HI6006

Competitive Strategy

Tutorial 10: Corporate

Governance and Structure
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Learning objectives
Master title style

- define corporate governance and explain why it is used to

monitor and control managers’ strategic decisions
- explain how three internal governance mechanisms –
ownership concentration, the board of directors and
executive compensation – are used to monitor and
control managerial decisions
- discuss types of compensation executives receive and
their effects on strategic decisions
- describe how the external corporate governance
mechanism – the market for corporate control – acts
as a restraint on top-level managers’ strategic decisions

Applied Business Statistics for Managers Holmes Institute 2

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Strategic Management
Master titleProcess
style

- define corporate governance and explain why it is used to

monitor and control managers’ strategic decisions

- explain how three internal governance mechanisms –

ownership concentration, the board of directors and
executive compensation – are used to monitor and
control managerial decisions

- describe how the external corporate governance

mechanism – the market for corporate control – acts as a
restraint on top-level managers’ strategic decisions

Applied Business Statistics for Managers Holmes Institute 3

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CORPORATE GOVERNANCE
title style
 Corporate governance can destroy or
create value for a firm.

 Corporate governance is the set of mechanisms

used to manage the relationships (and conflicting
interests) among stakeholders and to determine
and control the strategic direction and
performance of organisations.

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CORPORATE GOVERNANCE
title style
 Corporate governance mechanisms

Internal governance mechanisms

• ownership concentration
• board of directors
• executive compensation.
External governance mechanism
• market for corporate control.

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CORPORATE GOVERNANCE
title style

Internal governance mechanisms

 Ownership concentration
 high relative amounts of shares owned by individual shareholders
and institutional investors.
 Board of directors
 individuals responsible for representing the firm’s owners by
monitoring top-level managers’ strategic decisions.
 Executive compensation
 the use of salary, bonuses and long-term incentives to align
managers’ interests with shareholders’ interests.

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CORPORATE GOVERNANCE
title style

External governance mechanism

 Market for corporate control

the purchase of a firm that is
underperforming relative to industry
rivals in order to improve its strategic
competitiveness.
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CORPORATE GOVERNANCE
title style
Corporate governance fundamentals
 Corporate directors should:
– Focus on creating long-term value for
shareholders

– Use performance-related pay to attract and retain

senior management

– Exercise sound business judgement to evaluate

opportunities and manage risk
– Communicate with key shareholders.
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CORPORATE GOVERNANCE
title style

 Identifying ways to ensure that decisions are

effective, and facilitate the achievement of
strategic competitiveness

 Ensuring that top-level managers interests

are aligned with shareholders and other
stakeholders’ interests

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CORPORATE GOVERNANCE
title style

Board of directors

 is a group of shareholder-elected individuals

whose primary responsibility is to act in the
shareholders’ interests by formally
monitoring and controlling the corporation’s
top-level executive managers.- the firm’s
CEO and other top-level managers.

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Corporate Governance
Master title style

 QUESTION
 After the scandal that hit Volkswagen
commentators argued that board of directors
should become more involved with the formulation
of a firm’s strategies. How would the board’s
increased involvement in the selection of
strategies affect a firm’s strategic competitiveness?

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CORPORATE GOVERNANCE
title style
 Governance mechanisms and ethical
behaviour
 A firm’s strategic competitiveness is enhanced when its
governance mechanisms take into account the interests of all
stakeholders.
 shareholders in this group are viewed as the most important
 the focus of governance mechanisms is to control managerial
decisions to assure shareholder interests
 interests of shareholders are served by the board of directors.

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CORPORATE GOVERNANCE
title style

 Effective governance produces

ethical behaviour in the formulation
and implementation of strategies.

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CORPORATE GOVERNANCE
title style
 Question – From your knowledge of
corporate governance, how can
governance mechanisms at
Volkswagen be designed to ensure
against managerial unethical
behaviours?

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Organisational Structure
title style

Organisational structure
Learning Objective:
-define organisational structure
- describe the relationship between strategy
and structure

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Organisational Structure
title style
• The firm’s formal reporting relationships,
procedures, controls, and authority and
decision-making processes

• Specifies the work to be done and how to do

it, given the firm’s strategy or strategies

• It is critical to create an organisational

structure that is matched to strategy.
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Organisational Structure
title style
• Strategy and structure form a reciprocal
relationship, i.e. a change in one causes a
change in the other (there is often a time-lag
though)

 STRATEGY STRUCTURE

 The matching of strategy and structure is complex

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Organisational Structure
title style
Simple structure –
• The owner-manager makes all major
decisions and monitors all activities.

• offer single product lines in single

geographic markets.

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Organisational Structure
title style

Functional structure –
• CEO and a limited corporate staff
make all decisions.
• Functional line managers are in
dominant organisational areas:
production, marketing, engineering, R&D,
Accounting, HRM
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Organisational structure
title style
Multidivisional structure –
 Each operating division represents
a separate business or profit centre
• Top corporate officers delegate
responsibilities for day-to-day operations
and business-unit strategies to division
managers

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Organisational structure
title style

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Organisational structure
title style
 Question – Identify and discuss what
is Volkswagens’ organisational
structure?

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Assignment
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titleFinal
styleAssessment
 ASSESSMENT DESIGN – ADAPTED HARVARD
REFERENCING

The following guidelines apply:

 1. Reference sources in assignments are limited to
sources which provide full text access to the source’s
content for lecturers and markers.
 2. The Reference list should be located on a separate
page at the end of the essay and titled:
 References.

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Assignment
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titleFinal
styleAssessment
 ASSESSMENT DESIGN – ADAPTED HARVARD
REFERENCING

 The following guidelines apply:

 3. It should include the details of all the in-text citations,
arranged alphabetically A-Z by author surname. In addition,
it MUST include a hyperlink to the full text of the cited
reference source.
 For example;
 P Hawking, B McCarthy, A Stein (2004), Second Wave ERP
Education, Journal of Information Systems Education, Fall,
http://jise.org/Volume15/n3/JISEv15n3p327.pdf

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Assignment
edit Masterand
titleFinal
styleAssessment
 ASSESSMENT DESIGN – ADAPTED HARVARD
REFERENCING

 The following guidelines apply:

 4. All assignments will require additional in-text

reference details which will consist of the surname of the
author/authors or name of the authoring body, year of
publication, page number of content, paragraph where the
content can be found

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Assignment
edit Masterand
titleFinal
styleAssessment
 ASSESSMENT DESIGN – ADAPTED HARVARD
REFERENCING

 The following guidelines apply:

 For example;
 “The company decided to implement an enterprised wide
data warehouse business intelligence strategies
(Hawking et al, 2004, p3(4)).”

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 Group
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Assignment
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titleFinal
styleAssessment
 ASSESSMENT DESIGN – ADAPTED HARVARD
REFERENCING

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Assignment
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titleFinal
styleAssessment
 Non-Adherence to Referencing Guidelines
Where students do not follow the above guidelines:
 1. Students who submit assignments which do not
comply with the guidelines will be asked to resubmit their
assignments.
 2. Late penalties will apply, as per the Student
Handbook each day, after the student/s have been notified
of the resubmission requirements.
 3. Students who comply with guidelines and the citations
are “fake” will be reported for academic misconduct.


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