CHAPTER 4: ENVIRONMENTAL SCANNING
operates
• A changing environment can help and hurt a
company.
• There must be a strategic fit between what the
environment wants and what the corporation has to
offer, as well as between what the corporation needs
and what the environment can provide.
Environmental Uncertainty
➢ the degree of complexity plus the degree of change
that exists in an organization’s external environment
➢ a threat to strategic managers because it hampers
their ability to develop long-range plans and to
make strategic decisions to keep the corporation in
equilibrium with its external environment
➢ an opportunity because it creates a new playing field
in which creativity and innovation can play a major
part in strategic decisions
4.1 ENVIRONMENTAL SCANNING
➢ The monitoring, evaluation, and dissemination of
information from the external and internal
environments to key people within the corporation
➢ A tool to avoid strategic surprise and to ensure its
long-term health.
IDENTIFYING EXTERNAL ENVIRONMENTAL
VARIABLES
a. Natural environment
✓ includes physical resources, wildlife, and
climate that are an inherent part of existence on
Earth
✓ These factors form an ecological system of
interrelated life.
b. Societal environment
✓ mankind’s social system that includes general
forces that do not directly touch on the short-
run activities of the organization that can, and
often do, influence its long-run decisions
Factors:
1. Economic forces – regulate the exchange of
materials, money, energy, and information
2. Technological forces – generate problem-
solving inventions
3. Political–legal forces – allocate power and
provide constraining and protecting laws and
regulations
4. Sociocultural forces – regulate the values,
mores, and customs of society
c. Task environment
✓ includes those elements or groups that directly
affect a corporation and, in turn, are affected by
it
✓ governments, local communities, suppliers,
competitors, customers, creditors, employees/
labor unions, special-interest groups, and trade
associations
✓ typically, the industry within which the firm
Industry analysis
➢ popularized by Michael Porter
➢ refers to an in-depth examination of key factors
within a corporation’s task environment
• Changes in the natural environment usually affect a
business corporation first through its impact on the
societal environment in terms of resource availability
and costs and then upon the task environment in terms
of the growth or decline of particular industries.
SCANNING THE NATURAL ENVIRONMENT
• Until the 20th century, the natural environment was
generally perceived by business people to be a
given—something to exploit, not conserve.
• It was viewed as a free resource, something to be
taken or fought over, like arable land, diamond
mines, deep water harbors, or fresh water.
• Once they were controlled by a person or entity,
these resources were considered assets and thus
valued as part of the general economic system—a
resource to be bought, sold, or sometimes shared.
• Side effects, such as pollution, were considered to
be externalities, costs not included in a business
firm’s accounting system, but felt by others.
Eventually these externalities were identified by
governments, which passed regulations to force
business corporations to deal with the side effects of
their activities.
• The concept of sustainability argues that a firm’s
ability to continuously renew itself for long-term
success and survival is dependent not only upon the
greater economic and social system of which it is a
part, but also upon the natural ecosystem in which
the firm is embedded.
• A business corporation must thus scan the natural
environment for factors that might previously have
been taken for granted, such as the availability of
fresh water and clean air.
• Management must therefore scan not only the
natural environment for possible strategic factors,
but also include in its strategic decision-making
processes the impact of its activities upon the
natural environment.
• Research reveals that scanning the market for
environmental issues is positively related to firm
performance because it helps management identify
opportunities to fulfill future market demand based
upon environmentally friendly products or
processes.
SCANNING THE SOCIETAL ENVIRONMENT Eight Current Sociocultural Trends Are Transforming
North America and The Rest of The World
(Repatriation of Profits - the transfer of profits from a
1. Increasing environmental awareness
foreign subsidiary to a corporation’s headquarters)
2. Growing health consciousness
STEEP Analysis 3. Expanding Seniors Market
➢ The scanning of Sociocultural, Technological, 4. Impact of Generation Boomlet
Economic, Ecological, and Political-legal 5. Declining mass market (Mass customization –
environment forces. the making and marketing of products tailored to
➢ It may also be called PESTEL Analysis which a person’s requirements is replacing the mass
stands for Political, Economic, Sociocultural, production and marketing of the same product in
Technological, Ecological, and Legal Forces. some markets)
6. Changing pace and location life
Table 4.1: Some Important Variables in the Societal Environment 7. Changing household composition
8. Increasing diversity of workforce and markets
• Differences in societal environments strongly affect
the ways in which a multinational corporation
(MNC), a company with significant assets and
activities in multiple countries, conducts its
marketing, financial, manufacturing, and other
functional activities.
(trigger point - when demand for a particular product or
service is ready to boom)

SCANNING THE TASK ENVIRONMENT

Researchers at George Washington University have
identified a number of technological breakthroughs that
are already having a significant impact on many
industries:
1. Portable information devices and electronic
networking (cloud computing - a person can tap
into computing power elsewhere through a Web
connection)
2. Alternative energy sources
3. Precision farming
4. Virtual personal assistants
5. Genetically altered organisms
6. Smart, mobile robots
IDENTIFYING EXTERNAL STRATEGIC
Demographic trends are part of the sociocultural aspect of FACTORS
the societal environment: ➢ The origin of competitive advantage lies in the
ability to identify and respond to environmental
change well in advance of competition.
➢ Some companies better able to adapt than others
because of differences in the ability of managers to
recognize and understand external strategic issues
and factors.
Source: United Nations – World Population Prospects ➢ No firm can successfully monitor all external
factors. Choices must be made regarding which
• Before, the population was forecasted before to reach factors are important and which are not.
8.72 billion by 2040. ➢ This willingness to reject unfamiliar as well as
• But now it is forecasted to 9.2 billion (United Nations; negative information is called strategic myopia.
Director of National Intelligence).
• The bottom line: not all regions will grow equally. One way to identify and analyze developments in the
Most of the growth will be in the developing nations. external environment is to use the issues priority matrix
as follows:
1. Identify a number of likely trends emerging in the
natural, societal, and task environments. These are
strategic environmental issues—those important
trends that, if they occur, determine what the industry
or the world will look like in the near future.
2. Assess the probability of these trends actually
occurring, from low to medium to high.
3. Attempt to ascertain the likely impact (from low to
high) of each of these trends on the corporation being
examined.
➢ A corporation’s external strategic factors are the key
environmental trends that are judged to have both a
medium to high probability of occurrence and a
medium to high probability of impact on the
corporation.
➢ The issues priority matrix can then be used to help
managers decide which environmental trends should
be merely scanned (low priority) and which should be
monitored as strategic factors (high priority). Those
environmental trends judged to be a corporation’s
strategic factors are then categorized as opportunities
and threats and are included in strategy formulation.
4.2 INDUSTRY ANALYSIS: ANALYZING THE
TASK ENVIRONMENT
Industry
➢ a group of firms that produces a similar product or
service, such as soft drinks or financial services
PORTER’S APPROACH TO INDUSTRY ANALYSIS
Michael Porter
➢ An authority on competitive strategy, contends that
a corporation is most concerned with the intensity
of competition within its industry. The level of this
intensity is determined by basic competitive forces.
➢ “The collective strength of these forces determines
the ultimate profit potential in the industry, where
profit potential is measured in terms of long-run
return on invested capital.”
• In carefully scanning its industry, a corporation must
assess the importance to its success of each of six
forces: threat of new entrants, rivalry among existing
firms, threat of substitute products or services,
bargaining power of buyers, bargaining power of
suppliers, and relative power of other stakeholders.
• The stronger each of these forces, the more limited
companies are in their ability to raise prices and earn
greater profits.
• Although Porter mentions only five forces, a sixth—
other stakeholders—is added here to reflect the power
that governments, local communities, and other
groups from the task environment wield over industry
activities.
Porter’s 5 Forces
1. Threat of New Entrants
✓ New entrants to an industry typically bring to it
new capacity, a desire to gain market share, and
substantial resources. They are, therefore, threats
to an established corporation.
✓ The threat of entry depends on the presence of
entry barriers and the reaction that can be
expected from existing competitors. An entry
barrier is an obstruction that makes it difficult
for a company to enter an industry.
Some of the possible barriers to entry are:
a. Economies of Sale
b. Product Differentiation
c. Capital Requirements
d. Switching Costs
e. Access to Distribution Channels
f. Cost Disadvantages Independent of Size
g. Government Policy
2. Rivalry among Existing Firms
✓ In most industries, corporations are mutually
dependent. A competitive move by one firm can
be expected to have a noticeable effect on its
competitors and thus may cause retaliation.
 Intense rivalry is related to the presence of several
factors, including:
a. Number of Competitors
b. Rate of Industry Growth
c. Product or Service Characteristics
(commodity, a product whose characteristics
are the same, regardless of who sells it)
d. Amount of Fixed Cost
e. Capacity
f. Height of Exit Barriers (exit barriers, keep a
company from leaving an industry)
g. Diversity of Rivals
3. Threat of Substitute Products or Services
✓ Substitute product - product that appears to be
different but can satisfy the same need as another
product.
✓ “Substitutes limit the potential returns of an
industry by placing a ceiling on the prices firms
in the industry can profitably charge.” To the
extent that switching costs are low, substitutes
may have a strong effect on an industry.
4. Bargaining Power of Buyers
✓ Buyers affect an industry through their ability to
force down prices, bargain for higher quality or
more services, and play competitors against each
other.
A buyer or a group of buyers is powerful if
some of the following factors hold true:
a. A buyer purchases a large proportion of the
seller’s product or service
b. A buyer has the potential to integrate
backward by producing the product itself
c. Alternative suppliers are plentiful because
the product is standard or undifferentiated
d. Changing suppliers costs very little
e. The purchased product represents a high
percentage of a buyer’s costs, thus providing
an incentive to shop around for a lower price
f. A buyer earns low profits and is thus very
sensitive to costs and service differences
g. The purchased product is unimportant to the
final quality or price of a buyer’s products or
services and thus can be easily substituted
without affecting the final product adversely
5. Bargaining Power of Suppliers
✓ Suppliers can affect an industry through their ability
to raise prices or reduce the quality of purchased
goods and services.
A supplier or supplier group is powerful if
some of the following factors apply:
a. The supplier industry is dominated by a few
companies, but it sells to many
b. Its product or service is unique and/or it has
built up switching costs
c. Substitutes are not readily available
d. Suppliers are able to integrate forward and
compete directly with their present
customers
e. A purchasing industry buys only a small
portion of the supplier group’s goods and
services and is thus unimportant to the
supplier
6th Force: Relative Power of Other Stakeholders
✓ A sixth force should be added to Porter’s list to
include a variety of stakeholder groups from the task
environment.
Some of these groups are:
a. governments (if not explicitly included
elsewhere)
b. local communities
c. creditors (if not included with suppliers)
d. trade associations
e. special-interest groups
f. unions (if not included with suppliers)
g. shareholders
h. complementors (a company or an industry
whose product works well with a firm’s product
and without which the product would lose much
of its value)
INDUSTRY EVOLUTION
• Fragmented Industry
➢ where no firm has large market share, and each
firm serves only a small piece of the total market
in competition with others
➢ when an industry is new, people often buy the
product, regardless of price, because it fulfills a
unique need
• Consolidated Industry
➢ dominated by a few large firms, each of which
struggles to differentiate its products from those
of the competition
➢ By the time an industry enters maturity, products
tend to become more like commodities.
CATEGORIZING INTERNATIONAL INDUSTRIES
1. Multidomestic industries
➢ wherein companies tailor their products to the
specific needs of consumers in a particular
country
➢ a collection of essentially domestic industries,
such as retailing, insurance, and banking
2. Global industries
➢ wherein companies manufacture and sell the
same products, with only minor adjustments
made for individual countries around the world
➢ Examples of global industries are commercial
aircraft, television sets, semiconductors, copiers,
automobiles, watches, and tires
The factors that tend to determine whether an industry
will be primarily multidomestic or primarily global
are:
1) Pressure for coordination within the MNCs
operating in that industry
2) Pressure for local responsiveness on the part of
individual country markets
3. Regional industries
➢ wherein MNCs primarily coordinate their
activities within regions, such as the Americas or
Asia
➢ The major home appliance industry is a current
example of a regional industry becoming a
global industry.
➢ The dynamic tension between the pressure for
coordination and the pressure for local
responsiveness is contained in the phrase,
“Think globally but act locally.”
STRATEGIC GROUPS
• Strategic group - a set of business units or firms that
“pursue similar strategies with similar resources.”
• Strategic groups in a particular industry can be
mapped by plotting the market positions of industry
competitors on a two-dimensional graph, using two
strategic variables as the vertical and horizontal axes.
1. Select two broad characteristics, such as price and
menu, that differentiate the companies in an
industry from one another.
2. Plot the firms, using these two characteristics as
the dimensions.
3. Draw a circle around those companies that are
closest to one another as one strategic group,
varying the size of the circle in proportion to the
group’s share of total industry sales.
Other dimensions, such as quality, service, location,
or degree of vertical integration, could also be used
in additional graphs of the restaurant industry to gain
a better understanding of how the various firms in the
industry compete. Keep in mind, however, that the two
dimensions should not be highly correlated;
otherwise, the circles on the map will simply lie along
the diagonal, providing very little new information
other than the obvious.
STRATEGIC TYPES
Strategic type - a category of firms based on a common
strategic orientation and a combination of structure,
culture, and processes consistent with that strategy.
These general types have the following characteristics:
1. Defenders - companies with a limited product line
that focus on improving the efficiency of their
existing operations. This cost orientation makes
them unlikely to innovate in new areas.
2. Prospectors - companies with fairly broad product
lines that focus on product innovation and market
opportunities. This sales orientation makes them
somewhat inefficient. They tend to emphasize
creativity over efficiency.
3. Analyzers - corporations that operate in at least two
different product-market areas, one stable and one
variable. In the stable areas, efficiency is
emphasized. In the variable areas, innovation is
emphasized.
4. Reactors - corporations that lack a consistent
strategy-structure-culture relationship. Their (often
ineffective) responses to environmental pressures
tend to be piecemeal strategic changes.
HYPERCOMPETITION
• An intense form of competition wherein the
frequency, boldness, and aggressiveness of dynamic
movement by the players accelerates to create a
condition of constant disequilibrium and change.
• In other words, environments escalate toward
higher and higher levels of uncertainty, dynamism,
heterogeneity of the players and hostility.
• Companies must be willing to cannibalize their own
products (that is, replace popular products before
competitors do so) in order to sustain their
competitive advantage.
USING KEY SUCCESS FACTORS TO CREATE AN
INDUSTRY MATRIX
• Key success factors - variables that can significantly
affect the overall competitive positions of companies
within any particular industry.
• Industry matrix summarizes the key success factors
within a particular industry. The matrix also specifies
how well various competitors in the industry are
responding to each factor.
4.3 COMPETITIVE INTELLIGENCE
• Formal program of gathering information on a
company’s competitors.
• Often called business intelligence
• one of the fastest growing fields within strategic
management
Sources:
• Information brokers
• Internet
 • Industrial espionage
• Investigatory services
(competitors – organizations that offer same, similar, or
substitutable products or services in the business area in
which a particular company operates)
4.4 FORECASTING
Danger of Assumptions
• Faulty underlying assumptions are the most
frequent cause of forecasting errors.
Useful Forecasting Techniques
1. Extrapolation
➢ extension of present trends into the future
➢ It rests on the assumption that the world is
reasonably consistent and changes slowly in
the short run.
➢ The basic problem with extrapolation is that a
historical trend is based on a series of patterns
or relationships among so many different
variables that a change in any one can
drastically alter the future direction of the
trend.
2. Brainstorming
➢ non-quantitative approach that requires simply
the presence of people with some knowledge of
the situation to be predicted
➢ The basic ground rule is to propose ideas
without first mentally screening them. No
criticism is allowed.
3. Expert opinion
➢ nonquantitative technique in which experts in a
particular area attempt to forecast likely
developments
➢ This type of forecast is based on the ability of
a knowledgeable person(s) to construct
probable future developments based on the
interaction of key variables.
4. Statistical modeling
➢ quantitative technique that attempts to discover
causal or at least explanatory factors that link
two or more time series together
➢ regression analysis and other econometric
methods
5. Prediction markets
➢ recent forecasting technique enabled by easy
access to the Internet
6. Scenario writing
➢ the most widely used forecasting technique
after trend extrapolation
➢ focused descriptions of different likely futures
presented in a narrative fashion
➢ A scenario thus may be merely a written
description of some future state, in terms of key
variables and issues, or it may be generated in
combination with other forecasting techniques.
➢ Often called scenario planning
➢ An industry scenario is a forecasted
description of a particular industry’s likely
future.
4.5 THE STRATEGIC AUDIT: A CHECKLIST FOR
ENVIRONMENTAL SCANNING
• It examines the natural, societal, and task
environments.
• It looks at the societal environment in terms of the
PESTLE and Porter’s 5 forces (with the sixth
force).
4.6 SYNTHESIS OF EXTERNAL FACTORS - EFAS
• EFAS (External Factors Analysis Summary) -
organizes the external factors into the generally
accepted categories of opportunities and threats as
well as to analyze how well a particular company’s
management (rating) is responding to these specific
factors in light of the perceived importance (weight)
of these factors to the company.
CHAPTER 5: INTERNAL SCANNING
5.1 A RESOURCE-BASED APPROACH TO
ORGANIZATIONAL ANALYSIS
• Analysts must also look within the corporation itself
to identify internal strategic factors—critical
strengths and weaknesses that are likely to
determine whether a firm will be able to take
advantage of opportunities while avoiding threats.
• This internal scanning, often referred to as
organizational analysis, is concerned with
identifying and developing an organization’s
resources and competencies.
CORE AND DISTINCTIVE COMPETENCIES
3 Core Competencies attributes:
1. Resources - are an organization’s assets and are thus
the basic building blocks of the organization. They
include tangible assets, such as its plant, equipment,
finances, and location, human assets, and etc.
2. Capabilities - refer to a corporation’s ability to
exploit its resources. They consist of business
processes and routines that manage the interaction
among resources to turn inputs into outputs.
3. Competencies - is a cross-functional integration
and coordination of capabilities.
a. Core competency - a collection of
competencies that crosses divisional
boundaries, is widespread within the
corporation, and is something that the
corporation can do exceedingly well.
 b. Distinctive competencies - when core
competencies are superior to those of the
competition.
VRIO Framework
1) Value: Does it provide customer value and
competitive advantage?
2) Rareness: Do no other competitors possess it?
3) Imitability: Is it costly for others to imitate?
4) Organization: Is the firm organized to exploit the
resource?
USING RESOURCES TO GAIN COMPETITIVE
ADVANTAGE
Grant proposes a five-step, resource-based approach to
strategy analysis.
1. Identify and classify the firm’s resources in terms of
strengths and weaknesses.
2. Combine the firm’s strengths into specific
capabilities and core competencies.
3. Appraise the profit potential of these capabilities and
competencies in terms of their potential for
sustainable competitive advantage and the ability to
harvest the profits resulting from their use.
4. Select the strategy that best exploits the firm’s
capabilities and competencies relative to external
opportunities.
5. Identify resource gaps and invest in upgrading
weaknesses.
DETERMINING THE SUSTAINABILITY OF AN
ADVANTAGE
Two characteristics determine the sustainability of a
firm’s distinctive competency(ies):
1) Durability- is the rate at which a firm’s underlying
resources, capabilities, or core competencies
depreciate or become obsolete.
2) Imitability- is the rate at which a firm’s underlying
resources, capabilities, or core competencies can be
duplicated by others.
• Transparency - the speed with which other
firms can understand the relationship of
resources and capabilities supporting a
successful firm’s strategy
• Transferability - the ability of competitors to
gather the resources and capabilities necessary
to support a competitive challenge
• Replicability - the ability of competitors to use
duplicated resources and capabilities to imitate
the other firm’s success
Explicit Knowledge VS Tacit Knowledge
✓ Explicit Knowledge - knowledge that can be easily
articulated and communicated.
✓ Tacit Knowledge - knowledge that is not easily
communicated because it is deeply rooted in
employee experience or in a corporation’s culture.
5.2 BUSINESS MODELS
• Business Model
➢ a company’s method for making money in the
current business environment
➢ It includes the key structural and operational
characteristics of a firm—how it earns revenue
and makes a profit.
A business model is usually composed of five
elements:
1) Who it serves?
2) What it provides?
3) How it makes money?
4) How it differentiates and sustains competitive
advantage?
5) How it provides its product/service?
11 TYPES OF BUSINESS MODEL
1. Customer solutions model: IBM uses this model to
make money not by selling IBM products, but by
selling its expertise to improve its customers’
operations. This is a consulting model.
2. Profit pyramid model: The key is to get customers
to buy in at the low priced, low-margin entry point
(Saturn’s basic sedans) and move them up to high-
priced, high-margin products (SUVs and pickup
trucks) where the company makes its money.
3. Multi-component system/installed base model:
The product is thus a system, not just one product,
with one component providing most of the profits.
4. Advertising model: Similar to the multi-
component system/installed base model, this model
offers its basic product free in order to make money
on advertising.
5. Switchboard model: In this model a firm acts as an
intermediary to connect multiple sellers to multiple
buyers.
 6. Time model: Product R&D and speed are the keys
to success in the time model. Being the first to
market with a new innovation allows a pioneer like
Sony to earn high margins. Once others enter the
market with process R&D and lower margins, it’s
time to move on.
7. Efficiency model: In this model a company waits
until a product becomes standardized and then
enters the market with a low-priced, low-margin
product that appeals to the mass market.
8. Blockbuster model: The focus is on high
investment in a few products with high potential
payoffs—especially if they can be protected by
patents.
9. Profit multiplier model: The idea of this model is
to develop a concept that may or may not make
money on its own but, through synergy, can spin off
many profitable products.
10. Entrepreneurial model: In this model, a company
offers specialized products/services to market
niches that are too small to be worthwhile to large
competitors but have the potential to grow quickly.
11. De Facto industry standard model: In this model,
a company offers products free or at a very low price
in order to saturate the market and become the
industry standard. Once users are locked in, the
company offers higher-margin products using this
standard.
5.3 VALUE-CHAIN ANALYSIS
• A value chain is a linked set of value-creating
activities that begin with basic raw materials
coming from suppliers, moving on to a series of
value-added activities involved in producing and
marketing a product or service, and ending with
distributors getting the final goods into the hands
of the ultimate consumer.
• Typical Value Chain for a Manufactured Product:
INDUSTRY VALUE CHAIN ANALYSIS
• The value chains of most industries can be split into
two segments, upstream and downstream segments.
➢ Example: In the petroleum industry, upstream
refers to oil exploration, drilling, and moving
of the crude oil to the refinery, and
downstream refers to refining the oil plus
transporting and marketing gasoline and
refined oil to distributors and gas station
retailers.
• In analyzing the complete value chain of a product,
note that even if a firm operates up and down the
entire industry chain, it usually has an area of
expertise where its primary activities lie. A
company’s center of gravity is the part of the chain
that is most important to the company and the point
where its greatest expertise and capabilities lie—its
core competencies.
CORPORATE VALUE-CHAIN ANALYSIS
“Differences among competitor value chains are a key
source of competitive advantage.” – Porter
Corporate value chain analysis involves the following
three steps:
1. Examine each product line's value chain in terms of
the various activities involved in producing that
product or service.
2. Examine the "linkages" within each product line's
value chain.
3. Examine the potential synergies among the value
chains of different product lines or business units.
5.4 SCANNING FUNCTIONAL RESOURCES AND
CAPABILITIES
• The simplest way to begin an analysis of a
corporation’s value chain is by carefully examining
its traditional functional areas for potential
strengths and weaknesses. Functional resources and
capabilities include not only the financial, physical,
and human assets in each area but also the ability of
the people in each area to formulate and implement
the necessary functional objectives, strategies, and
policies.
BASIC ORGANIZATIONAL STRUCTURES
a) Simple structure has no functional or product
categories and is appropriate for a small,
entrepreneur-dominated company with one or two
product lines that operates in a reasonably small,
easily identifiable market niche. Employees tend to
be generalists and jacks-of-all-trades.
b) Functional structure is appropriate for a medium-
sized firm with several product lines in one industry.
Employees tend to be specialists in the business
functions that are important to that industry, such as
manufacturing, marketing, finance, and human
resources.
 c) Divisional structure is appropriate for a large
corporation with many product lines in several
related industries. Employees tend to be functional
specialists organized according to product/market
distinctions.
➢ Strategic business units (SBUs) are a
modification of the divisional structure.
Strategic business units are divisions or groups
of divisions composed of independent product
market segments that are given primary
responsibility and authority for the
management of their own functional areas. An
SBU may be of any size or level, but it must
have (1) a unique mission, (2) identifiable
competitors, (3) an external market focus, and
(4) control of its business functions.
➢ Conglomerate structure is appropriate for a
large corporation with many product lines in
several unrelated industries. A variant of the
divisional structure, the conglomerate structure
(sometimes called a holding company) is
typically an assemblage of legally independent
firms (subsidiaries) operating under one
corporate umbrella but controlled through the
subsidiaries’ boards of directors.
CORPORATE CULTURE: THE COMPANY WAY
• Corporate culture is the collection of beliefs,
expectations, and values learned and shared by a
corporation’s members and transmitted from one
generation of employees to another.
• 2 distinct attributes:
1) Cultural intensity is the degree to which
members of a unit accept the norms, values, or
other culture content associated with the unit.
2) Cultural integration is the extent to which
units throughout an organization share a
common culture.
STRATEGIC MARKETING ISSUES
• Market Position and Segmentation - deals with
the question, “Who are our customers?”
• Marketing mix - refers to the particular
combination of key variables under a corporation’s
control that can be used to affect demand and to gain
competitive advantage.
• Product Life Cycle - one of the most useful
concepts in marketing, in so far as strategic
management is concerned, is the product life cycle.
• Brand and Corporate Reputation
A brand is a name given to a company’s product
which identifies that item in the mind of the
consumer.
A corporate brand is a type of brand in which the
company’s name serves as the brand.
A corporate reputation is a widely held perception
of a company by the general public.
STRATEGIC FINANCIAL ISSUES
• A financial manager must ascertain the best sources
of funds, uses of funds, and control of funds.
• All strategic issues have financial implications.
Cash must be raised from internal or external (local
and global) sources and allocated for different uses.
• The flow of funds in the operations of an
organization must be monitored.
• The concept of financial leverage (the ratio of total
debt to total assets) is helpful in describing how debt
is used to increase the earnings available to common
shareholders.
• Capital budgeting is the analyzing and ranking of
possible investments in fixed assets such as land,
buildings, and equipment in terms of the additional
outlays and additional receipts that will result from
each investment.
STRATEGIC RESEARCH AND DEVELOPMENT
(R&D) ISSUES
1) choosing among alternative new technologies to
use within the corporation
2) developing methods of embodying the new
technology in new products and processes
3) deploying resources so that the new technology
can be successfully implemented
• A company’s R&D intensity (its spending on R&D
as a percentage of sales revenue) is a principal means
of gaining market share in global competition.
• A company’s R&D unit should be evaluated for
technological competence in both the development
and the use of innovative technology.
• A company should also be proficient in technology
transfer, the process of taking a new technology from
the laboratory to the marketplace.
• Most corporations will have a mix of basic, product,
and process R&D, which varies by industry,
 company, and product line. The balance of these types
of research is known as the R&D mix and should be
appropriate to the strategy being considered and to
each product’s life cycle.
STRATEGIC OPERATIONS ISSUES
1. Experience curve
✓ suggests that unit production costs decline by
some fixed percentage (commonly 20%–30%)
each time the total accumulated volume of
production in units doubles
✓ the actual percentage varies by industry and is
based on many variables: the amount of time it
takes a person to learn a new task, scale
economies, product and process improvements,
and lower raw materials cost, among others.
2. Flexible Manufacturing for Mass Customization
✓ The use of Computer-Assisted Design and
Computer Assisted Manufacturing (CAD/CAM)
and robot technology means that learning times
are shorter and products can be economically
manufactured in small, customized batches in a
process called mass customization—the low-
cost production of individually customized
goods and services.
(Human diversity refers to the mix in the workplace of
people from different races, cultures, and backgrounds.)
STRATEGIC INFORMATION SYSTEMS/
TECHNOLOGY ISSUES
• Primary Task of the Manager
➢ To design and manage the flow of information
in an organization in ways that improve
productivity and decision making.
• Impact on Performance
➢ It is used to automate existing back-office
processes.
➢ It is used to automate individuals task.
➢ It is used to enhance key business functions.
➢ It is used to develop competitive advantage.
• Supply Chain Management
➢ the forming of networks for sourcing raw
materials, manufacturing products or creating
services, storing and distributing the goods,
and delivering them to customers and
consumers

STRATEGIC HUMAN RESOURCE (HRM) ISSUES

a. Primary task of the human resource manager
✓ to improve the match between individuals and
jobs
✓ know how to use attitude surveys and other
feedback devices to assess employees’
satisfaction with their jobs and with the
corporation as a whole
b. Increasing Use of Teams
➢ Management is beginning to realize that it must
be more flexible in its utilization of employees
in order for human resources to be classified as
a strength.
(Virtual teams are groups of geographically and/or
organizationally dispersed coworkers that are assembled
using a combination of telecommunications and
information technologies to accomplish an organizational
task.)
c. Union Relations and Temporary/ Part-Time
Workers
➢ If the corporation is unionized, a good human
resource manager should be able to work
closely with the union.
d. Quality of Work Life and Human Diversity
➢ Human resource departments have found that
to reduce employee dissatisfaction and
unionization efforts (or, conversely, to improve
employee satisfaction and existing union
relations), they must consider the quality of
work life in the design of jobs.