Chapter 4

The Internal Assessment

The Nature of an Internal Audit
- First, what it the Internal Audit? It is the evaluation of all aspects of an organization by an
internal auditor. So, what is the internal auditors? They are the one who works as an
employee or an organization or company that manage the financial reporting, accounting,
operations, risk management, internal controls and all other aspects of an organization.
And it happens continuously. So, going back The Nature of an Internal Audit has two
aspects in all organizations; the strength and weakness.
All Organizations –

 Strength
o More effective management
- One of the biggest benefits and strength of internal audit is that if
facilitates more effective management of the organizations.
o On-going reviews
- Since the operations of the internal audit are continuous, it gives the
internal audit the opportunity to review its company’s performance even at
the middle of the year.
o Performance of staff improve
- Since the monitoring of the internal auditor are on-going, it will keep the
employees to remain active and alert.
o Ensures optimum use of resources
- Internal auditor will be able to reduce the cost and expenses of the
company since the internal controls will be able to point out the underused
and underutilized resources of the company and reuse it.
o Divisions of work
- Internal Audit helps promote the division of labor.
 Weakness
o Shortage of qualified staff
- The internal audit manages the financial reporting, accounting, and
everything inside the company
o Time lag
- The internal audit cannot begin till the accounting is complete. They can
do simultaneously so if the accounting process is delayed, so is the
internal audit.
o Ignorance of management
 - The findings of the internal audit are for the management’s eyes only. So,
if there’s an error in the financial statements, the management may not
take actions.
The key Internal Forces
Distinctive Competencies
o Strengths that cannot be easily matched or imitated by competitors.
o Building competitive advantage involves taking advantages of distinctive competencies.
o Strategies designed in part to improve on a firm’s weakness and turn to strengths.

The process of performing an Internal Audit

- The simple question here is simply “Why do business complete an internal audit?” For
organization with the management system in the place, the internal audit serves several
purposes: it helps to ensure adherence to the procedure ensuring the effectiveness of the
system providing information for the management reviews identifying opportunities for
improvement and driving continual improvement.

The Resource base view

- It is a managerial framework used to determine the strategic resources a firm can exploit
to achieve sustainable competitive advantage.
Integrating Strategy and Culture
- It is the pattern of behavior that has been developed by an organization as it learns to
cope with its problem of external adaption and internal integration and that has worked
well through to be considered valid and to be taught to new members as the correct way
to perceive, think, and feel.
Management
The functions of management consist of five basic activities: planning, organizing, motivating,
staffing, and controlling.

Function Description Explanation

1. Planning Consist of all those Planning is the process of thinking about the
managerial activities activities required to achieve a desired goal. It is
related to preparing for the the first and foremost activity to achieve desired
future. results.
2. Organizin Includes all those Organizing in management is a function that
 g managerial activities that involves developing an organizational structure
results in a structure of and allocating human resources to ensure the
task and authority accomplishment of objectives of the company.
relationships.
3. Motivatin Involves efforts directed In terms of motivating in management, here you
g towards shaping human can see how management interacts with its
behavior. employees and provides motivation so that they
should be energized and excited about performing
tasks.
4. Staffing Centered on personnel or Staffing in management is the obligation of Human
human resources Resource Management to hire eligible applicants in
management. the organization or company for specific positions.
In addition, staffing is an operation of recruiting
the employees by evaluating their skills,
knowledge and then offering them specific job
roles accordingly.
5. Controllin Refers to all those Controlling in management includes setting
g managerial activities standards, measuring actual performance and
directed toward ensuring taking corrective action in decision making.
that actual results are
consistent with planned
results.

Marketing

Marketing can be described as the process of defining, anticipating, creating, and

fulfilling
customers’ needs and wants for products and services.
7 Functions of Marketing
1. Customer Analysis
- it is the examination and evaluation of consumer’s needs, desires, and wants – involves
administering customer surveys, analyzing consumer information, evaluating marketing position
strategies, developing customer profiles, and determining optimal market segmentation
strategies.

2. Selling Product/Services
- includes many marketing activities, such as advertising, sales promotion, publicity, personal
selling, sales force management, customer relationship, and dealer relations.
3. Product and service planning
- includes activities such as marketing; product and brand positioning; devising warranties;
packaging; determining product options, features, style and such.
4. Pricing
- five major stakeholders affect pricing decisions; consumers, governments, suppliers,
distributors and competitors.
5. Distribution
- includes warehousing, distribution channels, distribution coverage, retail site locations, sales
territories, inventory levels and locations, transportation carriers, wholesaling, and retailing.
6. Marketing Research
- it is the systematic gathering, recording, and analyzing of data about problems relating to the
marketing of goods and services.
7. Opportunity Analysis
- involves assessing the costs, benefits, and risks associated with marketing decisions.
Product/Operations
-consist of all those activities that transform inputs into goods and services. It deals with inputs,
transformations and outputs that vary across industries and markets.

Decision Areas Example Decisions

1. Process Choice of technology, facility layout, process

flow analysis, facility location, line
balancing, etc.

2. Capacity Forecasting, facilities planning, aggregate

planning, schedule, capacity planning, and
queuing analysis.

3. Inventory Managing the level of raw materials, work-

in-process, and finished goods.

4. Workforce Managing the skilled, unskilled, clerical,

 and managerial employees.

5. Quality Ensuring high quality goods and services.

Research and Development

-fifth major is of internal operations that should be examined for specific strengths and
weakness.
It helps us to discover new things and this is the way to answer our questions. Research is also
the way to know if our theories are true or false. Research and development direct the society to
advancement, we just need to adopt and learned what R&D can offer us.
Management information system

“INFORMATION IS THE LIFEBLOOD OF THE COMPANY’’

-Mainly because information was the primary source of data’s to be used in auditing, to know
how company works or if it’s doing well. Information ties all business functions and provides the
basis for all managerial decisions.
Value chain analysis

VALUE CHAIN ANALYSIS (VCA) refers to the process whereby a firm determines
the costs associated with organizational activities from purchasing raw materials to
manufacturing product(s) to marketing those products.
Benchmarking

 Benchmarking is an analytical tool used to determine whether a firm’s value chain

activities are competitive compared to rivals and thus conducive to winning in the
marketplace.
Benchmarking is the process of comparing your own organization, its operations or processes
against other organizations in your industry or in the broader marketplace

Chapter 5
Strategies in Action

Long-Term Objectives
 Long-term objectives represent the results expected from pursuing certain strategies.
Strategies represent the actions to be taken to accomplish long-term objectives. The time frame
for objectives and strategies should be consistent, usually from two to Five years.

The Nature of Long-Term Objectives

Objectives should be quantitative, measurable, realistic, understandable, challenging,

hierarchical, obtainable, and congruent among organizational units. Each objective should also
be associated with a timeline.

The Nature of Long-term Objectives

1. Quantitative – there is a measurable way to know if the objectives are met or not.
2. Measurable – able to track the progress of the objectives.
3. Realistic – must be reasonable and acceptable. Avoid get rich quick-thinking.
4. Understandable- you should know the goal and you should know how to achieve it. Then
everyone who’s part of the organization must know the goal and they are able to understand it.
5. Challenging – objectives must be challenging for it motivated the employees to do better
because they know that we have a standard and a goal to achieve.
6. Hierarchical – the objectives must be structured from the most important up to the least
important. The most important should achieve first.
7. Obtainable- objectives must be attainable considering the resources, the personnel and its
function.
8. Congruent across departments- every unit of an organization must share the same goal.
The Benefits of Having Clear

1. Provide direction by revealing expectations- serve as direction for the company because we
have a particular goal that needed to be met.
2. Allow synergy- since every shares one goal therefore there will be a unity and cooperation.
They will work as one.
3. Aid in evaluation by serving as standards- it will be easy for now to evaluate things despite of
differences of the bosses of different units of an organization since we are following a standard.
4. Establish priorities- we will know what we need and what should be our priorities.
5. Reduce uncertainty- since we have our objectives, therefore we undergo with data gathering
and different research so our doubt and question about the factors that will affect our goal will be
lessened.
6. Minimize conflicts- if we can’t avoid problems at least we can minimize it.
7. Stimulate exertion- we can encourage the development of activities.
8. Aid in allocation of resources- will avoid loss shortage and conflict, because the resources
were allocated on right place.
9. Aid in design of jobs- we can enrich our job and what responsibilities should be taken into
consideration
10. Provide basis for consistent decision making- decision making will be easier because we
have a basis of what to do next.
Financial versus Strategic Objectives

Two types of objectives are especially common in organizations: financial and strategic
objectives. Financial objectives include those associated with growth in revenues, growth in
earnings, higher dividends, larger profit margins, greater return on investment, higher earnings
per share, a rising stock price, improved cash flow, and so on; while strategic objectives include
things such as a larger market share, quicker on-time delivery than rivals, shorter design-to-
market times than rivals, lower costs than rivals, higher product quality than rivals, wider
geographic coverage than rivals, achieving technological leadership, consistently getting new or
improved products to market ahead of rivals, and so on.

NOT MANAGING BY OBJECTIVES

There are 4 alternative ways to avoid in dealing “other than managing by objectives”:
1. Managing by Extrapolation
- “Extrapolation” is the act of concluding something or a hypothesis.
- adheres to the principle “If it ain’t broke, don’t fix it.” The idea is to keep on doing about
the same things in the same ways because things are going well.
2. Managing by Crisis
- based on the belief that the true measure of a really good strategist is the ability to solve
problems. Because there are plenty of crises and problems to go around for every person
and every organization, strategists ought to bring their time and creative energy to bear
on solving the most pressing problems of the day.
3. Managing by Subjectives
- built on the idea that there is no general plan for which way to go and what to do; just do
the best you can to accomplish what you think should be done. In short, “Do your own
thing, the best way you know how”.
4. Managing by Hope
- based on the fact that the future is laden with great uncertainty and that if we try and do
not succeed, then we hope our second (or third) attempt will succeed. Decisions are
predicated on the hope that they will work and the good times are just around the corner,
especially if luck and good fortune are on our side.

THE BALANCED SCORECARD

- Developed in 1993 by Harvard Business School professors Robert Kaplan and David
Norton.
- It is a strategy evaluation and control technique.
- Overall aim is to “balance”.
- It balances the financial measures with performance measures and the shareholder
objectives with customer and operational objectives.
Significant Benefits of Balanced Scorecard:
 Accurate measurement of performance and goals.
- The purpose of Balanced Scorecard is to provide a measuring standard by which
someone can determine whether the established goals have been met.
 Balanced view of the company’s performance.
- When the company is doing well financially, customer satisfaction could have a low
level, and the actions that should be taken within the next months will be to focus on the
latter. In this way, managers can identify areas that need improvement and allocate their
resources accordingly.
 Improved strategy communication and execution.
- Having a one-page picture of the strategy allows companies to easily communicate
strategy internally and externally. We have known for a long time that a picture is worth
a thousand words. This 'plan on a page' facilitates the understanding of the strategy and
helps to engage staff and external stakeholders in the delivery and review of the strategy.
The thing to remember is that it is difficult for people to help execute a strategy which
they don’t fully understand.
 Better organizational alignment
- The Balanced Scorecard enables companies to better align their organizational structure
with the strategic objectives. In order to execute a plan well, organizations need to ensure
that all business units and support functions are working towards the same goals.
Cascading the Balanced Scorecard into those units will help to achieve that and link
strategy to operations.
TYPES OF STRATEGIES
1. Integration Strategies
- Forward Integration, Backward Integration, Horizontal Integration
- sometimes referred to as vertical integration strategies.
- allow a firm to gain control over distributors, suppliers, and/or competitors.
2. Intensive Strategies
- Market Penetration, Market Development, Product Development
- require intensive efforts if a firm’s competitive position with existing products is to
improve.
3. Diversification Strategies
- There are two general types of diversification strategies: related and unrelated.
Businesses are said to be related when their value chains posses competitively valuable
cross-business strategic fits; businesses are said to be unrelated when their value chains
are so dissimilar that no competitively valuable cross-business relationships exist.
4. Defensive Strategies
- Retrenchment, Divestiture, Liquidation
 - management tools that can be used to fend off an attack from a potential competitor.

LEVELS OF STRATEGIES
 Large Company
 Corporate Levels – Chief Executive Officer (CEO)
 Division Levels – President or Executive Vice President
 Functional Levels – Finance, Marketing, R and D, Manufacturing, Information
Systems, Human Resource Managers
 Operational Levels – Plant Managers, Sales Managers, Production and
Department Managers
 Small Company
 Company Levels – Owner or President
 Functional Levels – Finance, Marketing, R and D, Manufacturing, Information
Systems, Human Resource Managers
 Operational Levels - Plant Managers, Sales Managers, Production and
Department Managers

BUSINESS STRATEGIES:

A business strategy refers to the actions and decisions that a company takes to reach its
business goals and be competitive in its industry. It defines what the business needs to do to
reach its goals, which can help guide the decision-making process for hiring and resource
allocation.

1) Integration Strategies
Integration strategies allow a firm to gain control over distributors, suppliers, and/or competitors.
3 Types of Integration Strategy: Forward, Backward and Horizontal Integration.
- Forward Integration
Manufacturer gaining control over Distributor
- Backward Integration
Distributor gaining control over Manufacturer
- Horizontal Integration
Gaining control over Competitor

2) Intensive Strategies
Intensive strategies require intensive efforts if a firm's competitive position with existing
products is to improve.3 types: market penetration, market development, and product
development.
- Market Penetration
A market penetration strategy is when a company works towards a higher market share by
tapping into existing products in existing markets.
- Market Development
Market development is a strategic step taken by a company to develop the existing market rather
than looking for a new market. The company looks for new buyers to pitch the product to a
different segment of consumers in an effort to increase sales.
- Product Development
Product development, also called new product management, is a series of steps that includes the
conceptualization, design, development and marketing of newly created or newly rebranded
goods or services.

3) Diversification Strategies
Diversification is a corporate strategy to enter into a new products or product lines, new
services or new markets, involving substantially different skills, technology and knowledge.

- Related Diversification
In these cases, the company starts manufacturing a new product or penetrates a new market
related to its business activity.
- Unrelated Diversification
When the business adds new or unrelated product lines and penetrates new markets.

DEFENSIVE STRATEGIES
 When we say defensive strategies it is the plan on how you will maintain your consumers
or how your business can be remain successful while your competitors gradually getting
them.
RETRENCHMENT
 It is the reduction of cost in exchange of sales and profits.
 One example of this is Starbucks where it closed 300 underperforming stores where
overall it is 600 closed store in different places where it is one of their plans, so that their
store build’s a new plan where it has a new sales and profit.
DIVESTITURE
 It is the process of selling subsidiary business interests or investments.
 One example of this is CADBURY PLC. Where it is the oldest and largest family run
business in the world, their product are chocolates and drinks. They sell their Australian
drinks way back 2008 where it all costs 811.9 million dollars at Asahi Breweries where it
is one of the largest beer brewer by market share.
LIQUIDATION
 This last type of defensive strategies means you will liquidate or sell all of your assets for
the reason that your company is slowly experiencing bankruptcy.
 One example of this is the Goody’s Family Clothing where they liquidate all of their 282
stores in 2009 and all of their 10,000 employees lost their jobs for the reason that they
have a problem in paying their rental land.
MICHAEL PORTER’S FIVE GENERIC STRATEGIES
  According to Porter strategies allow organizations to gain competitive advantage fro
three different bases and it is the cost leadership, differentiation and focus.
Cost leadership
 In cost leadership their target market is those who budget/saves their money and also
stingy consumers, in short their product is quite cheap.
o COST LEADERSHIP (LOW COST)- your advantage to your competitors is that
your product is cheap or affordable where you can create a demand.
o COST LEADERSHIP (BEST-VALUE)- the product is good when it comes to
quality and it is also affordable where it attracts many customers.
Differentiation
 The simple meaning of this strategy is that the product is unique that it can attract a
customer, but a little bit high when it comes to its quantity or the price of the product.
Sometimes they buy the product for the reason that they need or want it.
Focus
 The business is focusing on the niche or small group of people.
o FOCUS (LOW COST)- the product is also cheap but it focuses on the small group
of people.
o FOCUS (BEST-VALUE)- it is the mix of focus and differentiation where the
product is unique and has a good quality but the target market is a small group of
people.

STRATEGIES IN TURBULENT, HIGH VELOCITY MARKET

 When we say turbulent, it means the product is fast to change when it comes to
innovation and creating new product, one of the main example of this is the
TECHNOLOGY.
 the best strategy when it comes to fast change of product and innovation are the
following:
o first is you can react to change where you know that there was a innovation to
your competitors that means you need to plan some strategies where you can plan
if you will react to the changes or remain to your present plan.
o second, you anticipate where it means the leaders have some enough knowledge
and information to know what is likely to happen, where they are expecting to a
competitors plan where they will react to it and they will guide their team to
success.
 o And last is it can lead the market in terms of its own strategies, where you have
a far advantage to your competitors because you lead the innovation and change
when it comes to product. The competitors will adjust to it.
 Reacting to change and anticipating are basically defensive posture which means the
competitors are attacking you where you need to do some defensive strategies so that
your business will not left behind. And leading in the market in terms of its own
strategies is one of the types of offensive posture where you are the one who attacks your
competitors.
MEANS FOR ACHIEVING STRATEGIES
 COOPERATION AMONG COMPETITORS- where the two competitors will build
some partnership so that their sales will be more powerful and profitable.

 JOINT VENTURES- Forms a partnership but it is just temporary or contractual where

it has the same situation in COOPERATION AMONG COMPETITORS which means
both company benefits to one another.

 MERGER- A big company will invest to small or single business where it has a good
and concrete plan, which means the large organization thinks that their company’s profit
will have a benefit if they will invest it to a single business so that they will create a new
business.

 FIRST MOVER- Because you are the first mover you have the ability to be better off to
your competitors. It is like the lead the market in terms of its own strategies.

 OUTSOUCING- it is one of the reason to achieve the strategy because it helps every
company who have outsourcing to notice their shortcomings and also to know their
improvements when it comes to company. It also makes the works easier, lessen the
expenses and the problems of the company
STRATEGIC MANAGEMENT IN NON PROFIT AND GOVERNMENTAL
 You will choose what was your organization goal so that you will get your customer’s
needs. You will determine and analyze some problems and objectives so that you will
implement some orders and rules and also reach your goals.

EDUCATIONAL INSTITUTIONS
MEDICAL ORGANIZATIONS
GOVERNMENTAL AGENCIES AND DEPARTMENTS

Chapter 6: Strategy Analysis and Choice

 Strategy analysis and choice largely involve making subjective decisions based on objective
information. This chapter introduces important concepts that can help strategists generate
feasible alternatives, evaluate those alternatives, and choose a specific course of action.
The Nature of Strategy Analysis and Choice
Strategy analysis and choice seek to determine alternative courses of action that could best
enable the firm to achieve its mission and objectives. The firm’s present strategies, objectives,
and mission, coupled with the external and internal audit information, provide a basis for
generating and evaluating feasible alternative strategies
Stage 1: The Input Stage
(EFE Matrix, Competitive Profile Matrix, Internal Factor Evaluation Matrix)
Summarizes the basic input information needed to formulate strategies. The information derived
from these three matrices (EFE Matrix, CPM, IFE Matrix) provides basic input information for
the matching and decision stage matrices. The Input tools require strategists to quantify
subjectivity during early stages of the strategy-formulation process.
Stage 2: The Matching Stage
(SWOT Matrix, SPACE Matrix, BCG Matrix, IE Matrix, Grand Strategy Matrix)
Strategy is sometimes defined as the match an organization makes between its internal and
external resources and skills and the opportunities and risks created by its external factors.
The Strengths, Weaknesses, Opportunities, Threats (SWOT) Matrix
SO Strategies – use a firm’s internal strengths to take advantage of external
opportunities.
WO Strategies – aim at improving internal weaknesses by taking advantage of external
opportunities.
ST Strategies – use a firm’s strengths to avoid or reduce the impact of external threats.
WT Strategies – are defensive tactics directed at reducing internal weakness and
avoiding external threats.
Limitations of SWOT Matrix:
SWOT does not show how to achieve a competitive advantage.
SWOT is a static assessment (or snapshot in time).
SWOT may lead the firm to overemphasize a single internal or external factor in
formulating strategies.
SWOT Matrix is composed of 4 key factor cells, 4 strategy cells and one cell that is always left
blank (the upper left cell). The four strategy cells are labeled SO, WO, ST, and WT, are
developed after completing four key factor cells, labeled S, W, O, and T.
8 Steps in Constructing a SWOT Matrix:
 1. List the firm’s key external opportunities.
2. List the firm’s key external threats.
3. List the firm’s key internal strengths.
4. List the firm’s key internal weaknesses
5. Match internal strengths with external opportunities and record the resultant SO strategies
in the appropriate cell.
6. Match internal weaknesses with external opportunities and record the resultant WO
strategies.
7. Match internal strengths with external threats and record the resultant ST strategies.
8. Match internal weaknesses with external threats and record the resultant WT strategies.

Table 1.2 Representation of SWOT Matrix

Helpful Harmful

Internal
Strength Weaknesses

External

Opportunities Threats

The Strategic Position and Action Evaluation (SPACE) Matrix

The SPACE matrix, another important Stage 2 Matching tool. Its four-quadrant
framework indicates whether aggressive, conservative, defensive, or competitive strategies are
most appropriate for a given organization. The axes of the SPACE matrix represent two internal
dimensions [financial position (FP) and competitive position (CP)] and two external
dimensions [stability position (SP) and industry position (IP)]. These four factors are perhaps
the most important determinants of an organization’s overall strategic position.
The steps required to develop a SPACE Matrix are as follows:
1. Select a set of variables to define financial position (FP), competitive position (CP),
stability position (SP), and industry position (IP).
2. Assign a numerical value ranging from +1 (worst) to +7 (best) to each of the variables
that make up the FP and IP dimensions. Assign a numerical value ranging from -1 (best)
to -7 (worst) to each of the variables that make up the SP and CP dimensions.
3. Compute an average score for FP, CP, IP, and SP by summing the values given to the
variables of each dimension and then by dividing by the number of variables included in
the respective dimension.
4. Plot the average scores for FP, CP, IP, and SP on the appropriate axis in the SPACE
Matrix
5. Add the two scores on the x-axis and plot the resultant point on X. Add the two scores on
the y-axis and plot the resultant point on Y. Plot the new XY point.
6. Draw a directional vector from the origin of the SPACE Matrix through the new
intersection point. This vector reveals the type of strategies recommended for the
organization: aggressive, competitive, defensive, or conservative.

Table 1.3
The Boston Consulting Group (BCG) Matrix
The BCG Matrix graphically portrays differences among divisions in terms of relative
market share position and industry growth rate. The BCG Matrix allows a multidivisional
organization to manage its portfolio of businesses by examining the relative market share
position and the industry growth rate of each division relative to all other divisions in the
organization. The Boston Consulting Group (BCG) Matrix are designed specifically to enhance a
multidivisional firm’s efforts to formulate strategies.
The size of the circle corresponds to the proportion of corporate revenue generated by
that business unit, and the pie slice indicates the proportion of corporate profits generated by that
division. Division located at Quadrant I of the BCG Matrix are called “Question Marks,” those
located at Quadrant II are called “Stars,” those located in Quadrant III are called “Cash Cows,”
and those divisions located in Quadrant IV are called “Dogs.”
Question Marks (Quadrant I) – low relative market share position, yet they compete in
a high-growth industry. Generally, these firms’ cash needs are high, and their cash
generation is low.
 Stars (Quadrant II) – divisions with a high relative market share and a high industry
growth rate should receive substantial investment to maintain or strengthen their
dominant positions.
Cash Cows (Quadrant III) – have a high relative market share position but compete in a
low-growth industry. Called “Cash Cows” because they generate cash more than their
needs, they are often milked.
Dogs (Quadrant IV) – have a low relative market share position and compete in a slow- or no-
market-growth industry.
Table 1.4

The Internal-External (IE) Matrix

The Internal-External (IE) Matrix positions an organization’s various divisions in a nine-
cell display. It is like BCG Matrix therefore they are both called “portfolio matrices”. The IE
Matrix is based on two key dimensions: the IFE total weighted scores on the x-axis and the EFE
total weighted scores on the y-axis. The IE Matrix can be divided into three major regions that
have different strategy implications. First, the prescription for divisions that fall into cells I, II, or
IV can be described as grow and build. Intensive (market penetration, market development, and
product development) or integrative (backward integration, forward integration, and horizontal
integration) strategies can be most appropriate for these divisions. Second, divisions that fall into
cells III, V, or VII can be managed best withhold and maintain strategies; market penetration
and product development are two commonly employed strategies for these types of divisions.
Third, a common prescription for divisions that fall into cells VI, VIII, or IX is harvest or
divest. Successful organizations can achieve a portfolio of businesses positioned in or around
cell I in the IE Matrix.
Table 1.5
The Grand Strategy Matrix
All organizations can be positioned in one of the Grand Strategy Matrix’s four strategy
quadrants. The Grand Strategy Matrix is based on two evaluative dimensions: competitive
position and market (industry) growth. Appropriate strategies for an organization to consider
are listed in sequential order of attractiveness in each quadrant of the matrix. The Grand Strategy
Matrix is a handy tool as well, when it comes to formulating feasible strategies. Consists of a
four quadrant graph that lists strategic options for companies in either strong or weak
competitive positions in industries experiencing either rapid or slow growth. Companies need to
understand their current performance within a market and the trajectory of that market in order to
correctly position themselves on the Grand Matrix.
First Quadrant in GSM:
If the company is in this quadrant then they have a strong competitive position and the
market is in rapid growth. Arguably, this is the best quadrant to be in, with opportunity high and
its position is strong. It is unwise for a Quadrant I firm to shift notably from its established
cbompetitive advantages.
Second Quadrant in GSM:
If the company is in this quadrant then they have a relatively weak competitive situation
as a business, but there’s a lot of opportunity to go for and a lot of success to be had within the
market. The strategies in this position are all about why you’re not taking advantage of the
position. If you’re placed in this quadrant then you know you can change to improve results.
They need to determine why the firm’s current approach is inneffective and how the company
can best change to improve its competitiveness because Quadrant II firms are in a rapid-market-
growth industry.
Third Quadrant in GSM:
Quadrant III organizations compete in a slow growth industries and have a weak
competitive positions. These firms must make some drastic changes quickly to avoid further
decline and possible liquidation. This is a tricky position because you’re already not doing well
and there are no huge opportunity that presents itself like the second quadrant.
Fourth Quadrant in GSM:
Businesses here have a strong competitive position but are in a slow-growth industry.
These firms have the strength to launch diversified programs into more promising growth areas.
This lends itself to strategies such as diversification as you have the funds to innovate in
numerous areas before the market decline becomes unsustainable.
The Decision Stage
Analysis and intuition provide a basis for making strategy-formulation decisions. The matching
techniques just discussed reveal feasible alternative strategies.
Cultural Aspects of Strategy Choice
Culture includes the set of shared values, beliefs, attitudes, customs, norms, personalities,
heroes, and heroines that describe a firm.
It is the unique way an organization does business
It inspires commitment and productivity in an organization when strategy changes are
made.
If a firm’s strategies are supported by cultural products such as values, beliefs, rites,
rituals, ceremonies, stories, symbols, language, heroes, and heroines, then managers often
can implement changes swiftly and easily.
Culture provides an explanation for the difficulties a firm encounters when it attempts to
shift its strategic direction, as the following statement explains: Not only has the “right”
corporate culture become the essence and foundation of corporate excellence, but success
or failure of needed corporate reforms hinges on management’s sagacity and ability to
change the firm’s driving culture in time and in tune with required changes in strategies.

Governance Issues
 A “director,” according to Webster’s Dictionary, is “one of a group of persons entrusted
with the overall direction of a corporate enterprise.” A board of directors is a group of
individuals who are elected by the ownership of a corporation to have oversight and
guidance over management and who look out for shareholders’ interests. The act of
oversight and direction is referred to as governance.

Board of Directors Duties and Responsibilities:

1) Control and Oversight Over Management

2) Adherence to Legal Prescriptions
3) Consideration of Stakeholders’ Interests
4) Advancement of Stockholders’ Rights

Chapter 4

After studying this chapter, you should be able to do the following:

1. Describe how to perform an internal strategic-management audit.

2. Discuss the Resource-Based View (RBV) in strategic management.

3. Discuss key interrelationships among the functional areas of business.

4. Identify the basic functions or activities that make up management, marketing, finance/accounting,
production/ operations, research and development, and management information systems.

5. Explain how to determine and prioritize a firm’s internal strengths and weaknesses.

6. Explain the importance of financial ratio analysis.

7. Discuss the nature and role of management information systems in strategic management.

8. Develop an Internal Factor Evaluation (IFE) Matrix.

9. Explain benchmarking as a strategic management tool.

Chapter 5

After studying this chapter, you should be able to do the following:

1. Discuss the value of establishing longterm objectives.

2. Identify 16 types of business strategies.

3. Identify numerous examples of organizations pursuing different types of strategies.

4. Discuss guidelines when particular strategies are most appropriate to pursue.

5. Discuss Porter’s five generic strategies.

6. Describe strategic management in nonprofit, governmental, and small organizations.

7. Discuss joint ventures as a way to enter the Russian market.

8. Discuss the Balanced Scorecard.

9. Compare and contrast financial with strategic objectives.

10. Discuss the levels of strategies in large versus small firms.

11. Explain the First Mover Advantages concept.

12. Discuss recent trends in outsourcing. 13. Discuss strategies for competing in turbulent, high-velocity
markets.

Purpose

The purpose of this exercise is to discover some important lessons learned by local businesses that do
business internationally.

Instructions

Find at least three firms that engage in international or export operations. Search the owner or
manager of each business. Identify the important lessons that the firm has learned in globally doing
business.

Chapter 6
After studying this chapter, you should be able to do the following:

1. Describe a three-stage framework for choosing among alternative strategies.

2. Explain how to develop a SWOT Matrix, SPACE Matrix, BCG Matrix, IE Matrix, and QSPM.

3. Identify important behavioral, political, ethical, and social responsibility considerations in strategy
analysis and choice.

4. Discuss the role of intuition in strategic analysis and choice.

5. Discuss the role of organizational culture in strategic analysis and choice.

6. Discuss the role of a board of directors in choosing among alternative strategies.

Instructions

Step 1 On a separate sheet of paper, number from 1 to 10. For each of the 10 statements given as

follows, record a 1, 2, 3, 4, or 5 to indicate your attitude,

where

1 = I disagree a lot.

2 = I disagree a little.

3 = My attitude is neutral.

4 = I agree a little.

5 = I agree a lot.

1. The best way to handle people is to tell them what they want to hear.

2. When you ask someone to do something for you, it is best to give the real reason for

wanting it, rather than a reason that might carry more weight.

3. Anyone who completely trusts anyone else is asking for trouble.

4. It is hard to get ahead without cutting corners here and there.

5. It is safest to assume that all people have a vicious streak, and it will come out when they

are given a chance.

6. One should take action only when it is morally right.

7. Most people are basically good and kind.

8. There is no excuse for lying to someone else.

9. Most people forget more easily the death of their father than the loss of their property.
10. Generally speaking, people won’t work hard unless they’re forced to do so.

Step 2 Add up the numbers you recorded beside statements 1, 3, 4, 5, 9, and 10. This sum is Subtotal

One. For the other four statements, reverse the numbers you recorded, so a 5 becomes a 1, 4

becomes 2, 2 becomes 4, 1 becomes 5, and 3 remains 3. Then add those four numbers to get

Subtotal Two. Finally, add Subtotal One and Subtotal Two to get your Final Score.

Your Final Score

Your Final Score is your Machiavellian Score. Machiavellian principles are defined in a dictionary as
“manipulative, dishonest, deceiving, and favoring political expediency over morality.”

These tactics are not desirable, are not ethical, and are not recommended in the strategic management
process! You may, however, encounter some highly Machiavellian individuals’ in

your career, so beware. It is important for strategists not to manipulate others in the pursuit of

organizational objectives. Individuals today recognize and resent manipulative tactics more than

ever before. J. R. Ewing (on Dallas, a television show in the 1980s) was a good example of

someone who was a high Mach (score over 30). The National Opinion Research Center used this

short quiz in a random sample of U.S. adults and found the national average Final Score to be

25.1 The higher your score, the more Machiavellian (manipulative) you tend to be. The following

scale is descriptive of individual scores on this test:

• Below 16: Never uses manipulation as a tool.

• 16 to 20: Rarely uses manipulation as a tool.

• 21 to 25: Sometimes uses manipulation as a tool.

• 26 to 30: Often uses manipulation as a tool.

• Over 30: Always uses manipulation as a tool.