be asked:
o What are the current industry growth rates?
o What are the sizes of the closest competitors?
o How many close competitors exist in the industry?
o What is the over structure of the industry?
o Is the industry consolidated, fragmented, oligopoly, or monopoly?

Potential Entry of New CompetitorsThe easier it becomes for a company to enter into the
industry, the stronger the intensity becomes, and this brings about a cause for the competitor to
become more cutthroat. There are a few questions that can be asked or taken into consideration
when trying to eliminate new competition, as follows:

 Does it require a large amount of capital to enter into the industry?

 How loyal are the end users in that particular industry?
 Do entries into the industry require government regulation?
 How long is the process of accessing the required distribution channels?
 How difficult will it be for the end users to switch and utilize another product?

Threat of Substitutes

The threat of substitutes in Porter’s model actually addressed the goods and services that are
similar in nature. The questions that must be asked are the following:

 Are the substitutes more costly?

 How many substitutes are there?
 How is the quality of the substitute being perceived?
o When one product has become successful, it often leads to the creation of
additional products that have the same performance capability as other products in
the same industry.
Bargaining Power of Suppliers

 When addressing this particular model, the following questions need to be asked:
o Are there substitutes for the products that the suppliers are providing?
o Are the suppliers catering to multiple industries?
o Do the suppliers have the capability of entering into the business?
o Does your company have the capacity to enter into the supplier’s business?

Bargaining Power of Customers

When addressing this particular model, the following questions need to be asked:

 How many options does the buyer have?

 Are the buyers purchasing large quantities?
 How large are the buyers’ companies?
 Are you able to sustain with limited buyers?
 Are the buyers purchasing from multiple competitors?
 Are the buyers able to reproduce the product on their own?

The job of a strategist is to thoroughly analyze and understand the competition. Managers tend to
narrowly define the competition, presenting it as though it only occurs among today’s direct
competitors. The factors that need to be taken into consideration when dealing with competitive
forces or industry rivals are suppliers, customers, substitute products, and potential entrants. 

Summary
A company must take the time and effort in choosing the right generic strategy for itself because
this would support the other strategic options. The decision must be made as to which strategy
will be utilized, and that strategy must be used on a long-term basis. It is nearly impossible to try
out multiple strategies. Michael Porter has even warned against employing more than one
strategy because each strategy is different in nature. When the company chooses a particular
strategy, it has to make sure it leverages the company’s strengths. 

Key Terms
Differentiation Strategy

This strategy takes a product or service and makes it totally different from those of its
competitors.

Focus Strategy

This strategy focuses on the niche markets.

Cost Leadership
 This strategy is used to out-manage the competition.

Porter’s Five Forces Model

This model provides five forces that contribute to the nature of competitiveness in any given
industry. 

References 

Azadi, S., & Rahimzadeh, E. (2012). Developing marketing strategy for electronic business by using
McCarthy's four marketing mix model and Porter's five competitive forces. EMAJ: Emerging
Markets Journal, 2(2), 47–58.

Grundy, T. (2006). Rethinking and reinventing Michael Porter's five forces model. Strategic
Change, 15(5), 213–229.

Rice, J. F. (2010). Adaptation of Porter's five forces model to risk management. Defense AR

Journal, 17(3), 375–388. 
Questions
A popular competitive analysis that is widely used is known as Porter's Five Forces Model.

When performing value-chain activities in a cost-effective manner, which of the following needs
to be achieved? (Choose 2)
Outsourcing
Adopt labor saving operating methods
Minimal investment in advanced technology
Decline labor savings operating methods
Investment in advanced technology
the use of economies of scale (buy the materials in bulk if possible)
the use of bargaining power

The differentiation strategy takes a product or service and makes it totally different from those
of its competitors.

The threat of industry SUBSTITUTES in Porter's Model addressed goods and services that are
similar in nature.

Active adaptive change describes the interaction between organizations and communities.

The focus strategy focuses on the niche markets. The companies that tend to frequently use this
strategy have a full understanding of that market and the unique needs of the customers in that
market. Which of the following are key to being successful with pursuing a cost focus
strategy? (Choose 2)
Adopt the JIT production
Decrease investments in technology
Reduce the cost across the value chain by engaging with specialist suppliers
Eliminate the JIT production

Engaging in a low-cost strategy tends to leave the company in a vulnerable state.

Porter's Five Forces Model is used as a competitive analysis tool to evaluate strategy within
multiple industries.

The companies that tend to frequently use the focus strategy have a full understanding of
the MARKET.
The Nature of Strategy Implementation
98%
Introduction
Implementing a successful strategy is the key component
for achieving success, although a successful strategy
formulation does not necessarily guarantee a success
strategy implementation. It is often more difficult to do
something (strategy implementation) than say what you
are going to do (strategy formulation). Although both of
those components may be inextricably the same, strategy
formulation is very different from strategy
implementation.

Learning Materials

Most corporations or businesses have an in-depth understanding of what the scope of their
business entails, along with the strategies that are needed for that business to be successful. The
larger corporations tend to struggle with translating their concept into an action plan that will
enable, assist, or implement a successful and sustained strategy.

Most companies continuously fail to effectively motivate their employees so that they are excited
about working toward achieving the company goals. A company that will not take the
opportunity to develop a strategic plan will ultimately prevent its employees from having any
type of direction or focus. Most companies understand the process of turning their strategies into
individual plans, which are truly necessary to build a great business, but some companies find it
quite challenging.

Strategy Formulation

Strategy formulation  is a chosen process that an organization feels is the appropriate course of
action to obtain the organization’s desired goals. This process provides a framework for those
actions that will guide the organization to their desired or anticipated results. All strategic plans
need to be communicated throughout the organization. This will keep the employees fully aware
of the set objectives, purpose, and (most importantly) the mission.

This strategy forces an organization to carefully consider the changing environment conditions;
which will allow it to properly prepare for those changes that are most likely to occur. Strategy
formulation has a defined set of steps that will need to be utilized for the implementation to be
effective: define the organization, define the strategic mission, define the strategic objectives,
define the competitive strategy; implement the strategies, and evaluate the progress.
Strategy Implementation 

Strategy implementation is the act of allocating resources to support the organizational

strategies. This entire process entails the various activities that the management team deems
necessary to put the strategy in motion while monitoring the process. Strategy implementation is
comprised of the issues that involve putting those formulated strategies in place. It is important
to communicate how those strategic choices have come to be. Not every strategy that has been
created will succeed, regardless of how brilliantly it was formulated.

Both strategies formulation and strategy implementation can be distinguished in the following
ways:

Strategy formulation is viewed as positioning the forces

before carrying out the action. Strategy implementation is
effectively managing those forces throughout the action.
Strategy formulation concentrates on effectiveness; strategy
implementation focuses on efficiency. Strategy formulation
is predominately an intellectual process; strategy
implementation is predominately an operational process.
Strategy formulation requires analytical skills, and strategy implementation requires leadership
skills and the capability to motivate. Strategy formulation requires coordination among a few
individuals, and strategy implementation requires coordination among multiple individuals.

Strategy formulation tools and concepts are practically similar for businesses that are large or
small, and non-profit or for-profit organizations. The strategy implementation will vary for the
type of organization and the size of that organization. When the business is trying to implement
new strategies, it will have to alter specific areas for that new strategy to be effective.

Those certain areas could include shutting down facilities, adding new departments, developing a
new financial budget, hiring new employees, altering the pricing strategy, creating new cost-
control procedures, training new employees, providing new benefits to the employee, building
new facilities, transferring managers within the multiple divisions, and most importantly,
utilizing an effective management information system (MIS).

Annual Objectives

Annual objectives will work as the principle for actions that will direct and channel the efforts of
all activities of the organizational members. Objectives serve as the justifiable cause and
explanation of why an action should be taken. Objectives can also serve as a means to assess
standards of performance. All managers will be required to establish annual objectives for the
organizations.

The managers must consider including the employees in the process, because this leads to the
employees being more accepting and committing to the new plan. Annual objectives are crucial
for this process, because it will present the reasoning behind allocating resources; it will be the
primary tool utilized to effectively evaluate the organization’s manager. It will be the primary
tool that will assess if strategic formulation is functioning toward progress on a continuing basis,
and it will institute the organization’s priorities.

Management Perspectives

When addressing the organization within a company, from all the way down to the smallest
division, all the way up to the largest division, transitioning from the strategy formulation to
strategy implementation will require a possible change in responsibility. This will start from the
strategist to the divisional and functional managers. During this process, issues with regard to
this implementation could surface because of the shift in responsibility, especially if the
decisions that were derived from the strategy formulation plan caught lower to mid-level
managers off guard.

Both the manager and employee are motivated by their perceived self-interest versus the
organizational interest, unless the two are hand-in-hand. This is why it is imperative for the
divisional manager, along with the functional manager, to be heavily involved in the strategy
formulation procedure. It is also just as important for the strategist to be involved in the strategy
formulation.
Managers, along with their employees, should participate directly and early on in the strategy
formulation process. The role of both the employee and the manager is to provide their prior
expertise of any previous strategy formulation processes that they have participated in.

Policies

When changes occur within the organization, they do not happen automatically. Policies will
always be needed to ensure that a strategy will work. Policies are needed to assist with
addressing recurring issues while guiding the implementation of strategy. Policies are also
needed to encourage and support the overall organizational goals. Those policies could entail
specific guidelines, rules, forms, procedures, methods, and administrative practices.

Organizational policies are viewed as instruments that will assist with strategy implementation.
Most policies are also utilized to set organizational boundaries, restrictions, and limits on the
administrative tasks that are used to compensate and authorize behavior. Policies will
communicate to the employee and the manager what they are expected to achieve, which will
increase the probability that the strategies will be implemented successfully.

Polices provide the foundation of management control and allow uniformity across all
organizations, reducing the time that managers will have to spend making decisions, and it will
also dictate what work needs to be done and who should actually perform the work needed.
Polices also promote delegation with regard to the decision-making process and to the
managerial levels where the issues normally arise.

Summary

The overall objective of strategy implementation and strategy formulation involves the
application of the management procedure to accomplish the organization’s desired outcomes.
Particularly, strategy implementation will encompass designing the organization’s structure,
developing information, and managing human resources.

This includes a reward system, allocating the needed resources, and finally, approaches to
leadership and staffing. Formulating the correct strategy does not always suffice for any
particular organization, because it takes the managers along with the employees to successfully
implement those strategies. The employees, along with the managers, have to be motivated
and supportive of the strategies that are being implemented for the organization for those
strategies to be successful.

Key Terms
Annual Objectives

The principles for actions that will direct and channel the efforts of all activities of the
organizational members.
Competitive Strategy

The firm determines exactly where it fits into a particular industry or marketplace.

Define the Organization

The firm must identify the critical factors that are highly favored by its customers.

Evaluate the Process

The firm will take the necessary steps to thoroughly evaluate the progress of its processes and the
results to achieve success.

Implement Strategies

An organization will take the needed steps to define itself, understand the marketplace, and
identify the competition, but is all irrelevant if the strategy is not implemented.

Policies

Needed to assist with addressing recurring issues while guiding the implementation of strategy. o
define itself, understand the marketplace, and identify the competition, but is all irrelevant if the
strategy is not implemented.

Strategic Mission

The firm’s strategic mission, which will offer a long-range perspective on what the company
wants to accomplish.

Strategic Objectives

Require the firm to identify the specific performance targets that are needed to reach the goals
that have been identified.

Strategy Formulation

A chosen process that an organization feels is the appropriate course of action to obtain the
organization’s desired goals.

Strategy Implementation

The act of allocating resources to support the organizational strategies.

 References

Markiewicz, P. (2013). Methodical aspects of applying strategy map in an organization. Business,

Management & Education / Verslas, Vadyba Ir Studijos, 11(1), 153–167.
doi:10.3846/bme.2013.09

Daft, R. L., & Macintosh, N. B. (1984). The nature and use of formal control systems for management
control and strategy implementation. Journal of Management, 10(1), 43–66.

David, F. R. (2011). Strategic management. Upper Saddle River, NJ: Prentice Hall.

Questions
Which of the following strategies are addressed with regard to formulation and strategy
implementation? (Choose 2)
Annual Evaluations
Management Perspectives
Strategic Objectives
Policies
Annual objectives

Strategic objectives require the firm to identify the specific performance targets that are needed
to reach the goals that have been identified.

In the define the organization step, the firm must identify the critical factors that are highly
favored by its customers.

Strategy FORMULATION requires coordination among a few individuals, and strategy

implementation requires coordination among multiple individuals.

STRATEGY formulation is a chosen process that an organization feels is an appropriate course

of action to obtain the organizational goals.

The overall objective of strategy implementation and strategy formulation involves the
application of management PROCEDURES to accomplish the organizations desired outcomes.

Strategy formulation is viewed as POSITIONING the forces before carrying out the action.

Both the manager and employee are MOTIVATED by their perceived self-interest versus the
organizational interest unless the two are hand-in-hand.

What mission is when the firm looks to offer a long-range perspective on what the company
wants to accomplish?
Competitive Mission
Long-Range Mission
Mid-Range Mission
Strategic Mission
Put the steps of strategy formulation in order (from step 1 to step 6):
Define the organization
Define the strategic mission
Define the strategic objectives
Define the competitive strategy
Implement strategy
Evaluate the process
Matching Structure With Strategy 98%
Introduction

Learning Materials

Executives begin analyzing and revising their companies corporate strategies by investigating the
entire industry and the environmental conditions that may currently exist. They will then
thoroughly scrutinize the strengths and weaknesses of the competition, which will give them the
opportunity to carve out their strategic positions.

This will then allow them to dictate how they will surpass their rivals in an effort to gain a
competitive advantage. For a company to gain such an advantage, the company should either
differentiate itself from the competition for a first-class price, or it should pursue a low cost.

Click on the icon below to watch a video on competitive advantage:

http://education-portal.com/academy/lesson/competitive-advantage-the-importance-of-strategic-
marketing.html#lesson

The company should bring into line its value chain by generating human resource, marketing,
and manufacturing resources into the process. Based off of those mechanisms or strategies, the
financial targets and the allocation of the budgets should be set.

The Facts

When a company creates a business strategy, it normally creates these strategies at the upper
level of the organization. Corporate strategies can be disseminated into multiple approaches and
objectives, which will confirm to management that the strategy that they have in place is relevant
from the top all the way through the organization’s hierarchy.
Most companies try to incorporate an organizational structure into place in the very beginning
stages of the business, but changes are likely to occur over time as the company has the potential
to evolve periodically. The business strategy compared to the organizational structure may
appear to have dissimilar concepts, but there are a number of significant correlations linking the
two components.

The Process
Multiple managerial tools are utilized when it comes to
business owners creating strategies. Most companies will
utilize a qualitative tool, such as a SWOT analysis. There
are some quantitative tools that can be used as well, such as
reports that are provided by the organization’s total quality
management (TQM), which could potentially bring forth
issues by using a statistical model. This tool will also
provide insight of the company’s inclusive strengths on
which it can leverage.
The Structure

It is imperative that the organizational structure supports the organization’s strategy. The
employees affiliated with the company must be empowered to complete the necessary tasks that
are required if they want to have any chance of achieving organizational objectives. If this is not
done, the company may have the propensity to either give support to or encumber its employees
working in their current roles.

The structure should also dictate the reasoning as to why a specific strategy is formed.
Companies that have been known to run in a bureaucratic manner will be inclined to create a
preponderance of the strategic ideas at the top levels of management. Companies that are likely
to run with flatter structures will involve their employees during the strategic sessions.

The Strategy

The initial strategy that is formulated by the business owner will often dictate how the structure
of the company will form. For example, an entrepreneur that has the aspiration of starting his or
her own business that has a highly educated and trained workforce will have the tendency to
structure his or her workforce to be as flat as possible.

Whereas, you may have an entrepreneur that desires to enter into a specific business with a
traditional high employee turnover (e.g., telemarketing) because it may be a bit complicated to
preserve highly skilled labor in high-turnover industries.

The logic that is being presented here is that a company’s strategic choices are created based off
of the environment. To sum it all up, the structure will shape the strategy, and this particular
practice has been dominating the process for years. A company’s performance will depend
highly on how it conducts itself, which will have an effect on the determining structural factor
such as the number of supplies, buyers, and entry barriers.
Choosing the Right Strategic Approach

When the structural resources, conditions, or capabilities do not lean toward one particular
approach, the proper alternative will turn on the organization’s strategic frame of mind.

The structural approach is great to use when the structural conditions appear very attractive and
the organization will be able to effectively utilize its resources to build an idiosyncratic position.
It is also great when the structural conditions appear to be less attractive but the organization has
the resources or capability of surpassing the competition.

This approach is best when the structural conditions are very attractive and the key players are
well-established and do not have the resources or aptitude to outshine them. Or, it is great when
the structural conditions appear to be very unappealing and have the propensity to work against
an organization’s resources and capabilities.

Although the structuralist approach is being viewed as a valuable asset, the reconstructionist

approach would be more appropriate when incorporating the factors that are related to economic
and industry settings. It has been noted that the economic obstacles have heightened, so it is
possible that the need of a reconstructionist could be used as an alternative.

The first step that should be taken is that the organization’s leadership should choose the most
appropriate strategic approach based off the challenges that the organization may face. Although
this is the first step, the effort should not stop there. The executives will need to continue
ensuring that their organizations are in alignment with the strategic approach so that they are
capable of producing sustainable performance.

What are the Right Strategic Approaches for a Company?

If a company finds that the structural conditions of a particular industry or environment exist or
appear to be attractive, and if the company resources are accessible and the company has the
potential to carve out a practicable competitive position, then the company should anticipate
good returns. Even in an industry that is not so attractive, the structuralist approach can still be
 utilized effectively if the company has the resources and the capability to overshadow its
competition.

However, where the conditions exist to where they are being viewed as unfavorable and that are
going to work against the company, regardless of the resources or capabilities that exist, the
structuralist approach may not be the best option for the company to pursue.

Summary
Equally, strategy and structure should be sophisticated and modified periodically. Regardless of
how these strategies and structures develop, it is of the essence that these two elements always
fully sustain one another, and they should never impede or hinder the other.

Key Terms
Process

This is when multiple managerial tools are utilized when it comes to business owners creating
strategies.

Reconstructionist Approach

This is when the structural conditions are very attractive and the key players are well-established.

Strategy

This is when the organizational structure supports the organization’s strategy.

Structural Approach

The structural approach is great to use when the structural conditions appear very attractive and
the organization will be able to effectively utilize its resources to build a distinctive position.

Structure

This is when the organizational structure supports the organization’s strategy.

References

David, F. R. (2011). Strategic management. Upper Saddle River, NJ: Prentice Hall.

Davis, J. P., Eisenhardt, K. M., & Bingham, C. B. (2009). Optimal structure, market dynamism, and the
strategy of simple rules. Administrative Science Quarterly, 54(3), 413–452.

Gani, L., & Jermias, J. (2011). Investigating the joint effects of strategy, environment and control
structure on performance. Gadjah Mada International Journal of Business, 13(3), 249–266.

Kaplan, R. S., & Norton, D. P. (2006). How to implement a new strategy without disrupting your
organization. Harvard Business Review, 84(3), 100–109.

Education Portal. (n.d.).Competitive advantage: The Importance of strategic marketing [Video].

Retrieved from The Education-Portal Web
site:http://education-portal.com/academy/lesson/competitive-advantage-the-importance-of-
strategic-marketing.html#lesson
Questions
A company’s STRATEGIC choices are created based off the environment.

The STRUCTURAL approach is great to use when the structural conditions appear very

attractive and the organization will be able to effectively utilize their resources to build an
idiosyncratic position.

Most companies will utilize a qualitative and a quantitative tool to evaluate their chosen
strategies. Those tools are comprised of which of the following? (Choose 2)
Organizational objectives
Weekly report
Total quality management (TQM)
SWOT analysis

It has been noted that the ECONOMIC obstacles have heightened, so it is possible that the need
of a reconstructionist could be used as an alternative.

The strategy formulated by the business owner will often dictate how the STRUCTURE of the
company will form.

The reconstructionist approach is when the structural conditions are very attractive and the key
players are well-established and also do not have the resources or aptitude to outshine them.

Even in an industry that is not so attractive, the strucuralism approach can still be utilized
effectively if the company has the RESOURCES and capability to overshadow their
competition.

When the structural resources, conditions, or capabilities do not support one particular

approach, the organization's strategic culture and mind-set are important. 

What are two of the three suggested strategic approaches for a company? (Choose 2)
The competitor's environmental factors
The strategic mind-set
The competitor's capabilities and resources
The environmental conditions that an organization operates within
Most companies try to incorporate an organizational structure in the VERY
BEGINNING stages of the business.

Executives begin analyzing and revising their companies’ corporate strategy

by INVESTIGATING the entire industry and the environmental conditions that may currently
exist.

Although the structuralism approach is being viewed as a valuable asset,

the reconstructionist approach would be more appropriate when incorporating the factors
related to economic and industry settings.
Implementing Strategies98%
Introduction

When it comes to addressing the overall strategic

management process, the following questions should be
asked:

Learning Materials

Strategy implementation is the process of allocating the required resources as needed and
putting those identified strategies into an action plan. For this to transpire, the organization,
along with the management systems have to be mobilized to continuously support and strengthen
the achievements of the strategies. Because strategic planning is not an easy assignment to
undertake, there are some that are essential to making the strategic implementation process
successful.
First, the organization must identify its mission and objectives. Next, it should assess the current
performance mission along with the objectives. Once that has been addressed, the strategic plans
should be created to accomplish the purpose and objectives of the strategic plan. Implementing
the strategy is the next step in the process. Lastly, the anticipated results should be evaluated to
determine if the plans and or the implementation strategy processes need to be changed or
altered. The strategic management plan is put into place to create the maximum returns to the
investor.

The Strategic Management Process

From time to time, an organization will need to conduct an analysis on its mission because the
mission is the reason that the organization exists in the first place. A good mission statement
should define who the customers are, what products or services will be offered to the customer,
the location, and the original philosophy of the company.

These are the board beliefs about what one believes to be unsuitable and unacceptable. If an
organization has a strong principal value, it will assist with constructing an institutional identity,
it will give character back to the organization, and it will sustain the backbone of the mission
statement. The organization’s culture reveals the leading value system of the entire organization.

The strategic management process not only addresses the value and mission, but it also views the
culture of the organization. The organization’s culture should mold the members and the
managers who are associated with the organization.

It will also assist with making sure everyone is in alignment and progressing in the same
direction. It will brand the institutions as well as identify and build a character that the
employees and stakeholders will view as being valuable. It will also support the mission
statement and guide the behaviors of the employees in a meaningful and consistent manner.

Organizational objectives will be directed by the activities that have been set to achieve specific
performance results. Typical operating objectives could entail the following: market share,
human talent, profitability, product quality, innovation, social responsibility, cost efficiency, and
financial health. Along with identifying the operating objectives, the organization should also
evaluate the strengths, weaknesses, opportunities, and threats (SWOT).
A SWOT analysis guides an organization to determine
what the positive and negatives are within the organization.
It can also provide a helpful perspective on an organization
that is investigating new efforts, resolutions to problems
that it may be enduring, and possibly assist with
identifying the best path that could assist the company with
meeting its strategic initiatives.

The question that should be asked is: What are the company’s strengths? Would it be the
manufacturing efficiency, good market share, strong financing, a skilled workforce, or the
company’s superior reputation?

The next question should be: What are the company’s weaknesses? Could it possibly entail out-
of-date facilities, obsolete technologies, incompetent research and development, a feeble
management team, or past planning that has been found to be unsuccessful?

Analyzing the opportunities, the questions that should be asked are: Is there a potential to enter
into a new market, would the economy be viewed as being strong, who are the weak market
rivals, are new technologies emerging, and is there any potential growth existing in the market?

When addressing the threats, the following need to be taken into consideration: new competitors,
evolving market, new regulations, shortage of resources, and substitute products.

This is one of the most important steps in addressing the organization’s core competencies.
Those potential goals competencies could include a company having a specialization or
expertise, exceptional technology, a well-organized manufacturing approach, and a distinctive
product distribution system.

This allows an organization to assess the macro environment, which includes an analysis of the
government, the global economy, technology, the natural environment, social structures, and
population demographics. It also allows for an analysis of the industry environment, which
includes the customer, competitors, and resource suppliers.
Foundation of Strategic Competitiveness

Some may ask, what are the components that encompass or builds the foundation of a company’s
strategic competitiveness? Or, what are the basic concepts or strategies that most corporations
tend to utilize when trying to determine what their strategic initiatives involve? They must first
review their competitive advantage.

The competitive advantage is when a company sets out to operate set of characteristics that will
allow the organization to become more competitive than its rivals. Having a sustainable
advantage would be more advantageous because it would be harder for the competition to imitate
a competitor’s products or services. Although this may appear to be unproblematic, having a
strategy in place entails a comprehensive action plan that allows the company to analyze its long-
term objectives while guiding its resources to achieve organizational goals and preserve the
competitive advantage.

The strategic intent allows the company to focus on all of the organizational energies on the
integrated and persuasive goal. Strategy formulation  is when the company decides a course of
action in regard to creating its strategy. It also involves the organization assessing and evaluating
its current strategies, its organization, and its current environment, which will assist with revising
its strategic plans.

Environments of Competitive Advantage

The environments of the competitive advantage are comprised of three components: monopoly,
oligopoly, and hypercompetition.

A monopoly entails one major company, and that one company has no competition. This major
player creates a competitive advantage that is not easily surpassed.

An oligopoly entails a few companies, but those companies are not diametrically competing
against one another in a specific market. In that market, it provides that company with a long-
term competitive advantage against its competitors.

Hypercompetition is where there are several key companies that are directly challenging or
competing against one another in a specific market . If any of these companies gain any type of
competitive advantage, it will only be temporary.

Human Resources and Implementing Strategies

The role of the human resource manager is constantly changing as more companies will continue
to downsize. During this process, most corporations will reorganize their organizations to fit into
the new plan that has been created.

The human resource manager will need to consider the new staffing needs and the costs
associated with those needs. Costs will also need to be assessed and set aside for any additional
strategies that have been proposed during the strategy formulation stage.
This plan must address the best method of managing health care because most employers cover a
certain percentage, and other employers require their employees to pay a small portion of their
health care premiums. This plan should also address how the company will continue to motivate
its employees, how it should motivate its managers during the layoff process, and how they will
need to motivate them to take on a more intense workload.

Employee Stock Options Plans (ESOPs)

The employee stock option plan allows an employee to purchase stock from the company
through borrowed money or cash contributions. This program is a tax-qualified employee benefit
utilized to empower the employees of the company, which gives them a sense of ownership of
the company. ESOP allows the firms to obtain substantial tax savings because the interest and
principals coupled with the dividend payments are a tax-deductible funded debt.

Balancing Work Life and Home Life

Most companies feel that it is important to incorporate work/life strategies within their
organizations. This strategy is being utilized as a competitive advantage because of firms that
offer daycare, elderly child care, job sharing, flextime, adoption benefits, summer camps, car
insurance, and even pet care. The human resources department needs to ensure that they are
fostering a healthy work environment, which should also include the employees’ personal life.

Click on the icon below to learn more about work/life balance:

http://education-portal.com/academy/lesson/how-organizations-promote-work-life-balance-
definition-and-common-practices.html#lesson

Summary
For any strategy implementation to be successful or effective, the divisional managers along with
the functional managers have to cooperate with one another. A successful strategy
implementation plan will require hard work and dedication from motivated employees and
managers. If the organization does not have the full commitment from the executive team, then
the strategy implementation phase has a higher chance of failing. The executives must support,
lead, follow up, and paint a clear picture of where they envision the company going forward.
They must also monitor the progress of the strategic plan to ensure that all organizations
involved are aware of their responsibilities and expectations.

Key Terms
Analysis of Values

These are the broad beliefs about what one believes to be unsuitable and unacceptable.
Analysis of Organizations Objectives

These organizational objectives will be directed by the activities that have been set to achieve
specific performance results.

Analysis of Organizational Resources and Competences

This is one of the most important steps in addressing the organization’s core competencies.

Competitive Advantage

This is when a company sets out to operate a set of characteristics that will allow that
organization to become more competitive than its rivals.

Employee Stock Options Plans (ESOPs):

These allow an employee to purchase stock from the company through borrowed money or cash
contributions.

Foundation of Strategic Competitiveness

This is the component that encompasses or builds the foundation of a company’s strategic
competitiveness.

Hypercompetition

This is where there are several key companies that are directly challenging or competing against
one another in a specific market.

Monopoly

This entails one major company, and that one company has no competition.

Oligopoly

This entails a few companies that are not diametrically competing against one another in a
specific market.

Organizational Culture

This is the strategic management process that not only addresses the value and the mission, but it
also views the culture of the organization.

Strategic Intent
 This allows the company to focus all of its organizational energies on the integrated and
persuasive goal.

Strategy

This is a comprehensive action plan that allows the company to analyze its long-term objectives.

Strategy Formulation

This is when the company decides a course of action in regard to creating its strategy.

Strategic Intent

This allows the company to focus all of its organizational energies on the integrated and
persuasive goal.

Sustainable Advantage

This is more advantageous because it would be harder for the competition to imitate a
competitor’s products or services.

References

Education Portal. (n.d.). How organizations promote work-life balance: Definition and common
practices [Video]. Retrieved from The Education-Portal Web site:
http://education-portal.com/academy/lesson/how-organizations-promote-work-life-balance-
definition-and-common-practices.html#lesson

Govindarajan, V. (1989). Implementing competitive strategies at the business unit level: Implications of
matching managers to strategies. Strategic Management Journal, 10(3), 251–269.

Schwaninger, M. (2012). Implementing strategies: The Strohhecker-Groessler study and the need for a
new way of thinking. Systems Research & Behavioral Science, 29(6), 571–574.

John, S. (2012). Implementing sustainability strategy: A community-based change

approach. International Journal of Business Insights & Transformation, 416–420.

Strohhecker, J., & Größler, A. (2012). Implementing sustainable business strategies. Systems Research
& Behavioral Science, 29(6), 547–570.

Crews, D. E. (2010). Strategies for implementing sustainability: Five leadership challenges. SAM

Advanced Management Journal (07497075), 75(2), 15–21.

David, F. R. (2011). Strategic management. Upper Saddle River, NJ: Prentice Hall.

http://education-portal.com/academy/lesson/how-organizations-promote-work-life-balance-definition-
and-common-practices.html#lesson
Questions
Most companies feel that it is important to incorporate _______________ strategies within their
organizations.
objective
value
work
mission
life

Analysis of organizational resources and competences is one of the most important steps in
___________.
could include a company having a specialization or expertise
analyzing the competitor's core competencies
evaluating the competitor's manufacturing approach
evaluating the competitor's specialization or expertise
addressing the organization's core competencies

Competitive advantage __________.

makes the company less competitive than its rivals
is when the company has the opportunity to evaluate their overall mission
makes the company more vulnerable in the marketplace
is when a company sets out to operate a set of characteristics
allows that organization to become more competitive than its rivals

Analysis of values are the broad beliefs about what one believes to be unsuitable and
unacceptable.   

Organizational culture is the strategic MISSION process not only addressing the value and
management, it also views the culture of the organization. 

_____________ is where there are several key companies that are directly challenging or
competing against one another in a market. 
Open
Hyper-competition
Monopoly
Oligopoly

Analysis of industry and environment __________.

allows an organization to assess the competitor's product or services
allows an organization to assess the company's vision and mission
allows an organization to assess the micro environment
allows an organization to assess technology and global economy
allows an organization to assess the macro environment

MONOPOLY entails one major company and that one company has no competition.

The SWOT analysis is used to determine the company's _________.

Strategy
Goals
Opportunities
Objectives
Strengths
Weaknesses
Threats

The role of the human resource manager is constantly changing, as more companies will
continue to downsize. During this process, most corporations will REORGANIZE their
organizations to fit into the new plan that has been created. 

The EMPLOYEE Stock Plan allows an employee to purchase stock from the company through

borrowed money or cash contributions. 

Hyper competition is where there are several key companies that are directly challenging or
competing against one another in a specific market.

Having a sustainable advantage is __________.

easier for the competition to imitate a competitor’s products or services
problematic
a disadvantage
harder for the competition to imitate a competitor’s products or services

Strategy formulation is when a company __________.

involves the organization assessing and evaluating its past strategies
decides a course of action with regard to evaluating its past environment
involves the organization assessing and evaluating its competitors' past strategies
decides a course of action with regard to creating its strategy
UNIT 3
Entrepreneurial Ventures, Small Businesses,
and NPOs 97%
Introduction

In this section, focus changes from large corporations and businesses to entrepreneurial ventures,
small businesses and not-for-profit organizations. An important fact to remember is that strategic
management is not reserved solely for large corporations and businesses. When an
entrepreneurial venture, small business, or a not-for-profit organization (NFP) considers strategic
management initiatives, the reasons are similar to those of the large corporations and big
businesses.

Regardless of the type of organization, strategic management is used for to grow, stabilize,
renew, and improve operations, and to obtain and maintain competitive advantage. The core
concept in a strategic management initiative is to have a stretch goal in place that will take the
current operations, capabilities, and resources to the next level.

Learning Materials
Growth

Growth can mean many things depending on who is considering it. Whether it is modest
incremental growth, a massive expansion, or anything in between, growth is important for a
company to stay alive in a market. Just as the amount of growth means something different to
different organizations, so does the core ideology of what growth is.

Many entrepreneurial ventures start as simple ideas that grow into fruition. Take, for example,
the popular brand of cookies often sold in shopping centers, started as an entrepreneurial venture
in 1977. Today, the brand is known worldwide as a sign of quality, and as a brand that makes
very good cookies. Despite the notion that ‘no one could sell just cookies,’ the small business
that started with that simple idea has grown exponentially.
Not-for-profit organizations also experience growth, whether small or large. The following
article discusses the history of a popular not-for-profit:

http://www.habitat.org/how/historytext.aspx

(The History of Habitat, 2014)

Entrepreneurial ventures, small businesses, and not-for-profits (NFP), do not have to grow into
internationally known entities. The important aspect is that the growth desired is what suits the
organization.

Importance of Stability

Although a lot of the lessons in strategic management talk of growth and change, stability within
an organization is also important. There is a time after a strategic initiative when the proverbial
dust must settle.

As new products or processes are introduced and change is implemented, the organization needs
to take the opportunity to maintain a consistent operational ability. Although it is common to
hear people espouse that change is good, it can be hard for an organization to adapt to the
changes implemented through the strategic initiative. It can be daunting to take the current
operations, capabilities, and resources to a level that was not foreseen.

Research has shown that “for every successful corporate transformation, there is at least one
equally prominent failure” (Beer & Nohria, 2000, p. 195). Corporations and large businesses
have more resources than entrepreneurial ventures, small businesses and NFPs, making the
venture even more daunting. A period of stability allows the strategic initiative to be evaluated
and adjusted as needed.

Strategic management is used as a resource for organizations to maintain efficient operations and
to maintain the current products or services and when incremental growth is desired. The goal of
the stability strategy is not to make huge changes in the organization but rather to determine what
areas can be fine-tuned. The operations, capabilities, and resources are evaluated to determine
how each can be used to make the organization more efficient.
Renewal strategies can include divestment, liquidation, downsizing and bankruptcy, but all
renew strategies are not negative. Renewal strategies can also be used for positive change within
an organization. Examining the communication process between levels and departments within
an organization allow a deeper look at the strategic initiative and how it could have possibly
gone smoother with different communication methods and levels.

Renewal strategies also analyze the behaviors of managers at different levels and how they
interact with each other and the employees. Through the analysis change can be initiated that will
improve the organization as a whole.

Lewin and Volberda (1999) believed that there are different theories surrounding renewal
strategies that include selection and adaptation journeys which will be more closely examined in
later lessons. Renewal strategies should be thought of as a way to renew the organization and
allow it to be more closely aligned with the values, mission, and goals of the organization (Lewin
& Volberda, 1999).

Natural Life Cycle of an Organization

Regardless of the size of an organization, it will go through a natural life cycle. As the
organization moves through time, it is important to analyze the operations and make adjustments
that will have an overall improvement in processes and operations. If a company is stagnant and
does not evaluate the structure of operations on a regular basis, any type of competitive
advantage that has been won within the industry will be short lived.

Click on the icon below to learn more about organizational life cycles:

https://youtu.be/GlqTaFmooIE

This analysis should include not only the processes, but also the level of skill of each of the
employees within the organization. A determination can be made through communicating with
the employees as to whether there are ways to improve operations and efficiency of the process.

Competitive Advantage

Competitive advantage is the ability to stand above the competition and be a leader in the
industry. For large corporations and businesses, this is done by offering a comparable product or
service at a lower cost to the customer, or a better product or service at a slightly higher price.

This translates well to the entrepreneurial venture and the small business, but it may be confusing
to think of this for a NFP. Not-for-profit organizations depend on contributions of time,
resources, and money from the public. Common NFPs exist to work towards the awareness and
eradication of hunger, homelessness, diseases, and domestic violence, to name a few.
 In fact, there are many organizations vying for the public’s attention. Although no one wants a
single NFP to have control of the entire market, many leaders within the industry will have a
competitive advantage over the competition for resources.

Small businesses and entrepreneurial ventures have a more complex issue with competitive
advantage than the large corporations and businesses. This is, in part, because the larger
companies have the resources to gain and maintain the competitive advantage within a market.

For smaller companies, the goal is to be unique and offer a product or service that the larger
companies do not. This could be as simple as providing a higher level of customer service, more
customer loyalty, or access to higher quality suppliers and vendors. Not only must the smaller
companies compete against the larger companies, but also against each other to gain the niche
within the market that allows a competitive advantage.

Summary
Regardless of the size, type, or purpose of an organization, strategic management plays a pivotal
role in the continued success and survival of an organization. Entrepreneurial ventures, small
businesses, and not-for-profit organizations can have a lower level of operations, capabilities,
and resources; but this does not prohibit the use of strategic management initiatives to take the
organization to the next level within the industry. Through strategic management an organization
can attain growth, stability, renewal, improvement of operations, and a competitive advantage.

References

Association of Accredited Small Business Consultants. (2013). Progress through the life cycles of a
small business. [Video]. Retrieved from the YouTube Website:
https://www.youtube.com/watch?v=GlqTaFmooIE

Beer, M., & Nohria, N. (Eds.). (2000). Breaking the code of change. Boston, MA: Harvard Business
School Press.

The History of habitat. (2014). Retrieved from Habitat for Humanity Web site:
http://www.habitat.org/how/historytext.aspx

Lewin, A., & Volberda, H. (1999). Prolegomena on coevolution: A framework for research on strategy
and new organizational forms. Organization Science, 10(5), 519–534.

Key Terms

Growth

Whether it is modest incremental growth, a massive expansion, or anything in between, growth

is important for a company to stay alive in a market

Stability
 

Renewal

Improve operations

Competitive advantage
Questions
As an organization moves through the life cycle, what internal environment area should it
analyze to ensure modifications are not necessary? (Choose 2)
government agencies
emerging markets
operations
capabilities

Between all departments of the organization, the communication flow can be analyzed through
a renewal strategy.

Small businesses and entrepreneurial ventures have a more complex issue with competitive
advantage than larger corporations and businesses. How can the smaller companies gain
competitive advantage? (Choose 2)
It is not possible for the smaller companies to compete with the larger ones.
Offer a unique product or service.
Have comparable customer service to the larger organizations.
Have a higher level of customer service than larger corporations.

During the introduction and growth stages, increased sales and profits are expected.

A renewal strategy is a way for an organization to be more closely aligned with which of the
following? (Choose 2)
Competition
Goals of the organization
Comparative industries
Values and mission of the organization

Which of the following are elements of a renewal strategy? (Choose 3)

Determine how operations, capabilities, and resources can better serve the company
Fine-tune operations
Downsizing
Liquidation
How the organization can become more efficient
Divestment
Bankruptcy

What is the goal of a stability strategy? (Choose 2)

To determine what areas can be fine-tuned
To fine-tune the current operations, capabilities, and resources
To stabilize the economy
To create an outline for downsizing
When considering the type of growth that is ideal for an entrepreneurial venture, it is important
to keep in mind which of the following? (Choose 2)
The growth must be to the level the entrepreneur is comfortable with.
You must keep pace with all the competition in the industry.
The constant goal is to outpace the competition in the industry.
The amount of growth should be at the pace that is comfortable for the company.

Strategic initiatives are ideal when considering growth and change.

Which of the following are elements of a stability strategy? (Choose 3)

Downsizing
Determine how operations, capabilities, and resources can better serve the company
Fine-tune operations
Liquidation
Divestment
How the organization can become more efficient
Single-Business vs. Multiple-Business
Organizational Strategies 97%
Introduction

Strategic management is used by all organizations, whether they are large corporations or
businesses, small businesses, entrepreneurial ventures, or not-for-profit organizations. For this
lesson, the focus is on a comparison of the strategy implementation for single business
organizations versus the multiple business organization. A single business organization operates
in a single industry whereas the multiple business organization operates across industries with
products or services in two or more.

Strategic management and initiatives are used by organizations to shape the future direction the
organization will pursue.

Learning Materials

Strategic Initiatives

When considering a strategic initiative for a single business, there is a lot of research and
analysis that must be completed prior to implementing any strategy. Strategy development and
implementation require the cooperation of the different departments within an organization.

The level of difficulty in achieving this will depend on the size, scope, and locations of the
employees in the organization. An internal and external environmental analysis has to be
completed to determine the current and emerging trends within the industry and the region so
that strategies can be formulated that will help the organization achieve or maintain competitive
advantage. Threats to the industry and external environment must be monitored to ensure the
effect on the organization is minimal.

Multiple-Business Organization

A multiple-business organization is a company that has several brands or locations, with each
company being a part of the corporate headquarters’ portfolio. An organization that has multiple
businesses must consider the strategic initiatives for each business individually as well as the
impact on the company as a whole.
Take, for example, a large corporation that has as part of its
holdings a famous brand-name soda company. However, this
corporation has businesses that range from breakfast items, to
energy drinks, to snacks. The organization has different initiatives
that are implemented in each of the businesses that will affect the
organization as a whole. Each of the businesses are operated
separately, but are a part of its overall portfolio.

When creating a strategic plan in a single-business entity, the

process involves only the divisions of the company. A multiple-
business organization creates strategies for the companies that
comprise the portfolio, while keeping the overall corporate
objectives in mind.

Often referred to as the “parent” company, the corporate headquarters is the centralization of all
the companies. By overseeing the companies within the portfolio, strategies can be developed
and compared to determine if a strategic initiative can be useful to another company, or if it
would actually hurt the business in some way.

The relationships between the companies should foster a culture of innovation and strategy, and
shared information could result in new companies being added or brought into the portfolio
through the process of creation or acquisition. The cross-company relationship can also have a
positive effect on the business units where there can be value added or cost reduction when
redundancies are eliminated.

Corporate Infrastructure

The corporate infrastructure of a multiple-business organization should support the increased

economic worth through top-down initiatives. When a company within the portfolio makes the
determination that a strategic initiative is needed and sets out to complete the research and
analysis that is needed, the information may already be available because of another of the
companies recently completing the analysis in the same region.

This could save time and money allowing the process to proceed at a faster pace than if the
company was a single-business organization. By having the central location that controls the
individual units, the ability to share resources and knowledge exists.
Although resources are allocated to the different companies within the portfolio, there can be
shared information and resources that will lower cost of operations, making the corporation more
efficient and profitable. Looking at a couple of examples, when a large multiple-business
organization has many different companies, human resources is a department that can be shared.
The central location completes all required functions with all businesses and has a local
representative to be the “go-to” person on site for the employees.

By centralizing the human resources department, the companies are saving money not only
through minimizing job positions, but also by sharing the software and technology needed for
maintaining the records. The business entities can take this a step further by centralizing payroll
functions with all data input handled by the managers and the remaining functions handled at the
corporate headquarters.

This eliminates the need for individual payroll departments in the business units, cutting costs
and streamlining the process. The technology needed for this department would also be a cost
saving aspect as the licenses required would be minimal compared to a group of individual units.
Regardless of the function, when a department within the multi-business organization has a large
amount of redundancy, there is the option of centralizing it to save money and streamline
operations for the corporation as a whole.

Strategic Management

Strategic management is used for growth, stability, renewal, and entrenchment. For a multiple-
business organizational structure, a strategy to improve business operations would encompass
every company within the portfolio. For this type of strategic initiative, the companies would
complete the analyses individually and then comprise a team to analyze the result cross-
company.

This is much easier to do with a relatively smaller multiple-business organization, but can be
executed on any size company. The strategy for larger entities can complete strategic initiatives
that are focused on geographical location, product categories or by functional area (i.e., division).
The opportunities for shared resources within a multiple-business organization are only as
limited as the company allows. Through collaboration and cooperation, the company can
continue to grow and expand, increasing the portfolio.

Summary
Strategic management is a valuable tool for organizations to create growth, stability, renewal, or
entrenchment in an industry. The process of creating a strategic initiative is multi-faceted for a
single-business organization and becomes increasingly complex when applied to a multiple-
business organization.

The benefit of having multiple operational businesses within a portfolio is the ability to share
resources and knowledge. When structured appropriately, the shared resources can make the
multiple-business organization more efficient in operations and expedient in completion of
initiatives.
Questions
If a large multiple-business organization has many different companies that fall under it, what is
a resource that can be shared?  
Accounting
Receiving
Operations
Shipping
Human resources

The corporate infrastructure of a multiple-business organization should support the increased

economic worth through which of the following?
Creating separate initiatives per company
Down-up initiatives
Creating separate initiatives per division
Top-down initiatives

When a multiple-business corporation is completing strategic initiatives, it is important to

share INFORMATION AND RESOURCES.

A benefit to creating strategies in a multiple-business organization is that the strategy can be

evaluated to determine if it will be useful to another company in the PORTFOLIO AND
PARENT COMPANY.

Why should companies within a multiple-business portfolio share research and analysis
data? (Choose 2)
Sharing the data will help the process move along at a faster pace.
Sharing the data will save time and money.
To have a benefit over the competition.
The data would be irrelevant unless the business units were exactly the same.

A multiple-business organizational structure uses a strategy to __________ business operations,

encompassing every company within the portfolio. (Choose 2)
improve
delineate business operations by company but still
streamline
organize all employees

What must be completed when considering a strategic initiative? (Choose 2)

Set a goal
Analysis
Research
Brainstorming
By having a central location that controls the individual units, the ability to effectively
share KNOWLEDGE AND RESOURCES exists.

A multiple-business corporation uses __________ strategy to increase the breadth of the

corporate portfolio. (Choose 2)
renewal strategy
growth
strategic management initiatives
stability strategy

RESEARCH AND ANALYSIS must be completed when considering a strategic initiative.

Which of the following are benefits to having multiple business units in a region? (Choose 2)
The analysis of the external region is done.
The research of external environmental factors could already be completed.
The competing business units will increase the productivity of each company.
The competition is already known.

When a strategic initiative is developed by a multiple-business entity, why should it be analyzed

against the other companies in the portfolio? (Choose 2)
It should not be compared to the other companies; this would be a waste of time
To determine if it could be useful in theory to the other companies
To see if anything similar has been done in the past
To determine if it will cause harm to any of the other companies
Organizational Growth Strategies 98%
Introduction

There are many reasons an organization may choose to implement a growth strategy, although
making the decision to implement that growth strategy is not sufficient in and of itself for the
process to get started. The factors that have a direct effect on the organization and this course of
action will need to be evaluated beforehand to determine the best decision.

An organization will choose to implement a growth strategy to increase diversification of the

corporate portfolio, expand the product or service lines, or to grow through a merger or
acquisition. The external analysis will show the strength of the market for supporting these
initiatives.

The ability of the company to complete an organizational growth strategy depends on the internal
and external factors that are present.

Learning Materials

Business Growth

Generally, a business will start as a small operation but will not intend to remain small. The
intention will be to grow over time and increase sales and profits. The operations, capabilities,
and resources will be developed to support the growth of the organization.

The ability of an organization to grow is dependent on its current resources and how they are
allocated. The growth will be contingent on the financial health of the company, and will require
a strong level of strategic management to ensure resources are not squandered. The growth
strategy is also dependent on the competition and the level of market saturation.

Understanding the competition and market saturation helps an organization determine which
growth strategy to implement. For example, if a market is saturated with a product or service it
would not be wise to increase production. Instead, the product or service offering may need to be
expanded to add additional features or benefits that the competition is not offering.

Remember, to gain competitive advantage, a company must create value for the customer by
providing a good or service with higher quality at a comparable price or at comparable quality
with a lower price. This is known as increasing differentiation (higher quality) or by lowering
cost (same quality). When a market is saturated, this becomes increasingly difficult and creates
the need for a company to implement a growth strategy.

To learn more about market saturation, click on the icon below:

https://www.youtube.com/watch?v=oHijQzns7uc

Growth can occur in several ways, such as through market penetration, market expansion,
diversification, product or service expansion, or through a merger or acquisition. The external
analysis will help determine the best route to take, and the internal analysis of the current
operations, capabilities, and resources will show the ability of the company to make the change.

Market expansion is the most common strategy used for small companies. This strategy is
feasible if the market is not saturated and competition is not prohibitive. In this strategy, new
markets are researched and the existing products or services are offered to a larger, or new,
market. A market expansion strategy is also used to determine if alternate uses of the products or
services can be exploited to increase the type of customer base for the company.

When a market has been saturated or when competition is high, the strategy could involve
product or service expansion. For this type of strategy, the company would make a change to the
product or service currently offered that would make the company stand apart from the
competition.

Again, to be competitive, a company needs to provide a good or service at a comparable price

with higher quality or at comparable quality with a lower price to gain competitive advantage in
a market. The same holds true with a product expansion. The change is the product expansion
strategy, and it often includes integration of new technology or changing a product after the life
cycle has been exhausted.

Taking the product expansion and market expansion a step further allows a diversification
strategy to be considered. New products are offered to new markets to increase the customer base
for the company.

Even though the existing customers are maintained, the target market for the new product or
service will generally be different, allowing the diversification of customers along with the
diversification of products. A method to expand on the diversification strategy is to incorporate a
merger or acquisition of a different product or service.

When a company completes a merger or acquisition, the idea is to expand on the current
portfolio to increase the product or services being offered and to incorporate a new target market
into the current customer base.
A growth strategy that is based on the internal environment analysis focuses on the operations,
capabilities, and resources of the organization. Focusing on the areas that can be controlled by
the organization can grow the business.

A common area of concern for many consumers is the level and

quality of customer service received from companies. When an
organization creates a level of customer service that cannot be
easily replicated by the competitors, it is creating a benefit for
the customer. The same products or services are offered and may
be comparable to the competition, but the company will gain an
advantage by offering more value to the customer.

Strategic Implementation

Regardless of the type of organizational growth strategy that is chosen, the implementation plan
should be detailed and follow the standard cycle of identifying the possible end goals, creating a
strategic plan for implementation, implementing the plan and evaluate the ongoing results for
modification, and evaluating the results after the plan has reached completion.

Although the overall end goal is to achieve growth, this comes in many different ways. By
determining how the growth is to be achieved, the strategic plan will then pick one of the
mentioned growth strategies and proceed with the planning process.

Summary
There are many reasons why an organization wants to grow, and just as many strategies to
achieve the growth. Whether the goal is to increase the customer base, expand the product or
service base, or to diversify, an organization can take the risk of growing. Achieving the desired
end result is not guaranteed and any action taken will cause a level of risk to the organization;
however, the alternative is for the company to continue through the organizational life cycle
without the opportunity to create or maintain competitive advantage within the industry.

Key Words

Competitive Advantage

a company must create value for the customer by providing a good or service with higher quality
at a comparable price or at comparable quality with a lower price.

References
Gosse, B. (2010). Do you understand market saturation? [video]. Retrieved from the YouTube
Web site: https://www.youtube.com/watch?v=oHijQzns7uc
Questions
The growth strategy is dependent on which of the following? (Choose 2)
Neighboring industrial growth
Competition and the level of market saturation
The ability of the leadership to forecast correctly
The market saturation by the competition

For a company to gain competitive advantage, it must do which of the following? (Choose 2)

Offer a comparable product at a higher cost
Create value for the customer
Cater to the customer
Offer a comparable product for a lower cost or a higher quality at a comparable price

The external analysis will help determine the best route to take for a growth strategy.

A growth strategy is based on which of the following? (Choose 2)

An internal analysis of the operations, capabilities, and resources
The external environment
The ability of the leadership to plan
An analysis of the areas that can be controlled by the business

The ability of an organization to grow is dependent on which of the following? (Choose 2)

The forecasting of the future resources
The ability for the current resources to support the growth
The willingness of the company to grow
The current resources and how they are allocated

An analysis of the internal environment will show the ability of the company to make the
change needed for a growth strategy.

An implementation plan should be detailed.

A market expansion strategy is used to determine which of the following? (Choose 2)

The growth potential of the competitors
How the products or services can be exploited to increase the type of customer base
The potential growth of the company
The alternate uses of the products or services

The final step of a strategic plan should be to which of the following? (Choose 2)

Close the file on the strategic initiative
Evaluate the results and the methods used during implementation
Determine the areas that need further attention for future plans
Celebrate the completion of the plan
Understanding the ___________ helps an organization determine which growth strategy to
implement. (Choose 2)
industry standards
market saturation
competition
other industries

Growth can occur through which of the following? (Choose 2)

Product or service expansion, or through a merger or acquisition
Maintaining current operational effectiveness
Increasing internal operations
Market penetration, market expansion, or diversification

The growth will be contingent on the financial health and __________. (Choose 2)

the ability of the leadership to delegate the financial forecasting to the proper individuals
the strategic management to ensure resources are not squandered
the ability of the leadership to not allocate the resources effectively
the ability of the leadership to properly allocate the resources
Stability Strategy97%
Introduction
Strategies are not only used to gain competitive
advantage in an industry, but also to maintain the
advantage over the course of time. An organization
will not always be involved in constant change with
ongoing strategic initiatives. There will be times
when an organization needs to stabilize after
implementing a new change.

Strategies are not only used to gain competitive advantage in an industry, but also to maintain the
advantage over the course of time. An organization will not always be involved in constant
change with ongoing strategic initiatives. There will be times when an organization needs to
stabilize after implementing a new change.

The main focus for a stability strategy is to maintain the same business structure and to offer the
same products or services to the customer. The level of effort to maintain the operational
effectiveness is ideal when incremental growth and expansion is at an acceptable degree.

The purpose of the stability structure is not to change these areas, but to fine-tune the operations
to improve the efficiencies of the organization. Essentially the current operations, capabilities,
and growth are evaluated to determine how each can be better utilized.

Learning Materials
The Period of Evaluation

After a competitive advantage is achieved via the implementation a strategic initiative, the
company enters into a period of evaluation. The current state of operations is analyzed, along
with the internal environment changes, as the company readjusts to the new position within the
industry.

This is not a time of complacency, but rather a time to maintain the advantage achieved through
the initiative. When the business environment is stable and the company is satisfied with the
competitive advantage it has in the industry, a stability strategy is employed as a defensive
measure against losing the placement within the industry or market.

An organization that has implemented a change, whether it is small or large, must take the time
to evaluate the processes and procedures that accompany the change. The operations and
capabilities are evaluated to determine if efficiencies can be improved, job functions can be fine-
tuned, or if growth within the factors is warranted.
This is also the ideal time to reevaluate the strategic initiative process to determine if the process
of achieving the final goal was the most efficient. Through this analysis, not only is the
organization evaluated, but the decisions made and the implementation process employed.

Click on the icon below to learn more about evaluation:

https://www.youtube.com/watch?v=gW59Zzasc8w&t=1m10s

When the Industry is Unstable and Opportunities for Growth are Uncertain

There are times when an industry is unstable and opportunities for growth are uncertain. Threats
from the external environment can make the idea of any drastic change in an organization a high-
risk venture. When an industry or economy is unstable, many companies choose to employ a
stability strategy to maintain the current level of operations.

During such a period of uncertainty, a stability strategy is helpful for a company to maintain
conservative growth and change. Conversely, when the barriers to entry are high and no major
threats are present within the industry or market, a stability strategy allows an organization to
analyze the products, services, operations, and processes currently being utilized.

However, in this situation the external environment should not be ignored. If a company is
caught unaware of an impending threat without preparing for new competition, the likelihood of
losing competitive advantage is high.

As evidenced thus far, when a company has modest growth goals and incremental growth is
acceptable, an organization will use the stability strategy to complete a self-analysis. This
analysis could indicate that changes are required. Change is not an easy concept for a lot of
individuals to come to terms with, as it causes a fear of the uncertain.

Using the time while undergoing a stability strategy to analyze everything—from position
requirements to actual performance of tasks, budgetary alignment, and efficiency of operations—
allows a holistic viewpoint of the organization.

This analysis is a valuable tool for determining the next steps required. During the evaluation of
the current operations, it could be found that the expenditure of expansion or growth could have
caused the incursion of too much debt.

Strategic initiatives are based on projected growth and when the goal is not attained, it can cause
a lower revenue stream with higher expenditures, thus causing the organization to falter. During
the stability strategy implementation, the organization is able to center itself on the needed
operational goals to ensure continued operations.

When an industry is in the mature stage with low likelihood of growth because of market
saturation or product/service life cycle, the stability strategy is used to maintain current
operations with the same products or services. Can you recall a local merchant who has been in
business for what seems like an eternity? They have always been in the same location, offering
the same products or services for decades longer than what would seem possible.

This type of company has maintained business by building customer loyalty and by using a
stability strategy. Although this example is for a small business or entrepreneur, the same can be
said for some larger companies, although the likelihood of a large business or corporation
surviving for decades after the maturity phase is not as likely. This is an arena where a small
business or entrepreneur can have the advantage.

Steps to Completing a Stability Strategy

The steps to completing a stability strategy involve an internal analysis to determine the areas
that may be in the most need of attention during the implementation phase of this strategy. The
steps in the stability strategy include defining the goal, creating a balanced scorecard, aligning
the business with the goals, communicating with and motivating the personnel to implement the
plan, implementing the plan, and evaluating the results.
For the process of a stability strategy, the goals are defined as they relate to the reason for the
strategy. The purpose of the strategy is to maintain the same products or services currently being
offered, but to fine-tune the processes used. Through the creation (or fine-tuning) of a balanced
scorecard, the business practices are aligned with the goals of the organization.

A balanced scorecard is often used in strategic planning as a tool to align the day-to-day business
with the vision and strategy of the organization. Through an internal analysis, the customers (or
stakeholders), visions and strategies, and internal business processes are aligned to the business
goals to create an organization that fits the needs of the customer while maintaining operational
effectiveness within the industry.

As with any change within an organization, regardless of the type or size, communication of the
vision and strategy is imperative. Successful implementation will require the buy-in of the
personnel involved, as well as with the stakeholders. For this reason, the communication must
not only be open but effective.

During the implementation phase of the stability strategy, effective communication will rally the
stakeholders and help ensure the successful continued operations. As the strategic initiative team
completes the implementation phase, it is necessary to evaluate the plan along with the
implementation to determine the effectiveness not only of the plan itself, but also of the steps
taken along the way. This information is used in future stability strategies and in other strategic
initiatives.

Summary
There are many reasons an organization, whether it is a small business, an entrepreneurial
venture, or a not-for-profit organization will implement a stability strategy. However, the main
focus of this strategy is to take the focus off the growth and expansion of the organization and
put it on the internal environment of the organization instead.

During the duration of a stability strategy, an organization chooses to proceed cautiously in a

manner that will allow continued profit from the existing products and services. The steps taken
during a stability strategy allow a company to maintain successful operations in the industry.

References

Lalande, M.A. (2014). Evaluation. Retrieved from the Youtube Web site:

https://www.youtube.com/watch?v=gW59Zzasc8w
Questions
When a company has modest growth goals, the stability strategy is used to complete a self-
analysis.

What can make the idea of any drastic change in an organization a high-risk venture? (Choose 2)
Threats from the external environment that is too high
Change is inevitable and should always be considered
An unstable market
A drastic change is always a high-risk venture

The following are steps in a typical stability strategy. Put these steps in correct order.

Why are the operations and capabilities evaluated? (Choose 2)

To determine if the competitors are outperforming the internal factors
To determine if the job functions can be fine-tuned or if growth within the factors is warranted
To determine if the efficiencies can be improved
To determine if the job functions are irrelevant

Why is a stabilization strategy employed? (Choose 2)

The stabilization strategy is used as a defensive measure against losing the placement within the
industry or market.
The stabilization strategy is used as a means to maintain competitive advantage.
The stabilization strategy is used when there are no other initiatives planned.
The stabilization strategy is used as an offensive measure within the industry.

What does an organization do after a strategic initiative is completed? (Choose 2)

Review the external environment for new changes
Enter into a period of evaluation
Evaluate the process to create a better implementation plan for future endeavors
The company immediately begins the next strategic initiative

An organization is best suited to implement a stability strategy when _________. (Choose 2)

the barriers to entry are high
no major threats are present within the industry
the barriers to entry are low
there are emerging companies in the industry

Using the time of a stability strategy to analyze ___________ allows a holistic viewpoint of the
organization. (Choose 2)
actual performance of tasks, budgetary alignment, and efficiency of operations
the industry standards
the external environment
position requirements

How are the goals created for a stability strategy? (Choose 2)

The goals are aligned with the industry standards.
The goals are aligned with the fine-tuning of current operations.
The goals are set to create competitive advantage.
The goals are defined as they relate to the reason for the strategy.

When the barriers to entry are high and no major threats are present within the industry, the
stability strategy allows the organization to __________.
take a break from strategic initiatives
determine which operations, products, services, and processes are being utilized by the competition
determine which operations, products, services, and processes do not need to be utilized
analyze the products, services, operations, and processes being utilized

What type of change should be implemented with a stability strategy? (Choose 2)

Conservative growth and change
Immense
Incremental
Thorough

During the time of stabilization, what should the organization analyze? (Choose 2)

The new position within the industry
The current state of operations
The operations of the competitors
The future state of operations

Change is which of the following? (Choose 2)

Not an easy concept for some individuals to come to terms with
Always a good initiative to implement
Causes fear in individuals
Easy to implement

When an industry is in the mature stage with low likelihood of growth due to market saturation
or product/service life cycle, the stability strategy is used to do which of the following? (Choose
2)
Maintain a downward slope of the life cycle
Maintain the current product or service offering
Create a new life cycle
Maintain current operations

When in a stability strategy, the external environment should be monitored and analyzed.
Renewal Strategy 99%
Introduction
A renewal strategy, often called a turnaround strategy [A strategy in which the organization
attempts to do a turnaround from being unsuccessful to successful], is used by an organization
when there has been a marked decline in the organization’s performance. The organization is
literally attempting to do a turnaround from being unsuccessful to being successful.

There are many aspects to the renewal strategy that are important, such as timing, division or
departmental analysis, problems within the implementation phase, the purpose and vision of an
organization, as well as the products or services being offered by the organization. Small
businesses, entrepreneurial ventures, and not-for-profit organizations can either complete the
analysis internally or hire a turnaround specialist who focuses on the industry.

Learning Materials

Renewal Strategy

The timing of a renewal strategy is of utmost importance. An organization should not wait until
the occurrence of negative events, such as being on the verge of bankruptcy or going out of
business, to make the determination that a renewal is needed. Instead, a renewal strategy is used
when an organization is still profitable and relatively healthy.

A company’s purpose and vision can sometimes be lost in the growth process. Taking the steps
within a renewal strategy will align the company’s current operations to the original purpose and
vision. During the planning phase of a renewal strategy initiative, it may be determined that the
organization needs to make major changes in products, services, or target markets.

This process can also uncover the need for a merger or acquisition that could result in a growth
of product line or the integration of a new product or service. Products or services are subject to
a life cycle. When the life cycle for the product or service offered by an organization has run its
course, a renewal strategy can involve making a change in the product or service. The process
can also involve completely changing the course of operations and integrating new products or
services.
The process of completing a renewal strategy is similar to the formulation of the renewal
strategy. Regardless of the type of organization, the departmental processes and responsibilities
are analyzed—this is the process of determining not only what each department does, but how
they do it.

The resulting information may lead to the discovery of possible areas of weakness where
changes could result in a more efficient operation within the department. The end goals of the
strategy may be seen as a form of a wish list: if all aspects of the operation within the department
were at the ultimate level of operation, what would it look like?

This is how end goals are formulated and determined—by taking into consideration the current
operations, capabilities, and resources. The focuses of the analysis are the current operations, as
are the capabilities of the department making changes. Resources involve everything from the
processes and procedures to the individuals completing the tasks. From this data set, the strategic
plan is formulated, implemented, and evaluated.

When the determination is made that a change is needed, a detailed analysis must be completed
for each aspect of the organization. Whether the organization is small or large, each department
or division should be thoroughly analyzed.

This division of analysis allows an intricate analysis of the areas that are in need of a change.
This change includes not only the processes or products completed within a section of the
company, but also the individual job functions, cost analyses, and efficiency in actions of the
division in question.

The analysis requires an unbiased viewpoint: if the person responsible for the section of the
organization in question cannot be analytical, cross-department analysis can be used. This is the
most important step, because the data obtained through this analysis will be used to formulate
and complete the remaining steps of the renewal strategy.

It is important to remember that no process or procedure in the organization is too small to be

analyzed. Once the analysis is complete, the data should show all possible areas of weakness
where changes or improvements can be made.

Once the analysis of the data obtained is complete, the end goals for change are formulated. This
is an important stage in the process where the current operations, capabilities, and resources are
aligned with the end goals desired.
Whether it is more efficient use of employee work hours,
supply chain changes, or even operational practices, the end
goal should be the optimal performance desired within each
area. The current operations, capabilities, and resources are
evaluated and analyzed to determine where efficiencies can be
made. Change is a difficult thing for a lot of people to adapt to,
so the initial planning of the changes must be communicated
effectively.

An unfortunate aspect of a renewal strategy may be the result of eliminating positions which
means that a downsizing of the organization is warranted. This causes fear in employees who are
dependent on the job, and could result in survivor guilt of those who are retained after
implementation.

In smaller organizations such as small businesses, entrepreneurial ventures, and not-for-profit

organizations, change can be even more daunting for the staff. Rumors and speculation are
detrimental to the operational effectiveness of an organization and can cause further damage to
the efficiency. For this reason, honest communication is necessary throughout the process. Fear
will likely still exist, but the purpose of the change will also be known.

During the process of implementing a strategic initiative, an organization may discover that the
personnel are unable to fulfill the process of implementing the plan. During this pivotal time in
an organization’s life cycle, when the strategic plan is necessary for continued success or to
attain competitive advantage, it is necessary for a strategic initiative to be implemented
effectively.

If this is not possible, the organization may need to alter the course of action and modify the
renewal strategy. Although this is a major detour in the process, it will allow an adjustment that
will incorporate a change to assist in the original plan. Keeping the end goals in mind, the
organization should be able to alter the steps needed to attain the ultimate goal.

Taking a look at a small example from a small business may make this process more
understandable. A very common practice is the purchase of office supplies; this is a universal
example, since every company needs them. A small company has chosen to use several supply
vendors and places orders on a per-item price with the belief that the cost will be minimized.
However, when a company chooses a supply vendor for
office supplies there can be several discounts that may be
applied, based on the order volume. During the analysis, it
is found that several people within the organization are
ordering supplies as the need arises. This decision results in
high delivery fees due to the fragmented orders, as well as
higher per-item cost due to small quantity.

The possible end goal for the modification would be to minimize the cost of delivery and save by
purchasing in larger quantities. The strategic plan for implementation is simple: the departments
will submit requests throughout the month with one bulk order being placed once a month.
Because the turnaround time is one month, ordering points are established for each item and the
request submitted at that point. The end result is that shipping costs are eliminated due to a
minimum order point discount, and larger quantity item discounts are achieved.

Although this is a minute example of just one small aspect of an organization, it is easy to see
how even the smallest task in an organization must be evaluated for change. The point of the
renewal strategy is to make the organization more efficient and profitable.

The money saved with this small change will not save a struggling organization, but every small
step is a step in the right direction. Efficiencies throughout the organization can accumulate to
the point that the organization can survive and move forward. The implementation of the renewal
strategy is organization-wide, but whether the organization is small or large, every aspect must
be analyzed to determine all the steps necessary to turn the organization around.

Once the renewal strategy has been implemented and modified as necessary, the end results must
be evaluated. If the end goals were achieved, the process should be evaluated to determine the
best practices.

If the end goals were not achieved, the plan should be evaluated to determine what went wrong
so it can be improved upon in the future. Were the goals unrealistic and unattainable, or was the
implementation flawed? Through this stage of the process, future actions can be constructed to
result in optimal integration of strategic initiatives and performance of the steps necessary for
completion.

Summary
A renewal strategy is implemented when a company needs to make a change in order to stay
competitive in the industry—or to stay in business altogether. A renewal strategy is a form of a
makeover of the organization. The timing of the strategy implementation is important, as it
should not be a constant action by an organization, but it should also not be done at the last
moment when failure to maintain a profit is looming.

The renewal strategy should be implemented while an organization is still profitable to ensure
the continued success. Much like any other strategic initiative, the renewal strategy includes a
detailed analysis of the organization to determine the changes needed, along with a list of the
desired end goals, and the steps necessary to achieve the end goals.

The current operations, capabilities and resources are analyzed, and the end goals include the
desired operational function, efficiencies, and capabilities of each aspect of the organization, and
the resources needed to achieve the end goals.

Key Words
Turnaround strategy

A strategy in which the organization attempts to do a turnaround from being unsuccessful to 
successful
Questions
When should a renewal strategy be put in place?
A renew strategy should be put in place on the eve of a bankruptcy to avoid the downfall
A renewal strategy should be used when the emergence of new companies are foreseen in the industry
A renewal strategy should be put in place when negative events happen in the industry
When an organization is still relatively healthy

How does a renewal strategy affect the current operations, capabilities, and resources?
The renewal strategy only affects the way the organization reacts to the market norms.
The current operations, capabilities, and resources are not affected.
There is little effect on the current operations, capabilities, and resources.
The departmental processes and responsibilities are analyzed.

What happens if the internal analysis reveals that the personnel are unable to efficiently perform
the tasks needed for a renewal strategy?
The organization may need to alter the course of action.
Reorganize the organization.
The employees should be replaced with individuals who can complete the tasks needed.
The capabilities of the organization are paramount so personnel must be brought in who can complete
them.
The organization may need to alter the renewal strategy to align with the current capabilities.

What are the resources of an organization?

The competitors in the market
The office space of the organization
The processes and procedures of the organization
The emerging technologies in the market
The people who complete the processes and procedures of the organization

When a product or service is subject to a life cycle, how can a renewal strategy benefit a
company?
It can involve completely changing the course of operations and integrating new products or
services.
It can create an atmosphere of change within the organization.
It can energize the employees.
It can make the hierarchy realize that change is needed.

What should be done at the completion of a renewal strategy?

This is a time of reflection but the job is done, so those affected can relax.
When the strategy has been completed, there is no need for any further actions.
No evaluation is necessary because it was evaluated during the process.
The process of the renewal strategy should be evaluated to determine if any changes should be
made for future initiatives.
What aspects of the internal environment should be analyzed as a part of the renewal strategy?
The processes or products completed within a section of the company
Only the external environment is analyzed for a renewal strategy
Only the goals that align with the mission and vision of the organization are analyzed
The internal environment does not need analysis for a renewal strategy
The individual job functions within all areas of the organization

What should the focus be for a renewal strategy?

Alignment of the current operations to the original mission of the organization
The external environment
The alignment of the organization with the industry standards
The alignment of the organization to operations of the competitors
Alignment of the current operations to the original vision

When it has been determined that a renewal strategy is needed, what should be completed?
The emerging companies within the industry
The competitors in the market
A thorough analysis of the current operations, capabilities, and resources of each aspect of the
organization
The external environment

What can be uncovered during the planning phase of a renewal strategy?

It may be determined during the planning phase that the competitors have gained momentum.
It may be determined during the planning phase that the internal environment is volatile.
It may be determined that the organization needs to target new or different markets.
It may be determined during the planning phase that a strategic initiative is required.
It may be determined that the organization needs to make changes in products or services.

What tasks should be evaluated as a part of the renewal strategy?

All tasks regardless of size should be evaluated.
Only those tasks that the leaders deem as important.
Only those tasks that have a direct effect on the strategy.
Only those tasks that are deemed as important.
All tasks from the small to the large should be evaluated.

When creating a renewal strategy certain steps must be completed. Place the following in the
correct order:
Portfolio Analysis Matrices 98%
Introduction
 

When a company is deciding the route to take for a strategic

management plan, the decision has to be made to either grow
the company or to increase the profits. A couple of key
questions must be asked to make this type of decision.

Making the determination of how much time, effort, and

money should be spent to grow the current product or
service lines, or to develop new ones allows the choice to
flourish. Analyzing the current portfolio allows the
effectiveness and weaknesses to be identified and analyzed.

Portfolio analysis matrices are used to examine the activities of the business individually and
how they relate to each other as well as how the company relates to the industry. To fully
understand the portfolio analysis matrices, it is important to first understand the factors that must
be evaluated to create the matrix.

The product (or service) life cycle, competitive stance within the industry, the industry life cycle,
and the current operations, capabilities, and resources of the organization will all play a pivotal
role in the creation of these matrices.

Learning Materials

The Product Life Cycle

In the stage of the product life cycle, the achievement of the company’s product or service will
determine the course of action for increasing production, streamlining cost to increase revenues,
or investing in an advancement of technology or service offering. When a product or service is
introduced, the sales volume will steadily increase through the growth stage and level off at
maturity, where it will then decline.

Barriers to Product Entry

When a product or service is introduced into the market, the cost for entry is based on the level
of competition and the barriers to entry that exist. Based on the market size and strength, sales
may be slow to increase, so the cost of launch needs to be forecast with variables considered.
The growth stage of the cycle will generally show steadily increasing sales and profits.

As competitors in the market introduce comparable products or services, sales will hit a plateau.
If planned wisely, a shift in strategy can be implemented to sustain growth until the competition
catches up. During the decline stage, the demand for the product or service will shrink as more
advanced products or services enter the market.
Alternative cost-cutting measures can be taken during this phase to maintain profits, but in the
end the product or service will become obsolete. This process will differ based on many factors
centered on consumer demand. When embarking on a strategic plan, it is important to understand
the stage the product or service is in, along with the competitive advantage stage the company
has attained.

Examining the Competitive Position

The competitive position of the organization will be put to the test with
a strategic initiative, so this analysis must be a true picture of the
current position of the company and the industry. Industries have the
same type of life cycle as products or services, and can dissolve
through the declining phase if change is not initiated.

For example, if a company today decided to introduce a new mobile

telephone that was a “flip phone” with no further technology past
making telephone calls and sending text messages, chances are good it
would not survive in the current marketplace.

Another good example of a non-viable product would be if a company was to market movies on
VHS tape. Both of these products have gone through the product life cycle and are now all but
obsolete. Technology has surpassed the demand for these products and consumers are now
demanding more advanced products.

Some products have very long life cycles, such as a laptop computer. There are conflicting
reports about who invented the first laptop computer, but an early laptop could be purchased in
the 1980s for around $2,000. This wonderful new invention of the time weighed in at about 25–
30 pounds. Today, advertisements for laptops, notebooks, netbooks, and tablets are given in
ounces. Technology has progressed in the past decades to the point that the product that was first
introduced would not at all compare to what is on the market today.

Portfolio Analysis Matrices

Taking all factors into account, the product life cycle, industry life cycle, industry positioning,
the current operations, capabilities, and resources; the portfolio analysis matrices can be created.
Zic, Hadzic and Ikonic outline the major tools used by organizations for completing a portfolio
analysis such as the Arthur D. Little (ADL) matrix for industry analysis and the directional
policy matrix (DPM) to analyze the business strength.
Another common matrix used is the BCG growth-share matrix that helps a corporation determine
the best course of action for a strategic plan by analyzing the cash usage and generation of the
company and the product life cycle to help determine where the priority should exist.

These matrices have all been in use for many decades and have a central theme. A company must
not only understand the products and services that it offers (internal environment), but also
where it stands in the competitive mix of the industry (external environment). The internal and
external environments have a direct impact on each other and should be studied to determine the
impact each has on the future operations (Zic, Hadzic & Ikonic, 2009).

Click on the icon below to learn more about portfolio analysis:

https://www.youtube.com/watch?v=ERWZ9OceGAw

Internal Environment Portfolio Analysis

An internal environment portfolio analysis takes into consideration the tangible resources,
intangible resources, and human resources of the organization. The department or divisions of
the company are examined to determine the level to which each is operating as it relates to the
company as a whole.

A strategic initiative involves change which can disrupt the current operations, capabilities, and
resources of an organization. This analysis shows the strengths and weaknesses that exist and
what is in need of modification. Porter’s value chain analysis allows the internal environment
to be further analyzed to determine the analysis matrices that will have the largest impact on the
industry.

Porter introduced the concept of evaluating inbound logistics, operations, outbound logistics,
service, and marketing and sales to determine where competitive advantage can be gained by
creating value that will exceed the cost. By evaluating each of these areas as they relate to the
company, along with how the departments or divisions affect the value chain creates a portfolio
analysis matrix that will assist in increasing competitive advantage (Porter, 1985).

Summary
Creating portfolio analysis matrices for an organization is not a simple exercise involving
nothing more than putting in data and extrapolating the results. The internal and external
environments are examined and analyzed to determine the competitive positioning within the
industry—the life cycle of the product or service as well as the industry life cycle.

There are tools available to assist in the analysis of data as it is gathered, but leaders must have a
clear understanding of the relationship of the company to the environments, and the effect each
will have on the future operations.

The data gleaned from these matrices can be used to create or maintain competitive advantage or
to create strategic initiatives that will essentially allow the company to implement a series of
 shifts that will help maintain and increase the competitive advantage within the industry. The
matrices created and used by a company are in place to avoid stagnancy within the industry,
which would result in the company’s life cycle diminishing over time.

References

Porter, M.E. (1985). Competitive advantage: Creating and sustaining competitive advantage. New
York, NY: The Free Press.

Woltersworld. (2012).  Portfolio analysis explained - The BCG matrix.  Retrieved from the Youtube
website: https://www.youtube.com/watch?v=ERWZ9OceGAw

Zic, S., Hadzic, H. & Ikonic, M. (2009). Portfolio analysis—A useful management tool. Technical
Gazette, 16 (4), 101–105.

Key Terms
Cost for Entry

is based on the level of competition and the barriers to entry that exist

Porter’s Chain Value Analysis

allows the internal environment to be further analyzed to determine the analysis matrices that
will have the largest impact on the industry.
Questions
What can cause a product or service to hit a plateau in the life cycle?
Marketing campaigns have become stale.
The customers have grown accustomed to the product or service.
The technology has begun to surpass that which is offered by the organization.
The amount of marketing does not reach the selected market.
Competitors offer comparable products or services.

When a company is deciding the route to take for a strategic initiative, the plan to be made to
__________.
alter the entire company
create a resizing
grow the company
downsize
increase the profits

What should be included in the cost to launch a new product or service?

Market size and strength
The cost of internal resources
The comparable markets in other industries
The cost of operations
Variable sales and projected sales in the target market

A(n) INTERNAL environment portfolio analysis takes into consideration the tangible resources,

intangible resources, and human resources of the organization.

What plays a pivotal role in the matrices creation?

The external environment
The current operations, capabilities, and resources of the competition
The product or service life cycle, competitive stance in the industry, and the industry life cycle
The political, economic, sociocultural, and technology within the industry

What decision should an organization make based on the product life cycle position?
Whether to streamline cost to increase revenues or to invest in an advance of technology or
service offering
The projected closure date due to maturity
Whether the costs should be increased to spur sales
Whether the product fits with the industry standards

Making the determination of  __________ allows the choice to flourish.

how to resize the organization to save money
developing new product or service lines
motivating the employees to do more with less so the company can increase revenues
create a sense of change
how much time, effort, and money should be spent to grow the current product or service lines

Portfolio analysis matrices are used to __________.

create a control to ensure business units are staying in line with mission and goals of the company
relate the company to other industries
examine how the business units relate to the industry
analyze how the company relates to similar industries

Why is it important for a company to have research and development if the product or service
line has high market sales?
The life cycle of the product or service will continue to progress.
This will stop the life cycle of the organization.
By using research and development, the life cycle can be slowed for a product or service.
The introduction of a new product or service is not necessary until the life cycle enters the declining
phase.

Analyzing the current portfolio __________.

allows the competition to be identified and analyzed
allows the weaknesses to be identified and analyzed
allows the market to be analyzed
allows the external environment to be identified and analyzed
allows the effectiveness to be identified and analyzed

Companies have the _____________.

ability to change the life cycle of a product or service
most likelihood of success if change is constant
threat of dissolving through the declining phase if change is not initiated
ability to consistently maintain competitive advantage without implementing change
same type of life cycle as products or services

What are the four interconnected variables of a business model?

Key resources, customer values, growth, maturity
Key resources, customer value proposition, key processes, profit formula
Entry, growth, maturity, decline
Market, operations, resources, growth

A company’s competitive position in an industry will ____________.

require constant change to maintain
be easily maintained as long as strategic initiatives are used on a regular basis
be put to the test with a strategic initiative
be guaranteed if the strategic initiative succeeds
be altered with a strategic initiative requiring the current operations, capabilities, and resources
to be reevaluated

What will happen during the decline stage of the life cycle?
The demand will shrink as more advanced products or services enter the market.
There is no alternative to the decline and new products or services must be introduced.
Alternative cost-cutting measures will increase profits.
The demand will increase as more advanced products or services enter the market.
Alternative cost-cutting measures can be taken to maintain profits.

When a product or service is introduced, how is the cost of entry computed?

The cost of production
The amount of employees needed to produce the product or service
The operating expenditures
The level of competition in the industry or region
Strategic Management in Not-for-Profit
Organizations 99%
Introduction

Strategic formulation in for-profit organizations is simple to understand—the goal is to make a

profit, grow the business, and achieve competitive advantage within an industry. In a not-for-
profit (NFP) organization, it is illegal to make a profit for the owners. All profit must be used for
the charitable purpose defined within the organization’s bylaws.

Creating a strategic management plan still allows the organization to make more money;
however, this is used to assist the people they serve rather than serving as a financial windfall for
the owners. The planning process is similar to for-profit organizations with the difference being
the purpose behind the strategic initiative.

Learning Materials

Examining the Strategic Plan

A not-for-profit organization (NFP) is in the business of helping people. The bylaws of the
organization outline the service provided and the people who will benefit from their services.
Strategic planning in an NFP is used to increase the amount of people served and to streamline
the operations, capabilities, and resources of the organization.

Because an NFP can spend a great deal of time focusing on the people being served, the vision
and mission of the organization can sometimes become cloudy. When preparing to initiate a
strategic plan, it is wise to revisit the vision and mission to determine if the operations have
strayed to other areas. This analysis begins the process that will lead to environmental analyses,
SWOT analysis creation (defined below), strategic issues being identified, strategy formulation,
and implementation.

SWOT Analysis

During the internal and external environmental analysis, the focus will be on the strengths,
weaknesses, opportunities, and threats (SWOT) analysis. Strengths and opportunities are
maximized as weaknesses and threats are overcome.
 The internal analysis will identify the strengths and
weaknesses of the organization. This begins by
analyzing the current operations, capabilities, and
resources of the organization. Assessing the skills,
abilities, and job functions of the employees, along with
the processes in place, permit the strengths and
weaknesses of the employees and the processes to be
analyzed.

This will allow the NFP to determine what strengths can be maximized, and the weaknesses that
will need attention to minimize the effect they will have of the operational effectiveness of the
organization.

PEST Analysis

An external environmental analysis for an NFP will also utilize the PEST analysis [Analysis to
examine the potential impacts of political, economic, social, and technological forces] (political,
economic, social, and technological) analysis in a manner similar to that of a for-profit
organization. Analyzing the political, economic, socio-cultural, and technology trends will have
a direct impact on the NFP.

The government has strict laws and regulations that an NFP must follow to maintain the status
and tax benefit level. Because of this, it is important for the external analysis to evaluate not only
the current laws that are applicable, but also the emerging trends in the political arena.

Because an NFP depends on the donation of time and money from the area where operations are
conducted, the economic health of the region is vital to the successful operations of the NFP. The
socio-cultural aspects include the demographics, population growth rate, gender distribution, and
family size of the region. These aspects play a dual role for the NFP and attention should be
focused on all groups.

Remembering that an NFP is in existence to provide a charitable service to those in need, and to
do this requires the donation of time and money from people within the region being serviced.
The population needing assistance is one group and the donors are the second group. If the need
outweighs the resources, the target area from which to obtain resources must be widened to
fulfill the vision and mission of the organization.

Technology in NFP

Technology plays an integral role in any organization and for an NFP, the technology used is not
always the most efficient or up-to-date because of the nature of the organization. Analyzing the
currently available technology will allow the NFP to determine if changes are needed that will
have a positive influence on the strength of the organization.
Bryson identified the strategic issues [Fundamental policy questions affecting the organization’s
mandates; mission and values, product or service level and mix, clients, users or payers, cost,
financing, management or organizational design] an NFP can face as “fundamental policy
questions affecting the organization’s mandates; mission and values; product or service level and
mix, clients, users or payers, cost, financing, management or organizational design” (Bryson,
1988, p. 76).

If multiple issues are found during the internal and external analysis, they cannot all be fixed
with one strategic initiative. The focus must be on the issue that has the greatest impact on the
organization. When an organization tries to solve too many issues within a strategic plan, the
process can become convoluted. During the process of evaluating the issues found, the problems
should be analyzed to determine if there is a cross-dependency of issues that could be linked to
the need for a strategic change.

Identifying the End Goal

Once the issues have been identified, the strategic plan is formulated. The plan begins by
identifying the end goal that is desired. Using the data gathered through the analysis phase, the
best route to reaching the goal is determined.

There will be unforeseeable obstacles during implementation, so the formulation process should
include any variables that may occur along the way. The best way to determine what could go
wrong is to elicit the input of the employees who can draw upon past experience and knowledge.
Everything that could cause a deviation in the plan will not be readily apparent during the
planning phase; however, contingency plans can be put in place to deal with any setbacks that
occur during implementation.

The implementation phase of the strategic plan requires the support of the employees and
stakeholders. By communicating throughout the process, the organization will have the support
of the two groups in carrying out the plan and achieving the end goal.

During the implementation phase, close attention should be paid to the internal and external
environments to ensure any changes that would affect the plan are dealt with in a timely manner
so that they do not derail the initiative. Each step should be evaluated to ensure deviations are not
negative.

The evaluation of the strategic plan continues through completion, when the entire process is
then evaluated to determine what went right and what needs to be adjusted for future
implementations. The result of the initiative should also be compared to the end goal targeted
and to the initial issue that was to be resolved.

Through this analysis, it can be determined not only if the issue was solved but also if others
were uncovered during the process.

Re-evaluating the Strategic Plan

Once the strategic initiative has been implemented and evaluated, there is one more step in the
process. Because strategic initiatives can often change an organization, the vision and mission
should once again be evaluated to determine if they are still appropriate for the organization.

The reason for the strategy could have an altering effect on the organization, causing a shift in
the vision and mission. Resources and manpower are often at a premium in an NFP, causing the
process to be an ongoing operation to overcome the initial issues uncovered during the initial
analysis and any that come up along the way.

Summary

The purpose of a not-for-profit organization is to provide a charity to those in need. Strategic

management is not used to create a profit for the owners, but to increase the amount of goods or
services the NFP provides to those in need. The process of analyzing the internal and external
environments, identifying an issue to resolve, formulating a strategic plan, and implementing and
evaluating the plan are similar to a corporation or business, but the resources are smaller with
 more demands. The process can seem daunting and never-ending; however, it is necessary to
ensure the organization can continue to provide for those in need.

Reference

Bryson, J. M. (1988) A strategic planning process for public and non-profit organizations. Long Range
Planning,  1(1), 73–81.

Key Words

PEST analysis

Analysis to examine the potential impacts of political, economic, social, and technological
forces.

Strategic issues

Fundamental policy questions affecting the organization’s mandates; mission and values; product
or service level and mix, clients, users or payers, cost, financing, management or organizational
design
Questions
An analysis of the __________ will have a direct impact on the not-for-profit organization.
industry standard operating procedures
sociocultural and technology
competition
internal functions

By communicating throughout the process, the organization will ____________.

have plausible deniability when the plan does not work
be able to sidetrack any issues
have an ability to deny culpability when the plan does not go according to the plan
have the support of the stakeholders
have the support of the employees

Why is the first step of a strategic plan for a not-for-profit organization to clarify the vision and
mission?
It is necessary to make sure they align with the industry.
This is the time to establish the vision and mission.
During the growth phase, the vision and mission may become unclear.
The vision and mission of the organization are not seen as important when establishing the
organization, so this is the time to establish them.
It is important for the employees to understand how the new goal aligns with the vision and
mission of the organization.

The internal analysis will identify the ____________ of the organization.

weaknesses
innovations
opportunities
threats
strengths

What is the purpose of evaluating the skills, abilities, and job functions of the organization?
The weaknesses can be maximized for future effectiveness.
The weaknesses found can be targeted for further development.
The strengths can be targeted for further development.
The competitive stance in the industry can be strengthened.

Once the strategic initiative has been completed, what should the company do?
Reevaluate the vision of the organization
Determine what change should be made next
Determine if the organization is in line with the competitors
Determine if the current operations, capabilities, and resources are sufficient for the operation
Reevaluate the mission of the organization
The skills, abilities, and job functions of the employees along with the __________ allow the
operational effectiveness of the organization to be analyzed.
communication style
strengths and weaknesses
external factors
products and services

What is the mission of a not-for-profit organization?

Creating a tax break for the owners
Making a profit that can be used to fund other organizations
Helping people
Spending more money than it makes
Helping those in need

Because a not-for-profit organization depends on the __________, the economic health of the

region is vital to the successful operations of the organization.
capabilities of the personnel
resources
geographical location
donation of time

The implementation phase of the strategic plan requires the support of the __________.
government
industry
stakeholders
competitors

During the __________, the focus will be on the strengths, weaknesses, opportunities, and

threats analysis. (Choose 2)
external environmental analysis
internal environmental analysis
growth stage
analysis of the products and services
Strategic Management for the Small Business
98%
Introduction
Small businesses use strategic management just as large
corporations and businesses do, with adaptation for the size
and scope of the organization. When a small business
considers strategic management, the end goal will
generally focus either on staying the same size and
increasing profits or on growing the business.

In a small business, the owner and employees often work in cross-functional positions. Because
of this cross-functional job design, the small business owner will often depend on the input of the
employees in several areas of operations. The process of creating a strategic management plan
begins with the determination of the main goal for the company, size, or profits.

Learning Materials

Internal Analysis

The first step in creating a strategic management plan for a small business is to conduct an
internal analysis. The internal analysis gauges the internal environment by analyzing the current
operations, capabilities, and resources. This is where the input of the employees is most
beneficial.

Using a detailed list and description of these areas within each person’s area of responsibility
allows the employee not only the chance to complete the task, but also to analyze their own
capabilities along with the operations and resources they have to complete the tasks needed in
their contribution to the organization. This step not only serves the purpose of completing the
internal analysis, but also adds value to other areas as well.

As stated earlier, employees in a small business often have the additional responsibilities of what
would otherwise be separate positions. The ability to handle multiple responsibilities assists the
organization in saving money and, thus, in being more profitable. By giving the employees this
task, the small business owner is empowering the employees and creating an ownership in the
strategic initiative.

A strategic initiative must have the buy-in of the employees, and when the employees take an
active role in the process the success factor will be higher. By empowering the employees and
giving them autonomy in the creation of this analysis, the small business owner is also creating
an ownership in the process. Another benefit to having the assistance of the employees is to the
business owner, who may not have a working knowledge of the intricate aspects of every part of
the organization.

External Analysis

The next step in the process is to complete an external analysis. An external analysis scans the
external environment, and gathers relevant and important information about the competition. If a
small business wants to increase profits or grow in size it is important to understand what the
competition is doing.

In an industry where a small business will thrive, the owner must understand the trends within
the industry, where the competition is headed, and what gaps exist in the market that the business
can serve. Even though the general goal of the proposed strategic initiative may not be
determined at this point, the small business should evaluate the market to determine what target
customers would be delineated for either of the initiatives.

Understanding the customers’ needs can be accomplished by contracting a market analyst or as

simply as asking the current customers what they are looking for. Depending on the scope and
breadth of the proposed initiative, the choice will fit the desired end result. By taking the steps
necessary to complete the external analysis, the company is able to determine the position it
wants to hold in the industry after a strategic initiative.

This allows the company to make the choice of which direction to go in next, to make more
profits, or to grow the business. If the company wants to increase profits, the decision has to be
made that will determine how those profits will increase: the choice to cut expenditures, to
streamline the production process, or to increase the price of goods sold.

If the decision becomes clear that the business choice will be to grow, there are numerous
choices of the type of growth that will occur. Growth can be as small as increasing a product or
service by one item, or as wide-ranging as to expand into a larger field of products or services.

Determining the End Goal

Determining the ideal goal, whether it is to increase the profits or to increase the size of the
business, can be risky to a small business owner. The current operations, capabilities, and
resources of a company will be stretched as the goal demands. The business owner has to make a
choice of how the business will be altered by the strategic initiative and analyze closely whether
the stretch goal can be achieved.

Based on the goal, he or she must determine the possible strategies that could be employed,
deciding on the one that best fits the current capabilities and resources while maintaining room
for growth. For a small business, this choice could mean the growth of either profits or size, but
it could also put a strain on the company to the point that it cannot survive.

This is where there is a huge difference in the strategic initiatives that a small business might be
hesitant to implement, versus those of a large business or corporation that would not be impacted
so heavily. The choices of the possible strategic initiatives must be weighed heavily with all
possible alternatives being considered along with the possible outcomes, both good and bad.
Once the decision has been made, the strategic initiative that has been chosen must be outlined
for all affected areas of the company.

Key Components of Implementation

By incorporating the input of the employees and continuing open communication of the process,
the implementation phase can become a time when the employees rally together to put the plan
in action. Implementing the strategy requires the commitment of all employees to the process.

A strategic plan can be equated to a road map, with check points along the way to the goal, and
as such, the implementation phase should be monitored as each step is taken. Unforeseeable
issues and problems may arise that require the plan to deviate from the original outline, but by
evaluating the results and adapting as necessary along the way, the end goal can still be
achieved.

The important fact to remember as the plan is being implemented is that, in general, changes
should be minor adjustments. If the plan is well thought out prior to implementation, major
changes should not be required unless there is an enormous shift in the industry or market,
although that is rare. During the implementation phase, it is also important to take notes along
the way so that the process can be analyzed after completion.

Analyze Results

As with any strategic initiative, once the process has been completed the results should be
analyzed. It is important to not only analyze whether the company reached the desired goal, but
also to analyze the steps taken from inception of the idea through completion. The first step in
the process the small business should complete is evaluating the current operations, capabilities,
and resources in the internal analysis. After a strategic initiative, those same areas should be
analyzed to set the new baseline for future operations and initiatives.

Summary
Just as large businesses and corporations implement strategic plans to make a change to the
organization, small businesses will also use this valuable tool to increase profits or grow the
business. The steps may not be as complex or formal, but the overall process resembles that
taken by larger entities. Small business owners can put the business at risk by making a wrong
choice in strategic planning, but it can also be proven that small businesses that choose to not
take the steps necessary are also at risk.

Key Words

Internal analysis
Process of analyzing the current operations, capabilities, and resources of an organization

External analysis

scans the external environment, and gathers relevant and important information about the
competition
Questions
How can a small business owner rally the employees together to put a plan in action?
Continue to have open communication of the process.
Incorporate the use of a consultant.
Instruct the employees in the steps necessary for them to complete.
Continue to micromanage the process to ensure the steps are completed to the business owner’s
specifications.
Incorporate the input of the employees.

Depending on the ___________ of the proposed initiative, the choice of increasing the size of the
company or increasing profits will fit the desired end result.
reason
breadth
alternatives
available substitutes
scope

What type of strategy is built around the value chain model?

Sustainment strategy
Stability strategy
Cost leadership strategy
Growth strategy
Differentiation strategy

What must a small business owner understand about the external environment?
The trends within the industry.
The operational strategy of the competition.
The processes and procedures of the competitors.
All the competitors and prospective competitors in the industry.

Why is it important for a small business to understand what the competition is doing?
The small business needs to create an initiative that will allow it to grow in size without putting
the company in danger.
A small business should emulate only those actions taken by the competition.
Competitive advantage can only be achieved by copying the competition.
Competitive advantage can only be achieved if the company follows the same trends as the
competition.
The small business needs to understand the competition so the correct actions in an industry can
be taken to increase profits.

What must a small business owner understand about the external environment?
The operational strategy of the competition.
The processes and procedures of the competitors.
The trends within the industry.
All the competitors and prospective competitors in the industry.
Where the competition is headed and what gaps exist in the market.

In many small businesses, the employees are required to fulfill the responsibilities of multiple
roles. What benefit does this create?
This assists the company in saving money.
This creates job security for the employees.
By spreading the personnel thin, the company is able to give more value to the employees.
This makes the employees irreplaceable and thus gives them security.
This helps the company be more profitable.

What should be evaluated at the end of the strategic initiative?

The actions of the employees
The ability of each employee to complete a task only as originally designed
The communication between employees
Whether the company reached the desired goal
The steps taken from inception of the idea through completion

During the implementation phase, what should be incorporated?

End goals
Contingency plans to use when the employees cannot handle a task
Milestone goals
Controls to ensure every step is closely monitored and controlled by the owner

What should the goal encompass?

The goal should fit the external environment.
The goal that best fits the needs of the company.
The goal that best fits the needs of the industry.
The goal should be one that would be commonly used in the industry.
The goal that best fits the current capabilities and resources while maintaining room for growth.

What is the first step in creating a strategic management plan for a small business?
Assess the comparison of current operations, capabilities, and resources with comparable companies
Assess the current operations, capabilities, and resources.
Assess the external environment
Determine the competitive advantage position
Assess the internal environment

How does a small business owner create a feeling of ownership in the company for the
employees?
The employees feel like they are more valued because they are completing work the owner should be
doing.
By empowering them to complete the analysis.
The employees feel like they have to complete the internal analysis to keep their positions.
A strategic initiative causes fear in the minds of the employees rather than ownership in the plan.
By giving them autonomy to complete an internal analysis.

Creating a strategic plan for a small business requires actions to be completed. Place the
following in the recommended order:

What benefit is there in soliciting the input of the employees in creating a detailed list and
description of the current operations, capabilities, and resources?
Allowing the employees to complete this task also allows them to analyze their own capabilities
along with the operations and resources they have to complete the tasks needed.
The owners of a small business are not able to accurately analyze all areas, so this allows it to be done
properly.
This allows an unrealistic viewpoint of the areas of responsibility.
This gives the employees the illusion of being a part of the process.
This allows a realistic viewpoint of the areas of responsibility.
The Effect of Technology and Innovation on
Strategy Formulation 98%
Introduction
When formulating a strategic initiative, an organization will
complete an internal and external analysis to determine the most
effective and efficient route to competitive advantage within an
industry. This process involves completing a SWOT analysis 
(strengths, weaknesses, opportunities, and threats) to find the
strengths and weaknesses within the internal environment and
the opportunities and threats of the external environment.

Technology and innovation within an industry can be classified as either an opportunity or a

threat depending on the current conditions within the industry and the research and development
that is being implemented within the organization. Corporate strategy is developed for stability,
growth, and retrenchment within an industry to achieve and maintain competitive advantage.

Learning Materials

External Analysis

Completing the external environment analysis will show the current technology being
implemented in the industry. Ideally, emerging trends will be evident enough to allow an
organization to forecast future adaptations as a part of the strategic planning process. Technology
advancements allow opportunities and threats from the external environment to threaten the
competitive advantage an organization has attained in an industry.

When the first MP3 player was introduced, it was new technology that shocked the industry and
created competitive advantage for the company. As the competitors began creating substitutes,
other products were introduced by the original company to continue the competitive advantage
by offering new products that had higher value to the customer.

Brand loyalty continues for the software company as long as the innovations continue to meet
the consumer demand for increased technology and convenience. Technology advancements
allow innovation to take a company to new heights and create a morphing external environment
for all in the industry.

Impact of Innovation

Because innovation and technology have a direct impact on an organization’s current operations,
capabilities, and resources, as well as the strategic direction that will be pursued, it is important
to understand the process an organization should take to understand the impact.
Organizations that incorporate innovation will traverse through the industry life cycle with a
higher level of competitive advantage if the process is handled correctly. When a new company
is created through the introduction of a new innovation, it enters the industry in the introduction
phase. During this time, the innovations of a company are used to gain a market share and create
increased competition.

As the company moves through the growth stage, the innovations and advancements must
continue to keep the company competitive. If the company fails to continue research and
development to create new innovations, the competitive stance within the industry can be lost.

The company’s growth will level off during the maturity stage where products and services are
established and new innovations are not introduced. Eventually, the industry life cycle will
decline as new innovations bring about new industries in response to the consumer demands.

Click on the icon below to learn more about implementing innovation into a business strategy:

https://www.youtube.com/watch?v=B4ZSGQW0UMI

Incorporating Innovation

Innovation can mean something completely different to an organization depending on the

product or service that is central to the organization. Innovation can be new products or services,
but it can also be the technology that is used to produce or deliver the product or service to the
consumer.

The organization must define what areas will be targeted for innovation and advancement. This
is not to say that only one area of the organization can be subjected to innovation, but the choices
must be well defined and clear. Creating a strategic plan that focuses on innovation will ensure
the organization maintains the focus on the future integrations.

The strategic plan must be well communicated to all stakeholders to foster support. The strategic
plan for innovation should include both short-term and long-term goals. As with any other
strategic plan, the implementation should be monitored to ensure it is flowing as planned.
However, with this strategy it is just as important, if not more so, that the external environment
be closely monitored for threats from the competitors within the industry.

Fostering Innovation

Creating an internal environment that supports innovation is a vital step for an organization to
take. Although there may be those individuals who are the thought leaders of the organization
who develop a majority of the innovations that will be implemented, an environment that fosters
innovation should encourage all employees to develop plans for improvement to be considered.

Through this type of organizational culture, the employees develop a feeling of ownership in the
future trends. When the culture supports innovation, the organizational values and principles
should be examined to determine if modifications are needed to support the new culture.
Dynamic Nature of Technology and Innovation

Technology has advanced exponentially over the last few decades. Innovative minds have used
emerging technology to push the imagination further than ever before. During the process of
identifying possible end goals for a strategic plan, it is necessary to consider emerging trends in
technology and innovation.

A strategic plan is used to achieve or maintain competitive advantage, but if the emerging trends
outreach the end goal being considered, the process is for naught. The strategic plan should be
created to integrate the technology in a manner that will maximize the efficiency of
implementation and integration.

It is common for companies to spend a lot of time, money, and effort to collect data in support of
a strategic initiative, only to find that the information becomes outdated before the plan can be
implemented. Knowing that technology and innovation are not stationary should be a central
focus that allows a company to use them to their advantage.

Summary
Companies have been born out of the introduction of a new product or service that was created
using forward-thinking technology advancements and innovative entry into an industry.
Organizations that foster a culture of innovation and change are more likely to have employees
who readily develop ideas that will aid the organization in future growth.

Completing a SWOT analysis of the internal and external environments allows the organization
to identify the gaps where innovation can be targeted. This will aid the organization in creating a
strategic plan that will foster innovation within the organization as well as aid in creating a new
competitive advantage within the industry.

References

HSGUniStGallen. (2013). Business model innovation [Video]. Retrieved from the YouTube

website: https://www.youtube.com/watch?v=B4ZSGQW0UMI
Questions
Technology advancements cause __________ from the external environment to threaten the
competitive advantage an organization has attained in an industry.
strengths
factors
weaknesses
Threats
Opportunities

During the introduction phase, the innovations of a company are used to __________.
decrease competition
lower market share
create increased competition
increase the barriers to entry
gain market share

A strategic plan for innovation should contain ___________.

competitors' goals
a lot of planning
long-term goals
the inclusion of historical data
Short-term goals

__________ has a direct impact on an organization’s current operations, capabilities, and

resources.
Price
Innovation
Value
Cost
Technology

As the company moves through the growth stage, the __________ must continue to keep the
company competitive.
advancements
competitiveness
strategic initiatives
Changes
innovations

The dynamic capabilities approach sees the firm as an open system where _________ is/are
aimed at improving the strategic flexibility of the corporation.
external factors
Leveraging
managerial tasks
internal factors
Competence building

A multinational strategy strives to optimize the production structure by __________ the

production business model.
Challenging
scrutinizing
maintaining
evaluating
reinventing

What happens during the maturity stage?

New products and services are introduced.
Products and services are established.
The company settles into a relaxed mode of operation.
New innovations are introduced.
New innovations are not introduced.

How can a company continue to maintain competitive advantage in an industry?

By increasing the value the customer has in the products or services offered
By continuing to offer the same or comparable products that created the competitive advantage
By not making any changes that would affect the competitive stance within the industry
By creating products or services that have the same value to the customer
By creating products or services that have increased value to the customer

What happens to the internal environment in an open system?

It is constantly changing and adapting.
The employees become unsure of the future actions of the organization.
Constant learning, innovation, and relevant identification of the internal processes occurs.
It changes in response to the external environment.
A protection of the strategic competences occurs.

When a new company is created through the introduction of a new innovation, it enters the
industry in the __________ phase.
introduction to the industry
mature
plateau
Declining
introduction

Completing a(n) __________ will show the current technology being implemented in the
industry.
environmental scan
internal environmental analysis
external environment analysis
case study
analysis of the external environment

Thanks to ongoing environmental scanning and benchmarking, the dynamic internal capabilities
should __________.
decrease
increase
stay moderate
generate superior efficiency and quality
Generate superior innovation and customer responsiveness

Eventually, the industry life cycle will decline as new innovations bring about new industries in
response to __________.
the internal environment of the competitors
the external environment
the cycle of the industry
customer demands
The demands of the customer for more value

If a company fails to continue __________ to create new innovations, the competitive stance

within the industry can be lost.
to scrutinize the competition
making changes
to analyze the internal environment
Research
development
Strategic Management for Entrepreneurial
Ventures 98%
Introduction
Strategic management formulation for an entrepreneurial venture
is shaped, in part, by the past experiences, knowledge, and
abilities of the entrepreneur. In the beginning, the decisions made
for the venture is the sole decision of one person who may seek
out assistance from others in the industry. Entrepreneurs have a
different attitude about growth, with motives and behaviors that
support their vision.

Entrepreneurial ventures use strategic management to grow, stabilize, renew, improve

operations, and obtain and maintain competitive advantage. The process of planning for each of
these can be modest or far-reaching, based on the aspirations of the entrepreneur and taking the
venture’s current operations, capabilities, and resources into account.

Learning Materials

The Strategic Plan

When developing a strategic plan, the entrepreneur will identify the possible end goals that are
desired and list the steps that must occur to achieve that goal. These milestones allow the
strategic plan to have a well-defined path to completion.

Creation of the strategic plan in a logical manner helps make the implementation smoother.
During the implementation, close attention should be paid to ensure the plan is going as
envisioned. The milestones that were established will help set controls to determine if
modifications are needed. Once the strategic plan has run its course, the results are evaluated to
determine if the end goal was missed, achieved, or surpassed.

Determine the End Goal

When considering a strategic management venture, the first step is to determine what the end
goal will be. Whether the initiative is to achieve growth, stability, renewal, improvement of
operations, or to attain competitive advantage in the industry, the end goal must be identified.
When identifying possible end goals, it is imperative that the goal be
specific. Vague goals lead to vague plans and results. Essentially, the
end goal must be identifiable.

Taking growth as an end goal, what does the growth entail? Is it

growing the company bigger, hiring more employees, developing a
larger product or service line, expanding into a larger space, or perhaps
a combination of any of these?

The thought of implementing a strategic plan can be daunting, because it is enabling a change
within the venture. Change can be a frightening thing in itself, but integrating a strategy to
achieve stability allows the change to settle while being evaluated for future modifications.

Stability Strategy

There are many reasons for implementing a stability strategy, such as a volatile market or
economy, the lack of the entry of major threats, the recent occurrence of rapid growth or
expansion, the desire for incremental growth, or the lack of foreseeable growth options in the
industry.

Just as the reasons for stability strategies vary, so do the intended results. Strategic plans for
stability are necessary when the market is volatile or when the economy is in turmoil. This type
of plan allows the organization to stabilize and maintain the current operations.

Allow time to refocus the operations by aiming the focus away from the external environment
and bringing it to the internal environment where changes can be implemented to streamline the
operations. After a major strategic initiative has been completed and the organization needs to
ensure the products or services are being completed at the new level of production, an
organization will use this strategy to ensure it is operating at optimal efficiency.

Click on the icon below to learn more about stability strategy:

http://www.management4all.org/2012/11/stability-strategy.html

(Management4all, 2012).

Improvement of Supporting Processes

It is important to note that during the creation of a stability strategy, the same products and
services are offered, so they are not the focus. Instead the focus points to the improvement of the
processes that support the products or services.
When the focus is on growth or expansion, the organization’s attention can stray away from the
very operational practices that need the most attention. Taking the time to evaluate how
operations can be improved to support the products or services in a more efficient manner can
have an impact on the resources of the organization.

Maintaining Current Operations

During the life cycle of an organization, there comes a point in time when the optimal growth in
an industry has reached its pinnacle. By implementing the stability strategy, the current
operations are maintained.

Creating a strategic plan for implementation is like creating a road map with a destination. The
steps along the way are used to make sure the company, like a car, is headed in the right
direction. Without a well-thought-out plan, the process can go awry.

An entrepreneurial venture has to take the current operations, capabilities, and resources in mind
for the strategic initiative, but also for the implementation phase. The goal of the strategic
initiative is to enact change—however, if the goal is too lofty and not supported by the
capabilities and resources of the organization, the plan is doomed to failure.

Of course, an entrepreneur is generally creative and should look at the possibility of making
changes and increasing the capabilities and resources in a manner that will allow the plan to
grow into fruition. The change should stretch the organization to a new level, but should not be
unattainable.

Monitor the Progress of the Plan

Regardless of the type or reason of a strategic initiative, the entrepreneurial venture must monitor
the progress of the plan. When controls are in place, the plan can be evaluated at key incremental
checkpoints to determine if modification is needed. If a strategic plan does not go as initially
intended, this does not mean the plan was bad. By evaluating the ongoing results for
modification and making the necessary changes, the overall goal can still be achieved. The
important thing to remember is the final goal.

Self-Reflection

There is a lot of planning that goes into creating a strategic plan, but the most important aspect of
any strategy is to evaluate the results. For an entrepreneurial venture, this requires a lot of self-
reflection on the planning, implementation, and follow-through.

Research must be done prior to the planning process to determine the industry standards,
competition, and what it will take to obtain a competitive advantage. These results are then
compared to the results of the initiative. Analyzing the beginning operations, capabilities, and
resources against the new results allows a holistic view of the initiative and helps determine the
next step that will be needed.
 Summary
In an entrepreneurial venture, a strategic plan is based on the previous knowledge and experience
of the entrepreneur. The research completed prior to implementing an initiative not only helps
the organization determine which course of action is best for the organization, but also helps the
entrepreneur expand the current database of knowledge as well.

The motives and behaviors that helped shape the organization will lend support to the initiatives
put in place to grow and expand the company in a manner that will move it toward attaining
competitive advantage in the industry. Regardless of whether the strategic plan is used for to
achieve growth, stability, renewal, improvement of operations or to obtain and maintain
competitive advantage, the process must be monitored closely and the results analyzed.

Only through analysis can the entrepreneur learn from the successes or failures and move in a
positive direction.

References

Stability strategy or consolidation strategy? (2012). Retrieved from management4all Web site:

http://www.management4all.org/2012/11/stability-strategy.html
Questions
After a major strategic initiative has been completed and the organization needs to
ensure __________, an organization will use this strategy to ensure they are operating at optimal
efficiency.
employees are completing their jobs correctly
the external environment has not surpassed the organization while it was in the middle of the change
level of production meets the goals set
the products and services are being completed at the level of the old standards

What is the focus during a stability strategy?

Focus on the emerging technologies within the industry
Focus on the external environment while maintaining the current operations
Focus on the internal environment
Focus on the internal environment while growing the product and service base

Regardless of the __________ of a strategic initiative, the entrepreneurial venture must monitor

the progress of the plan.
excuse
discharge
Reason
outcome
type

There is a lot of planning that goes into creating a strategic plan. For an entrepreneurial venture,
this requires __________.
assistance for the areas where the entrepreneur is weakest
a thorough plan to detail the planning, implementation, and follow-through
a lot of attention
the use of an outside agency to evaluate the areas that need the most attention
Self-reflection on the planning, implementation, and follow-through

When developing a strategic plan, the entrepreneur will __________.

hire a consultant to direct the process
determine what the competition is doing and emulate it
determine the series of plans that will be needed
identify the possible end goals that are desired
List the steps that must occur to achieve the goal

What can happen when the focus of an organization stays on the process of growth or expansion?
The focus stays on the external environment, allowing the company to grow at a pace that equals the
competition.
The company’s growth will continue to make it successful.
The focus on internal practices can be lacking, which will cause the operational effectiveness to
be minimized.
The company will continue to grow at a rate that will encourage competitive advantage.

In an entrepreneurial venture, a strategic plan is based on __________.

the experience of others
the knowledge of others
the previous experience of the entrepreneur
the research done to accumulate the data needed to formulate a plan
the previous knowledge of the entrepreneur

What is the reason a stability strategy is used?

Large growth is desired
There are plenty of foreseeable growth options available within the industry
No major threats of entry exist
The economy and market are calm

There is a lot of planning that goes into creating a strategic plan, but the most important aspect of
any strategy is __________.
planning process
the evaluation of the final results
the impact on the external environment
employee buy-in

Research must be done prior to the planning process to determine the __________ and what it
will take to obtain a competitive advantage.
industry standards
internal strengths
internal opportunities
internal threats

A stability strategy takes the focus of operations __________.

to a focus that is centered on the external environment
away from the external environment and onto the internal environment
to the external environment where possible emerging threats could arise
away from the internal environment because the operations are stable

What are strategic initiatives used for in an entrepreneurial venture?

To improve operations or attain competitive advantage
To achieve balance in the operational effectiveness
To evaluate the external factors
To evaluate how the external environment will affect the future growth of the organization
Effective Communication Techniques for Use
in Corporate Strategy 97%
Introduction
When a company implements a strategic initiative, there will
be some level of change. There has been a great deal of
research on the effect change has on an organization.
Although it is known that an organization must change as it
adapts to the changing environment and consumer needs, there
is also a fear in organizations that the change initiated through
the strategic initiative will have a negative impact on the
organization.

The fear is that the change will result in the company failing. (Abrahamson, 2000; Leana &
Barry, 2000; Palmer, Dunford, & Akin, 2006). When implementing a new strategy, the buy-in
and commitment of the employees is important to creating a positive internal environment and
increasing the likelihood of a successful initiative. This is achieved by successfully
communicating with the employees.

Learning Materials

As companies are grown from inception to success, the importance of communicating with the
employees can often go overlooked. Bennis believed that “among the existing disciplines that
must contribute if modern leadership is to be understood are those related to communication”
(Bennis, 2007, p. 4).

Components of Communication

A leader must remember that communication is both verbal and non-verbal, with both having an
impact on the completion of the initiatives. Perhaps just as important as communicating with
employees is the ability to listen. Palmer, Dunford, and Akin asserted “listening becomes a
central communication skill” (Palmer, Dunford, & Akin, 2006, p. 294), which should be stressed
in corporate strategic initiatives.

Basic Communication Steps

The basic communication steps used in any situation include: sender, message, medium,
receiver, and feedback. The sender is the person communicating (regardless of form of
communication); message is the information being conveyed through any type of medium such
as written, spoken, or body language; the receiver is the person getting the information, and the
feedback is given based on what was communicated.
Although it may seem strange that listening can be more important than speaking in
communication, this is indeed the case. When communicating with a person, it can become an
easy habit to begin formulating the response before the message is completed.

Impact of Listening

When doing this, it is possible to miss the main point of the message altogether, thus causing the
response to not directly relate to the message being delivered. Imagine this message “the
production finished on time today, but there were four accidents because of safety issues.”

If you stop listening after hearing that the production schedule was maintained today, the
information about safety issues would go unnoticed. In this example there are underlying
messages that could also be construed that would require the receiver to be listening carefully
and to ask follow-up questions in the feedback phase to clarify the true issue at hand.

Click on the icon below to learn more about active listening:

https://www.youtube.com/watch?v=ESujTCel6lM

Simple Message Conveyance

When communicating with employees, it is important to keep the information conveyance

simple. The average person comprehends at a 7th-grade level; the sender should take into
consideration the audience before the communication process begins.

The employees will need the information relevant to them, along with the big picture of how
their contribution fits into the plan as a whole. Depending on the depth of the strategic initiative,
the communication strategy can be just as complex as the strategic initiative.

A mistake that can occur when determining the best communication strategy to use is to either
give too much information to everyone, causing confusion in finding the relevance in the
message, or to not communicate enough, which will create fear of the unknown in the
employees. Fear can lead to negative behavior within the organization that will be detrimental to
the strategic initiative.

Communicating Strategic Initiatives

When completing the internal and external analysis to create the strategic plan, a great deal of
information can be synthesized. Use the information gleaned through the internal and external
environment analysis to create an organizational behavior model that supports the change being
created through the strategic initiative.
To support the culture within the organization, the leaders of should be visible and accessible.
During the analysis phase of the strategic planning process, the employees will speculate about
the plan that is being considered as well as the reason for initiating another strategy. During this
phase, the leaders need to listen to employees and empathize with the fear that may be present.

By communicating the purpose behind the strategic initiative early in this process, the employees
are more likely to embrace the need to implement the strategy and take an active role in the
analysis and implementation.

Employee Input

When developing a strategy, the input of the employees within the organization can be
instrumental in creating the implementation phase. The information gathered during the internal
environment analysis will define the current operations, capabilities, and resources within the
organization, along with defining the responsibilities of each department. When communicating
the departmental impact, the communication phase needs to be multi-directional.

The leaders within the organization need to clearly define the role of the department, and the
employees within each department have to take the initiative to communicate the level of
understanding of the requirements. This is a pivotal time when understanding non-verbal
communication is valuable, as it will help determine if more information or explanation is
needed for the message to be received and understood.

Seeing the Big Picture

Communicating the strategic initiative, the department responsibilities, and the end result is not
the complete process. Depending on the breadth of the initiative, the implementation phase could
either be over fairly quickly or span a long period of time.

In either case, it is necessary to identify benchmarks for departmental goals as each of these
responsibilities within the whole picture. A common saying is that a person must see both the
forest and the trees. This means seeing not only the small picture of what must be completed
within the department, but how the organization as a whole is doing during the implementation
phase.

Paying attention to the big picture does not take the focus off the individual parts of the plan, but
allow the parts to be a part of the whole. This communication is completed in two channels, from
the departments to the leadership team and then out to the organization. Meeting the benchmarks
and goals should be celebrated to engage the employees in further successes.

Eliciting Feedback

During the implementation phase, feedback should be elicited from the employees. This allows
the progress to be monitored to ensure the plan is running smoothly, or to make adjustments as
necessary.
 Any concerns identified by the employees should be addressed in a positive manner. If a
negative attitude is communicated nonverbally, the verbal message given can be misunderstood.
After the completion of the implementation phase, the input of the employees should also be
taken into consideration. Allowing the employees to point out what went as planned, what had to
be adjusted, or what went horribly wrong helps the leaders plan for future initiatives.

Summary
Communication comes in many forms, both verbal and nonverbal. When completing a strategic
initiative in an organization, it is important for the leaders to understand the communication
cycle and to adjust the message based on the receiver, rather than to expect the receiver to simply
understand everything that is conveyed.

Listening plays a vital role in the communication process and ensures the receiver is getting the
message as it is intended. By providing feedback after the message is received, the sender can
make any adjustments necessary to ensure the message was received as intended. The same can
be said through the implementation phase and after completion. Multidirectional communication
allows the employees to have ownership in the initiative that should in turn contribute to the
likelihood of success.

References

Abrahamson, E. (2000). Change without pain. Harvard Business Review, 78(4), 75–79.

Bennis, W. G. (2007). The challenges of leadership in the modern world. American Psychologist, 62(1),

2–5.

Gordontrainingint. (2010). Leadership training: Active listening [video]. Retrieved from the Youtube

website: https://www.youtube.com/watch?v=ESujTCel6lM

Leana, C. R. & Barry, B. (2000). Stability and change as simultaneous experiences in organizational
life. Academy of Management Review, 25(4), 753–759.

Palmer, I., Dunford, R., & Akin, G. (2006). Managing organizational change: A multiple perspectives
approach. Boston, MA: McGraw-Hill Irwin.
Questions
When communicating the departmental impact, the communication phase needs to
be __________.
Multidirectional
top-down only
only horizontal
only vertical
In both directions

During the communication process, it is a pivotal time when understanding nonverbal

communication is valuable because it will help determine if more EXPLANATION is needed.

Listening to the entire message before speaking allows __________.

the receiver to formulate good counter opinions
the sender to ignore the objections of the receiver
the full meaning of the communication to be understood
the receiver to give the full message
the speaker to give all the pertinent information needed

What information is gathered during an internal analysis?

The growth and expansion opportunities
The threats that are present
The opportunities for growth
The current operations, capabilities, and resources
The responsibilities of each department

Although it is known that an organization must change as it adapts to __________, there is also a

fear in organizations that the change initiated through the strategic initiative will have a negative
impact on the organization.
changing environment
weaknesses of the internal environment
demands of the internal environment
strengths of the internal environment
Consumer needs

When communicating with another individual, it is easy to __________.

ignore the person communicating because of a dislike
begin to ignore the message because of the means of communication
begin formulating the response before the message is completed
be distracted by outside influences and not hear the message
formulate your answer before hearing the entire message

Any concerns identified by the employees should be __________.

ignored
addressed in a positive manner
compartmentalized for future consideration
disregarded until the final analysis process
Appreciated
welcomed

To support the culture within the organization, the leaders should be _________.
visible only when necessary
kept apart from the employees
inaccessible
Accessible
visible

What parts of the strategic initiative plan should be communicated to the employees?
The employees should be told the end goal of strategic initiative.
The information should only be provided on an as-needed basis with only those details that are
pertinent to any given person.
The employees need to know all the information possible all at once.
The employees should only be told what they have to do to make the overall plan work.
They need to know the department responsibilities for the strategic initiative.

Multidirectional communication allows the employees to __________, which should contribute

to the likelihood of success.
think they are playing a pivotal role in the process
voice their concerns
communicate the issues as they happen
have buy-in to the project

The information obtained through the internal environment analysis helps to create
___________.
an organizational behavior model that is counterintuitive to the desired end result
an organizational behavior model that does not support the change being created through the strategic
initiative
a model of organizational behavior that will not support the end result of the strategic initiative
a model of organizational behavior that will support the end result of the strategic initiative
An organizational behavior that supports the change being created through the strategic
initiative

The communication process is often confusing and misunderstood. When communicating with
someone, what is the process that should be followed?

While developing a strategy, the input of the employees within the organization _________.
allow possible obstructions to be planned for
are used to complete the implementation phase
is not necessary for the completion of the plan
are necessary in the external analysis research
Can be instrumental in creating the implementation plan

During the implementation phase, feedback from the employees should be __________.
disregarded
ignored
welcomed
tolerated
Creating Plans to Improve Business
Operations for Small Businesses and NFPs
98%
Introduction
The process of creating a plan to improve business operations
begins with the employees and with the feedback received from
the customers. Improving business operations for small businesses
and not-for-profit (NFP) organizations is vital to the continued
success and future growth.

Although a business owner can speculate about how well the

business is providing for the customer, in the end, it is necessary
for the stakeholders to take an active role in the plan creation. By
eliciting the feedback of the employees, the processes can be
further analyzed to find the gaps in the operational functions.

Small businesses and NFPs have similar constraints on resources, requiring the operational
effectiveness of the organizations to be at the optimal level of performance.

When an organization goes through strategic plans, the internal environment can shift, causing a
ripple effect of changes. Unfortunately, a strategic initiative can have an adverse effect on the
operational effectiveness of the organization.

This may seem counterproductive for the purpose of the strategic initiatives, but it is important to
remember that when an organization goes through the process of making changes, there may be
side effects to the change that were not anticipated. Enterprise resource planning is a tool that is
well suited for evaluating the operations of a small business or NFP after the strategic initiative
has concluded.

Learning Materials

Enterprise resource planning (ERP) [Rooted in the manufacturing sector, seeks to encompass all
aspects of operations within an organization needed in the completion of business transactions to
include the functions of human resources, accounting, marketing, and processes.] has its roots in
the manufacturing sector and has been used for many decades to control inventory. However, in
the 1990s the concept behind ERP has expanded to encompass all aspects of operations within an
organization needed in the completion of business transactions to include the functions of human
resources, accounting, marketing, and processes.
 Although ERP is
generally seen as a
tool for large
corporations and
businesses, small
businesses and NFPs
can use ERP to
bridge the gap
between job
functions and
departments. Many
companies have
developed
technology to
facilitate ERP in
large businesses, but
the concepts behind
the system are a
valuable tool for the
small businesses and
NFPs.

Centralizing Resources

In a small business or NFP, it is common practice for employees to be cross-functional,

completing the responsibilities of multiple job positions. By creating a centralization of the
resources used by each of these departments, it is possible to maximize the resources.

The objective in an ERP is to centralize the data and processes to enhance the workflow within
the organization. To determine the best way to implement an ERP system, first, fully analyze
each part of the organization. The employees who complete the job functions within the
organization are the best resource to determine the intricacies of the jobs and the resources
needed to complete the function.

The accounting department provides a good example of common resources used within the
department. The accounts receivable records the incoming funds, accounts payable records the
outgoing. Although these two functions have transactions that go in different directions, the
resulting transactions are noted in the same system.

Imagine if there were separate systems where the transactions were annotated—there would
never be an accurate portrayal of the current financial picture at any given time. Human
resources often store data in a central repository that includes such data as employee information,
training and development, job descriptions, benefits, and payroll data.
The data pertaining to payroll is also recorded in the accounting department, so the two
departments must communicate the information. By having a central location where information
is stored, the need to have independent systems that do not communicate is eliminated.

Implementing an ERP system

The steps necessary to implement an ERP system are similar to creating a strategic plan. The
high-level goal is created to target the processes and procedures conducted by the organization in
the completion of the mission.

Click on the icon below to learn more about ERP:

https://www.youtube.com/watch?v=PVRgIXLWDHs

An external analysis using the PEST (political, economic, social and technological) analysis
allows the vision and mission of the organization to be aligned with the external factors. It is
critical that all aspects of the PEST analysis be identified to ensure that the business plan to
improve operations will still be in line with the needs and requirements of the PEST factors.

To fully understand the processes and procedures used within each of the departments, it is
important for the employees who are responsible for completing the tasks to determine the
departmental design and provide information about how work is conducted. During this phase in
the process, the feedback that has been received from the customers is used to identify any weak
areas in the operations.

Collaboration

In a small business or NFP, it is common for employees to have cross-functional knowledge

from experience within the organization or from previous employment. Collaboration is a
valuable tool when analyzing how departments can be run more efficiently.

By creating a team and discussing the data collected, it is advisable to examine the information
to determine if efficiencies can be implemented that would streamline the processes completed
and reduce redundancy. Once all the data is gathered, the next step is to conduct a gap analysis
that is used to determine where the gaps exist both internally and in the product or service
delivery to the customer.

By bringing all the departments together, it is possible to identify commonalities between the
departments. Processes and procedures that are duplicated can be eliminated and thus create a
more simplified operation. Through the collaboration, a system is then created that centralizes
the resources, reports, and data that are used by each of the departments.

The new system is tested to discover any flaws and is then rolled out to the remaining employees
through training. As with any strategic initiative, it is important to monitor the processes put in
place to ensure understanding and adherence by all employees, but also to find any flaws in the
design that need to be adjusted.
 Summary
Within small businesses and NFPs, there is often a need for operations to be streamlined to make
the organization more efficient and profitable. There are many tools for analysis available to
organizations to identify redundancy and common practices between departments.

Implementing an ERP allows the organizations to evaluate the processes and procedures within
the departments so that resources can be shared and communication increased. The input of the
employees and customers to find the gaps in the processes and procedures is the process of using
the human capital to benefit the organization’s growth in the future.

Key Terms
Enterprise Resource Planning

Rooted in the manufacturing sector, seeks to encompass all aspects of operations within an
organization needed in the completion of business transactions to include the functions of human
resources, accounting, marketing, and processes.

References

Jonarsystems. (2011). What is ERP? (Enterprise Resource Planning) [video]. Retrieved from the

Youtube website: https://www.youtube.com/watch?v=PVRgIXLWDHs
Questions
The process of creating a plan to improve business operations begins with __________.
an analysis of the external opportunities and threats
an analysis of the external environment
feedback received from the customers
an analysis based on the strengths and weaknesses of the internal environment

Enterprise resource planning can be used in __________.

the functional planning for human resources
only in the manufacturing sector
only those areas that revolve around manufacturing
all areas with little success
The accounting department

When designing an ERP system the high level goal is created to __________.
target the positions that can be eliminated by streamlining the operations
target the areas that will be affected by the system
determine the cutbacks that will help the organization save money
align the ERP with the restructuring desired
Target the processes and procedures conducted by the company

When an organization goes through a strategic initiative, the internal environment can shift,
causing __________.
fear in the employees
changes to occur throughout the organization
the operations, capabilities, and resources to be insufficient to cover the need of the change
irrefutable damage to the organizational structure
a ripple effect of changes

The objective in an ERP is __________.

to decentralize the data and processes
to enhance the workflow within an organization through decentralization
to centralize the data and processes
to centralize the people and processes with a decentralized resource pool
to enhance the workflow within the organization through centralization

It is critical that all aspects of the PEST be identified to ensure __________.

the internal environment understands the need for the change
the competition does not surpass the company
the emerging technologies are implemented immediately
the business plan to improve operations will still be in line with the needs of the PEST factors
The new operations will still be in line with the requirements of the PEST factors
By bringing all the departments together for the planning phase, it is possible to ___________.
determine why the processes should not be integrated into a centralized system
create teams based on departments
determine how the processes can be streamlined to department specific needs
to determine the commonalities between the departments
Identify common processes used

An external analysis using the __________ allows the vision and mission of the organization to
be aligned with the external factors.
common industry data
PESTEL analysis
competitor’s information
SWOT analysis
PEST analysis

The employees who complete the job functions are __________.

used to integrate the new system
the worst choice to decide if the ERP will benefit their position because the employees will fear the
change
the resources needed to complete the ERP
the ones to decide if the ERP will be implemented

In a small business or NFP, it is common for employees to __________.

be territorial of their responsibilities
become knowledge experts on their area of responsibility
be proficient in one area of the organization
have some cross-functional knowledge due to past experiences
Fill multiple positions

Once an ERP is created, what should be done within the company?

Only key personnel in the company should be trained to create knowledge experts.
Once the system has been tested, it should be rolled out to employees with training.
It should be immediately rolled out to all employees.
It should be given to all employees at the same time to be fair.
The new system should be tested to find flaws.

Small businesses and NFPs can use enterprise resource planning to __________ between job
functions and departments.
understand the gaps
communicate
eliminate gaps
create jobs to fill the gaps
Bridge the gap

How can collaboration be a benefit to a small business or NFP during the planning system of an
ERP?
If the same steps are needed in multiple departments, they can be duplicated, which would eliminate
the need to create them from scratch.
The processes and procedures that are duplicated can be maximized.
The processes and procedures that are duplicated can be eliminated.
The operation can be simplified by duplicating the necessary steps.
The operation can be simplified by eliminating duplication.
Unit 4
Competitive Strategies 98%
Introduction

The model Michael Porter describes discusses how strategy is the process of taking action that
will create a defendable position within an industry. In some ways, this strategy can be seen as
both offensive and defensive in regards to competitive forces.

The defensive strategies will align with the structure of the industry and will position the firm to
align its strengths and weaknesses to the industry. The offensive strategies should be designed
to do more than just simply cope with the competitive forces; they should modify the
underlying cause of those forces, thereby altering the competitive environment itself.

Learning Material

There are multiple strategies that firms can use to offensively and defensively assist the firm with
identifying which is the best approach based on the circumstances. Michael Porter suggests three
broad generic strategies that can be utilized to create a defendable position for the long term of
the firm, and these strategies will allow the firm to outperform the competitor. The three
strategies are known as: cost leadership, differentiation, and focus or niche strategy.

Click on the icon below to learn more about Porter's generic strategies:

http://www.youtube.com/watch?v=V14kuqYEsxE

Cost Leadership

Cost leadership is having the lowest amount per unit cost for that product in the industry, the
lowest cost that is relative to the firm’s rival. This means that the firm could have the lowest cost
per unit amongst their competitors in a highly competitive industry.

The case returns on profits may be low, but it will be much higher than the competitor. Or, the
firm could have the lowest cost amongst a few rivals where the firm has the opportunity to enjoy
pricing power along with the higher profits. It must be taken into account that cost leadership is
defined independently of market structure.

Cost leadership is a defendable strategy because it will assist the firm against the powerful
buyers. The buyers have the potential to drive the prices down to the next efficient producer.
Cost leadership will also defend against the most powerful suppliers.
Cost leadership allows the firm to have some type of flexibility to absorb the increase in input
cost, but the competitors may not have the same type of flexibility. The factors that lead to cost
leadership will allow the firm to provide entry barriers in some instances. The economies of scale
will always require potential rivals to enter into the industry with the ability to produce
substantially, and this could prohibit others from entering into the market as potential
competitors.

For the firm to achieve a low-cost position within the industry, it will usually require the
following skills and resources: process innovation that will develop a cheaper charter to produce
existing products, large capital investment to obtain new technology that could potentially led to
long-term market share and short-time losses, continuous capital investments that will assist with
maintaining the cost advantage throughout the market share and economies of scale, intensive
monitoring of labor, and control of overhead.

Differentiation

Differentiation of the product being offered means creating a product that is perceived as being
unique by the industry. It also means that, to some extent, the firm can create their own market.
There are multiple approaches when it comes to differentiation: brand image, different design,
new technology, and number of features. The differentiation strategy could mean utilizing two or
more of these specific dimensions.

The differentiation model is also a defendable strategy for gaining the average returns because of
the following reasons:

The uniqueness will create a barrier and it will reduce the competitor from creating substitutes;
this will lead to higher margins which reduces the firms need for a low cost advantage

It will protect the firm from competitive rivalry that creates brand loyalty; it also lowers the price
resistance of demand by making the customer less sensitive to changes in the pricing of the
product

The higher margins will provide the firm with a little more leverage to deal with their powerful
suppliers

Differentiation mitigates buyer power because the buyer now has fewer alternatives

Organizations can implement the differentiation strategy by checking off the characteristics
outlined below:
Focus or Niche Strategy

Focus or niche strategy is when the firm focuses on a particular buyer group, geographical
market, or product segment, where differentiation and low cost are solely focused on achieving
objectives throughout the entire industry.

The focus or niche strategy is focused on serving a specific target market, customer, product or
even a location. The firm must keep in mind that the focus strategy also means achieving a low-
cost advantage in a narrow part of the market.

This would also apply to the differentiation strategy. As with the differentiation strategy, it is
possible that the market share will be very limited. If the firm decides to focus on the focus
strategy, the firm must be sure that the market segment being catered to is wholly different from
the leading market.

Stuck in the Middle

A firm that finds themselves not being able to develop a strategy in one of the three directions
will be seen as stuck in the middle. This means the firm is lacking market share, overhead
control, and capital, as well as lacking in industry differentiation required to create the margins
that remove the need for a low-cost position.

A firm that finds themselves stuck will have to gravitate toward utilizing the low-cost strategy or
even the differentiation strategy.

Risk of Each Strategy

Each generic strategy is based on building various mechanisms of defense against the
competitive force; therefore, they will all involve different risk:
 Summary

When a firm chooses one of the following strategies—low cost, differentiation, or the focus
strategy—the firm has the capability of being profitable within their industry. According to the
Michael Porter model, there may be instances of where a firm will find themselves “being stuck
in the middle.” When a firm finds themselves in this position, they will find that they are almost
guaranteed low profitability, do not possess any type of competitive advantage, and are more
than likely on the way to being overshadowed by firms that have the competitive advantage. This
is why it is imperative for the firm to choose a business strategy that they are capable of
implementing successfully.

References

Azadi, S., & Rahimzadeh, E. (2012). Developing marketing strategy for electronic business by using
McCarthy's four marketing mix model and porter's five competitive forces. EMAJ: Emerging
Markets Journal, 2(2), 47-58. doi:10.5195/emaj.2012.25
David, F. R. (2011). Strategic management. Upper Saddle River, NJ: Prentice Hall.

Kryscynski, D. (2012). Generic strategies - Mini lecture [Video]. Retrieved from the YouTube Website:
http://www.youtube.com/watch?v=V14kuqYEsxE

McLaren, T. S., Head, M. M., Yuan, Y., & Chan, Y. E. (2011). A multilevel model for measuring fit
between a firm's competitive strategies and information systems capabilities. MIS
Quarterly, 35(4), 909–A10.

Renko, N., Sustic, I., & Butigan, R. (2011). Designing marketing strategy using the five competitive
forces model by Michael E. Porter—case of small bakery in Croatia. International Journal of
Management Cases, 13(3), 376–385.

Yinan, Q., Xiande, Z., & Chwen, S. (2011). The impact of competitive strategy and supply chain
strategy on business performance: The role of environmental uncertainty. Decision
Sciences, 42(2), 371–389. doi:10.1111/j.1540-5915.2011.00315.x

Key Terms

Cost Leadership

Having the lowest amount per unit cost for that product in the industry, the lowest cost that is
relative to the firm’s rival.

Differentiation

Differentiation of the product being offered by the firm’s means creating a product that is
perceived as being unique by the industry.

Focus or Niche Strategy

Focus or niche strategy is when the firm focuses on a particular buyer group, geographical
market or product segment, where differentiation and low cost are solely focused at achieving
objectives throughout the entire industry.
Questions
The firm must keep in mind that the focus strategy also means which of the following?
Achieving a high cost advantage in a wide range of the market.
Achieving a low cost advantage in a narrow market.
Achieving a low cost advantage in a wide range of the market.
Achieving a high cost advantage in a narrow part of the market.

For the firm to successfully implement the differentiation strategy, they would require applied
R&D.

Some risks that are associated with the FOCUS strategy would encompass imitation and changes
within the target segment. 

The factors that lead to cost leadership will allow the firm to provide entry barriers in some
instances. 

Differentiation of the product being offered by the firm should address which of the following
with regard to differentiation approaches? (Choose 2)
Customer support
Different design
Product innovation
Number of features

Cost leadership is having the lowest amount per unit cost for that product in the industry; the
lowest cost that is relative to the firm’s rival. 

Differentiation of the product being offered by the firm should address which of the following
with regard to differentiation strategy? (Choose 2)
Customer support
Number of features
Applied R&D
Different design
Product innovation
Exclusivity

Differentiation of the product being offered by the firms means which of the following?  
Substituting a product that is perceived as being unique by the industry.
Creating a product that is perceived as being similar to the industry.
Creating a product that is perceived as being unique.
Creating objectives that are perceived as being unique by the industry.

Cost leadership is a defendable strategy because it will assist the firm against
the POWERFUL buyers. 
The differentiation strategy could mean utilizing two or more of these specific dimensions.

Niche strategy is when the firm focuses on a particular buyer group, geographical market, or
product segment.

Focus or niche strategy is when the firm focuses on a particular buyer group.

The buyer's need for DIFFERENTIATION will fall; and the substitutes will decrease.

A firm that finds itself stuck will have to gravitate toward utilizing the low-cost strategy or even
the DIFFERENTIATION strategy.
Strategies for Competitive Advantage 98%
Introduction
As previously discussed, gaining the competitive
advantage of the competition allow the
competitors the ability to offer their customers
great value through lowering their prices, or by
providing their customers additional benefits and
services that could justify that firm possibly
raising their prices. For those firms that are
experienced with providing niche marketing,
finding and sustaining a competitive advantage
will allow that company an opportunity to
increase their profits over a long term.
 Learning Materials
The Soul of Competitive Advantage

What does it truly mean to have a competitive advantage over the competition? When a firm is
looking to evaluate their competitive advantage, the following question must be asked: why
would the customer look into purchasing this operation rather than purchasing from the
competition?

Some firms may find this question a challenge to answer, especially in those markets where the
products and/or services are less differentiated. When a firm is trying to successfully establish
their business, it is often dependent on the firm having a strong competitive advantage that can
build a core of loyal customers over a certain period of time.

Successful firms are experienced with performing a combination of business activities (e.g.,
finance, customer service, marketing, production, and customer service). However, obtaining the
competitive advantage is the key component that allows the firm to gain a competitive edge that
surpasses the efforts of its competitor.

Click on the link below to learn more about competitive advantage:

http://www.youtube.com/watch?v=S9O2oPbT3fs

Strategies for Differentiation

The following strategies discussed could assist a firm with differentiating their products or
services from their competitors:

Product features and benefits: What makes the firm unique and desired by the consumer? (i.e.,
what quality of the ingredients, style, comfort, production methods, and so forth will show the
products to be entirely different from the products that are currently being offered by the
competitor)
Location: Will the firm be positioned where they can gain the attention of their customers? The
location will always be a beneficial factor for those firms that insist on selling directly to the
public. The location should be in an attractive area with convenient and easy access for the
consumer.

If the firm has to be tied down to an existing location, this will influence other decisions that the
firm has to make (i.e. marketing, product distribution, and product selection). If this becomes a
major factor for the firm, it may be possible for the firm to partner with another firm that already
possesses a more attractive establishment.

Operating procedures: The firm has to address the internal policies, standards, and processes
they could potentially implement to smooth out the day-to-day operations that will bring value to
the firm, and in turn provide the customer with a positive experience

Staff: The firm must ensure that the managerial staff is in the position to produce a quality
product and provide excellent customer experience. Does management act professionally, and
does the management team have the required expertise to support the product that the customers
can rely heavily on?

Customer incentive programs: Does the firm employ incentive programs that will attract new
and retain their current/repeat customers through sales, promotions, giveaways, or coupons?

Price: Most firms competing in the same industry will have the tendency to have the same cost
structure. This means that when the competitor cuts their price, others will normally follow suit.

By performing this action, it will decrease the chances of the competitor gaining a competitive
advantage. The firm has to ask what cost advantage the firm has that would justify the action of
permanently reducing their prices. The firm may have the possibility of taking a cost advantage
by lowering their overhead or even their shipping cost, raw materials, cheaper labor, and so on.

Brand name recognition: Implementing a good marketing strategy may be enough to

differentiate one firm from another by brand name. This executed marketing plan could be a
major contribution to the firm’s success, as it would focus solely on the customer.

Brand recognition is based on the firm providing a good, consistent marketing strategy. Firms
that do not have the capabilities or resources to effectively market themselves as their own brand
will need to consider possibly joining forces or cooperatively market their product with another
firm that has a recognizable brand name.

Weather: Will the weather have an effect on the firm producing or selling their product or
service?

Guarantees and warranties: If the firm is going to advertise that they are provide a high-quality
product, will that customer perception be reinforced with warranties and guarantees?
Value added products or services: Can the firm offer additional services or develop additional
products?

Organization and alliance: Does the firm have any exclusive alliances or sources of supply?
Some firms have the capabilities of providing a unique product by pooling their resources.

Customer experience: When the firm consistently provides their customers with information in
regards to the product and services being provided, it will allow the firm and the customer to
gain a personal connection that builds customer loyalty.

Quality: With all the elements that have been discussed previously, quality will be viewed as the
underlying factor for a firm. A successful firm is known for consistently providing a quality
product. The quality of a product should be much higher than the competitor’s product, or from
the firm providing exceptional customer service.

Evaluation Process

When a firm initially enters into a specific market, it would be in the best interest of the firm to
perform a comprehensive evaluation of what goals the firm is trying to achieve and how they
ultimately fit into the marketplace.

Evaluate the firm’s resources: Gaining the competitive advantage often lies in the firm’s
resources and the firm’s overall ability. The firm must thoroughly evaluate their existing
resources and the products and services they offer.

What could the organization use that may potentially be an advantage to the firm? From the
components discussed previously, which are readily available and which would the firm need to
obtain focus on one or more of the strategies?

Clarify the goals: Does the firm have a clear idea of what they seek accomplish? Firms that
have specific and achievable goals have the propensity to gain consistent growth. The firm
should always have realistic goals in place, but those goals should be challenging and written out
so that they clarify what they are expected to do for the customer in the near future. Those goals
that have been identified will ultimately become benchmarks for the firm and will assist with
maintaining focus with all the parties involved.

Define customers: For the firm to define their potential customers, they must determine with the
products and services that the customer wants, but they are not able to obtain from their
competitors. Once those needs have been identified, the characteristics of those customers should
then be analyzed so that the firm can identify commonalities.

When the firm develops those hypotheses in regards to what the potential customer is seeking to
purchase, engaging potential customers will offer a full understanding to those needs. This will
also give the firm the opportunity to provide added features that customers are inquiring about,
and what the customer is more than willing to pay for.
 Examine competitors: With a full understanding of what the customer is wanting, it is
imperative that the firm look into their competitors and how they are targeting customers in the
same market. The firm should analyze their direct competition, and once the competitor has been
identified, the firm should compare the competitor’s strengths and weaknesses against the firm’s
strengths and weaknesses. This analysis will provide more insight to where the firm needs to
focus and where the advantages lie.

Summary
Overall, when the firm is trying to build a competitive advantage, it will always involve
understanding the customer’s needs and consistently devising a strategic plan to utilize the
available resources to set the firm apart for their competitor.

The firm’s strategy will need to consider the target market, strengths and weaknesses, the
business, the business goals, and lastly, the product and services that the firm has developed,
along with the strategies the competitor has put into place.

The questions the firm should ask are: who are the competitors; are the business and target
market clearly defined; are the competitors being tracked periodically; what has been learned
from the competitors mistakes; is the firm taking advantage of the competitors weaknesses; how
does the firm prices compare to the industry; does the firm have a loyal customer base; and what
are the current trends and can the firm take advantage of those trends.

References

Campbell, B. A., Coff, R., & Kryscynski, D. (2012). Rethinking sustained competitive advantage from
human capital. Academy of Management Review, 37(3), 376–395.

David, F. R. (2011). Strategic management. Upper Saddle River, NJ: Prentice Hall.

Fremeth, A. R. & Richter, B. K. (2011). Profiting from environmental regulatory uncertainty: Integrated
strategies for competitive advantage. California Management Review, 54(1), 145–165.

Renko, N., Sustic, I., & Butigan, R. (2011). Designing marketing strategy using the five competitive
forces model by Michael E. Porter—Case of small bakery in Croatia. International Journal of
Management Cases, 13(3), 376–385.

Stojanoski, J., Dapi, Z., & Elmazi, L. (2013). Tourism competitive environment and small business
strategies to create competitive advantages. Case of Albania and Macedonia. International
Journal of Management Cases, 15(3), 14–19.

Virtualstrategist. (2008). How to develop a competitive advantage. Retrieved from the YouTube

Website: http://www.youtube.com/watch?v=S9O2oPbT3fs

Key Terms
Product Features and Benefits

What makes the firm unique and desired by the consumer.

Location

Where the firm be positioned where they can gain the attention of their customers.

Operating Procedures

Where the firm has to address their internal policies, standards, and processes they could
potentially implement to smooth out the day-to-day operations.

Staff

Responsible in producing a quality product and provide excellent customer experience.

Customer Incentive Programs

Incentive programs that will attract new and retain current/repeat customers.

Price

When most firms competing in the same industry have the tendency to have the same cost
structure as their competitor.

Brand Name Recognition

Implementing a good marketing strategy would be enough to differentiate one firm from the
other.

Weather

A potential factor that will have an effect on the firm producing or selling their product or
service.

Guarantees and Warranties

What the firm is going to advertise when stating that they are providing a high quality product.

Value Added Products or Services

The firm offering additional services and or developing additional products.

Organization and Alliance

When the firm has exclusive alliances or sources of supply.

Customer Experience

Providing customers with information with regard to the product and services being provided.

Quality

When a firm is successfully known for consistently providing a quality product.

Questions
Most firms competing in THE SAME industry will have the tendency to have the same cost
structure.

Successful firms are experienced with performing a combination of business activities, but
utilizing customer service.

The firm must ensure that the managerial staff is in the position to provide a quality product.

Most firms competing in the same industry will have the tendency to have the
same COST structure.

The firm must ensure that the managerial staff is in the position to do which of the
following? (Choose 2)
Produce a quality product
Provide excellent customer experience
Produce an inappropriate product
Provide mediocre customer experience

Gaining the competitive advantage often lies in the firm's RESOURCES and the firm's overall
ability.

Some firms have the capabilities of providing a unique product by POOLING their resources. 

The evaluation process could assist a firm with differentiating their products or services from
their competitor by which of the following? (Choose 3)
Examine Competitors
Evaluate the Firm's Resources
Location
Define Customers
Operating Procedures
Clarify the goals

How will the firm employ incentive programs that will attract new and retain their current and
repeat customers? (Choose 2)
Sales
Word of mouth
Coupons
Warranties

Implementing a good marketing strategy would be enough to DIFFERENTIATE one firm from

the other. 
it is imperative that the firm look into their competitors and how they are targeting customers in
the same market.
 The Nature of Strategic Analysis 99%
Introduction

Analyzing the industry should begin by the firm defining

the markets and the products that will be sold. It will also
entail analyzing the skills the competitors have gained
within that particular industry, followed up by the industry
structural analysis, and lastly, by identifying the key
elements for that particular industry.

The strategic analysis is used for many purposes. It allows the firms the capability of:

 strategic evaluation
 analyzing the industry
 evaluating the business strategy analysis
 addressing the critical issues and evaluating the recommendations

Learning Material
Industry Analysis

The firm must begin by defining the business by analyzing their market along with their products
that will depict their specific area within the industry. Once they have determined and understand
the business segment, the firm must then identify the capabilities that are needed to participate in
that particular industry, and the competitors that have the capability of targeting the same market
segment. The four components listed above will set the parameters in regards to having a full
understanding and analysis of the industry.

The industry analysis should also describe the industry structure, which should entail the
following “five forces” of the competition:
Identify Internal Capabilities and Skills

For the firm to effectively implement their strategy depends on how they address the functions
and business processes that will support their strategy. The nature of the organization will
depend upon how the organization functions within the business process capabilities.

The organizations skills are central to a strategy implementation that could be categorized into
either a product or service function or process, or a product or service delivery satisfaction
function or process. The product-related functions and processes are contingent upon the firm’s
R&D and manufacturing/purchasing capabilities.

The market-related functions are specifically designed to effectively serve the customer.
Fulfilling the customer demand will rely heavily on the firm’s marketing activities that include
sales, service, and distribution activities. Those are the key factors to ensuring customer
satisfaction that in turn will address the customers’ needs and demands.

Research and Development (R&D): This will generate proprietary technologies that can be
applied to the overall development and the production of any new products.

Time to market: This is needed to integrate any new technology into the firm’s product and
services. In today’s competitive environment, the firm is looking at taking the advantage of
arriving first into the marketplace in an effort to introduce the next generation of technologies
through new product and process developments.

Manufacturing: This functionality will transform the firm’s purchased software and

components into their products. For the firm to make sales on their products, they must
acceptable products readily available, and in a timely fashion for their customers.
If the firm is looking to gain market share within their industry, they must ensure they are
providing the highest quality products and are offering their customers competitive prices.

Integrated supply chain: This requires the firm to purchase components that will need to be
assembled.

Product outsourcing: The firm is able to provide products that are not only available, but meets
the customer order requirements. Outsourcing increases the firm’s opportunity to provide a wider
range of products, or even to introduce any new products in an increased rate.

Distribution function: This is needed for the firm to obtain market access. The firm that chooses
to dominate the sales channels within a specific marketplace will have control of that market.

Market to collection process: This is utilized to obtain customers and to deliver products. The
Internet is changing the role of the firm’s salesforce by eliminating the face-to-face approach.

It is projected that the intermediary roles (e.g., distributors and agents) will have to embrace that
change to that of infomediary. As the firm’s quality of product improves, service becomes less
detrimental, and the opportunity to open new channels can be developed.

Marketing function: This will educate the customer about the firm’s products and services. It is
important to keep the customer informed of the product and services being offered, as this will
educate the customer on product capabilities.

Marketing and advertising will assist in this effort as it will pull the customer into the market to
collection process; this creates brand recognition and brand imaging for the products and
services being offered.

Customer service and satisfaction: Lack of customer satisfaction is detrimental to sustaining

the firm’s brand loyalty. Firms find it less expensive keeping an existing customer versus
acquiring a new customer.

Once the relationship between the customer and the firm has been established, it is important that
the customer relationship activities are present to maintain the relationship between the customer
and the firm. This will assist with problem-solving later on if it arises.

Business Strategy Evaluation and Recommendations

The business strategy analysis provides a description of the firm’s strategic goals and the
business strategy. The firm, being able to implement this strategy, is then analyzed to determine
if the firm is capable of functioning and operating as needed, resulting in financial and
competitive performance.
 The strategic evaluation will entail the firm conducting a SWOT to analyze the internal and
external factors that could potentially affect the firm’s business strategy. Those factors are then
compared against the competition and the industry’s success factors. This will also provide the
firm with competitive resource requirements, along with the firm’s resources and capabilities.

Lastly, the critical issues and recommendations assist with identifying the critical issues that the
firm will need to address. This analysis should provide the recommendation that will address
those critical issues and the result in changes of the functional implementation and the product
market strategy.

Summary
A firm’s strategic analysis should be based on assessing the efficiency and effectiveness of the
organization in an effort to determine if the firm’s strategic needs and requirements are being
met in the competitive market place.

Once the firm has identified their business strategy, they can work on improving the firm’s
strategic performance. The process is done by conducting a SWOT analysis, and the firm will
then align the SWOT analysis to the firm’s overall strategy, while determining the critical
components that need to be addressed.

The firm can then address those critical factors or issues by then putting them in order of
importance while providing recommendations.

References

Critchley, W. (1979). Defining strategic value: Problems of conceptual clarity and valid threat
assessment. Policy Studies Journal, 8(1), 28–37. doi:10.1111/1541-0072.ep11814189

David, F. R. (2011). Strategic Management. Upper Saddle River, NJ: Prentice Hall.

Langley, A. (1990). Patterns in the use of formal analysis in strategic decisions. Organization Studies
(Walter De Gruyter Gmbh & Co. KG.), 11(1), 17–45.
Questions
Substitution addresses the need to change in-product market structure by
providing ALTERNATIVE APPROACHES.

Most strategies should be used as a combination to address higher performance and lower

prices.

The organization's skills are central to strategy implementation, which could be categorized into
which of the following? (Choose 2)
multiple products that deliver overall customer satisfaction
either a product or service function or process
a product or service delivery satisfaction function or process
a service delivery satisfaction function or process

The organization's skills are central to strategy implementation, which could be categorized into
either which of the following?
A product or service function or procedure
A product or service delivery satisfaction function or process
A unit or service function or process
A service function or procedure
A product or service function or process

The firm must begin by defining the business by analyzing their market along with
their PRODUCTS that will depict their specific area within the industry. 

What are the items that consist of product-related functions and processes? (Choose 3)
Time to market
Distribution function
Manufacturing
Marketing function
R&D

The market-related functions are specifically designed to effectively serve the client.

Outsourcing increases the firm’s opportunity to provide a wider range of products.

For the firm to effectively implement their strategy, it depends on how they address the functions
and __________ that will support their strategy. 
business proposition
product
mission
business processes
Barriers to exit could include contracts that have to be honored, outstanding warranty, and/or
alternative use of potential sale of equipment and facilities.   
SWOT 99%
Introduction
The acronym SWOT stands for strengths, weaknesses,
opportunities, and threats. The SWOT matrix analysis is a
process that the management team utilizes to identify their
organization’s internal and external components that could
possibly affect the company’s future performance. The
strengths and weaknesses are comprised of the company’s
internal factors and the opportunities and threats are
comprised of the company’s external factors that address
any environmental factors.

The SWOT is used to access the company’s overall corporate planning strategy to determine
how to address the financial goals along with the company’s organizational goals for the
upcoming year. This is also where the company creates or updates their strategies on how they
are going to meet those goals.

Learning Materials
Why perform a SWOT?

A SWOT analysis identifies the firm's strengths, weaknesses, opportunities, and threats. A firm’s
strategy, along with their decision-making process, is highly swayed by marketers. A firm should
have a full understanding of the environment where they are operating in to determine the
research that must be done for that firm to be competitive.

Although the SWOT is a useful tool that can assist a firm with having a better understanding of
the business environment, it will allow that firm to effectively penetrate their desired
marketplace, while capitalizing on opportunities.

Click on the icon below to learn more about a SWOT analysis:

http://www.youtube.com/watch?v=GNXYI10Po6A

SWOT Matrix
Common SWOT Matches

The matrix could be viewed as such: SO (strengths and opportunities), WO (weaknesses and
opportunities), ST (strength and threats), and WT (weaknesses and threats). When it comes to
matching the key internal and external factors, some companies tend to find this part very
challenging when creating the SWOT matrix. It will require the management team to use their
better judgment, as it has been found that there is not one particular set of matches to utilize.

SO (Strength and Opportunities Strategy)

Companies use the SO (strengths and opportunities) strategy to leverage the internal strengths
while taking advantage of any external opportunities that may be present. Most companies would
like to view their organizations as always having the capabilities of utilizing their internal
strengths to take advantage of the external trends and occurrences.

Most organizations will pursue WO, ST, or WT strategies so that they can utilize the SO
strategy. When the firm recognizes that they have multiple internal weaknesses, they will work
even harder to overcome those weaknesses and turn those weaknesses into strengths.

When a firm recognizes that they have major obstacles to overcome when addressing major
threats, they will have the propensity to avoid those threats and work on addressing the
opportunities.

WO (Weaknesses and Opportunities) Strategy

Companies that use the WO (weaknesses and opportunities) strategies focus on addressing the
company’s internal weaknesses that allows them to take advantage of the company’s external
opportunities. There may be instances where key external opportunities may exist, but the
company’s internal weaknesses may preclude the company from being able to explore those
specific opportunities.

An example of this could be where a known demand for a specific electronic device is needed to
control the timing of fuel injectors in an automobile engine (which would be the opportunity) but
an auto parts manufacturer may not have the ability to create the technology that is required to
build this specific technological device; that would be known as the weakness.
The company would use the WO in this particular situation to possibly acquire this technology
by forming a joint venture with a firm that has the capability of producing this technology.

ST (Strength and Threats) strategy

The ST (strength and threats) strategy is used to leverage on the firm’s strengths. This is utilized
to prevent or possibly reduce the overall impact of any external threats.

This does not mean that the firm should always address the threats that are presented in the
external environments face-to-face because they view the firm as having a strong organization.

An example of a ST strategy is when a technology company utilized a legal department known

for its excellency in practicing law (which is a strength), to obtain nearly $700 million from nine
Japanese and Korean companies that were found to have infringed on patents for a
semiconductor memory chip; that is known as the threat.

It has been known that competitive firms that have a tendency to copy ideas and products that
have been patented tend to become a major threat in the industry. The U.S. still encounters issues
with selling products in China.

The WT (Weaknesses and Threats) strategy

The WT (weaknesses and threats) strategy is normally used as a defensive tactic in an effort to
reduce the company’s internal weaknesses and to eliminate or avoid any external threats. A
company that finds themselves in the position of having multiple external threats, along with
internal weaknesses, will have the tendency to be placed in an unwarranted position. Companies
that are placed in this position will have to find a way to survive, or they will have to possibly
declare bankruptcy, retrench, merge, or even possibly liquidate their assets.

Utilizing Resources Effectively

There are multiple companies that will dominate their markets, and will have a predetermined
supply of manpower, capital, and production capacity. When evaluating the company’s overall
strengths, it will assist with determining how that company would effectively allocate their
resources; that in turn will allow that company to maximize on their revenue growth and
profitability.

This will provide the company the opportunity to evaluate where they can become more
competitive. The company could then discover where they have not leveraged strengths that have
not been fully taken advantage of in the past.

Improving Company Operations

When the managers take the time to review the company’s weaknesses, it should not be looked
at as the company having shortfalls in their strategic performance.
This should be the opportunity to explore the company’s critical areas that will need to be
assessed for improvements so that the company can compete effectively in their market.
Conducting an assessment of weaknesses will also prevent the company from encountering
strategic blunders, such as entering into the market with products that are substandard to what
their well-entrenched competitors are presenting.

It is imperative for the company to improve in areas that will assist with staying abreast of their
competition. Companies must continuously monitor their weaknesses and work on turning those
weaknesses into strengths.

Exploring Opportunities

Company growth will require all firms to explore new opportunities. This includes possibly
exploring a new customer base, expanding into a broader distribution of products, exploring the
opportunity to develop new categories and/or products and services related to the geographic
location.

In the SWOT matrix, the management team should also identify any potential emerging
opportunities that could be utilized at that current time.

Dealing With Risk

A company having a threat in the marketplace should be viewed as a risk. This threat is viewed
as an external occurrence that has a possibility of having an impact on the performance of the
company.

Companies will also be faced with threats that are coming directly from the competitor. The
changes that will occur because of the regulatory environment have a potential to have an
adverse impact on the company’s overall performance.

The consumer wants and needs could also change that prevent the consumer from purchasing
luxury products or services (e.g., during a recession). The risks are lessened when the company
takes the time out to evaluate or develop a contingency plan that could be implemented when
those impending threats come into existence.

Having a SWOT in place will assist the company with preparing themselves when the time
comes to address the external environment.

Competitive Positioning

Many companies use the SWOT to analysis their key competitors. The management team starts
off by painting a picture of where they believe the company should position themselves against
their competitors.

The company’s management team can also use the information derived from the SWOT to assist
with determining where they should strategically position themselves. The company should
focus on aggressively attacking the competitor’s weaknesses, while leveraging on their strengths.
The SWOT will also provide evidence about a competitor’s weaknesses that could potentially be
demoralized.

Summary

The SWOT matrix will continue to be utilized throughout many organizations when addressing
the firm’s strategic planning process. It must also be noted that although the SWOT is an
effective tool for a firm to utilize, it also has its limitations.

The SWOT will not determine how a firm will achieve the competitive advantage over the
competition. The SWOT should be used as a starting point in accessing the firm’s strategic plan,
and as a guideline in implementing those plans.

The SWOT should also be viewed as a static assessment—or snapshot—for that current time. A
firm’s circumstances, threats, capabilities, and strategies will change periodically, as their
competitive environment will change and will not necessarily be revealed in a SWOT matrix.

Lastly, the SWOT matrix could potentially cause the firm to overemphasize the internal and
external factors that affect the strategies that were formulated.

References

Virtualstrategist. (2008). SWOT analysis: How to perform one for your organization. Retrieved
from you YouTube Website: http://www.youtube.com/watch?v=GNXYI10Po6A

Key Terms

SWOT 

An acronym which stands for strengths, weaknesses, opportunities, and threats.

Questions
Companies use the SO (strengths and opportunities) strategy to leverage on the __________
strengths while taking advantage of any __________ opportunities.
internal; external
outside; company’s
company’s; competitors’
external; internal

The company should focus on which of the following? (Choose 2)

Leveraging on their strengths
Aggressively attacking the competitor’s weaknesses
Aggressively attacking the competitor’s threats
Leveraging on their weaknesses

The risks are lessened when the company takes the time out to evaluate or develop
a CONTINGENCY plan that could be implemented when those impending threats surface into
existence. 

The SWOT should be used as __________.

a starting point in accessing the competitor's strategic plan
a starting point in accessing the firm’s strategic plan
a strategy plan
how to create a competitive plan

Having a SWOT in place will assist the company with preparing themselves when the time
comes to address the EXTERNAL environment.

Most organizations will pursue WO, ST, or WT strategies so that they can utilize the SO
strategy. 

A company having a(n) THREAT in the marketplace should be viewed as a risk.

The SWOT matrix will continue to be utilized throughout many organizations when addressing
the firm’s __________. 
strategic processes
strategic mission
strategic plan
strategic objectives

__________ and _________strategies focus on addressing the company’s internal weaknesses

which allows them to take advantage of the company’s external opportunities.
Weaknesses; Threats
Weaknesses; Opportunities
Threats; Opportunities
Strengths; Threats
Functional Strategies and Organizational
Strategies 98%
Introduction

A strategy can entail a course of action or a set of rules that allows a firm to make a specific
pattern or create a common thread. This pattern or thread is derived from the organization’s goals
and objectives.

A strategy could also be specific and purposeful activities

that allow an organization to move from one role to the
next and toward the firm’s desired future state. A strategy
is also a planned or actual synchronization of the firm’s
goals and actions, and it can be connected to the firm’s
  strategic positioning; this allows the firm to make trade-
offs between multiple activities and create a fit.

Learning Materials
The Functional Business Strategy

The functional business strategy is part of the organization’s operational management, and it is

based on a specific department or specific discipline within an organization, such as human
resources, marketing, or finance. For a firm to state that they have a functional-level strategy for
product development, it simply means that the firm has developed a strategy for selling its goods
and services to its customers.

The functional business strategy is part of the organization’s strategic plan. The organizational
strategy is the framework of how a firm may need to change over a specific period of time so
that it can reach its goals; the strategy may also include how the firm should address any
transformations. This strategy requires critical and analytical thinking so that the firm can
compare its current state to the desired stated, address any potential gaps, and recognize
execution capabilities.

Evaluating Goals and Strategies

A functional business strategy will allow a firm to address the practicalities of long- and short-
term organizational goals and objectives by determining its functionality. Most businesses exist
because they want to make a profit; because of this, smaller firms tend to find it easier to define
their plans and goals, because there are fewer levels of hierarchy to address.
The functional business strategy affords smaller firms the opportunity to evaluate the industry
and ensure that their goals and strategies are still a good match. For instance, a technological
company may adopt the functional business strategy for its human resources department, because
it is looking to hire well-qualified individuals with social media, web design, or programming
experience.

This task will entail looking at the specific needs of the function, human resources, information
technology, and research and development. Then the firm can set objectives to fill in the gaps of
those functions.

Functional Business Advantages

The functional business strategy is most often utilized by small businesses, because small
businesses need to focus on managing the business’s constituents. If a firm sets out to develop
individual goals and objectives for a specific job function within the company, the firm’s owners
and managers can effectively assign the correct resources and individuals to the task.

For example, an employee that is skilled in the technology arena can be assigned work in that
specific field. If functional business advantages are not utilized, tasks would be assigned to
individuals with no knowledge in the field. The overall advantages of the functional business
strategy rely heavily on viewing the employees as valuable resources. This means that the firm
will need to assess the strengths and weaknesses of its resources and employees.

Functional Business Challenges

The functional business strategy is a very useful tool for most businesses, because it will lead to
the evaluation of its resources; however, there are some disadvantages. For smaller firms, the
disadvantages are even more obvious.

Small businesses do not always have the luxury of separating their departments by functions,
because often the departments are made up of a single individual or a small group of individuals.
This will make the functional business strategy more difficult to implement. The strategies must
be fluid and able to acclimatize to the various skills sets and competencies of the resources.

Functional Operational Strategy

Although the functional strategy is used often, some firms may look at adopting the operational
strategy. The operational strategy deals with the finer points that go along with an
organization’s day-to-day operations, such as scheduling employee shifts, filing invoices, and
dealing with multiple customer complaints.

The operational strategy views resources as a means to an end when it comes to effectively
managing the business. The operational strategy can be very effective in a small business setting,
because it allows the organization to view an employee as an individual resource for multiple
functions. This strategy also allows the business to analyze the weaknesses in the functional
areas.
Click on the icon below to learn more about operational strategy and strategic planning:

http://www.youtube.com/watch?v=2weg_EorCR0

The constant changes that occur in today’s market tend to take business leaders by surprise.
Firms are steadily working on ways to grow their businesses; they may be tempted to act rapidly
rather than carefully considering how they should function to get the desired results.

Organizational strategies allow for planning ahead, and the firm can determine the changes that
are needed to achieve its desired goals, outcomes, and tasks. The firm will hope that this will
lead to growth, but it can easily lead to downsizing and organizational restructuring during hard
economic times. Once the firm has set the desired goal, it should then lay its course using the
organizational design approach.

Organizational Strategies

Organizational strategies determine how a firm can take itself from point A to point B. The
intended destination may be one or more of the following:

 Diversification
 Growth
 Faster turn-around time
 Better customer service
 Lower labor costs

It is the firm’s responsibility to find the most appropriate method or path to achieve its goal. An
example is if the firm is looking to lowering its labor cost; in this situation, it should consider
restructuring to avoid identical job functions. It can also lead to changing the roles of its
employees. In addition, it can lead to additional jobs; for example, if the firm is looking to spruce
up its call center to provide customers with better service, the firm may need to add more
customer service positions.

Organizational Design

Organizational design is a more detailed description of the organization’s strategy. The design
will communicate the firm’s goals and desires, and these are then translated into tangible plans.

If a firm decides to downsize, the organizational designs should specify what part of the
organization needs to be downsized. If the firm is looking to introduce a new line of business, it
will need to determine what or who is responsible for that new business, how many positions
need to be added, and where in the organizational structure the new line will begin.

Most firms will provide this information in a formal organizational chart so that each individual
and department clearly understands the changes and new organization of the company.
 Summary

The disadvantages of functional strategies greatly affect small businesses, but operational
strategies have disadvantages as well. Firms may view their employees as pawns in the planning
process.

The planning process is when the business owners and managers look to combine functional and
operational strategies to move toward the company’s long-term goals. A firm may also view its
employees as valuable assets or resources who will help focus the firm on business tools, money,
and technology in an effort to achieve its goals.

Strategically aligning and designing a firm can be somewhat complex. These matters may affect
the firm’s finances, business culture, and operations, as well as the human reactions and feelings
of those individuals associated with the business. This may cause the firm to look at bringing in
outside consultants for assistance with facilitating and managing the firm’s strategy and design
process.

References

Chuang, M. M., Yang, Y. S., & Lin, C. T. (2009). Production technology selection: Deploying market
requirements, competitive and operational strategies, and manufacturing attributes. International
Journal of Computer Integrated Manufacturing, 22(4), 345–355.
http://dx.doi.org/10.1080/09511920802209066

David, F. R. (2011). Strategic management. Upper Saddle River, NJ: Prentice Hall.

Squire, B., & Lewis, M. (2010). The impact of inclusive and fragmented operations strategy processes
on operational performance. International Journal of Production Research, 48(14), 4179–4198.
http://dx.doi.org/10.1080/00207540902942883

Stone, D. (2014). Strategic vs. operational planning: Strategy vs. tactics [video]. Retrieved from the
YouTube Website: http://www.youtube.com/watch?v=2weg_EorCR0

Key Terms

Operational Strategy

Documents the finer points that go along with an organization’s day-to-day operations, such as
scheduling employee shifts, filing invoices, and dealing with multiple customer complaints.

Organizational Strategy

is the framework of how a firm may need to change over a specific period of time so that it can
reach its goals.

Functional Business Strategy

A part of the organization’s operational management that is based on a specific department or
discipline.
Questions
The functional business strategy is most often utilized by small businesses.

The functional business strategy will allow a firm to address the practicalities of
the __________ term organizational goals and objectives.
long and short
short and mid
dynamic and long
long and mid

Once the firm has set the desired goal, they should then lay their course using the organization
design approach.

The operational strategy can be very effective in a small business setting, because it allows the
organization to view an employee as an INDIVIDUAL resource for multiple functions.

Although the functional strategy is used quite often, some firms may look at adopting
the OPERATIONAL strategy. 

A strategy could also be related to a firm pursuing specific __________ that will allow an

organization to move from one __________ to the next.
industry; role
objective; mission
activities; role
industry; objective

The _________ design is a more detailed description of the organization’s __________.

mission; strategy
organizational; strategy
operational; strategy
functional; mission

The functional strategy tends to deal with the finer points that go along with most groups'
__________ .
operational operations
strategic operations
day-to-day operations
individualized operations

The ORGANIZATIONAL strategy entails the framework of how a firm may need to possibly

change over a specific period of time, to proficiently deliver their strategies of the enterprise.
Organizational strategy entails the plan on how a firm can take their organization from point A
to point B.   

A TECHNOLOGICAL company may have the tendency to adopt the functional business

strategy for their HR departments that are looking to hire individuals that are well-qualified and
diverse in social media, Web design, or programming. 
The Decision Stage 99%
Introduction
Managers are challenged every day by situations that
require them to make decisions within their organizations.
These decisions are sometimes difficult. The decisions that
are the most difficult are the ones that could be life
changing, because that decision could dictate an
organization’s future. Decision making should be seen as a
process that will need to be learned.

Learning Materials

The Decision Making Process

Although the aforementioned five steps simplify the decision-making process, the following set-
backs should be taken into consideration:

Misidentifying the problem: There will be times when the existing problem is not easy to
identify. When this occurs, the manager will need to figure out exactly where the problem lies
and where he or she needs to focus efforts to resolve the problem. This will assist the manager in
the long run.

Relying on a single source: When a manager is considering possible consequences, he or she

must be open to a wide variety of alternatives so that the best solution is chosen. If the manager
relies on a single source of information, he or she is not considering all of the options.

Having multiple resources: Having multiple resources is not necessarily a bad thing. Collecting
as much data as possible will help the manager make his or her final decision, but too much
information may lead to a state of confusion. Trusting gut instinct is always an option.

Overestimating the outcome: When managers look to put a plan of action into place, they
should have already weighed the valid options. If a manager makes a decision that is based on an
unachievable outcome, it will not solve the problem.

Poor timing: Time can sometimes work against managers. When it comes to making major
decisions, it is beneficial to take the time to make the best decision possible. The manager must
have a total understanding of what is at hand, because there may be a time where it is best to
delay a decision.

There are also instances that may occur where delaying the response could be detrimental. A
quick decision can sometimes be advantageous, because it will allow the manager to make any
necessary changes if additional problems arise.

Click on the link below to learn more about risk in decision making:

http://www.youtube.com/watch?v=xAcWmwsUd24

Summary
Decisions will always need to be made.  Most decisions will require little effort, but others may
require a manager to scrutinize the situation thoroughly. The manager can always use the five
basic steps to good decision making.

These steps are essential to the decision-making process, and they will help managers take
appropriate actions in their professional life. Decision making is an ongoing process and will
never cease to exist.

The following are the five steps in the decision-making process:

 Identify the problem: When the manager has a clear understanding of the problem that exists
within his or her organization.

Gather information: When the manager has gathered all the facts that may be directly tied to
the problem.

Evaluate the alternatives: This will determine how the final decision will impact the manager
and those involved.

Make the decision: When the manager has identified the problem, gathered all the required
information by consulting experts, and chosen a solution.

Evaluate the decision: Any decision that the manager has made will need to be monitored for
progress.

References

Aggarwal, R., & Singh, H. (2013). Differential influence of blogs across different stages of decision
making: The case of venture capitalists. MIS Quarterly, 37(4), 1033–A3.

Cambridge Judge Business School. (2013). Managing risk well is about embedding uncertainty into the
decision-making process [Video]. Retrieved from the YouTube Website:
http://www.youtube.com/watch?v=xAcWmwsUd24.

David, F. R. (2011). Strategic management. Upper Saddle River, NJ: Prentice Hall.

Heath, C., & Sibony, O. (2013). Making great decisions. Mckinsey Quarterly, (2), 66–76.
Questions
When it comes to the decision-making process, there are multiple steps that should be taken.
Which of the following are two of the steps? (Choose 2)
Gather Information
Evaluate the Problem
Identify the Problem
Gather Documentation

When the MANAGER looks into putting a plan of action into place, they should have already
weighed all the valid options. 

Having multiple RESOURCES is not necessarily a bad thing.

Most DECISIONS will require little effort from the manager.

The manager must think about all the information that is needed and start creating
a(n) __________ to that situation. 
Analysis
Alternative
Document
Time line

When it comes to making the right decisions, it is imperative that all required DATA is gathered
that may be directly tied to the problem. 

Collecting as much DATA as possible will assist the manager with formulating their final
decision.

Any decision that the manager makes will need to be which of the following?  
Made on a yearly basis
Discussed with and agreed upon by all subordinates
Made on a quarterly basis
Put into action as it is imperative for the manager to monitor the decision made on a regular
basis

Identify the known setbacks in decision-making process. (Choose 3) 

Overestimating the Outcome
Gather Information
Having Multiple Resources
Misidentifying the Problem
Make the Decision
The manager has identified the problem, and thus gathered all the required __________ by
consulting with certain __________, and weighed the consequences. 
information; experts
information; managers
facts; managers
facts; individuals

When it comes to a manager making a __________ decision, it should be seen as a

__________ that will need to be learned. 
bad; procedure
aggressive; procedure
aggressive; process
good; procedure
Strategic Groups 98%
Introduction

When a firm decides to address its overall strategic initiatives, it must heavily evaluate the
strategic choices because its decisions could have the potential to affect the firm’s technological
production, its vertical combination, along with its gradation of product differentiation.

It must also take into consideration the firm’s formal organization, as well as diversification.
Firms that find themselves contending in the same industry must try not to use similar strategies
—even if they tend to share the same common goal that will bring about revenue expansion over
time.

All firms must take this into consideration for two reasons:

1) The firm may possess diverse and long-lasting firm-specific assets that could have been
originally obtained on a random basis that generate a modification among the firms in the rates
of return they are envisaging from any expected incremental obligation of resources in their
specified market;

2) The products that the firm creates may fluctuate significantly from its competitor in non-price
characteristics, based on the heterogeneous consumer’s preference.

Learning Materials

Identifying Strategic Groups

A strategic group encompasses various groups of firms that reside within a specified industry,
and those firms will tend to combat the same environmental factors, employ the same resources,
and have a propensity to have parallel strategies in place when it comes to addressing their
environmental forces.

The strategies could entail, but are not limited to: the firm’s level of technological investments
and leadership, pricing practices, quality of the product, and the product scope, along with the
firm’s scale capabilities. The firm’s analyst, with the assistance of the managers of the
organization, is key to identifying strategic groups.

Once this has been done, the analyst and managers can gather a better understanding to the
various types of strategies that the firm is able to assume when working in the same industry.

For example, look at the restaurant industry: it can be divided into multiple strategic groups that
would include fast-food chains and fine-dining restaurants. Variables that would be taken into
consideration would include pricing, preparation time, and presentation. The quantities of groups
that are listed within the industry, along with the firm’s composition, are contingent heavily on
the measurements that are developed to define the groups.
If the firm can create strategies by providing an unchanging and substantial component of market
structure, it will be just as imperative for that firm to determine if it can be studied, and if its
strategic groups can be recognized by an outside observer.

Classifying Strategic Groups

For the firm to address the value chain analysis, it is detrimental if it classifies which strategic
group it belongs to by concentrating on Porter’s dimensions (i.e., vertical integration, brand
identification, specialization, cost position, price policy, financial and operating leverage,
technological leadership, customer service, channel selection, relationship with the parent
company, and so forth). These dimensions were developed to pinpoint the differences within
firms that operate exclusively in the same industry.

Strategic group variances will also be a contributing factor, especially when it comes to the
elements of the market structure. This is solely because of the firm’s strategic preferences that
may affect the firm’s overall system. The system has been employed by the decision makers of
that firm when it comes to the firm selecting a short-term plan that addresses the operating
policies.

Interpreting Industry Analyses

An effective industry analysis of products is derived by carefully studying and interpreting data
from information that is formulated from multiple sources. There will always be a plethora of
specific-data that will be made accessible for any firm that wants to analyze the industry, and to
gain a better understanding of what is occurring within the industry.

Firms must also take into account globalization—international markets and their rivalries—
because of the growing development of those global markets, in that a particular country will no
longer limit or restrict industry structures. More importantly, when a firm enters into an
international market, it will enhance that firm’s chances of becoming successful for any new
undertakings.

When a firm uses the analysis of the five forces within its specific industry, it will allow that firm
to pinpoint where the industry is more attractive in regards to the firm’s potential to increase its
average or above average returns.

Furthermore, the stronger the competitive forces—the firms that generate their profits by
incorporating those new strategies have a propensity to decline. When the industry is viewed as
being unattractive, the entry barriers have a tendency to be very low, the suppliers and the buyers
will have a strong bargaining position, there will be a strong competitive threat from those firms
that desire to provide a substitute product, and there will be an intense rivalry among the
competitors.

These specific factors will cause difficulties for a firm that is trying to achieve a strategic
competitive advantage, and will cause those firms to earn above average returns. When a firm
enters into a more attractive industry that has a higher entry barrier, the buyers and suppliers
have little bargaining power, there will be less competitive threats from the firms that choose to
provide a product substitute, and the rivalry among the firms will be very moderate.

Competitor Analysis

When it comes to the firm analyzing its competitor, it should be viewed as the final stage of the
external environment analysis. These companies are examples of rivalries that are keenly
interested in understanding each other’s objectives, assumptions, capabilities, and strategies.

A firm having knowledge about these five questions will assist that competitor in preparing for
an anticipated response from its rivalry.

An effective competitive analysis is useful for gathering data and information that can potentially
aid a firm in understanding its competitor’s strategic implications, and that competitor’s
intention.

These data points are valuable information that is then compiled to form competitor
intelligence —the data the firm will utilize to understand its rivalry’s assumptions, capabilities,
and strategies, as well as its overall objectives.

When gathering competitive intelligence, the firm must pay close attention to the complementors
of its products and strategy. Complementors are the firms or networks of those firms that are
selling the goods and services that are viewed as compatible with the focal firm’s good or
service. When the complementor’s goods or services assist with contributing to the functionality
of a focal firm’s goods or services, it will in turn create an additional value for that particular
firm.

Click on the icon below to learn more about competitive analysis:

http://www.alliancecg.com/market_analysis_case_study.asp
(Market and competitive analysis: A Case study, 2014).

Summary
Strategic groups will always have several implications, the first being that firms that have been
found within groups tend to offer like products and services to the same customer. The
competitive challenges amongst most firms can be very intense, and this will cause those firms to
be susceptible to loss of profitability.

Next, the magnitude between the five forces will be totally different across the strategic group.

Lastly, depending on how close the strategic groups are aligned in regards to their strategies,
there is more likely to be rivalry between the groups.

References

Market and competitive analysis: A Case study. (2014). Retrieved from the Alliance Consulting
Group Website: http://www.alliancecg.com/market_analysis_case_study.asp

Key Terms
Strategic Group

This encompasses various groups of firms that are reside within a specified industry, and those
firms will tend to combat the same environmental factors, employ the same resources, and have a
propensity to have parallel strategies in place when it comes to addressing their environmental
forces.

Competitor Intelligence

This is the data the firm will utilize to understand its rivalry’s assumptions, capabilities and
strategies, as well as its overall objectives.

Complementors

These are the firms or networks of those firms that are selling the goods and services that are
viewed as compatible with the focal firm’s good or service.
Questions
When a firm uses a competitor analysis, it will want to thoroughly understand which of the
following? (Choose 2)
What is the competitor doing?
What firm’s overall goal?
What is the firm doing?
What are the competitors' overall goals?

The presence of mobility barriers will restrict or prevent the firm from shifting from one
strategic group to another strategic group.

The __________ drawing does not officially complete the __________ analysis. 

Strategic Objectives; Strategic Group
Strategic Map; Strategic Group
Strategic Factors; Strategic Goals
Strategic Goals; Strategic Map

When it comes to the firm analyzing its competitor, it should be viewed as the final stage of
the EXTERNAL environment analysis.

A strategic group is comprised of various firms that encounter similar

competitive ENVIRONMENTS.

When a firm enters into a more attractive industry that has a higher entry barrier, which of the
following statements are true? (Choose 2)
There will be less competitive threats from the firms that choose to provide a product substitute
The buyers and suppliers have little bargaining power
There will be more competitive threats from the firms that choose to provide a product substitute
The buyers have more bargaining power

The strategic map is used to ANALYZE the strengths of the five forces and how they differ
between those strategic groups. 

Mobility ________ will be analogous with regard to _______ barriers.

Factors; Entry
Barriers; Exit
Plans; Exit
Factors; Exit

When the firm uses a strategic group, they will have the capability of studying
the COMPETITIVE forces that  govern the firm’s performance. 
Strategic Group Mapping 98%
Introduction

The reasoning behind strategic mapping is to ensure that the firm takes the customer’s
perspective into consideration. It will also ensure the firm that the strategy being implemented
will be successful, as it will assist with communicating and managing the firm’s strategy more
effectively.

It will encourage the firm to continuously ask questions in regard to the company’s future
strategy, its relationships with other businesses within the market, and most importantly, the
people who will benefit from the product or service to gain a full understanding of the market.
Strategic maps will outline how the firm’s strategy will bring about a positive change.

The strategy map is an illustrative representation of the firm’s strategy. It will describe the
firm’s strategy and communicate the story of the strategy being presented. It will also visually
describe how value is to be formed by the firm and what is going to drive that change within the
organization. Strategy maps are a part of the firm’s overall balanced scorecard management
approach.

Learning Materials

Strategic Group Mapping

Strategic group mapping is a technique that companies utilize to verify their position in their
specific field or marketplace.

There are multiple advantages to utilizing the strategic group mapping process, as follows:

 It will assist the firm in identifying who the direct and indirect competitors are.
 It will assist the firm in identifying potential opportunities, or identifying any strategic
problems.
 It will illustrate how a firm could possibly maneuver through multiple strategic groups.

When the firm is assessing its strategy, it will allow it to take the customer’s views or needs into
account.

Utilizing Strategy Group Mapping

Strategic group mapping will help businesses asses the top five players identified within their
industry. A profile should be created for each player that addresses the following questions:

 What are the primary services that the firm offers?

 What type of beneficiary group does it work with?
 What’s its overall impact?
 What are its plans for the future?
  How might the firm create an impact where the relationship between both entities can be
reconsidered?

When these questions have been asked, the results are then mapped on a matrix and can be
performed within a group or individually. This tool is utilized by most subject matter experts
(SMEs) and larger corporations, and it takes several hours to complete a detailed map.

Among the questions that also need to be asked are: What are the most important factors that will
lead the company to success for the products or services that are being offered to the consumer?
Will the consumer will be able to access the product in a timely fashion? Will the products or
services tender to all of their needs? Will the products or services provide a unique need that will
be tailored to the consumer?

This tool will continue to be utilized for analytical purposes. This map will continue to be useful
and should be utilized within a company setting to leverage the competition. When an
organization is trying to graphically display its competition in a particular industry, strategic
mapping will allow it to evaluate how the industry may change in regard to the various trends
and how they affect a particular market.

When it comes to strategic group mapping, strategic variables should be utilized as the axes of
this map, and should be identified by the organizations analyst. If this standard is followed, there
are multiple principles that can be shown to be very useful—one being, the most effective
strategic variables that can be utilized as an axes would be those components that will identify
the key mobility barriers that are found within the industry.

For example, in the soft drink industry, the key barriers that are utilized are brand identification,
along with the distribution channels that will then serve as useful axes in the strategic group
mapping.

Here is an example of a strategic group map using retail chains:

 (Strategic Group Mapping of Retail Chains, n.d.)

Next, the organization should map the groups in a way that it will select the axis variables so that
they do not move simultaneously. For example, if all the firms were identified with having a high
product differentiation and are also identified as having a broad product line, these two variables
should not serve as the axes on the strategic map.

The variables that should be selected must reflect diversification of amalgamation within the
industry. Next, the axes for the strategic map should not be seen as continuous or monotonic
variables. For example, in order to effectively service a company that sells chain saws, the target
channels would be servicing dealers, mass merchandisers, and sellers of the private labels. Most
firms would focus on any one of these components, whereas you may find some firms that would
try to span the range.

Click on the icon below to learn more about strategic plan mapping:

http://www.youtube.com/watch?v=CcF3ZMgXQrA

Creating Strategic Maps

Organizations have come to recognize the strategic map as a significant part of having a
successful organization and executing a successful strategy. Strategy maps are often used as a
standalone tool that multiple organizations utilize to understand and deploy their strategic
concept. For a firm to maximize its worth, it will need to be viewed and used as the core building
block in an aligned change management process.

This simply means that the strategy map along with the scorecard is truly necessary, but is not
sufficient enough to execute the strategy efficiently. In order for a firm to get the most out of a
strategy map, it will need to be a part of the change management initiative.

The logistics of the strategy map has improved dramatically, all the way down to the specific
measures, personal initiatives, and targets. Moreover, there are still uncertainties about the
required steps the firm is required to do in regard to creating its own strategy maps.

Specify an overriding objective

This first step is crucial because it will link the firm’s strategy map to steps that were created
earlier, creating or reaffirming the firm’s overall mission, vision, and core values. Each
organization should have a true understanding of the overriding objectives and the strategies the
firm plans to implement.
Choose the value proposition

The firm that tries to pursue multiple avenues will be destined to find mediocrity. With that
being said, those firms will deliver exceptional levels of distinctive value to those specially
selected customers who are able to acquire the rewards that are being offered by market
leadership.

Choose the financial strategies

The firm will need to formalize its plans and strategies that are centered on the firm’s revenues
and cost. Those financial strategies can be divided into three major areas: productivity, revenue
growth, and asset utilization. All firms will need to pay some level of attention to each of those
strategies.

Choose the customer strategies

Once the firm has established its financial strategies, the firm must remember to formulate its
plans and strategies to monopolize the marketplace. Simply stated, the firm must clearly
establish and communicate its customer strategies.

Execute through the internal perspective strategies

Once the firm has established its financial and customer strategies, the firm will need to establish
action items that will realize its plan or strategies to win the marketplace.

Plan the learning and growth strategies

Now that the firm has established a financial and customer strategy and executed a plan, the firm
has the ability to identify potential gaps in knowledge, skill sets, and any known abilities to
execute its strategy. During this stage, the firm will have the ability to develop the necessary
learning and growth strategies.

Summary
When it comes to mapping the industry, an industry may be mapped multiple times utilizing
various combinations of the strategic dimensions. In an effort to assist the analyst in evaluating
the key competitive issues, this tool must be used effectively with diagnosing the competitive
relationships. The strategy maps will benefit the firms by managing the strategy and focusing on
the change.

Some would view the strategy map as an effective and powerful tool to utilize throughout the
organization. It will assist firms with maintaining their competitive peak. This tool and technique
will provide firms the opportunity to effectively create their own strategy mapping initiatives so
that the firms can successfully implement their strategy where it has found others to fail.
The firms that find themselves struggling with strategy execution will utilize these maps as a
way communicating their strategic initiatives to the firm’s stakeholders. Once the firms realize
the full power of strategy mapping, upper management will have to commit to describing and
effectively communicating their strategy that will direct their decision making away from a
temporary focal point on financial figures.

References

ddd9255. (2013). Strategic group mapping [Video]. Retrieved from the YouTube Website:

http://www.youtube.com/watch?v=CcF3ZMgXQrA

MBA Lectures. (n.d.). Strategic group mapping of retail chains. (n.d.) [Image]. Retrieved from

the mba-lectures Website:
http://mba-lectures.com/management/strategic-management/1006/strategic-group-mapping-of-
retail-chains.html

Key Terms
Strategic Group Mapping

This is a technique that companies utilize to verify their position in their specific field or
marketplace.

Strategy Map

An illustrative representation of the firm’s strategy.

Questions
Organizations have come to recognize the STRATEGIC MAP as a significant part of having a
successful organization and executing a successful strategy. 

Strategy maps often used as a __________ tool.

niche
directional
stand-alone
strategic

For a firm to MAXIMIZE its worth, it will need to be viewed and used as the core building
block in an aligned change management process. 

For a firm to get the most out of a strategy map, it will need to be a part of
the CHANGE management initiative. 

When it comes to mapping the industry, an industry may be mapped multiple times utilizing
_________ combination(s) of the strategic dimensions. 
a single
analytical
a calculated
various
different

Complete the following sentence.  Strategic group ________ is a technique that companies
utilize to verify their position in their specific field or marketplace.
processing
enlisting
placing
mapping

The strategy map is a(n) _________ representation of the firm’s strategy. 

industry
organizational
textual
illustrative

Based on the following statements, choose the best answer to describe the strategy map.
A powerful tool to utilize outside the organization.
A powerful tool to utilize throughout the industry.
An ineffective tool that was utilized throughout the organization.
A powerful tool to utilize throughout the organization.
When it comes to __________ mapping, __________ should be utilized as axes of this map.
Strategic Variables; Strategic Groups
Strategic Goals; Strategic Factors
Strategic Factors; Strategic Goals
Strategic Objectives; Strategic Groups
Social Responsibility 99%
Introduction
In 1946, the United States Congress enacted a tax
code change that required publicly traded companies
to deduct up to five percent of their federal taxable
income. The United States Congress did not force the
companies to make these charitable donations, but
they highly encouraged them to do so. This legislature
ultimately became a landmark and caused some
controversy with regard to corporate social
responsibility. Do publicly held corporations have an
obligation to their local communities that surpasses
their normal duties to the law?
 Learning Materials

Social Responsibility

It has been debated whether business corporations have a social responsibility, or an obligation
to utilize some of their resources to assist the areas that they operate in. Those corporations could
provide a monetary donation, volunteer time, or time and energy.

Sometimes, the needs that need to be met are outside of a corporation’s normal operational
scope; as a result, it will make significant contributions however it sees fit. These corporations
are seen as good citizens, because they are making effort to give back to their communities and
society.

There are multiple dissenters of corporate social responsibility, because many believe that
corporations should not be obligated to address the needs of their communities; they should only
be obligated to obey the law.

A corporation’s main obligation should be to maximize the wealth of their shareholders by

conducting the company’s operations, dissenters argue. In addition, the moral quality of the
corporation has to be evaluated to determine the corporation’s commitment to social
responsibility. This can also cause problems.

The first problem that can arise is the type of corporate contribution. This can become a barrier
for thriving businesses. Many corporations tend to gain unwelcomed publicity if they support or
oppose controversial social programs. Moreover, socially responsible investment funds will
thoroughly screen stocks by examining the corporation’s giving activities. As the corporation’s
funds increase, the pressure to be socially responsible will grow. In some cases, a fund that is
already approved could cause another fund to reject an investment.
The second problem that can occur is a false impression. One notorious company implemented a
very generous corporate giving program, and this stopped most individuals and corporations
from thoroughly examining the company’s business practice.

This company’s corporate donations have gone toward projects that were directed by the spouses
of individuals that were affiliated with Congress or other elected official positions. When
corporation-sponsored organizations are associated with political or intellectual activity, they can
undermine the market.

The courts can treat a corporation as an individual, an object of ownership, or a network of

contracts; however, no laws have communicated exactly what a corporation consists of.
Economists, social scientists, and ethicists have similar views of corporations, but they look at
them slightly differently because of their different disciplines. Economists believe that the
corporation is a set of relationships designed to optimize efficiency. Social scientists believe that
the corporation is a social agreement with its own culture, and ethicists believe the corporation is
a moral agent.

The Common Good

Business corporations will enhance the common good by employing individuals to work for their
corporation. They also provide goods and services for their customers, and this creates wealth for
the corporation. The probability of making a profit is high, because the wealth of modern society
is directly associated with the presence of corporations.

Because a corporation’s wealth is dependent on the community, the community has a significant
degree of control over corporations, and it can ensure that the organization functions properly
and contributes to society.

Business corporations are compelled to serve the common good when they are functioning
properly. As a lasting result, the primary social responsibility of the corporation is to make sure it
is contributing to the common good.

Corporations produce economic benefits, but many people do not think this is enough of a
contribution to society. In fact, some people believe that corporations unfairly take from their
communities rather than give; however, when a corporation is created, the community is not
giving anything away to that business.

If a community is looking to pursue any economic benefits that a corporation may offer, that
community may decide to offer the corporation something in exchange. The community will
state that the corporation is stable and limits the civil liability of its members, meaning the
investors and employees.

This does not mean that the corporation is not being held accountable for corporate social
responsibility. If the corporation views corporate social responsibility as a demanding task, it
may choose to only obey the law. The law is reactive, meaning that laws and regulations were
passed to prevent previous experiences from reoccurring. As a result, the law constitutes a set of
 minimal requirements that corporations must meet to be considered an ethically sound
organization.

The Responsibilities

Corporations are required to view their most important constituencies with an open mind.
Corporations should also be prepared to address the needs of their communities, and they should
be prepared to collaborate to do so. For example, a retailer and grocery wholesaler could
potentially collaborate to ensure that no individual within their community goes hungry, or
pharmaceutical companies could partner with the government to provide medication at an
affordable price.

There will always be obstacles that corporations need to surpass to avoid harming their
communities, such as pollution or water contamination; corporations have similar responsibilities
to their employees and customers. They also must not use their economic or political powers to
obtain any type of position in the legislature that could possibly be viewed as being unfairly
favorable.

Click on the icon below to learn more about the relationship between a corporation and the
community:

http://www.youtube.com/watch?v=XWNol3TxvtI

Summary
Overall, corporate philanthropy has and will continue to help communities. It is a concept that
should not be taken lightly, because it is a big part of business today. However, a company’s
social obligations should not encroach on its ability to build wealth, create jobs, and offer
products and services that satisfy consumer needs. These principles should be acknowledged as
the objectives of most corporations.

References

Chin, M. K., Hambrick, D. C., & Treviño, L. K. (2013). Political ideologies of CEOs: The influence of
executives’ values on corporate social responsibility. Administrative Science Quarterly, 58(2),
197–232. http://dx.doi.org/10.1177/0001839213486984

David, F. R. (2011). Strategic management. Upper Saddle River, NJ: Prentice Hall.

Homburg, C., Stierl, M., & Bornemann, T. (2013). Corporate social responsibility in business-to-
business markets: How organizational customers account for supplier corporate social
responsibility engagement. Journal of Marketing, 77(6), 54–72.

KnowledgeatWharton. (2012). 'Leveraging corporate responsibility': The Stakeholder approach to

maximizing social value [Video]. Retrieved from the YouTube Website:
http://www.youtube.com/watch?v=XWNol3TxvtI
Munro, V. (2013). Stakeholder preferences for particular corporate social responsibility (CSR) activities
and social initiatives (SIs). Journal of Corporate Citizenship, (51), 72–105

Pless, N. M., Maak, T., & Waldman, D. A. (2012). Different approaches toward doing the right thing:
Mapping the responsibility orientations of leaders. Academy of Management Perspectives, 26(4),
51–65. http://dx.doi.org/10.5465/amp.2012.0028
Questions
Corporations also have similar responsibilities with regard to
their __________ and __________. 
employees; stakeholders
employees; customers
groups; stakeholders
managers; customers

The economists believe that the CORPORATION is a set of relationships that are designed to
optimize efficiency.

A corporation’s main obligation should be to their __________, and maximizing the wealth of
those __________ by conducting the company’s operations. 
Customers
Managers
Shareholders
Focus

If the COMMUNITIES are looking to pursue any economic benefits that a corporation may be

offering, some will look at offering the corporation in exchange.

Business corporations will do which of the following? (Choose 2)

Will provide the goods and services for their customers.
Will provide the services for their customers.
Enhance the common good by employing individuals to work for their corporation.
Enhance the common good by eliminating individuals to work for their corporation.

Business corporations are compelled to serve the common __________ when they are
functioning properly. 
security
community
good
well-being

In 1946, the United States Congress enacted a tax code change that mandated companies that
were publicly traded businesses.

The law constitutes a set of requirements that are __________ for being __________ sound
behavior not just for the individual, but for the organization as well. 
maximum; ethically
mandated; unethically
minimal; ethically
mandated; ethically
Socially responsible __________ funds will thoroughly screen __________ by simply examining
the corporation’s corporate giving activities. 
mutual funds; capital
investment; stocks
bonds; stocks
stocks; capital
Managing a Cross-Functional Team 97%
Introduction
Cross-functional teams are viewed entirely differently than regular
teams, because regular teams are specifically aligned on one
functional level. An example would be when you have a group of
individuals that are associated with a company’s marketing
department that tend to speak the same verbiage and they all have a
true understanding to what is expected in regards to meeting
departmental objectives.

When dealing with a cross-functional team, you will have individuals that are affiliated with
different departments and have a wide array of specialties, i.e., operations, legal, accounting,
finance, human resources, and so forth.

Those individuals will bring their own expertise and perspective of the issues that need to be
addressed. Having this type of diversity is the main reason why cross-functional teams have a
propensity to be successful, but also have the tendency to be problematic.

Learning Materials
Effective Leadership

It takes more for a manager to just manage a cross-functional team; that team must be led. When
strong leadership is present, it will create and foster team unity. When that type of leadership is
present, it will lead that cross-functional team to achieving overall success.

A cross-functional team will encounter issues with external components. It is important for that
team to have internal support, strength, and commitment to sustain those external pressures. In
the same manner, the assigned team leader must be knowledgeable enough to know when to
allow the functional and skilled experts to take the lead.

As a good leader, it is important to note that when a group of highly skilled individuals are
brought together, those individuals may have a resolution to that problem from their own
meaning and perspective. Those types of solutions will require a careful balance in leadership.

The assigned task needs to be coordinated and organized, but team members must be able to
express their thoughts and expertise as it is needed. Being able to incorporate the correct
leadership style is the key to effectively leading a cross-functional team.

Obtaining Support from Upper Management

One of the main objectives of a team leader is to ensure that the cross-functional team has the
support from the upper management and the key stakeholders that are affiliated with the
organization. All managers that are associated with each functional area have to provide support
to the teams initiatives.
The cross-functional teams objectives need to be viewed as a priority or it will be extremely
difficult for each individual team member to allot the time and resources that will be needed to
complete the team’s tasks.

When the team obtains the support from the upper echelon, the senior managers will work on
ensuring that the remaining part of the organization has a full understanding to what the team’s
objectives are and providing an overall picture of why the team was formulated. It is extremely
important for each organization to know the relationship between the cross-functional team and
the functional team dynamics.

The roles of each department will constantly evolve and change, so it is imperative for the
relationships between both units are monitored regularly.

Communication

A crucial component that is needed within any organization is the ability to effectively
communicate with team members. Cross-functional teams will encompass team members that
come from various aspects; that is why it is extremely important for all team members to have a
clear understanding as to what is expected and to what is going on so that the objectives are not
misinterpreted, forgotten, or dismissed.

With effective communication, rumors can be avoided and awareness can be raised in regards to
the team’s objectives. Effective communication will also allow the team to build stronger a
relationship, as those relationships will be heavily relied upon later down the road. It is also
important that effective communication is a part of the initial process when building cross-
functional teams.

The team members must also have the capability of communicating effectively with the
appropriate individuals within their organizations about the outcomes of team discussions and
the decisions made.

This will also allow them the opportunity to communicate the benefits along with the risks of
those decisions for their colleagues to be fully aware of the issues and understand what is to
come. This effort will reduce the level of mistrust and allows each team member to provide their
support despite any opposition that may occur within the various departments, which, in turn,
builds unity.

Click on the icon below to learn more about team communication:

http://www.youtube.com/watch?v=HYohAz8pTmk
Setting Clear Objectives

Before any manager attempts to convince their organization that the set objectives are top
priority, the cross-functional teams need to have a clear understanding to what those objectives
entail. Management must constantly communicate and remind their team members of those
goals, as this will assist the team with staying focused on the target outcome and decreasing the
impact of any external influences.

In some manners, creating a team charter would be useful, as it will ensure that everyone
involved on the cross-functional team stays focused. A charter will also assist the team with
establishing the basic standards in regards to the team working effectively with one another.

For the manager to add more value to the cross-functional team goals, the managers should
ensure that the success of the project is incorporated into the departmental goals for each
functional department.

Although cross-functional teams tend to not be related to an individual’s regular duties, he or she
may have to tend to competing responsibilities. When the goals of the department are in
alignment with the cross-functional team’s objectives, there will be much more scope for
cooperation, and a higher probability of achieving success.

Utilizing the Right Motivational Approach

As discussed previously, linking the cross-functional team success to the overall success of each
functional department is an influential way of gaining support while increasing team motivation.
The manager should always create and communicate the performance standards as well as the
expectations that are affiliated with each team.

The team members must know how they are performing as a member of a cross-functional team.
That evaluation should differ from their functional department objectives. In these particular
situations, the team members may have distinct roles, and having a clear expectation of each role
is imperative—especially when the team’s decisions require some type of compromise and
additional resources from a functional department.

When the individual’s rewards are based of their performance standards, it will assist with
securing a personal commitment from that individual in regards to the team goals. The team
leader, along with the functional leaders, must ensure that these rewards are distributed
respectively. It is also a great idea to award the team as a whole entity, as it will garner team
cohesiveness and unity.

Building Positive Teams

While communicating outside of the team is imperative, the internal communication is just as
important. The key to building a cross-functional team is creating unity, honesty, respect, and
trust. This is just as critical in the departmental teams.
 There will be instances where the team members have to compete within their organizations to
obtain additional resources. When the manager asks these two elements to work together, the
manger must spend enough time building the trust and creating a cohesive environment so that
the team is able to communicate openly.

The manager must also understand the diversity of these teams, because they will analyze, think,
and solve problems differently. If the trust is present, those team members will be more likely to
share their knowledge more freely and participate in open discussions, even when there is a
possibility that the ideas will not be highly favored or accepted.

Each manager should be aware of Tuckman’s Five Stages of Group Development. This model
will assist managers with bringing those groups together.

Click on the icon below to learn more about Tuckman's Five Stages of Group Development:

http://www.youtube.com/watch?v=AKf51o8YxOs

Summary
When it comes to leading a cross-functional team, the manager, as well as their functional
managers, will have to be careful in setting the expectations of those teams. The functional
managers will need to know how much time will need to be allotted for each team member when
it comes to working on the projects outside of their departmental work.

In some instances, the departmental managers will need to give some authority, and the cross-
functional team members need to be made aware of the needs of that individual’s department.
The team members should not feel as though they are being pulled by each side and torn between
what tasks need to be completed with each department.

If the team members feel that they are obligated to both entities, they will be less likely to give
100% for either role. The manager must make sure that they have established a dual reporting
structure that will allow the leaders of each organization the opportunity to effectively
communicate with one another.

References

Bruns, H. C. (2013). Working alone together: Coordination in collaboration across domains of

expertise. Academy of Management Journal, 56(1), 62–83. doi:10.5465/amj.2010.0756

Dominguez, R. (2013). Five stages of group development. Retrieved from the YouTube Website:
http://www.youtube.com/watch?v=AKf51o8YxOs

Mankelow, J. (n.d.)  Managing cross-functional teams: Balancing team needs and functional
lines. Retrieved from the mindtools Website:
http://www.mindtools.com/pages/article/newTMM_30.htm
Jaussi, K. S. (2003). Functional background identity, diversity, and individual performance in cross-
functional teams. Academy of Management Journal, 46(6), 763–774. doi:10.2307/30040667

Tyler, R. (2012). Building a team - Team communication.  Retrieved from the YouTube Website:
http://www.youtube.com/watch?v=HYohAz8pTmk

Uhl-Bien, M., & Graen, G. B. (1998). Individual self-management: Analysis of professionals' self-
managing activities in functional and cross-functional work teams. Academy of Management
Journal, 41(3), 340–350. doi:10.2307/256912

Key Terms
Effective Leadership

When a manager manages a cross-functional team that creates and fosters team unity.

Communication

Being able to effectively communicate with team members.

Setting Clear Objectives

When management constantly communicates and reminds their team members of those goals, as
this will assist the team with staying focused on the outcome of the target and decreases the
impact of any external influences.

Building Positive Teams

When the manager is creating unity, honesty, respect and trust amongst team members.
Questions
Communicating outside of the team is IMPERATIVE helpful.

The manager should always create and COMMUNICATE the performance standards.

Before any manager attempts to convince their organization that the set objectives are priority,
the cross-functional teams need to have a clear understanding to what those OBJECTIVES
entail. 

When managing a cross-functional team, setting clear objectives entails which of the
following? (Choose 3)
Goals
Staying focused
Rumor avoidance
Establishing the basic standards
Building strong teams
Creating a charter

For the manager to add more value to the cross-functional team goals, what needs to happen?
The managers should ensure that the success of the project is incorporated into the
departmental goals for each functional department.
The employees should ensure that the success of the project is incorporated into the departmental goals
for each functional department.
The managers should ensure that the failure of the project is incorporated into the departmental goals
for each functional department.
The managers should ensure that the success of the project is incorporated into the corporation's goals
for each functional department.
The managers should ensure that the success of the project is incorporated into the
departmental goals.

The manager should always CREATE AND COMMUNICATE the performance standards.

When managing a cross-functional team, communication entails which of the

following? (Choose 3)
Establishing the basic standards
Rumor avoidance
Awareness
Staying focused
Clear expectations
Building strong teams

Cross-functional teams will encounter issues with EXTERNAL components.

When it comes to leading a cross-functional team, which one of the following needs to happen?
The manager does not have to be careful in setting the expectations of those teams
The manager will have to be careful in setting the expectations of their regional managers
The manager will have to be careless in setting the expectations of those teams
The manager will have to be careful in setting the expectations of their functional managers
The manager will have to be careful in setting the expectations of those teams

One of the main objectives of a team leader is to ensure that the cross-functional team has the
support from UPPER MANAGEMENT.

An assigned task needs to be COORDINATED.

Each manager should be aware of Tuckman’s Five Stages of group development.

It is extremely important for each organization to know the relationship between the cross-
functional team and the FUNCTIONAL team dynamics.

Being able to incorporate the correct leadership style is the KEY to effectively lead a cross-
functional team.

When dealing with a cross-functional team, you will have individuals who are affiliated with
different departments and have a wide array of specialties. What are those specialties? (Choose
2)
Executive team
Accounting
Receptionist
Operations
Human resources
Strategies for Competitive Advantage 98%
Introduction
The goal of every company is to gain and sustain
competitive market in the industry. To achieve this
milestone, a company must be ever-vigilant of the external
environment, consumer demands, changing technology,
and the competitors. Porter’s five forces model illustrates
the threats that should be evaluated and monitored. The
profitability of the company’s initiatives creates
shareholder value, increasing the likelihood of ensuring the
support of future initiatives.

Porter’s model is an excellent tool for evaluating the external environment while the balanced
scorecard evaluates the internal environment. Both aspects help an organization determine the
plausibility of the strategic plan being sustainable in the long term.

Learning Materials

Porter’s five forces model was developed in 1979 and years later is still applicable to
organizations that wish to stay competitive. The five forces that affect competition within any
industry are the following:

These are areas that a company must take into consideration when developing a strategic plan,
regardless of whether the purpose is to introduce a new product or service or offer a comparable
product or service at a lower cost. Taking a look at each of these forces will allow a better
understanding of the impact each will have on the competitive stance of the organization.  

When competing in an industry, the ideal situation would be to not have any competitors;
unfortunately, that is rarely the case. Take into consideration modern technology: how many
different types of cell phones and computers can be named? Most likely the list is long and over
time could be added to. When a new product or service is introduced into the market,
competitors rush to either offer a better product or service or a comparable one at a lower cost.
This is the battle to maintain competitive advantage. The purpose behind creating a strategic plan
is to do just this, thus causing competition in the field.
The buyers, otherwise known as the consumers or customers, are the cause of the need for
change. Consumers demand better products and services, or comparable ones at a lower cost.
The company that provides what buyers desire will obtain the advantage. Conversely, the
suppliers understand the need for companies to maintain competitive advantage. The suppliers
have the power to enable a company to stay within the budgetary constraints of the strategic plan
or to modify as the cost is adjusted. And finally, the threat of substitutes is always there. When a
new product or service comes out, the opportunity exists for a competitor to create its own
strategic plan to do exactly what the company has done—create a comparable product or service
for a lower cost or a better product or service.

The final force that will shape competition is the rivalry among existing competitors. Depending
on the strength of the competitors, the threat of new entrants will either be strong or weak.
Regardless, the existing rivalry among competitors will always be present as each one tries to
gain and maintain competitive advantage. The model Porter introduced 35 years ago is still
applicable to organizations because the threats are still present.

To stay competitive in what could

be a saturated market, an
organization needs to take into
consideration all variables. During
the internal and external
environmental analysis,
opportunities and threats become
apparent. The external analysis
should include Porter’s five forces
model as a means to determine how
the forces will affect the strategic
plan.

Part of the five forces model focuses on the bargaining power of buyers. Economic value is a key
concept in determining the competitive advantage an organization will have if the strategic plan
is implemented. Economic value is simply the equation of what a consumer is willing to give up
having the product or service. It is common to think of this equation as the concept of supply and
demand. If a product or service costs more than what is currently available, the consumer will
demand that it is far better than any suitable substitute. Conversely, if the product or service is
the same, the consumer will demand a lower cost. The value of the product or service can only
be gauged by the consumer, not the company offering it. Market analysis and a consumer needs
analysis should be a part of the external environmental analysis. The value, price, and cost are
evaluated to determine if the strategic plan will be effective in creating a competitive advantage
for the organization.

A strategic plan is a plan that will change an organization. Whether the goal is to create a new
product or service, or offer a comparable product or service at a lower cost, the process must
have the end result of being profitable for the company. Shareholders invest in a company with
the goal of a positive return on their investment. Profitability is the goal of every company, and it
is important to create the value for the shareholders when formulating a strategic plan. The
shareholders will evaluate the value the plan has for the risk capital that is invested. Risk
capital is the money invested in the company that will be lost if the company fails to perform
and goes out of business. As a part of the annual financial statements that are filed with the
Securities and Exchange Commission (SEC), a public company must report the return to
shareholders along with an industry comparison. For a strategic plan to be effective, the
profitability, as measured by the return on investment, is measured.

The balanced scorecard is a concept that is used by organizations to align the strategic plan
with the vision and mission statement. The financial, internal business processes; learning and
growth; and the customer are evaluated on four areas: objectives, measures, targets, and
initiatives. Evaluating these areas as they relate to the vision and strategy of an organization
allows an in-depth analysis of the organization’s performance. This is a valuable tool to use
when determining competitive advantage because it forces a deeper look and understanding of
the strategic plan and how it will affect these areas.

The following video provides a more in-depth explanation of the components of a balanced
scorecard:

https://youtu.be/I-jt8zySe8E

Once a strategic plan has been carried out through completion and a company has either
achieved or maintained competitive advantage, it is important to maintain. Because of this, it is
important to include an analysis of whether or not the change is sustainable. Even though the
process is never-ending and a company must be ever-vigilant of the competitors and the market,
the current initiative must be sustainable. The operations, capabilities, and resources that exist
prior to implementation will be modified to fit the new plan. A determination must be made prior
to implementation of whether the new structure is sustainable for the long-term success of the
plan.

Summary
 Evaluating the competitive advantage a company has in the market
can be a daunting task. Companies strive to be the leader in an
industry, and often when they attain that goal, it is short-lived
because of the competition’s ability to offer a comparable product or
service at a lower cost to the consumer or a product or service that is
more advanced or better. When developing a strategic plan, the
forces that guide the change must be evaluated to determine if the
change will have a return on investment favorable enough to warrant
the implementation. Using Porter’s five forces along with an
evaluation of the economic value that will be realized, the
profitability and shareholder value, and a balanced scorecard, the
company can determine if the initiative is sustainable. These steps,
although arduous, allow a more holistic view of the projected
success.

Key Terms
Porter's Five Forces Model

The five forces that affect competition within any industry are the following: threat of new
entrants, bargaining power of buyers, threat of substitute products or services, bargaining power
of suppliers, and industry rivalry

Strategic Plan

A plan that will change an organization.

Risk Capital 

The money invested in the company that will be lost if the company fails to perform and goes out
of business.

Balanced Scorecard

A concept that is used by organizations to align the strategic plan with the vision and mission
statement.

References

Kaplan, R. S., & Norton, D. P. (1996). Linking the balanced scorecard to strategy. California
Management Review, 39(1), 53–79
Questions
A high barrier to entry can equate to which of the following?
Decreased technology
Diminished cost advantages
Low cost of entry into the industry
Diversity in competitors
High cost of entry into the industry

Porter's Five Forces Model helps an organization understand the competition and industry facets
of strategic positioning. Which of the following are elements to barriers to entry? (Choose 2)
Differentiation
Number of competitors in the industry
Economy of scale
Cost of entry
Time required entering the industry
Cost advantages
Barriers
Technology

Competitive advantage is achieved by offering a COMPARABLE product for a lower or same

cost.

Why do shareholders invest in a company? (Choose 2)

The goal is to have a positive return on the investment.
People like what the company stands for and want to be a part of it.
The innovation that the company introduced to gain competitive advantage impresses the
shareholders and encourages further investment.
The goal is to have a negative return on investment so a tax credit can be gained.

What determines the power an organization has in the competitive field? (Choose 2)

Power relies on the manner the executives consolidate the knowledge to relate it to the
competition.
The level of innovation the organization is willing to invest in.
Power relies on the degree of knowledge the C-level decision makers have.
The technology used by the organization.

Which of the following aspects of the balance scorecard communication process is with defining
the vision? (Choose 2)
Communicate based on areas affected
Clarify for understanding
Set goals for each employee and department
Set target goals
Gain buy-in
The balanced scorecard allows an organization to evaluate the STRENGTH of the internal
environment.
Which of the following aspects of the balance scorecard communication process is part of
business planning? (Choose 2)
Set target goals.
Elicit the feedback from affected personnel during the process.
Review the strategic process and learn from problems and issues that arose.
Establish benchmarks to be achieved.
Align the strategic initiatives with projected outcomes.

When an organization considers changing suppliers to decrease the cost of producing a product
or service, what should be considered in addition to the switching cost? (Choose 2)
The brand identity
The unique product or service offered by a supplier that cannot be duplicated
The ability the supplier has of offering a substitute when necessary
The price elasticity

When an organization is considering a strategic initiative, it must consider which of the

following? (Choose 2)
If the change achieved through the initiative is sustainable
How the competitors will react to the change
If the plan will result in the goal being achieved
If this can be the last strategic plan needed for the organization

Porter's Five Forces Model helps an organization understand the competition and industry facets
of strategic positioning. Which of the following are elements of competitive rivalry? (Choose 2)
Industry concentration
Time required to enter the industry
Economy of scale
Quality
Differentiation
Diversity of competitors
Switching costs
Diversity of product or service
Exit barriers

Porter’s Five Forces Model allows an organization to evaluate the opportunities and threats of
the external environment.

What are the building blocks that result in profits earned by a company? (Choose 2)
The creation of value for the customer
The size of the companies within the industry
The negotiating power of the companies with their suppliers and customers
The diversity of competitors within the industry
When a company is analyzing the substitutes in the industry, what are the important factors to
take into consideration? (Choose 2)
The performance level of the substitutes
The buying volume of the buyers
The economies of scale
The willingness of the consumers to pay the cost of switching
Competitive Advantage 98%
Introduction
When a firm looks into
sustaining a competitive
advantage, they are
attempting to acquire and or
develop a characteristic or
combinations of
characteristics that allows the
business to outperform their
competitors. These identified
characteristics could possibly
provide access to a multitude
of natural resources or access
to individuals that have a
particular skill set. This
would provide an overall
advantage over their
competitors.

Learning Materials

Maintaining a Competitive Edge

When putting effort into gaining a competitive advantage, the business must produce a product
or service that is not immediately or easily replicated, or the firm will be seen as being
unsustainable. Gaining and keeping a competitive advantage must be maintained over a long-
period of time, as this is the key to determining superior performance. It also guarantees survival
and placement in the marketplace.

The ultimate goal of a firm is to sustain superior performance, with the competitive advantage
becoming the overall foundation for the firm. It secures market leadership and the opportunity to
stay abreast of the competition.

There may be instances where a firm can only sustain a competitive advantage for a short period
of time because of their competitors mimicking or undermining that advantage. This means that
is not enough to sustain a competitive advantage.
Competitive Advantage

All firms are constantly looking for ways to gain competitive advantage over their competition.
This position in the marketplace will allow the firm to set themselves apart from the masses,
while providing a product or service that is made particularly for their particular target audience.

Competitive advantage requires the firm to identify their specific target market, provide a clear
definition of what the need is, and develop a high quality product or service that surpasses any
other product or service that is being offered on the market.

Once the competitive edge has been developed, the daily task of maintaining it will be the
challenge. Companies will need to continuously forecast the trends and monitor the changes that
will constantly occur within the industry.
This will provide the company the ability to stay ahead of the game. The company must
continuously monitor their competitors and any plans that are being put in place for the future.
Most importantly, the company must also keep in mind that they will also have to evaluate and
recognize the needs of their customers, as the customers’ needs will tend to change periodically.
During this process, the company must be willing to adapt and change as needed.

Click on the icon below to learn more about competitive advantage:

http://www.youtube.com/watch?v=QPu4v_Ae0Vc

The Focus

The business strategy must start with focusing on the need of a specific target audience. For
those individuals wanting a fast meal, the microwave will be highly favored. Individuals that
tend to lead a fast-paced life will lean more towards an affordable way to communicate on the
go, so they will gravitate towards purchasing a cell phone.

If a firm focuses on identifying the target market, along with the target market’s needs, they are
most certainly guaranteed to set themselves apart from their competitors and gain a clear
competitive advantage.

Delivering High-Quality Product or Service

The question that has to be asked is—where does a firm begin in an effort to gain this
competitive advantage? The firm must focus on delivering a high-quality service and or product.
Gaining the competitive advantage is not a simple task to achieve.

Competitive is just that—being significantly better than any alternatives that may exist in the
target market. Strategic advantage is gained by those firms that have the capability of delivering
a product or service that is better and more meaningful to their target audience.

The product and or service should be the most important aspect of the company. Without it, the
business will be viewed as useless and the overall reputation will be tarnished. A business can
have the most appealing prices and the best customer service, but if they do not have what the
consumer desires, the company will more than likely be unsuccessful. The firm’s products or
services should be durable, reliable, fairly priced, recognizable, and live up to their reputation.

It should also be taken into consideration that the product has a life-cycle: the product is initially
created, goes through a growth period, and will eventually decline or possibly die altogether.

To ensure that the product has continued success over a long period of time, the business must
make sure that the product or service is in high demand, continue to add new features, explore
different markets, make the product or service a trendsetter, and think of ways to entice others to
purchase the product or service.
Pricing

Businesses will find that most consumers will spend top-dollar on their product of choice, but
they will also find that most consumers are very skeptical when it comes to spending their
money.

It is important for the firm to recognize that they will not always be able to provide the
lowest price to maintain that healthy profit margin. There will always be multiple ways to lure
those unsuspecting customers into buying a product or service by offering coupons, special
offers to repeat customers, discounts, sales, money back guarantees, or even a convenient return
policy.

A little competition can be very healthy, but it can also be catastrophic if the firm is not equal to
the standard with the active occurrences within their particular market or industry. Determining
the price of a product or service should be dependent upon the market and upon the competitive
strategy that the business has decided to pursue. The appropriate price should be determined by
the competitive position that the company is striving to achieve relative to their competitor and
the weight of the competitors brand image.

Differentiation

Today, consumers have more than enough options when it comes to purchasing something for
their needs. To gain a competitive advantage through differentiation, the firm has to be offering a
product or service that surpasses their competition.
 E-Commerce

Depending on how the firm chooses to handle the competition, e-commerce could be the direct
link needed that will either lead that firm down the road to success, or lead them on the path of
failure.

Various firms are gaining a competitive advantage by utilizing the internet for direct sales and
for keeping constant communication with their distributors, customers, partners, shareholders,
creditors, competitors, and clients that could possibly be dispersed internationally.

E-commerce provides the firm the opportunity to sell, advertise, track paperwork, purchase
supplies, and eliminate any unnecessary paperwork, all while sharing any public information. E-
commerce is minimizing the unwieldiness of time, while reducing risk, distance, and space. This
allows the firm to provide a more effective customer service experience, improved products, and
greater efficiency that yields a higher profitability.

The internet has changed the face of how individuals organize their lives, inhabit their homes,
and interact with family members, neighbors, and even themselves. The Internet provides the
consumer with endless comparison shopping that then allows the consumers the opportunity to
demand discounts collaboratively.

Summary

A successful business does not necessarily obtain that status by accident, though it may appear
that way at times. Most firms take the time to observe and size up their target markets, and then
zone in on a unique approach when it comes to meeting their customer’s needs, expectations, and
values. A firm must work on achieving a sustained competitive advantage by continuously
monitoring the environment and adapting to the changes that currently exist in the external
trends, competencies, events, and resources. It can also do so by evaluating and capitalizing on
the factors in regards to formulating, implementing, and evaluating the strategies that have been
put into place.

References

Campbell, B. A., Coff, R., & Kryscynski, D. (2012). Rethinking sustained competitive advantage from
human capital. Academy Of Management Review, 37(3), 376–395.

Chintalapati, N. (2013). Protecting the competitive advantage derived through HR: Challenges for IT
Industry. IUP Journal of Management Research, 12(3), 29–44.

David, F. R. (2011). Strategic management. Upper Saddle River, NJ: Prentice Hall.

Goldsmith, D. (2013). Rethinking the company's competitive advantage. Financial Executive, 29(6), 14–
17.

Kryscynski, D. (2013). Alternative competitive advantage [Video]. Retrieved from the YouTube

Website: http://www.youtube.com/watch?v=QPu4v_Ae0Vc

Mithas, S., Tafti, A., & Mitchell, W. (2013). How a firm's competitive environment and digital strategic
posture influence digital business strategy. MIS Quarterly, 37(2), 511–536.

Vriens, M. & Brazell, J. D. (2013). The competitive advantage. Marketing Insights, 25(3), 32–38.

Key Terms

Competitive Advantage

When a firm is attempting to acquire and or develop a characteristic or combinations of

characteristics that allows the business to outperform their competitors.

Focus

When the business strategy must address the needs of a specific target audience.

Pricing

A method that firms will utilize to lure customers into buying a product or service by offering
coupons, special offers to repeat customers, discounts, sales, money back guarantee, or even a
convenient return policy.

Differentiation

When the firm is offering a product or service that surpasses their competition.

E-commerce

Provides the firm the opportunity to sell, advertise, track paperwork, purchase supplies, eliminate
any unnecessary paperwork, while sharing any public information.
Questions
The firm’s products or services should be DURABLE, reliable, fairly priced, recognizable, and
live up to its reputation.

The _________ must continuously monitor their competitors and any plans that are being put in
place for the future.
company
managers
shareholders
assets

The PRODUCT and/or service should be the most important aspect of the company. 

Which of the following questions could be used to determine if the firm has a competitive edge
over their competition? (Choose 2)
Does the firm already possess a strong loyal customer base?
Who will be the company’s competitor?
What are the current trends that need to be evaluated?
Who will be the firm’s favorite competitor?

Gaining the competitive edge should entail which of the following? (Choose 3)

Reevaluate customer needs
Monitor competitors
Monitor trends
Quality products
Customer needs
Forecast

Which statements best describe competitive advantage? (Choose 2)

Allows that organization to become more competitive than its rivals
Makes the company less competitive than its rivals
When a company sets out to operate a set of characteristics
When the company has the opportunity to evaluate their overall mission

Various firms are gaining a competitive advantage by doing which of the following? (Choose 2)
Utilizing the Internet for indirect sales
Utilizing the Internet for direct sales
Keeping constant communication with their distributors
Lessening the communication with their distributors

Businesses will find that most consumers will spend TOP-DOLLAR on their product of choice.

A firm trying to sustain a competitive advantage is doing which of the following? (Choose 2)

Develop a skill set
Acquire or develop a characteristic
Develop combinations of characteristics
Acquire another firm

There will always be multiple ways to lure those unsuspecting customers into buying a product
or service by offering which of the following? (Choose 2)
Trips
Coupons
No-return policy
Sales

All firms are constantly looking for ways to gain competitive advantage over their ________.
industry
businesses
competitors
Employees
rivals

Gaining the competitive advantage should entail which of the following? (Choose 3)

Clear definition
Specific market
Reevaluate customer needs
Monitor trends
Quality products
Customer needs

E-commerce provides the firm the opportunity to sell, advertise, track paperwork, purchase
supplies, eliminate unnecessary paperwork, while sharing any public information. 

All firms are constantly looking for ways to gain COMPETITIVE advantage over their
competition.

When putting effort into gaining a competitive advantage, the business must produce a
__________ or service that is not immediately or easily replicated.
vision
objectives
product
initiative

If a firm focuses on identifying the TARGET market, along with their needs, they are most
certainly guaranteed to set themselves apart from their competitors.