CHAPTER 10 : BUILDING ORGANIZATION CAPABLE OF GOOD STRATEGY EXECUTION

Learning Objectives :

1) Gain command of what managers must do to execute strategy successfully .

2) Learn why hiring , training and retaining the right people constitute a key component of the strategy execution process .

3) Understand that good strategy execution requires continuously building and upgrading the organization's resources and capabilities .

4) Recognize what issues to consider in establishing a strategy-supportive organizational structure and organizing the work effort .

5) Become aware of the pros and cons of centralized and decentralized decision making in implementing the chosen strategy .

the principal components of the strategy execution process : 

1) Staff the organization with managers and employees capable of executing the strategy well.

2) Build the organizational capabilities required for successful strategy execution.

3) Create a strategy-supportive organizational structure .

4) Allocate sufficient resources (budgetary and otherwise) to the strategy execution effort .

5) Institute policies and procedures that facilitate strategy execution.

6) Adopt best practices and business processes that drive continuous improvement in strategy execution activities .

7) Install information and operating systems that enable company personnel to carry out their strategic roles proficiently.

8) Tie rewards and incentives directly to the achievement of strategic and financial targets.

9) Instill a corporate culture that promotes good strategy execution.

10) Exercise the internal leadership needed to propel strategy implementation forward .

the 10 basic tasks of the strategy execution process : 

• Build the organizational capabilities required for successful strategy execution
• Establish a strategy-supportive organizational structure.
• Allocate sufficient resources to the strategy execution effort .
• Institute policies and procedures that facilitate strategy execution .
• Adopt best practices and business processes that drive continuous improvement in strategy execution activities .
• Install information and operating systems that enable company personnel to carry out their strategic roles proficiently.
• Tie rewards and incentives directly to the achievement of strategic and financial targets.
• Instill a corporate culture that promotes good strategy execution.
• Exercise the internal leadership needed to propel strategy implementation forward .

THREE key actions : 

² Staffing the organization - putting together a strong management team,and recruitment and retaining employees with the needed experience , technical skills and intellectual capital.

² Acquiring , developing and strengthening strategy-supportive resources and capabilities - accumulating the required resources ,developing proficiencies in performing strategy-critical value chain activities , and updating the company’s capabilities to match changing market conditions and customer expectations.

² Structuring the organization and work effort - Organizing value chain activities and business processes,establishing lines of authority and reporting relationships, and deciding how much decision-making authority to delegate to lower-level managers and frontline employees.

CENTRALIZED ORGANIZATIONAL STRUCTURES 

BASIC TENETS : decisions on most matters of importance should be in the hands of top-level managers who have the experience,expertise,and judgement to decide what is the best course of action , lower-level personnel have neither the knowledge,the time,nor the inclination to properly manage the tasks they are performing , strong control from the top is a more effective means for coordinating company actions

CHIEF ADVANTAGES ; fixes accountability through tight control from the top , eliminates potential for conflicting goals and actions on the part of lower-level managers , facilitates quick decision making and strong leadership under crisis situations.

PRIMARY DISADVANTAGES ; lengthens response times by those closest to the market conditions because they must seek approval for their actions , does not encourage responsibility among lower-level managers and rank-and-file employees , discourages lower-level managers and rank-and-file employees from exercising any initiative .

DECENTRALIZED ORGANIZATIONAL STRUCTURES 

BASIC TENETS : decision-making authority should be put in thee hands of the people closest to,and most familiar with,the situation , those with decision-making authority should be trained to exercise good judgment , a company that draws on the combined intellectual capital of all its employees can outperform a command-and-control company.

CHIEF ADVANTAGES ; encourages company employees to exercise initiative and act responsibly , promotes greater motivation and involvement in the business on the part of more company personnel , spurs new ideas and creative thinking , allows for fast response to market change , entails fewer layers of management . 

PRIMARY DISADVANTAGES ; higher-level managers may be unaware of actions taken by empowered personnel under their supervision , plus the organization at risk of empowered employees happen to make 'bad' decisions  can impair cross-unit collaboration . 

CHAPTER 9 : ETHICS,CORPORATE SOCIAL RESPONSIBILITY,ENVIRONMENTAL SUSTAINABILITY,AND STRATEGY

Learning Objectives :

1 . Understand how the standards of ethical behavior in business are no different from the ethical standards and norms of the larger society and culture in which a company operates . 

2 . Recognize conditions that can give rise to unethical business strategies and behavior.

3 . Gain an understanding of the costs of business ethics failures .

4 . Learn the concepts of corporate social responsibilities and environmental sustainability and how companies balance these duties with economic responsibilities to shareholders.

BUSINESS ETHICS 

CONCERNS STANDARDS OF RIGHT AND WRONG AND THE APPLICATION OF ETHICAL PRINCIPLES TO THE ACTIONS AND DECISIONS OF BUSINESS ORGANIZATIONS AND THE CONDUCT OF THEIR PERSONNEL,BUSINESS ETHICS ARE NOT MATERIALLY DIFFERENT FROM ETHICAL PRINCIPLES IN GENERAL . 

THREE SCHOOLS OF THOUGHT

SCHOOL OF ETHICAL UNIVERSALISM :

common understandings across multiple cultures and countries about what constitutes right and wrong behaviors give rise to universal ethical standards that apply to members of all societies,all companies,and all businesspeople.

SCHOOL OF ETHICAL RELATIVISM : 

different societal cultures and customs have divergent values and standards if right and wrong.thus,what is ethical or unethical must be judged in the light of local customs and social mores and can vary from one culture or nation to another.

INTEGRATED SOCIAL CONTRACTS THEORY:

universal ethical principles based on the collective views of multiple cultures and societies combine to form a "social contract" that all individuals in all situations have a duty to observe.

THREE OTHER FACTORS CONTRIBUTE TO UNETHICAL BUSINESS BEHAVIOR :

1) Faulty oversight that enables the unscrupulous pursuit of personal gain

2) Heavy pressures on company managers to meet or beat short-term earnings targets

3) A company culture that puts profitability and good business performance ahead of ethical behavior.

the effect of the failures in business ethics :

1) Visible costs,such as fines,penalties,and lower stock prices

2)Internal administrative costs such as legal costs and costs of taking corrective action

3)Intangible costs, such as customer defections and damage to the company's reputation

SELF-DEALING : 

occurs when managers take advantage of their position to further their own private interests rather than those of the firm .

SHORT-TERMISM : 

the tendency for managers to focus excessively on short-term performance objectives at the expense of longer-term strategic objectives.it as negative implications for the likelihood of ethical lapses as well as company performance in the longer run .

CORPORATE SOCIAL RESPONSIBILITY (CSR) :

 refers to a company’s duty to operate in an honorable manner,provide good working conditions for employees,encourage workforce diversity,be a good steward of the environment , and actively work to better the quality of life in the local communities where it operates and in society at large.

SUSTAINABLE BUSINESS PRACTICES : 

are those that meet the needs of the present without compromising the ability to meet the needs of the future.

CHAPTER 8 : DIVERSIFICATION AND THE MULTIBUSINESS COMPANY

Learning Objectives :

1 . Understand when and how business diversification can enhance shareholder value .

2 . Gain an understanding of how related diversification strategies can produce cross-business strategic fit capable of delivering competitive advantage .

3 . Become aware of the merits and risks of the corporate strategies keyed to unrelated diversification . 

4 . Gain command of the analytical tools for evaluating a company’s diversification strategy.

5 . Understand a diversified company’s four main corporate strategy options for solidifying its diversification strategy and improving company performance. 

WHAT DOES CRAFTING A DIVERSIFICATION STRATEGY ENTAIL?

² Picking new industries to enter and deciding on the means of entry .

² Pursuing opportunities to leverage cross-business value-chain relationships and strategic fit into competitive advantage. 

² Establishing investment priorities and steering corporate resources into the most attractive business units.

² Initiating actions the boost the combined performance of the corporation’s collection of business.

WHEN BUSINESS DIVERSIFICATION BECOMES A CONSIDERATION

Ø When it spots opportunities for expanding into industries whose technologies and products complement its present business.

Ø When it can leverage its collection of resources and capabilities by expanding into businesses where these resources and capabilities are valuable competitive assets.

Ø When diversifying into additional businesses opens new avenues for reducing costs.

Ø When it has a powerful and well-known brand name that can be transferred to the products of the businesses . 

APPROACHES TO DIVERSIFYING THE BUSINESS LINEUP

l Diversification by Acquisition of an Existing Business

l Entering a New Line of Business through Internal Development

l Joint Ventures

l Choosing a Mode of Entry

CHOOSING THE DIVERSIFICATION PATH : RELATED VERSUS UNRELATED BUSINESS

RELATED BUSINESS : possess competitively valuable cross-business value chain and resource matchups

UNRELATED BUSINESS : have dissimilar value chains and resource requirements,with no competitively important cross-business relationships at the value chain level . 

EVALUATING THE STRATEGY OF A DIVERSIFIED COMPANY

STEP 1 :

 Evaluating Industry Attractiveness

STEP 2 :

 Evaluating Business-Unit Competitive Strength

STEP 3 :

 Determining the Competitive Value of Strategic Fit in Diversified Companies

STEP 4 : 

Checking for Resource Fit

STEP 5 : 

Ranking Business Units and Assigning a Priority for Resource Allocation

STEP 6 :

 Crafting New Strategic Moves to Improve Overall Corporate Performance . 

CHAPTER 7 : STRATEGIES FOR COMPLETING IN INTERNATIONAL MARKETS

Learning Objectives :

1 . Develop an understanding of the primary reasons companies choose to compete in international markets.
2 . Learn how and why differing market conditions across countries influence a company's strategy choices in international markets.
3 . Learn about the five major strategic options for entering foreign markets.
4 . Gain familiarity with the three main strategic approaches for competing internationally.
5 . Understand how multinational companies are able to use international operations to improve overall competitiveness . 
6 . Gain an understanding of the unique characteristics of competing in developing-country markets.

Why companies decide to enter foreign markets ?

• To gain access to new customers
• To achieve lower costs through economies of scale,experience,and increased purchasing power
• To further exploit core competencies
• To gain access to resources and capabilities located in foreign markets
• To spread business risk across a wider market base 

Why competing across national Borders Makes Strategy-Making More Complex

• Different countries have different home-country advantages in different industries 

• Location-based value-chain advantages for certain countries

• Differences in government policies,tax rates, and economic conditions

• Currency exchange rate risks

• Differences in buyer tastes and preferences for products and services

POLITICAL RISKS : stem from instability or weaknesses in national governments and hostility to foreign business. ECONOMIC RISKS : stem from the stability of a country's monetary system,economic and regulatory policies,the lack of property rights protections.

EXPORT STRATEGIES Advantages : Low capital requirements, economies of scale in utilizing existing production capacity , no distribution risk , no direct investment risk Disadvantages : Maintaining relative cost advantage of home-based production , transportation and shipping costs , exchange rates risks , tariffs/import duties , loss of channel control

licensing and franchising strategies Advantages : Low resources requirements , income from royalties and franchising fees , rapid expansion into many markets Disadvantages : Maintaining control of proprietary know-how , loss of operational and quality control , adapting to local market tastes and expectations .  foreign subsidiary strategies  Advantages : high level of control , quick large-scale market entry , access to acquired firm's skills , avoids entry barriers  Disadvantages : Costs of acquisition , complexity of acquisition process , integration of the firms' structures,cultures,operations and personnel greenfield strategies  Advantages : High level of control over venture , "learning by doing" in the local market , direct transfer of the firm's technology,skills,business practices,and culture Disadvantages : Capital costs of initial development , risks f loss due to political instability or lack of legal protection of ownership , slowest form of entry due to extended time required to construct facility benefit of alliance and joint venture strategies :   Gaining partner's knowledge of local market conditions , achieving economies of scale through joint operations , gaining technical expertise and local market knowledge , sharing distribution facilities and dealer networks and mutually strengthening each partner's access to buyers , directing competitive energies more toward mutual rivals and less toward one another , establishing working relationships with key officials in the host-country government. the risks of strategic alliances with foreign partners : Outdated knowledge and expertise of local partners , cultural and language barriers , costs of establishing the working arrangement , conflicting objectives and strategies and/or deep differences of opinion about joint control , differences in corporate values and ethical standards , loss of legal protection of proprietary technology or competitive advantage , over dependence on foreign partners for essential expertise and competitive capabilities .  INTERNATIONAL STRATEGY : A strategy for competing in two or more countries simultaneously .  MULTIDOMESTIC STRATEGY  : is one in which a firm varies its product offering and competitive approach from country to country in an effort to be responsive to differing buyer preferences and market conditions . It is a think-local, act-local type of international strategy,facilitated by decision making decentralized to the local level .  GLOBAL STRATEGY : is one in which a company employs the same basic basic competitive approach in all countries where it operates,sells much the same products everywhere,strives to build global brands,and coordinates its actions worldwide with strong headquarters control.It represents a think-global,act-global approach. TRANSNATIONAL STRATEGY : a think-global,act-global approach that incorporates elements of both multidomestic and global strategies .

THREE APPROACHES FOR COMPETING INTERNATIONALLY

MULTIDOMESTIC APPROACH  (Think local,act local) 

Advantages : can meet the specific needs of each market more precisely,can respond more swiftly to localized changes in demand,can target reactions to the moves of local rivals,can respond more quickly to local opportunities and threats

Disadvantages : hinders resource and capability sharing or cross-market transfers,higher production and distribution costs,not conductive to a worldwide competitive advantage

TRANSNATIONAL APPROACH  (Think global,act local)

Advantages : offers the benefits of both local responsiveness and global integration,enables the transfer and sharing of resources and capabilities across borders,provides the benefits of flexible coordination

Disadvantages : more complex and harder to implement , conflicting goals may be difficult to reconcile and require trade-offs,implementation more costly and time-consuming

GLOBAL APPROACH  (Think global,act global)

Advantages : lower costs due to scale and scope economies,greater efficiencies due to the ability to transfer best practices across markets,more innovation from knowledge sharing and capability transfer,the benefit of a global brand and reputation

Disadvantages : Unable to address local needs precisely,less responsive to changes in local market conditions,higher transportation costs and tariffs,higher coordination and integration costs. 

Chapter 6 : Strengthening A Company's Competitive Position

Learning Objectives :

1) Learn whether and when pursue offensive or defensive strategic moves to improve a company's market position .

2) Recognize when being a first mover or a fast follower or a late mover is most advantageous .

3) Become aware of the strategic benefits and risks of expanding a company's horizontal scope through mergers and acquisitions.

4) Learn the advantages and disadvantages of extending the company's scope of operations via vertical integration.

5) Become aware of the conditions that favor farming out certain value chain activities to outside parties .

6) Understand when and how strategies alliances can substitute for horizontal mergers and acquisitions or vertical integration and how they can facilitate outsourcing.

The principal offensive strategy options include the following :

1) Offering an equally good or better product at a lower price .

2) Leapfrogging competitors  by being first to market with the next-generation products.

3) Pursuing continuous product innovation to draw sales and market share away from less innovative rivals.

4) Adopting and improving on the good ideas of other companies.

5) Using hit-and-run or guerrilla warfare tactics to grab market share from complacent or distracted rivals .

6) Launching a preemptive strike to secure an advantageous position that rivals are prevented or discouraged from duplicating . 

BLUE OCEAN STRATEGY 

-offers growth in revenues and profits by discovering or inventing new industry segments that create altogether new demand.

Strengthening A Company's Market Position Via Its Scope Of Operations . 

Horizontal Scope

-the range of product and service segments that a firm serves within its focal market .

Vertical Scope

-the extent to which a firm's internal activities encompass one,some,many,or all of the activities that make up an industry's entire value chain system,ranging from raw-material production to final sales and service activities . 

Backward integration

-involves entry into activities previously performed by suppliers or other enterprises positioned along earlier stages of the industry value chain system.

Forward integration

-involves entry into value chain system activities closer to the end user.

OUTSOURCING

-involves contracting out certain value chain activities to outside vendors .

-outsourcing certain value chain activities makes strategic sense whenever : an activity can be performed better or more cheaply by outside specialists,the activity is not crucial to the firm's ability to achieve sustainable competitive advantage,it improves organizational flexibility and speeds time to market,it reduces the company's risk exposure to changing technology or buyer preferences,it allows a company to assemble diverse kinds of expertise speedily and efficiently,it allows a company to concentrate on its core business,leverage its key resources, and do even better what it already does best.

STRATEGIC ALLIANCES

-is a formal agreement between two or more separate companies in which they agree to work cooperatively toward some common objective.

-the benefits of strategic alliances : picking a good partner,being sensitive to cultural differences,recognizing that the alliances must benefit both sides,ensuring that both parties live up to their commitments,structuring the decision-making process so that actions can be taken swiftly when needed,managing the learning process and then adjusting the alliance agreement over time to fit new circumstances.

Chapter 5 : The Five Generic Competitive Strategies

Learning Objectives : 

1) Understand what distinguishes each of the five generic strategies and why some of these strategies work better in certain kinds of industry and competitive conditions than in others.

2) Gain command of the major avenues for achieving a competitive advantage based on lower costs.

3) Learn the major avenues to a competitive advantage based on differentiating a company's product or service offering from the offerings of rivals.

4) Recognize the attributes of a best-cost provider strategy-a hybrid of low-cost provider and differentiation strategies.

THE FIVE GENERIC COMPETITIVE STRATEGIES .

First : Low-Cost Provider Strategy

Striving to achieve lower overall costs than rivals on comparable products that attract a broad spectrum of buyers. (Mydin)

Second : Broad Differentiation Strategy

Seeking to differentiate the company's product offering from rivals' with superior attributes that will appeal to a broad spectrum of buyers. (Honda)

Third : Focused Low-Cost Strategy

Concentrating on a narrow buyer segment (or market niche) and outcompeting rivals on costs, thus being able to serve niche members at a lower price.(Hari-hari)

Forth : Focused Differentiation Strategy

Concentrating on a narrow buyer segment (or market niche) and outcompeting rivals with a product offering that meets the specific tastes and requirements of niche members better than the product offering of rivals.

Fifth : Best-Cost Provider Strategy

Giving customers more value for their money by satisfying buyers' expectations on key quality/features/performance/service attributes while beating their price expectations. (Adidas)

Chapter 4 Evaluating A Company's Resources , Capabilities , and Competitiveness.

Learning Objectives : 

1)Learn how to access how well a company's strategy is working.

2)Understand why a company's resources and capabilities are central to its strategic approach and how to evaluate their potential for giving the company a competitive edge over rivals.

3)Discover how to assess the company's strengths and weaknesses in light of market opportunities and external threats.

4)Grasp how a company's value chain activities can affect the company's cost structure and customer value proposition.

5)Understand how a comprehensive evaluation of a company's competitive situation can assist managers in making critical decisions about their next strategic moves . 

The Components of a Single-Business Company's Strategy

 In this chapter we are dealing with some questions which are how well is the firm's present strategy working,what are the firm's competitively important resources and capabilities,Is the firm able to take advantage of market opportunities and overcome external threats to its external well-being,are the firm's prices and costs competitive with those of key rivals,and does it have an appealing customer value proposition,is the firm competitively stronger or weaker than key rivals,what strategic issues and problems merit front-burner managerial attention.

When dealing with the first questions,the firms present a good strategy when it's achieving its stated financial and strategic objectives and it's an above industry performer. The answer for the second questions is based on the competitive assets,the firm's resources and capabilities,the determinants of its competitiveness and ability to succeed in the marketplace and the firm's strategy depending on what factors to develop sustainable competitive advantage over its rivals. 

Types of Company Resource

Dealing with the third question , the key question is whether the company is in a position to pursue attractive market opportunities and defend against external threats to its future well-being. SWOT analysis is the best solution in order to answer the third question . Based on the question 4 , the higher a company's costs are above those of close rivals,the more competitively vulnerable it becomes. The answer for the fifth question is based on how the company rank relative to competitors on each of the important factors that determine market success and does the company have a net competitive advantage or disadvantage versus major competitors . Last but not least , in answering the last question , the company need to get a clear fix on exactly what strategic and competitive challenges confront the company , which of the company's competitive shortcomings need fixing, and what specific problems merit front-burner attention by company managers .