Chapter 6: Corporate Expansion and Strategic Actions 6.

The Conglomerate or higher level of diversification-This refers to

highly diversified firms that generated their revenue from unrelated
The Dynamics of Corporate Expansion-We have witnessed the growth and business but are being controlled by its mother corporations or became
expansion of corporate conglomerate in the Philippine business landscape. independent with each other, but the major stockholder is the mother
Their growth and expansion hinges on corporate management system that plans company. Example of such business conglomerate is San Miguel
and implements strategy that will increase their profitability and market share, Corporation who is involved in beer and wines, processing and
not only on their core products but also on other ventures. When a firm chooses distribution, real estate constructions, energy development and more.
to diversify its business interest beyond its core operation, it uses the dynamics
of corporate level strategy. Rationale For Corporate Diversification Strategy-No firm would like to
remain stagnant in their operations. Value is created through related
Corporate expansion and diversification -Play a major role in the behavior diversification on unrelated diversification when its strategy allows in the
of large firms by studying the market and entering into its business niche after increase of their business revenue or reduce cost while implementing their
a careful analysis of its profitability Business expansion is saddled with fraught business level strategy. Greater market power is created through vertical
and uncertainty and the decision to expand needs careful study of the market integration as it involves the process of acquiring the related reason for
and its effect on the company's image. corporate diversification strategy.

Before embarking on any decision to expand or diversify, the company 1. The Corporate Enhance Strategic Competitiveness
must be able to study the following dimensions: As the corporate base expands its operational efficiency, the firm develops
1. The business that would generate additional revenue using its core strategic competencies that have to be tasked to develop new ventures that will
competencies. increase the corporate revenue. This strategic competitive advantage could be
2. The management strategy that will be used to operate it profitably. divided further into the following:
3. The trusted people who will be assigned as part of the management team. a) The Power in the Economies of Scope- The corporate sharing of
4. The investment needed and the resources available. activities to the new ventures reflects the transferring
5. The relative importance of the business in building its corporate image. of knowledge and the development of strong capabilities. The firm with strong
managerial operational synergy and competencies develops strong competitive
Crafting The Corporate Strategy- The corporate level strategy is expected advantage over the possible entrants in the industry.
to generate above average return on investments by creating value. Creating
value is the strategy of making the operation of the new business venture under The power of economies of scope and developed manpower and
the umbrella of the mother corporation. The business portfolio could be corporate resources are harnessed to gain further related revenue. Sharing of
effectively managed and controlled when the mother company is involved in its related activities like purchasing functions and distribution develop economies
operation and financial control. of scale, and therefore operational cost is transformed into added revenue. Firms
like San Miguel Corporation that operate packaging plants could utilize their
Successful diversification is expected to reduce variability in the firm's added resources for other products. Their bottling plant could produce bottles
profitability index as the income generated would come from different business for wines and beverages.
units. It is increasingly important for the firm to establish policy control and
monitoring of its operation and financial system. b) The Power of Core Competencies and Operational Capabilities- As
the firm develops its foothold in the business community, it developed
Diversification requires the crafting of the multi-business strategy that involves manpower base and executive abilities according to the core training and
operating in different business environment and product markets. It requires corporate interventions. Corporate core competencies are values of the
unique organizational structures where diversified firms operate independently firm. This is transformed into core competencies through activities in the
with sets of executives under the corporate mother organizations. managerial and technological knowledge, experience and expertise.

 The prevailing logic of diversification suggest that the firm operates into The Value and Economy in the Transfer of Core Competencies
additional markets using its excess capital resources, corporate 1. The experience gained in the mother firm could be used effectively.
capabilities and core competencies that will create value laden 2. The cost training has been eliminated.
opportunities. When firms operate in markets that are competing or 3. The development of greater managerial motivation.
complimentary with each other, they are in multi-point competition. 4. Empowerment and the development of corporate responsibility
Example: Jollibee Corporation where they operate on fast food business with
similarly the same operation but with diversified product offerings. c) The Power of Market Related Diversification-It refers to the power of
the firm when it is able to sell its products or services below the competing
Corporate Level of Diversification-varies among firms in the firm or to reduce the cost of production and distribution by offering
industry. Aggressive corporations diversify into other industries while others similarity in product quality. This multi-point competition of offering
diversify primarily on related business. There are diversified firms that operate products in the same market area or geographic markets allows the firm
on dominant business categories while the giants in the industry operate under to diversify either vertically or horizontally by adding related products
several links in terms of product and services. that could be simultaneously be carried into its marketing operation.

Levels And Types of corporate Diversification Strategy  Vertical and horizontal diversification is the process of adding a new
1. Diversification through expanded operation-It refers to corporate venture upward by acquiring or establishing a new firm that will handle
expansion where most of its sales revenue came from its core the production of new product that is different or similarly the same with
competencies of operation. The chain of Andok's Lechon Manok is an that of the competing firm.
example of diversification by establishing various store operations in  Horizontal diversification is the process of either backward or forward
developed areas. Others copy the same system of operation like Baliwag integration by producing the inputs of production or creating a new
chain of lechon manok and liempo. Others go into franchising business venture that will handle its distribution.
and added some sales revenue for their royalty.
d) The Power of Corporate Financial Strategies and Capabilities- This
2. Dominant or two layered diversification- Diversification of this nature is the unrelated system of diversification where the firm invests its while
focuses on strategic operation on a single type of business with an added generating profit in their investments. The corporate financial strategies
twist by offering other services or products that will generate added refer to cost savings realized through improve allocation of corporate
revenues. Example of this type of dominant operation is the SEVEN- outside business investments. Big conglomerated with financial
ELEVEN (7-11) groups of business units operating twenty-four hours a executives tasked to develop strategies on proper investments in capital
day in convenient locations. They now offer snack food and rice meals for markets view financial strategies in two different dimensions:
commuters and employees who have night duties and those travelers
wanting to get some ready to eat snacks. Efficiency in Capital Market Allocation- The source of capital investments
came from the profits generated in the firm's internal operation. The generated
3. Inter-related diversification- This strategy is getting a certain income could either be distributed to stockholders or invested in new capital
percentage of their revenue from This strategy is getting interrelated market that will generate additional revenue. In the conglomerate setup, the
operation. The links between the operations are in the same area but the corporate office distributes capital to business divisions to create value for the
main business is the one generating the greater share of revenue. An overall company thereby provides gains from the internal market allocation.
example of this operation is Mercury Drug where they added some
groceries and other medical supplies. They expanded their operation in Strategic Restructuring Processes- Conglomerate with resources at their
developed areas throughout the country with resulting twist of a disposals non-performing firms and develop them into profitable ventures that
convenient store. may be related or unrelated
to their operation. Buying out firms at low value as the former owners could not
4. Backward diversification strategy- is the process of getting the business manage it effectively against its competitors or its market share has fallen down
operation wherein they used to source out the inputs from an existing below profitable level could be an unrelated business expansion strategy.
supplier. An example of this strategy is the Poultry and Hog raiser who
used to buy feeds from Feed Millers. As a result of their expansion in 2. Corporate Incentives and Resource Competitiveness
requirements, they either buyout the Millers or expanded into feed milling a. Tax and Tariff Incentives- In developing countries like the Philippines, the
operations. The core business expands backwards but, in the process, incentive to diversify came from both the internal and external environments.
increases its revenue by reducing the cost of its inputs in its core business. The external environment
came from incentives given by the government for new industries in terms of
5. Forward diversification strategy- It is the process of moving its business tax incentives and corporate tax laws. The tax incentives could be in terms of
operation into two or three layers by integrating its core businesses into tariff reductions in the importation of new machineries a new technology that
other processing operation. La Suerte Enterprises in Lucena City used to will be used in the production of goods.
be buyers of copra and other farm products to resell to coconut oil millers.  Companies operating in export processing zones enjoy corporate
The company ventured and expanded into oil milling business from the incentives for a number numb of years depending on their corporate
volume of purchases. The residues from copra cake added with corn and operations. Joint venture firms operating with foreign partners are given
some other formulation were made as poultry and hog production. Further tariff incentives as they generate the necessary employment opportunities
forward diversification could be into canning and meat processing. for the local manpower in the surrounding community.
Chapter7: Globalization And International Strategy resources and skills are shared and used in other countries to gain benefits from
several factors, such as:
Opportunities in the Global Marketing- The international market yields 1. Factors of Production These are the basic inputs needed to run a
potential for corporate expansion and market penetration as the global business, like labor, capital, technology, and natural resources. They help
population continuous to increase, needing new products and services. The reduce costs and improve competitiveness in the market.
global strategy is the selling of more goods and services outside of its domestic a. The Cost of Labor- It is one important component in the production of
market. It is the process of diversifying operation to the wider base of operation goods and services as no international business would locate their
by expanding its market niche to other countries for quality products, which the operations where the labor cost is more than its domestic operation.
domestic market has saturated. There are products that could be produced at b. Cost of Land for Construction of Facilities-Corporate expansion of
lower cost due to the presence of local material inputs that is not available in plants and facilities needs land. The cost of land in the suburban Metro
other countries. Manila such as Laguna and Batangas is a factor to consider in locating
their operations in the Philippines.
 Some demand for products may then develop in other countries and export c. Natural Resources of the Country of Operation- The Philippines is
opportunities become open for corporate strategic action. Increased rich in natural resources, which could be transformed into finished
demand in foreign countries justify direct investments in products product for export to other countries. Japan and Korea imported our iron
operation abroad as demand need to be meet before competitors take the ores, copper and gold.
lead step toward the target market. As the firm standardized its products, d. Infrastructure Development-The opening of more infrastructures like
the process of producing the same may be less costly in other countries as the expressways and development of more road system are factors that
labor costs may be lower than in the domestic market. Another reason is would encourage multinational corporations to locate their facilities
that manufacturing cost in terms of power rates and other operating inputs into the country.
may be lower in another country. 2. The Size of Market Demand- It is the characteristic of the nature and
 The firms expanding in international markets are not devoid of challenges. size of the buyers' needs in the home market for the industry's goods and
Firms have to consider the following factors when they engage in services. The sheer size of a market segment can produce the demand
international operations: necessary to create scale efficient facilities.
1. Firm in global food and consumer products has to adapt to the local taste 3. Related and Supporting Industries- The manufacturing of goods is not
preference of the country in which they operate. a monopoly of one company. They are dependent on the support of
2. Employment contract and training of manpower in competitive quality. available suppliers of material inputs in the production of goods or their
3. Cultural differences and language used in operation that affects basic products.
production efficiency. 4. Firm Strategy, Structure and Rivalry- The foster of growth in certain
4. Joint ownership of international operations like the Philippines requiring industries varies among firms in the global market. This dimension refers
sixty percent local partners and forty percent foreign capital investments. to the technical competencies of the firm along the areas of their expertise.
5. Requirements in the use of more local content in product manufacturing.
6. Research and development in the use of local materials.  The Government Policy of the Country of Operation
Government policies in the host country can affect the success or failure of a
The Benefits of Global Strategies company’s international expansion. A country’s location, culture, local
1. Increase in Market Size-There could be a dramatic increase in the market competition, and the need to improve production also help firms compete
as firm move into the global market. As part of their expansion, firms must effectively in the global market.
succeed in emerging markets by offering incentives to retailers and using local
banks and agents for payments. With markets in America and the Philippines The Level of Corporate Strategy in International Operations- The strategy
already saturated, Coca-Cola and Pepsi are now focusing on China to capture is based on the type of market conditions in the country of operation. Some
the growing consumer market and changing taste preferences. This move helps multinational corporations give individual country units of the authority to
them reach new customers, strengthen their global presence, and increase develop their own business level strategy to tailor fit their operations according
overall sales growth. to the needs and problems prevailing in the country. Product and geographic
diversification are the usual focus and scope of international corporate level
2. Return on Investments-The primary reason for investing in foreign markets strategy as they operate in multiple industries and in multiple countries.
is to achieve above average returns. Firms that have fully expanded locally must
seek new global opportunities to maximize the use of their resources. Jollibee The Levels of Corporate Level Strategies are:
Corporation, with its strong capital and work force, is expanding internationally 1. Multi-Domestic Strategy- It is the process of decentralizing operating
to compete with KFC, capture a share of the global market, and earn substantial decisions to tailor fit the product according to the needs and wants of the
returns in foreign currency as it operates in dollar-based economies. Moreover, consumer in the particular country.
Jollibee requires minimal investment in research and developments in its menu Advantages of multi-domestic strategy:
featuring Chicken joy, burgers, fries, and other products is already tailored to a. Satisfaction of local consumer needs and wants.
the taste preferences of Filipinos and other customers worldwide. b. Expansion of market share.
c. Presence of quality products.
3. The Economies of Scale-Firms benefit from economies of scale by d. Lower price due to competition.
producing and distributing products internationally. They can standardize
products to suit a wide range of global customers, especially in industries such Disadvantages of multi-domestic strategy:
as electronics and consumer goods. For instance, Procter & Gamble operates in a. Corporate uncertainty of the future due to competition.
Thailand, producing shampoo and hair conditioner for export to the Philippines, b. The economies of scale are limited to local market.
while also sending detergents from the Philippines to Thailand for similar c. Decentralization of operation entails additional cost due to higher
markets. salaries and allowances of assigned executives.
By utilizing production facilities on a broader scale and centralizing technical
and research operations, firms reduce costs and enhance efficiency. This 2. The Global Strategy Through Standardization- This strategy focuses on
approach enables product standardization across borders and coordination of the development of more standardized products across country markets as
key functions such as marketing and distribution to achieve greater economies operation is more controlled by the central office in the home country. While
of scale. each country units operate through standardized products through competitive
strategy in the economies of scale.
4. Exchanges in Technical and Learning Process Advantages of the Global Strategy:
- No country holds a monopoly on knowledge. Each nation develops its own a. Utilizes of the economies of scale
core competencies that can be shared internationally through the exchange of b. Reduced cost in product development research
resources and expertise across borders. This collaboration creates synergy, c. More control of the home office
leading to the production of higher-quality goods and services at lower costs. d. Standardized products
Operating in international markets provides valuable learning opportunities.
Filipino engineers working with Japanese counterparts gain technical skills and Disadvantages of the Global Strategy:
improved work habits, while other nationalities learn Filipino values and the a. It requires sharing of resources
English language used in industrial settings. Such knowledge exchange b. Foregoing growth opportunities in local market
promotes mutual growth, innovation, and stronger international partnerships. It c. Needs effective coordination and control
also helps develop a more skilled and globally competitive workforce. d. Product adaptation to local market

5. Localized Operational Advantages-Many firms expand to other countries 3. Transnational Strategic implementation
to take advantage of lower labor costs, with China offering nearly half the labor It is an international strategy through which the firm seeks to achieve global
cost of the Philippines. Companies like Colgate-Palmolive move production to efficiency
China while keeping their marketing offices in the Philippines to maintain local and local responsiveness.
market presence. This strategy helps reduce costs, ensure stable operations, and Advantages of the Transnational Strategy ;
tap into China’s large consumer market for greater growth opportunities. It also a. Produces higher performance level
allows firms to increase efficiency and remain competitive in the global market. b. Product standardization in the international market
c. Efficiency produces economies of scale.
Strategic Approaches to International Business d. Improves competitiveness in international market
The success of firms in global markets depends on effective strategic Disadvantages of the Transnational Strategy:
approaches. At the business level, they must adopt key strategies such as: a. Difficulty in coordination and control
1. Cost leadership b. Strict compliance to standards and specifications
2. Differentiation c. Marketing and pricing strategy differ across countries.
3. Integrated cost leadership and differentiation d. Government requirements of increased local content.
 Implementing these strategies in international business creates a
competitive advantage by building unique, hard-to-duplicate core The Mode of Entry in International Operations
competencies. 1. Exporting- It is the process of establishing marketing and distributing of the
products to a foreign country through distributors or chain of retailers on
Business level strategy in the global market- International business strategies contractual arrangements. Exporting is most advantageous when the mother
are different from local ones. In global markets, a company’s home country corporation is nearest to the foreign market due to the transportation cost or
often becomes its main source of strength and advantage. A company’s where facilities are available in bringing the product to other countries.
Advantages of Exporting:
 a. Low capital requirement in establishing office. of business operations for multinational firms such as tariff and taxes,
b. Ease in operation as distributors handle marketing. legal requirements and the possible nationalization of private assets.
c. Less risk as it is passed on to distributors. Government instability and conflicts should be studied very carefully
d. Immediate in increasing sales at low investments. before investing in foreign countries.
e. Small and medium enterprises could penetrate the export market
through the internet 2. The Economic Risk- The economic situation in the country may look
Disadvantages of Exporting: very positive during the initial operation of the multinational firm, yet
a. Higher cost of products the turbulent environment in terms of difference and fluctuation on the
b. Low control in operation and distribution value of different currencies which could be partly due to the political
c. Difficulty in marketing competitive products risk. The firm's competitive advantage could be affected when the value
d. Presence of more competing products. of the currencies in the country of operation fluctuates, eroding the
possible gain in operation. Recession in the country of operation affects
2. Licensing Arrangement with Foreign Partners- It is the process of multinational operations.
allowing a foreign firm to purchase the right to manufacture the firms' product
within the host country. It is a form of organizational network being practiced Chapter 8: Structural Dynamics and Control Strategie
by smaller firms. Under this arrangement, the firm that allows the use of its right Corporate strategies need a supportive organizational structure to be
to use the brand name of the product, its features and specifications is paid a effective. Structure provides the framework for implementation and control,
royalty for every product produced and while top executives ensure strategies align with the right structure and adapt
distributed. when necessary. The success and profitability of a firm depend on how well its
Advantages of Licensing: strategies fit with its organizational structure.
a. It is less costly in terms of investments Firms design structures that are complex enough to support
b. Less risky for the licenser strategies but simple enough to implement effectively. Competitiveness in local
c. Enhancement of brand in foreign market and global markets requires careful
Disadvantages of Licensing: alignment of structural elements to ensure strategies work. Structure defines
a. Less control in the operation of the licensee tasks, procedures, and decision-making, influencing how managers act and how
b. Low return as profit is shared by the licensor and licensee results are achieved.
c. Risk in technology transfer after contract expires As firms expand through new opportunities and competitive
d. Inflexibility in different ownership arrangements advantages, they must adjust their structures to match new strategies.
Remaining in the same structure despite changes in the business environment is
3. International Strategic Alliance:Strategic alliance has become a popular counterproductive. Top management should act proactively, modifying
arrangement in international expansion as it allows the partner firms to share structure and strategy before problems arise, ensuring adjustments are made
and risk their common resources. This arrangement could be favorable to both ahead of performance decline caused by market forces.
partners as it can facilitate the development of core competencies that contribute
to the firm's future strategic competitiveness. The partnership could be brought The Importance of Organizational Control
by common understanding of both corporate values in management and trust in Organizational controls are vital for guiding strategies and
its capability to sustain profitable operation. measuring performance. They compare actual results with expected outcomes,
Advantages of International Strategic Alliance: and effectiveness is judged against performance indicators. Without strong
a. Development of competitive strategies. controls, firms cannot sustain competitive advantage.
b. Share cost in facilities and resources. Strategic controls are subjective; they verify if strategies fit goals
c. Share risk in production and marketing. and capabilities, and rely on effective communication between managers and
d. Technology transfers to the host country. staff. Financial controls are objective; they measure performance, safeguard
e. Learning new corporate strategies and capabilities assets, authorize transactions, and ensure efficient use of resources.
Disadvantages of International Strategic Alliance: Together, strategic and financial controls support strategy implementation and
a. Problems of cultural integration. indicate whether goals are achieved with
b. Difference in work values and perceptions. minimal resources.
c. Incompatibility in management styles may cause conflict in decision
making. Characteristics of Strategic Controls
d. Difficulty in management due to language barriers especially in non. 1. It helps firm understand what it intends to do.
English communicating countries. 2. They are subjective criteria
e. Trust of partners is critical. 3. It examine what fits to be done
4. It demands effective communication
4. Acquisitions of Existing Local Firm-The free trade mania in the last decade 5. It verifies the sharing of appropriate strategies
continues to expand in the global market. In the same manner, big multinational
corporations, which have the resources and capital, would like to expand their Characteristics of Effective Financial Controls
operations by buying out non-performing firms in some countries where they 1. Financial controls are effective indicators of performance
would like to penetrate the growing market needs. The multinational 2. They are objective criteria that measure performance
corporations believe that it is the easiest way to penetrate the international 3. It evaluates present performance against previous record
market for their products or services. 4. It is the indicators in safeguarding the corporate assets
Advantages in Acquisitions: 5. It ensures that transactions are properly authorized
a. Easy access to foreign markets. 6. It provides reliable information in the use of financial resources.
b. Control of operations is in the hands of investors. Organizational effectiveness depends on both strategic and financial
c. More products could be marketed in the foreign markets. controls working together to achieve profit goals.
d. Technology transfer to a local firm. Large diversified corporations rely more on financial controls due to extensive
Disadvantages in Acquisitions: data across units, while smaller firms emphasize strategic controls, focusing on
a. It requires big investments and debt financing. differentiation and team performance.
b. Complicated and complex in operation due to cultural differences.
c. Difficult to negotiate agreements. The Interdependence of Structure and Strategy
d. Difficulty in merging operational system due to differences in Strategy and structure influence each other. Plans depend on
management style structure, and structure shapes future strategies. Any change in structure
requires strategic adjustments. Firms must ensure alignment for stability and
5. The Greenfield Venture Operation- It is the establishment of a wholly flexibility, making it valuable, rare, hard to imitate, and non-substitutable to
owned new subsidiary in a foreign country. While in the process is complex and sustain growth.
potentially costly, it affords the maximum operating control and has the
potential of getting the above average return on investment. This potential is Patterns Of Relationships Between Strategy and Structure
especially true of firms with strong intangible capabilities that have strong 1. Increase In Sales Volume
leverage in entering a country with opportunities for investments in green-field 2. Geographical Distribution
ventures. 3. Vertical and Horizontal Integration
Advantages of Greenfield Venture Operation: 4. Product Diversification
a. Technology transfers to the new country. 5. Research and Development
b. Generation of employment opportunities. 1. Increase in Sales Volume- As sales volume grows, the firm requires
c. Operational control and management. additional staff for marketing and distribution. New departments are
d. New product development for new market. established, including an in-house advertising agency, each developing
Disadvantages of Greenfield Venture Operation: strategies to justify their role in the organization.
a. Costly on initial investments. 2. Geographical Distribution-Expansion across provinces, regions, and
b. Government requirements and regulations. even international markets demands new managers and executives.
c. Risky in competitive advantage over local firms with the similar Country managers are needed for exports, and global growth requires
product. strategies to meet rising demand worldwide.
3. Vertical and Horizontal Integration-Growth through integration
The Risk International Environment: Firms' expanding in the international requires highly capable executives trusted by management to drive
environment carry multiple risks as it is difficult to implement and manage. corporate strategies. As new assignments are given, managers must create
Highly diversified firms are accustomed to market conditions yielding consistent strategies aligned with their roles. This leads to new
competitive situations that differ from what was predicted. The international departments and structures, each developing strategies that support
environment is full of opportunities for growth and expansion, yet the turbulent organizational goals.
scenario still lingers as risks in investment. 4. Product Diversification- Introducing new products or technologies
Several risks are involved with multinational operations. Foremost among demands new organizational structures and strategies to stay competitive.
them, these risks are the following: Diversification requires fresh talent and well-developed approaches to
1. The Political Environment- It is related to instability in the ensure products succeed in the market and can be exported internationally.
government where the firm intends to operate. Insurgency, civil wars 5. Research and Development-Corporate expansion into new ventures
and changes in national leadership are risks that are difficult to predict requires a more elaborate structure to ensure profit and return on
and therefore pose as congruent risks in business operation. Changes in investment. These ventures must design diversified strategies, sometimes
political leadership and type of governance may create new regulation
 distinct from the mother corporation, to analyze internal and external Characteristics of Effective Strategic Leaders
environments and create new opportunities for sustained growth. 1. Willing to make candid and courageous decisions that may be difficult but
Based on the above growth patterns three major organizational structures were necessary.
used to implement strategies: 2. Have foresights on the prevailing condition in the environment.
1. Simple Structure The owner-manager controls decisions and directly 3. Have clear understanding on the consequences of their decisions.
supervises operations. Employees follow simple instructions with 4. Have clear visioning of employees’ needs and capabilities.
informal coordination. Strategies focus on one product line in a specific 5. Motivates employees for effective and efficient performance.
market. As the firm grows, loyal and competent staff take on added 6. Knows the art of soliciting feedback from peers and supervisors.
responsibilities, but control remains centralized under the owner. 7. Develop strong partnership internally and personally.
a. The Line Organizational structure 8. Good communication skills that facilitate effective execution of their
Advantages of Line Organization strategic vision.
1. Ease of operation and control as few layers in decision making
2. Few lines in the structure that facilitate communication Managerial Leadership as Organizational Resources
3. Direct authority of executive that guides the work completed in cost Top level executives and managers who know the art of managerial
leadership form leadership is the greatest investment of the firm towards its desired goals and
4. Responsibilities can be pinpointed immediately that increase efficiency competitive advantage. Management knowledge is not enough to develop
5. Strong focus on process improvement with highly formalized rules and strategic leaders as it requires the art of leadership.
procedure Decision making is based on foresight, seeing the world of business
6. The structure contributes to low cost operational dynamics miles away from where they are making and making steps ahead in the direction
Disadvantages of Line Organization of profit objectives with caution for uncertainties and strong determination for
1. Lacks system of specialization opportunities. Strategic leadership capitalized on their present strength to
2. Limited opportunities for learning and growth combat competition and threats from the environment.
As operations grow more complex, the owner-manager shifts focus
to strategic planning and industry relations. Daily supervision and control are
delegated to trusted supervisors or newly hired managers with proven Rational In Establishing Work Teams of Corporate Members
capabilities. Staff officers assist in handling routine business, allowing the The corporate organization has to go along in the fast-changing
owner to concentrate on broader corporate growth. industrial area as the global economy is rapidly changing the landscape of
business. The general agreement in tariff as business conditions would topple
-Delegation of authority and responsibility that takes action based information the barriers in the exchange of goods and services. Corporate and small
Disadvantages of Line and staff structure -More executives to pay -Jealousy entrepreneurs must go global and resist the ongoing competition in the world
among executives may exist -Over confidence creates lesser control of market.
operations Technological advancement is the business of corporate strategies
b. The Line and Staff Organizationsl Structure and organizations has to race towards the direction as it is a way to produce
Advantages of Line and Staff Structure more products with high quality standards. Corporate strategies must be
1. Services of staff assistants that develop better research and development developed along the line pf E-global market and economy. Strategic decisions
strategies includes lateral actions, concerning the implementations of plans and programs.
2. Greater horizontal and vertical communication
3. Specialized functional areas that characterized differentiation form The Dynamics of Top Level Decision Making
4. -Delegation of authority and responsibility that takes action based The top-level decision making involves two important areas that
information have something to do with the operation of the firm. Managerial expertise
Disadvantages of Line and staff structure should be able to take a closer look on the two aspects as it will greatly affect
1. More executives to pay the firms structural strategies.
2. Jealousy among executives may exist
3. Over confidence creates lesser control of operations The Dynamics of Top Level Decision Making
1. The external business environment
[Link] Structure 2. The firms Internal Environment and its Characteristics.
Divisional Functional Structure The board sets policies, the CEO directs 3. The external business environment
strategies, and managers handle operations. It promotes specialization, 4. Analysis of the external environment concerning industry structure.
knowledge sharing, and career growth, suited for complex operations. 5. Analysis of the market growth in the firm’s primary business.
Divisional Product or Regional Structure Expansion by product or region 6. Analysis on the number and type of competitors.
creates divisions overseen by the board. The CEO and managers develop 7. Political and Legal environment that affect business condition.
strategies and report directly to the board. 8. The degree to which the product can be differentiate.
9. The firms Internal Environment and its Characteristics.
Advantages 10. The commitment of the firm for growth and expansion.
1. Effective communication and coordination 11. The size of the firm to compete in the environment.
2. Effective sharing of knowledge and information 12. The organizational culture of the firm
3. Allows functional specialization that allows innovation 13. Availability of the human capital
4. Career path for executives and managers 14. The patterns of the cooperation and interaction among managers and
Disadvantages employees
1. May have negative effect on communication’
2. Needs close coordination among units The Managerial Performance of Management Teams
3. Few formal rules and regulations Top executives need to understand the industry they are in, know
4. Need strong linkages of control mechanism who their competitors are, and be familiar with how the company works on the
inside. A good management team is made up of people with different skills,
3. The Growth of Multi- Divisional Structure backgrounds, and experiences because this helps bring more ideas and better
Diversified corporations expand locally and internationally, making functional solutions.
structures hard to manage. Multinational structures use divisions with their own The members of the team should be committed to working
profit centers, where unit heads run operations and set independent strategies. efficiently and doing their best to maintain the trust of the company's
Advantages: shareholders. When these leaders cooperate well and support each other, the
1. Accurate monitoring of business performance company is more likely to grow and succeed in the long run.
2. Simplified operational and problem control
3. Each unit operates as a separate center Leading Teams Effort Effectively
4. Improved resource allocation 1. Design the work structure that provides flexibility and autonomy for
5. Active performance monitoring decision making.
6. Dominant structure for multi-level corporation 2. Provides adequate corporate resources for members to accomplish the
task.
Disadvantages: 3. Determine if the teams are necessary to accomplish corporate goals and
1. Over-expansion may create vacumn in the organizational ladder objectives
2. Needs trusted and committed executives 4. Determine the effectiveness if team members’ contribution to work teams.
3. Higher caliber of top executives often are difficult to find 5. Ensure that all team members know and understand their respective roles.
4. Over diversification may deplete important financial and human resources 6. Provide the training and corporate interventions through corporate
consultants.
Organizational Structure An organization chart should guide real operations, 7. Provide regular feedback regarding performance and accomplishments.
not just serve as display. As firms grow, both top executives and line managers 8. The heterogeneous group of top executives is composed of managers with
must shape the structure to ensure strategies are implemented. Strategy and managerial leadership capabilities and with varied knowledge, functional
structure influence each other: managers adjust structures to support goals and expertise, educational background and training, and experience in dealing
respond to market changes. with the challenge of new emerging system in the global arena of business.
9. Sustainable firm’s growth is the product of cohesive and cooperative
Chapter 8: Strategic Leadership for Effective Organization efforts of the top executive
The Foundation of Effective Leadership
Effective leadership serves as the foundation for guiding an The Cardinal Characteristics and Values Of Good Work Teams
organization toward its goals through the strategic management process. It 1. Members participate actively and positively.
develops essential managerial competencies and ensures that leaders are able to 2. Members listened and received thoughtful feedback.
make informed decisions that benefit the company. In today’s competitive 3. Willing to take risk and focus on ultimate goal.
business environment, organizations need multifunctional leaders who can 4. There exists open communication and teammates trust the judgement of
adapt to change and influence both managers and employees. Ultimately, the others.
growth and success of the firm largely depend on the strength and effectiveness 5. Members take the initiative to get things done on time.
of its strategic leadership. 6. Support other team members willingly.
7. Understanding and committed to team objectives and working
enthusiastically.
8. Members influence others and get involved in decision making.
 9. Encourage everyone and acknowledge others. Corporate Ethical Standards
10. Humbleness in accepting mistakes rather than blame other members.  Ethics define the firm’s image and credibility.
11. Participative leadership require managers at the top knowledge in meeting  Builds stakeholder trust and goodwill.
and patching up different opinions and ideas.  Ethical decision-making strengthens organizational culture.

Factors To Consider in Development of Management Teams Balancing Organizational Control

1. The more heterogeneous the management team the more difficult it is to  Ensures achievement of goals through strategic and
manage. financial controls.
2. Differences in opinions due to different background and experience. Key Factors:
3. Diverse background may inhibit the process of decision making if not 1. Monitor strategy implementation
properly manage. 2. Support change and innovation
4. Sub-optimal decisions may emerge when threats and opportunities are not 3. Adjust resource allocation
properly examined. 4. Maintain flexibility in using core competencies
5. Difficulty in bridging of opinions due display of intellectual supremacy
especially when one asserts his position in the organization. Summary
6. It requires high level of managerial leadership in the process of  Internal and external staffing ensure the right leadership.
consultative capabilities and democratic steering opinions.  Effective strategic leadership aligns people, culture, and vision.
7. Members in high technology environment is important as they are core in
 Ethics, innovation, and control drive sustainable success.
the development of new and innovative products. Experience and
expertise in the firm’s core business added value to the effectiveness of
top management teams. The characteristics of high performing teams are
related to innovation and strategic system.

Characteristics of High Performing Teams

1. High driven with task-oriented goals.
2. With clear and elevating goals.
3. Committed and competent members who work hard.
4. Collaborative climate of trust among members of team.
5. High standard of excellence.

The Power Being Throne

The board of directors is the policy making body of the corporate
organization. The Chief Operating Officer is the implementing arm of the board
with regards to the policy decision. The board of directors and for representing
the stockholders’ interest in the business.
Higher performance level is expected when the board is actively and
directly involved in shaping the firm’s strategic decisions.

Staffing the Corporate Team and Effective Strategic Leadership

 Staffing corporate members is a critical decision that affects
organizational performance.
 Involves selecting and developing leaders aligned with corporate strategy
and values.

External Sourcing Strategies

 Hiring from outside the organization to fill key positions.
Advantages:
• Brings in new ideas and perspectives
• Experience from other firms
• Encourages innovation and technology adoption
• Develops new systems and procedures

Effective Strategic Leadership

 Involves creating a long-term vision aligned with the organization’s
intent.
 Builds trust, innovation, and ethical standards within the company.

Components of Effective Strategic Leadership

1. Corporate Strategic Direction
2. Maintaining and Exploiting Core Competencies
3. Developing Human Resources
4. Sustainable Organizational Culture
5. Corporate Ethical Standards and Practices
6. Balancing Organizational Control

Corporate Strategic Direction

1. Develop long-term vision and adapt to new goals.
2. Balance short-term objectives with long-term growth.
3. Focus on survival, efficiency, and innovation.

Maintaining & Exploiting Core Competencies

1. Use strengths to deliver quality products and customer value.
2. Share expertise across departments.
3. Encourage innovation and sustainable operations.

Sustainable & Effective Organizational Culture

1. Shared values that shape how business is done.
2. Key Cultural Dimensions:
3. Entrepreneurial Orientation – encourages growth and
4. innovation
5. Autonomy – freedom to act creatively
6. Innovativeness – supports experimentation
7. Risk Taking – encourages calculated risks

Developing Human Resources

 Train and motivate employees for effective strategy implementation.
Importance:
1. Source of competitive advantage
2. Helps achieve mission and vision
3. Vital for leadership and execution
4. Ensures effective use of resources

Corporate Culture & Re-Engineering

 Cultural change is vital for adapting to new environments.
Steps:
1. Hire people with the right values
2. Set clear goals and performance metrics
3. Use performance-based rewards
4. Communicate and solve problems effectively