CBM2 – STRATEGIC MANAGEMENT

INTRODUCTION OF STRATEGIC MANAGEMENT ESSENTIALS GLOBAL STRATEGIES

STRATEGIC PLANNING o are potential actions that require top-management decisions and large amount of
resources and also it is the means of achieving the long-term objective.
STRATEGIC MANAGEMENT
ANNUAL OBJECTIVES
o Is the art and science of formulating, implementing, and evaluating cross- o are short-term milestones that organizations must achieve to reach long-term
functional decisions that enable an organization to achieve its objectives. objectives.
STAGES OF STRATEGIC MANAGEMENT POLICIES
o are the means by which annual objectives will be achieved, include guidelines,
1. STRATEGY FORMULATION rules, and procedures, established to support efforts to achieve stated objectives.
o includes developing a vision and a mission statement, identifying an
organization’s external opportunities and threats, determining internal COMPREHENSIVE STRATEGIC-MANAGEMENT MODEL
strength and weaknesses, establishing long term objectives.
2. STRATEGY IMPLEMENTATION
o requires a firm to establish annual objectives, devise policies motivate
employees, and allocate resources
3. STRATEGY EVALUATION
o is the primary means for obtaining this information

KEY TERMS IN STRATEGIC MANAGEMENT

COMPETITIVE ADVANTAGE
o as any activity a firm does especially well compared to activities done by rival
firms, or any resource a firm possesses that rival firms desire.

STRATEGIST
o are the individuals most responsible for the success or failure of an organization.

VISION AND MISSION STATEMENT

o vision describe the desire of the organization future, while mission defines the
organization business and approach its objectives.

EXTERNAL OPPORTUNITIES AND THREATS

o refers to economic, social cultural, demographic, environmental, political, legal,
governmental, technological and competitive trends and events that could
BENEFITS TO FIRM THAT DOES STRATEGIC PLANNING
significantly benefit or harm the organization in the future.

INTERNAL STRENGTHS AND WEAKNESSES 1. Enhanced Communication Result

o are the organization’s controllable activities that are performed especially well or 2. Deeper/Improved Understanding All managers and employees on
poor. 3. Greater Commitment mission to help the firm succeed.

LONG-TERM OBJECTIVES
o can be define as specific results that an organization seeks to achieve in pursuing This figure shows only the flow and the outcome of a firm or a business
organization using strategic planning or strategic management.
its basic mission. Long-term means more than one year. Objectives are essential
for organizational success it provides direction to the organization.
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THE NATURE OF DOING BUSINESS GLOBALLY o Gaining an understating of regional organizations such as the European
o Refers to international trade whereas a “Global Business” is a company doing Economic Community, the Latin American Free Trade area, the International Bank
business across the world. The exchange of goods and services over a distance for reconstruction and development, and the international finance corporation is
goes back a long time such trade. difficult but is often required in doing business internationally.
o Refers to global competition of products and services. o Dealing with two or more monetary systems can complicate international business
o Expansion of business in other parts of the world. operations.
o Examples: Local Business Doing international trade - Jollibee Corporation
THE GLOBAL CHALLENGE
ADVANTAGES AND DISADVANTAGES OF DOING BUSINESS GLOBALLY o refers to the different variables affecting a business organization, such as
economic, society, government, environment, political legal, and technological
ADVANTAGES advancement which can be an opportunities or threats to the firm’s objectives.
o Firms can gain new customers for their products and services. o Examples of Global Challenge:
o Foreign operations can absorb excess capacity, reduce unit cost and spread  Health Problems
economic risks over a wider number of markets.  Women Empowerment
o Foreign operations can allow firms to establish low-cost production facilities in  Energy Source
 Science and Technology
locations close to raw materials or cheap labor.
 Climate Change
o Competitors in foreign markets may not exist, or competition may be less intense
 Social Factions
than in domestic markets.
o Foreign operations may result in reduced tariffs, lower taxes and favorable BUSINESS CULTURE ACROSS COUNTRIES
political treatment. o Model or style of business operations within a company. The business culture
o Joint ventures can enable firms to learn the technology, culture and business determines how different levels of staff communicate with one another as well as
practices of other people and to make contacts with potential customers, how employees deal with clients and customers.
suppliers, creditors, and distributors in foreign countries.
o Economics of scale can be achieved from operation in global rather than solely MEXICO’S BUSINESS CULTURE
domestic markets. Large scale production and better efficiencies allow higher o In Mexico’s high-context culture, communication is much less direct as many
sales volumes and lower-price offerings. ideas are inferred through vague communication, and direct remarks such as “If
o A firm’s power and prestige in domestic markets may be significantly enhanced if you don’t sign I will go with your competitors” can be taken as rude, over-
the firm competes globally. Enhanced prestige can translate into improved aggressive and insulting,” notes Mexico Business Associates. The takeaway for
negotiating power among creditors, suppliers, distributors, and other important mobility teams and assignees on the ground is to be patient and embrace the
groups. process of building relationships, which over time can build business.

DISADVANTAGES JAPAN’S BUSINESS CULTURE

o Foreign operations could seize by nationalistic factions. o Japan’s unique culture has been shaped by trends and forces from within and
o Firms confront different and often little-understand social, cultural, demographic, outside the country. An understanding of these and how they have shaped
environmental, political, governmental, legal, technological, economic and Japanese society will help you in your dealings with Japanese people, businesses
competitive force when doing business internationally. These forces can make and society in general.
communication difficult in the firm.
o Weaknesses of competitors in foreign lands are often overestimated, and CHINA’S BUSINESS CULTURE
strengths are often underestimated. Keeping informed about the number and o Chinese business people will expect you to be well prepared for the meeting.
nature of competitors is more difficult when doing business internationally. Make sure to have at least 20 copies of your proposal ready for handing out. Note
o Language, culture and value systems differ among countries which can create that presentation materials should be only in black and white, avoid colors.
barriers to communication and problems managing people. o Small talk is considered particularly important at the beginning of a meeting.

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o They prefer to establish a strong relationship before closing a deal, so you might
have to meet up several times to achieve your objectives.
o It is vital for you to maintain composure during meetings. Causing embarrassment
or showing too much emotion could have a negative effect for a business CHINA’S BUSINESS CLIMATE
negotiation. Regarding decision-making, the Chinese tend to extend negotiations o China's business environment showed one of the strongest improvements
far beyond the agreed deadline to gain some advantage. Be prepared for that:
worldwide in the 12 months ending May 1 thanks to its robust reform agenda, the
accept their delays and do not mention deadlines. Your patience will be much
World Bank Group said on Thursday.
appreciated!
o China's ranking in the World Bank Group's Doing Business 2020 study climbed to
o People in China usually enter the meeting room in hierarchical order. So be
31st place in terms of ease of doing business, up from 46th a year earlier and
careful – they will assume that the first of you walking in the room is the head of
78th in 2017, the bank said.
the delegation!
o The World Bank highlighted some key reforms in the report including
o Business hours are 8:00 am to 5:00 pm, Monday to Friday.
implementing a preferential corporate income tax rate for small enterprises,
o Many Chinese workers take a break between 12:00 and 2:00 pm, during which
reducing the value-added tax rate for certain industries and enhancing the
almost everything stops from working – from lifts to phone services. electronic filing and payment system.
o It is best to schedule an appointment during these periods: April to June and o Other key reforms included simplifying import and export procedures by
September to October. implementing advanced cargo declarations, upgrading port infrastructure,
INDIA’S BUSINESS CULTURE optimizing customs administration and publishing fee schedules.
o Zhou Jin contributed to this story
o Indians are strongly guided by their respective religions and their shared values.
Respect for elders and hierarchy are core values that permeate all aspects of BRAZIL’S BUSINESS CLIMATE
Indian society. Indians also place huge importance on family and community. And o Brazil’s consumer confidence is climbing, with households more optimistic about
as in many Asian cultures, the concept of saving face – avoiding blame or any
inflation, unemployment, personal income, their own financial situation and debt.
type of shameful situation – can influence decision-making processes and affect
And, following the impeachment of then-president Dilma Rousseff in August 2016,
your business dealings in India.
President Michel Temer of the centrist Brazilian Democratic Movement Party set
o Building good business relationships and trust are important in India, so you
out to restructure the economy. His government has formally applied for
should expect to spend plenty of time at meetings, dinners and social clubs with membership of the OECD.
potential business partners. In a first meeting, let the Indian host guide the initial o After almost three years of economic recession, the Brazilian economy is now
stages of the conversation. As in some other Asian cultures, Indians like to
slowly heading towards a recovery. IMF predictions had Brazil’s economy growing
develop a personal connection first. So, expect to be asked – and prepare to ask
by 0.5% in 2017, and interest rates are decreasing.
your own questions – about family.
o Will the air of optimism last? However, the economy twists and turns, doing
BUSINESS CLIMATE ACROSS COUNTRIES business in Brazil remains notoriously complicated. In fact, Brazil was named the
o General economic environment comprising of the attitude of the government and second-most complex jurisdiction for accounting and tax in TMF Group’s 2017
Financial Complexity Index. Here’s what to consider before making the leap to do
lending institutions toward businesses and business activity, attitude of labor
business in Brazil.
unions toward employers, current taxation regimen, and inflation rate.
MEXICO’S BUSINESS CLIMATE
AFRICA’S BUSINESS CLIMATE
o Mexico was the sixth easiest country to do business in Latin America according to
o has remained generally stable, with some notable improvements by key
the World Bank’s Ease of Doing Business 2012 report, ranking 53rd out of 183
performers, according to the annual Doing Business report, but much more
countries. The economic environment is stable and real GDP grew by 3.8% in
improvement is needed across the board if the continent is to make a real impact.
2011. However, following the recession in 2009 Mexico is heavily reliant on the
The World Bank’s annual Doing Business report has revealed that while much
USA and Canada making it vulnerable to economic concerns in these economies.
progress is being made to improve the climate for businesses across Africa,
In addition, corruption and high crime levels raise security issues for businesses.
further improvement is needed, and at a faster pace, if the continent is to close the
gap.
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5. Be visibly a responsible community citizen.
6. Utilize your accounting practices to identify and eliminate questionable activities.
7. Follow the motto: Do unto others as you would have them do unto you.
Daily, newspapers and business magazines report legal and moral breaches of
ETHICS AND SOCIAL RESPONSIBILITY IN STRATEGIC MANAGEMENT
ethical conduct by both public and private organizations. Being unethical can be
o Business ethics, social responsibility, and environmental sustainability are distinct,
expensive. For example, Cisco Systems in 2015 sued Arista Networks for copying
but are quite related. For example, many people consider it unethical for a firm to verbatim sections of its user manuals. In addition to plagiarism, literally hundreds of
be socially irresponsible or to treat animals inhumanely. business actions are unethical, including:
o Business ethics can be defined as principles of conduct within organizations that 1. Misleading advertising or labeling
guide decision making and behavior. Good business ethics is a prerequisite for 2. Causing environmental harm
good strategic management; good ethics is just good business! 3. Poor product or service safety
o Social responsibility refers to actions an organization takes beyond what is 4. Padding expense accounts
legally required to protect or enhance the well-being of living things. 5. Insider trading
o Sustainability refers to the extent that an organization’s operations and actions 6. Dumping banned or flawed products in foreign markets
protect, mend, and preserve rather than harm or destroy the natural environment. 7. Not providing equal opportunities for women and minorities
o Polluting the environment, for example, is unethical, irresponsible, and in many 8. Overpricing
cases illegal, as is treating pigs, cows, chickens, and turkeys inhumanely. 9. Sexual harassment
Business ethics, social responsibility, and environmental sustainability issues 10. Using company funds or resources for personal gain
therefore are interrelated and impact all areas of the strategic- management EXAMPLES OF GOOD BUSINESS ETHICS:
process, as illustrated in Figure 3-1 with white shading.  Whistle-blowing – refers to employees reporting any unethical violations they
discover or see in the firm.
GOOD ETHICS IS GOOD BUSINESS  Avoid Bribery- refers to by not accepting any form of offering, giving,
o The Institute of Business Ethics (IBE) did a study titled “Does Business Ethics receiving or soliciting of any item of value to influence the actions of an official
Pay?” and conclude that companies displaying a “clear commitment to ethical or other people in discharge of a public or legal duty.
conduct” consistently outperform companies that do not display ethical. Philippa SOCIAL RESPONSIBILITY AND POLICIES
Foster Black of the IBE stated, “Not only is ethical behavior in busines life the right
thing to do in principle, it pays off in financial returns.” SOCIAL RESPONSIBILITY
o means that business, in addition to maximizing shareholder value, must in a
DOES IT PAY TO BE ETHICAL? manner that benefits the society.
o A rising tide of consciousness about the importance of business ethics is o Examples of social responsibility:
sweeping the United States and the rest of the world. Strategists are the  Reducing carbon footprints
individuals primarily responsible for ensuring that high ethical principles are  Improving labor policies
espoused and practiced in an organization. All strategy formulation,  Charitable giving
implementation, and evaluation decisions have ethical ramifications. As indicated  Volunteering in the community
in Academic Research Capsule 3-1, it does pay to be ethical; high-performing POLICIES
companies generally exhibit high business ethics.
o are the guidelines developed by an organization to govern its actions. Also deals
SEVEN PRINCIPLES OF ADMIRABLE BUSINESS ETHICS with acquisitions of resource with which organizational goals can be achieved.
1. Be trustworthy, no individual or business wants to do business with an entity it o Examples of Policies:
does not trust.  Code of conduct
2. Be open-minded, continually asking for "ethics-related feedback" from all internal  Workplace safety
and external stakeholders.  Anti-harassment policy
3. Honor all commitments and obligations.  Privacy Policy
4. Do not misrepresent, exaggerate, or mislead with any print materials.  Attendance/vacation/time off policy

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ENVIRONMENTAL RESPONSIBILITY o Sometimes medicines require elements within specific plant species. If
o is about managing the use of natural resource in the most effective and efficient some species go extinct, it limits future technological innovation.
manner in order to reduce environmental impacts and financial cost.  Treating environmental resources as if they have intrinsic rights and
value.
ENVIRONMENTAL SUSTAINABILITY o In other words, we shouldn’t just rely on a monetary value, i.e. we should
protect rainforests because they deserve to be protected rather than
o is defined as responsible interaction with the environment to avoid depletion or
using a cost-benefit analysis of whether we gain financially from
degradation of natural resources and allow for long-term environmental quality
protecting rainforests.
 Targeting social welfare/happiness and environmental sustainability above
crude measures of progress such as GD

TYPES OF STRATEGIES

LONG – TERM OBJECTIVE

o Represent the results expected from pursuing certain strategies. Strategies
represent the action to be taken to accomplish long-term objectives.

CHARACTERISTICS OF OBJECTIVES
 Quantitative
 Measurable
 Realistic
 Understandable
This figure shows the aspect of environmental sustainability by means making  Hierarchical
conservation and protection for further of the next generation.  Obtainable
ISSUES OF ENVIRONMENTAL SUSTAINABILITY:  Congruent across departments
 Long-term health of ecosystems. BENEFITS OF HAVING CLEAR OBJECTIVES
o Protecting the long-term productivity and health of resources to meet
 Provide direction by revealing expectations
future economic and social needs, e.g. protecting food supplies, farmland
 Allow synergy
and fishing stocks.
 Assist in evaluation by serving as standards
 Intergenerational decision making
 Establish priorities
o When making economic decisions, we should focus on implications for
 Reduce uncertainty
future generations, and not just the present moment. For example,  Minimize conflicts
burning coal gives a short-term benefit of cheaper energy, but the extra  Stimulate Exertion
pollution imposes costs on future generations.  Aid in allocation of resources
 Renewable resources  Aid in design of jobs
o Diversifying into energy sources that do not rely on non-renewable  Provide basis for consistent decision making
resources. For example, solar and wind power.
 Prevent the consequences of man-made global warming. AVOID NOT MANAGING BY OBJECTIVES
o Policies to ensure the environment of the planet does not deteriorate to a
point where future generations face water shortages, extreme weather 1. MANAGING BY EXTRAPOLATION
events, excess temperature. – All factors that could make living in parts o adheres to the principles “if it isn’t broke, don’t fix it” the idea is to keep on.
of the world very difficult if not possible.
Doing the same things in the ways because things are going well.
 Protection of species diversity and ecological structure.
2. MANAGING BY CRISIS

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obased on the belief that the true measure of a really good strategist is the
ability to solve problems. Because there are plenty of crisis and problems to
go around every person and organization, strategist ought to bring their time
and creative energy to bear on solving the most pressing problems of the day.
Managing by crisis is actually a form of reacting letting the events dictate the
what and when of management decisions.
3. MANAGING BY SUBJECTIVE
o 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. “do
you own thing, the best you know how”.
4. MANAGING BY HOPE
o based o the fact that the future is laden with great uncertainly and that if we
try and do not succeed. Then hope our second (or third) attempt will succeed.
Decisions are predicated on the hope that they will work and that good time
are just around the corner, especially if luck and good fortune are on our side.

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