La Consolation University Philippines

(Formerly University of Regina Carmeli) PLANNING

Malolos City, Bulacan AND
DECISION
AIDS

ORGANIZATIONAL
STRUCTURE AND INTERNATIONAL
CONTROLS STRATEGY

CORPORATE COOPERATIVE
GOVERNANCE STRATEGY

STRATEGIC MANAGEMENT
FORECASTING
• Forecasting is the process of predicting changing conditions and
future events that may significantly affect the business of an
organization.
• Forecasting is important to both planning and decision making.
• Forecasting is used in a variety of areas such as: production
planning, budgeting, strategic planning, sales analysis, inventory
control, marketing planning, logistics planning, and purchasing
among others.
METHODS OF FORECASTING

JUDGEMENTA
QUANTITIVE QUALITITIVE
L
FORECASTING FORECASTING
FORECASTING

It relies on numerical data and mathematical model to predict future conditions.

Time-series methods used historical data to develop forecasts of the future

Explanatory or causal models attempt to identify the major variables that are related to or
have caused particular past conditions and then use current measures of those variables
(predictors) to predict future conditions.
METHODS OF FORECASTING

JUDGEMENTA
QUANTITIVE QUALITITIVE
L
FORECASTING FORECASTING
FORECASTING

It is used to make short-term forecasts. These models depend on the information

available in different sources which have been quoted by thought leaders. The
qualitative model is used when the availability of data is low.

Market Research: It incorporates procedures for testing hypothesis from the

available numbers for real markets.

Delphi Method: This method involves taking opinions from experts through
questionnaires and then using it into a forecast.
METHODS OF FORECASTING

JUDGEMENTA
QUANTITIVE QUALITITIVE
L
FORECASTING FORECASTING
FORECASTING

It relies mainly on individual judgments or committee agreements regarding

future conditions and methods are highly susceptible to bias.

The jury of executive opinion is one of the two judgmental forecasting model. It
is a means of forecasting in which organization executives hold a meeting and
estimate, as a group, a forecast for a particular item.
The Sales-force composite is a means of forecasting that is used
mainly to predict future sales and typically involves obtaining the views of
various salespeople, sales managers, and/or distributors regarding the
sales outlook
CHOOSING AND FORECASTING METHODS
Quantitative Forecasting
Methods
Have a short-to-medium time
horizon
Require a short period of time
if a method is developed
Often have high development
costs
Are high in accuracy in
identifying patterns
Are low in accuracy in
predicting turning points for
time series, but medium for
other methods
Are difficult to understand
Technological Forecasting
Methods
Have a medium-to-long time horizon Have a short-to-long time horizon
Require a medium-to-long time
The choice of which
Have medium development costs
forecasting method to
use depends upon the
Are of medium accuracy in
needs within
identifying patterns particular
forecasting situations.
Are of medium accuracy in
predicting turning points
Are easily understood.
Judgmental Forecasting
Methods
Require a short time
Have low development costs
Are of medium-to-high accuracy
in identifying patterns
Are of low accuracy in predicting
turning points
Are of low accuracy in predicting
turning points
 INTERNATIONAL STRATEGY
International Strategy: a strategy through which the firm sells
its goods or services outside its domestic market

REASONS FOR HAVING A INTERNATIONAL STRATEGY:

A. International markets yield new opportunities
B. Needed resources can be secured
C. Greater potential product demand
D. Borderless demand for globally branded products
E. Pressure for global integration
F. New market expansion extends product life cycle
OPPORTUNITIES AND OUTCOMES OF
INTERNATIONAL STRATEGY
A.
INCENTIVES AND BASIC BENEFITS OF
INTERNATIONAL STRATEGY
 IDENTIFYING INTERNATIONAL
OPPORTUNITIES:
THREE BASIC BENEFITS OF INTERNATIONAL STRATEGY

INCREASED MARKET INCREASED ECONOMIES OF SCALE DEVELOPMENT OF A COMPETITIVE

AND LEARNING
SIZE
• The strength of • Expanding size or scope of markets helps
achieve economies of scale in
international markets manufacturing as well as marketing, R&D,
may facilitate efforts to or distribution. Costs are spread over a
more effectively sell larger sale based and profit per unit is
and/or produce products increased.
that create value for • Working in multiple international markets
customers also provides firms with new learning
• Domestic market may opportunities. Increasing the firm’s R&D
ability can contribute to its efforts to
lack the size to support enhance innovation, which is critical to
efficient scale both short- and long-term success.
manufacturing facilities.
ADVANTAGE THROUGH LOCATION
• Example access to low-cost labor,
critical resources, or customers
• Certain markets may offer superior
access to critical resources, e.g., raw
materials, lower-cost labor, energy,
suppliers, key customers. Cultural
influences may be advantageous—a
strong cultural match facilitates
international business transactions.
Physical distances influence firms’
location choices, i.e., transportation
costs
TYPES OF INTERNATIONAL STRATEGIES

INTERNATIONAL
BUSINESS - INTERNATIONAL
LEVEL STRATEGY CORPORATE - LEVEL
STRATEGY

International Business - Level

International Corporate-
strategy is concerned with the
Level Strategy is concerned
strategic decisions concerning
with the overall objective and
the choice of product,
scope of business to fulfil
competitive advantage,
stockholder’s expectations.
customer satisfaction, etc.
BUSINESS-LEVEL VS. CORPORATE-LEVEL
STRATEGY
Basis for Comparison Business-Level Strategy Corporate-Level Strategy
Business-Level Strategy is the strategy Corporate-Level Strategy is stated in the
framed by the business managers to mission statement, which explains the
Meaning strengthen the overall performance of business type and ultimate goal of the firm.
the enterprise.
Created by Middle level management Top level management
Nature Executive and Governing Decisive and Legislative
Selection of plan to fulfill the objectives Business selection in which the company
Relates to of organization. should compete.

Deals with Particular business unit or division Entire business organization

Term Short term strategy Long term strategy
Competing successfully in the Maximizing profitability and business
Focus
marketplace. growth.
Approach Introverted Extroverted
Cost Leadership, Focus and Multi Domestic, Global and Transnational
Major Strategies Differentiation Strategy
 Liability of Foreigners:
Cost associated with
entering foreign markets

ENVIRONMENTAL
TRENDS

Regionalization: Is a
business strategy that
maintains focus on a particular
region or area as such, this
approach employs
differentiation based on
regions.
CHOICE OF INTERNATIONAL ENTRY MODE
WHAT’S THE BEST SOLUTIONS?
The firm’s intellectual
property rights in an
emerging economy are
WHOLLY
not well OWNEDthe
protected,
numberSUBSIDIARY
of firms in the
(GREENFIELD
industry is growing
The firm must act fast, andVENTURE)
the need for
The firm has no
quickly to gain global integration is foreign
rapid access to high. manufacturing
ACQUISITION
this new market, expertise andEXPORTING
requires
where corruption investment only in
is not an issue. distribution.

CHOICE OF
INTERNATIONAL
ENTRY MODE
The firm needs to
The firm needs to
STRATEGIC
reduce its risk facilitate the
through
ALLAINCEthe product
sharing of costs. LICENSING
improvements
The firm needs to
connect with an
necessary to enter
STRATEGIC
experienced foreign markets.
ALLIANCE
partner already in
the targeted
market.
RISKS IN AN INTERNATIONAL ENVIRONMENT

ECONOMIC
POLITICAL RISK
RISK
Government instability Foremost economic risk - currency volatility
Conflict or war Currency effect on the prices of globally
manufactured goods, thus exports/imports

Government regulations Government oversight and control of

economic/financial capital.
Conflicting and diverse legal authorities Weak Intellectual Property (IP) rights protections

Potential nationalization of private assets Investment losses due to political risks

Government corruption Terrorism
Changes in government policies Security risk of foreign firms acquiring key natural
resources or strategic IP.
EXAMPLE OF POLITICAL AND ECONOMIC RISK
STRATEGIC COMPETITIVENESS OUTCOMES
Implementation follows the selection of international strategy and mode of entry:
1. International diversification and returns
2. International diversification and innovation
3. Complexity of managing multinational firms

International diversification: Firm expands sales of its goods or services across the borders of global
regions and countries into different geographic locations or markets
Many factors contribute to the positive effects of international diversification:
• Private versus government ownership
• Economies of scale and experience
• Location advantages
• Increased market size
• Opportunity to stabilize returns, which helps reduce a firm’s overall risk
• Exposure to new products and markets
• Opportunity to integrate new knowledge into operations
• Generation of resources to sustain innovation efforts
• The relationship among international geographic diversification, innovation, and returns is complex
THE CHALLENGE OF INTERNATIONAL STRATEGIES
THE COMPLEXITY OF MANAGING
INTERNATIONAL STRATEGIES
Complexity of managing multinational firms–six
considerations:
LIMITS TO INTERNATIONAL EXPANSION
There are several reasons that explain the limits to
the positive effects of the diversification associated
with international strategies

Complexity
Geographic Logistical Logistical of
Cultural Geographic
costs competition
dispersion costs diversity dispersion

Cultural Relationship
Costs of Trade Host Trade
diversity and between firm
coordination barriers Government barriers
barriers and host
country
STRATEGIC ALLIANCE AS A PRIMARY
TYPE OF COOPERATIVE STRATEGY
Strategic Alliance: Cooperative strategy in which firms combine
resources and capabilities to create a competitive advantage
THREE TYPES OF MAJOR STRATEGIC ALLIANCES

JOINT VENTURE EQUITY STRATEGIC NONEQUITY STRATEGIC

ALLIANCE ALLIANCE
Two or more firms
create a legally Two or more firms own Two or more firms
different percentages of develop a
independent the company they have
company to share formed by combining contractual
resources and some of their resources relationship to share
capabilities to and capabilities for the some of their
develop a purpose of creating a unique resources
competitive competitive advantage. and capabilities to
advantage create a competitive
advantage
 BUSINESS – LEVEL COOPERATIVE STRATEGY
BUSINESS-LEVEL COOPERATIVE STRATEGY: Firms combine some of their
resources and capabilities for the purpose of creating a competitive advantage by
competing in one or more product markets
• Firms share some of their
Competition
Reducing resources and capabilities in
• Collusive strategies differ Strategy complementary ways to
from strategic alliances in that develop competitive
advantages
they are usually illegal
• Include distribution, supplier,
• Created to avoid destructive or outsourcing alliances where
or excessive competition firms rely on upstream or
downstream partners to create
BUSINESS Complementary
Uncertainty
LEVEL value
Reducing Strategic
COOPERATIV
Strategy Alliances
E STRATEGY

• Are used to hedge against risk • Initiate competitive actions to

and uncertainty attack rivals
• These alliances are most • Launch competitive responses
noticed in fast-cycle markets to their competitor’s actions
Competition
• Uncertainty is reduced by
• Can be used at the business
Response level to respond to competitor’s
combining knowledge and Strategy
attacks
capabilities
CORPORATE - LEVEL COOPERATIVE STRATEGIES
• CORPORATE - LEVEL COOPERATIVE STRATEGY is a strategy through which a firm
collaborates with one or more companies for the purpose of expanding its operations.
A. Helps a firm diversify itself in terms of products offered, markets served, or both.
B. Requires fewer resource commitments
C. Permits greater flexibility in terms of efforts to diversify partners’ operations

DIVERSIFYING STRATEGIC
FRANCHISING SYNERGISTIC STRATEGIC ALLIANCE
ALLIANCE

Firm uses a franchise

as a contractual relationship
to describe and control the
sharing of its resources and
capabilities with partners
Spreads risks and uses
resources, capabilities, and
competencies without
merging or acquiring another
company
Firms share some
of their resources and
capabilities to create
economies of scope
Creates synergy
across multiple functions
or multiple businesses
between partner firms
Firms share some of their
resources and capabilities to
diversify into new product or
market areas
Allows a firm to expand
into new product or market
areas without completing a
merger or acquisition
INTERNATIONAL COOPERATIVE
STRATEGY
CROSS-BORDER STRATEGIC ALLIANCE : An international cooperative strategy in which
firms with headquarters in different nations combine some of their resources and capabilities
to create a competitive advantage
● These alliances are sometimes formed instead of mergers and acquisitions, which can
be riskier
● Cross-border alliances can be complex and hard to manage
Why form cross-border strategic alliances?
1. A firm may form cross-border strategic alliances to leverage core competencies that are the
foundation of its domestic success to expand into international markets.
2. Multinational corporations outperform firms that operate only domestically.
3. Due to limited domestic growth opportunities, firms look outside their national borders to expand
business.
4. Some foreign government policies require investing firms to partner with a local firm to enter their
markets.
 NETWORK COOPERATIVE STRATEGY
Network Cooperative Strategy: A cooperative strategy wherein several firms agree to form
multiple partnerships to achieve shared objectives
Effective social relationships and interactions among partners are keys to a successful
network cooperative strategy.
TYPES OF NETWORK COOPERATIVE STRATEGY
STABLE ALLIANCE NETWORK  DYNAMIC ALLIANCE NETWORK
• Long-term relationships that often • Arrangements that evolve in industries
appear in mature industries where with rapid technological change leading
demand is relatively constant and to short product life cycles and purpose
predictable is often exploration of new ideas
   
• Stable networks are built for exploitation • Primarily used to stimulate rapid, value-
of the economies (of scale and/or creating product innovation and
scope) available between the firms subsequent successful market entries
   
COMPETITIVE RISKS WITH COOPERATIVE
STRATEGIES
RISK AND
COMPETITIVE
MANAGEMENT
DESIRED
RISK
APPROACHES OUTCOMES

1. INADEQUATE CONTRACTS
2. MISREPRESENTATION OF
1. DETAILED
COMPETENCIES CONTRACTS AND
3. PARTNERS FAIL TO USE MONITORING
THEIR COMPLEMENTARY CREATING VALUE
RESOURCES 2. DEVELOPING
4. HOLDING ALLIANCE TRUSTING
PARTNERS SPECIFIC
INVESTMENT HOSTAGE RELATIONSHIPS
CORPORATE GOVERNANCE
Corporate Governance: A set of mechanisms used to manage the relationships (and
conflicting interests) among stakeholders, and to determine and control the strategic direction and
performance of organizations (aligning strategic decisions with company values)
When CEOs are motivated to act in the best interests of the firm—particularly, the shareholders—the
company’s value should increase.

Corporate Governance Concern

• Effective corporate governance is of interest to nations as it reflects societal standards:
– Firms’ shareholders are treated as key stakeholders as they are the company’s legal
owners
– Effective governance can lead to competitive advantage
– How nations choose to govern their corporations affects firms’ investment decisions;
firms seek to invest in nations with national governance standards that are acceptable
CORPORATE GOVERNANCE
Group of shareholder-elected
individuals (usually called
Governance mechanism that seeks to align the ‘directors’) whose primary
interests of top managers and owners through responsibility is to act in the
salaries, bonuses, and long-term incentive owners’ interests by formally
compensation, such as stock awards and stock monitoring and controlling the
options
corporation’s top-level
executives
EXECUTIVE BOARD OF
COMPENSATION DIRECTORS

GOVERNANCE
It is important to serve the interests of theMECHANISMS
firm’s multiple MARKET FOR • External governance: a
stakeholder groups! CORPORATE
AND ETHICAL mechanism consisting
• Capital Market CONTROL of a set of potential owners
BEHAVIOR seeking to acquire
Stakeholders
• Product Market undervalued firms and earn
Stakeholders above-average returns on
• Organizational their investments
Stakeholders
 BOARD OF DIRECTORS
As stewards of an organization's resources, an effective and well-structured
board of directors can influence the performance of a firm:
I. Oversee managers to ensure the company is operated in ways to
maximize shareholder wealth
II. Direct the affairs of the organization
III. Punish and reward managers
IV. Protect shareholders’ rights and interests
V. Protect owners from managerial opportunism
THREE DIRECTOR CLASSIFICATION:
Related outsiders:
Outsiders: Individuals
Individuals uninvolved
Insiders: The firm’s CEO who are independent of
with day-to-day
and other top-level operations, but who the firm’s day-to-day
managers have a relationship with operations and other
the firm relationships
 EXECUTIVE COMPENSATION
Performance-Based Incentive-Based
compensation compensation Stock options

Repricing: Strike price

It used to motivate It plans intended to value of options is
decisions that best increase firm value, in commonly lowered from its
serve shareholder line with shareholder original position
interest are imperfect expectations, subject Backdating: Options grant
in their ability to to managerial is commonly dated earlier
monitor and control manipulation to than actually drawn up to
managers maximize managerial ensure an attractive
exercise price
interests
 MARKET FOR CORPORATE CONTROL
 Need for external mechanisms exists to:
• Address weak internal corporate governance
• Correct suboptimal performance relative to competitors
• Discipline ineffective or opportunistic managers
 Threat of takeover may lead firm to operate more efficiently
 Changes in regulations have made hostile takeovers difficult

 Managerial defense tactics increase the costs of mounting a takeover

 Defense tactics may require:
• Asset restructuring

• Changes in the financial structure of the firm

• Shareholder approval

 External mechanism is less precise than the internal governance

mechanisms
GOVERNANCE MECHANISMS AND ETHICAL
BEHAVIOR
• In the U.S., shareholders • Product market
(in the capital market
Some observers believe
stakeholders (customers, that ethically
group) are the most suppliers, and host
important stakeholder communities) and responsible
group served by the organizational companies design
Board of Directors stakeholders (managerial and use governance
and non-managerial mechanisms that
• Governance mechanisms employees) are also serve all stakeholders’
focus on control of important stakeholder interests
managerial decisions to groups and may
protect shareholder withdraw their support of
interests the firm if their needs are
not met, at least
minimally
Capital Market Product Market Organizational
Stakeholders Stakeholders Stakeholders

It is important to serve the interests of the firm’s multiple stakeholder groups!

 ORGANIZATIONAL STRUCTURE AND
CONTROLS
 It specifies the firm’s
formal reporting
relationships, Organizational Controls guide
procedures, controls, the use of strategy, indicate how
and authority and to compare actual results with
decision-making expected results, and suggest
processes corrective actions to take when
ORGANIZATIONAL ORGANIZATIONAL the difference is unacceptable.
 It specifies the work to
STRUCTURE CONTROL Two types:
be done and how to do it,
given the firm’s strategy Strategic Controls
or strategies Financial Controls
 Is the pivotal component
of effective strategy
implementation
 ORGANIZATIONAL CONTROLS
• Business - Differentiation Strategy
emphasizes strategic controls (such as
STRATEGIC subjective measures of the effectiveness of
product development teams)
CONTROLS • Corporate - Related Diversification strategy
where sharing among business units is
critical; emphasizes strategic controls

• Business - Cost Leadership Strategy

emphasizes financial controls (such as
FINANCIAL quantitative cost goals)

CONTROLS • Corporate - Unrelated Diversification

strategies where capabilities are not
shared; emphasizes financial controls
RELATIONSHIPS BETWEEN STRATEGY AND
STRUCTURE
RECIPROCAL RELATIONSHIP - Change in one typically causes
a change in the other, underscoring the interconnectedness
between strategy formulation and strategy implementation

STRATEGY STRUCTURE

“Strategy typically has a much more important

influence on structure than structure on
strategy.”
THREE KEY STRUCTURAL FORMS USED TO
IMPLEMENT STRATEGIES:
FUNCTIONAL MULTIDIVISIONAL
SIMPLE STRUCTURE
STRUCTURE (M-FORM) STRUCTURE

 Owner-manager makes all major decisions and monitors

all activities
 Staff acts as extension of manager's supervisory
authority
 Few rules, limited task specialization, basic technology
system
 With size comes complexity and managerial and
structural challenges; firms tend to move from a simple to
a functional structure
THREE KEY STRUCTURAL FORMS USED TO
IMPLEMENT STRATEGIES:
FUNCTIONAL MULTIDIVISIONAL
SIMPLE STRUCTURE
STRUCTURE (M-FORM) STRUCTURE

 CEO and a limited corporate staff make all decisions.

 WITHIN – functional specialization results in active knowledge sharing
within each area
 BETWEEN – impedes communication and coordination among different
functional areas
 Facilitates career paths and professional development in specialized functional
areas
 Causes functional-area managers to focus on local versus overall company
strategic issues
THREE KEY STRUCTURAL FORMS USED TO
IMPLEMENT STRATEGIES:
FUNCTIONAL MULTIDIVISIONAL
SIMPLE STRUCTURE
STRUCTURE (M-FORM) STRUCTURE

● Operating divisions each represent a separate business or profit center

● Top corporate officer delegates responsibilities for day-to-day operations and
business-unit strategies to division managers
● Ties together all operating divisions
● Each division represents a separate business or profit center with its own functional
hierarchy
● Each division is responsible for daily operations
● Business-unit strategy is delegated to the division
 SUMMARY
Forecasting plays a pivotal role in long-term business planning. An
organization needs to develop a forecasting system that involves several
approaches to predicting uncertain events. Such forecasting requires the
development of expertise in identifying forecasting problems, applying a range of
forecasting methods, selecting appropriate methods of each problem and
evaluating and refining methods over time. It is also important to have a strong
organizational support for the use of formal forecasting methods if they are to be
used successfully.
An International strategy requires analyzing the international market, studying
resources, defining goals, understanding market dynamics and develop
offerings. International strategy for an company looking to grow is a continuous
process.

La Consolation University Philippines

(Formerly University of Regina Carmeli)
Malolos City, Bulacan
 A cooperative strategy gives a company advantages, specially to companies that have a lack
of competitiveness, know how or resources. This strategy gives to the company the possibility to
fulfill the lack of competitiveness. Cooperative strategy also offers access to new and wider market
to companies and the possibility of learning through cooperation. Cooperative strategy has been
recently applied by companies that want to open their markets and have a liberalist vision of
negotiation through cooperation.
Corporate governance is an important part of strategic management that can improve firm
performance. Despite its importance, many people are unclear about what corporate governance
is precisely. Both managers and investors should understand what corporate governance is and
the role that it plays in firms. Being aware of what corporate governance is will allow them to see
how it affects their respective businesses.

Strategies do not take place against a characterless background but must take account of the
features of the organization in which they will be implemented. Organizational structures
determine what actions are feasible and most optimal. The importance of organizational structures
in the implementation of a strategy is hard to overemphasize. Good strategy involves taking
account of where a company finds itself in terms of the external market and its internal
organizational structure. Strategy and implementation must cohere .

La Consolation University Philippines

(Formerly University of Regina Carmeli)
Malolos City, Bulacan
THANK YOU!!!