BUS 6320 III

BUS 6320, Global Strategic Management 1

Course Learning Outcomes for Unit I At the end of this unit, you should be able to:

1. Compare and contrast evolving global strategic business models. 1.1 Describe strategic planning models. 1.2 Describe competitive advantage. 1.3 Differentiate between analysis, formulation, and implementation components of strategies using

the Analysis, Formulation, Implementation (AFI) framework.

2. Analyze the processes for formulating sustainable corporate business strategies. 2.1 Summarize the evolving importance of sustainability in strategic planning processes.

Required Unit Resources Chapter 1: What Is Strategy? (ULOs 1.1, 1.2, and 1.3) This chapter reviews gaining and sustaining competitive advantage, stakeholder strategy, and the Analysis, Formulation, Implementation (AFI) Strategic Framework. Chapter 2: Strategic Leadership: Managing the Strategy Process (ULO 2.1) This chapter examines strategic leadership and the strategic management process. Unit Lesson Lesson: Living in a Global Village: The Importance of Strategy (ULOs 1.1, 1.2, 1.3, and 2.1) We live in an interconnected, technological, competitive world with more than 8 billion people. Firms have historically seen global business as an opportunity to grow their business. Globalization continues to grow in importance, and this unit introduces key concepts to the course.

Global Strategic Management What is global strategic management? In today’s world, many sustainable competitive businesses have some level of globalization and/or internationalization. As illustrated in Exhibit 1.3: The Pyramid of Corporate Social Responsibility in the course textbook, a pyramid of corporate responsibility can be used to outline the range of responsibilities of a firm, beginning with the prerequisite of the economic imperative at the base. According to Rothaermel (2024), strategic management integrates the components of analysis, formulation, and implementation as a systematic way to build competitive advantage. A graphic example illustrating the strategy formulation process is presented in Exhibit 1.4: The Analysis, Formulation, Implementation (AFI) Strategy Framework in the course textbook. Thinking strategically enables managers to view their organization holistically and lead their organization towards a sustainable competitive advantage. Porter (1996, as cited in Jones, 2018) notes that operational effectiveness is necessary, it is not strategy. In Porter’s view operational effectiveness is doing things similar to competitors—but better, whereas strategy is about doing things in different ways or indeed doing different things. In developing this strategy, managers will make trade-offs as gains in one area that might mean expenses in another area.

UNIT I STUDY GUIDE An Introduction to Global Strategic Management

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Competitive Advantage: The Importance of Mission and Vision The strategy must fit within the customers’ perceptions of the company. For instance, Walmart is perceived as a low-cost leader while Nordstrom is perceived as a high quality, high-service product leader. Both strategies work well within the same industry sector as they each clearly differentiate their business strategies targeting different customer needs (Rothaermel,2024). Organizational leaders make decisions within research and development, marketing, production/operations, finance, and human resources. Through decisions in each of these areas, managers differentiate their product/service offering. Several ideas for gaining a competitive advantage are as follows:

• Develop a unique competitive position that differentiates a product from a service. • Understand that there are trade-offs with each business decision. • Obtain sustainability through a solid business strategy that is applied across the entire organization.

Strategic plan development begins with the development of objectives through a vision, mission, and values system. The mission statement of a company is a description of what an organization does including the products and services it provides and the industry in which it will compete. The vision statement is a description of what the organization would like to accomplish while simultaneously creating a motivational message. Think of this as what is going to happen in the future. Organizations have developed and communicated incredibly creative vision statements. In the course textbook, Exhibit 2.5: Companies with Customer-Oriented Vision Statements outlines several examples. The values statement describes the principles by which the organization operates. Think of these as cultural and ethical norms for the organization. This can include ethical cultural norms both internally and externally while providing employees with guidance. The development of an effective mission, vision, and values/objectives provides the basis for effective strategic planning within an organization. Exhibit 2.4: The Interplay Between Purpose-Driven Vision, Strategic Intent, and Core Competencies illustrates the links between these concepts. How do leaders build support across the whole organization for these strategic initiatives?

Corporate Social Responsibility Another area of importance within the umbrella of strategic plan development is that of corporate social responsibility (CSR) which suggests that organizations need to maintain a level of sustainable business practices and reflect upon the communities within which they operate. Historically, a business was about profit. Increasingly it is about profit, people, and planet to reflect broader values. Additionally, companies may communicate their corporate social responsibility report (CSR) detailing their progress toward improving the planet, its people, and the communities in which they work and live. Another aspect of a CSR effort is the company’s contributions to preserving the environment by reducing greenhouse gas emissions, reducing energy consumption, reducing water consumption, and reducing solid waste sent to landfills. Companies may address animal welfare and human rights as well as communicate their community involvement as demonstration of their high-level of corporate social responsibility within their overall strategic plan.

Leadership and Strategy As leaders within an organization look to compile an effective, sustainable business strategy plan, the AFI Strategic Framework of align, formulate, and implement outlined in Exhibit 1.4 provides a useful visualization of the interdependent management tasks within a firm. Porter (1996) highlights the need for a strategy that understands the competition and to find ways to build competitive advantage. As identified in the Five Forces model developed by Porter, competitive forces include industry rivals, customers, suppliers, potential entrants, and substitute products (Rothaermel, 2024). Beginning with industry rivals, organizations need to not only look at their direct competitors but all companies within the industry sector and even related industries. In today’s world, the business environment is changing at lightning speed, which creates an environment where competitors are continuously moving in and out of being a threat. Customers can become a threat as they play one company against another, forcing prices

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down. Organizations are continually vying for the attention of customers, and price point is one of the most effective strategies. Suppliers can charge higher prices that force the organization’s profit margins downward, enabling competitors to take a stronger stance in the industry. New entrants with recent technologies and fresh insights could force organizations to make costly internal changes to remain competitive. Finally, substitute products can offer customers another product that is theoretically of greater value and lower priced (Dobbs, 2012). Through understanding these competitive forces, leaders will be able to understand the industry’s current profitability, providing an opportunity to anticipate competition and profitability over the long run. This could be considered the starting point for developing business strategy. These forces can unveil why changes have occurred in the overall organizational financial position, leading to an understanding of the organization’s strengths, weaknesses, opportunities, and threats (SWOT). Compiling a SWOT analysis is another tool used by leaders within an organization. Strategy development could also be viewed as building a defense against these competitive forces. Rothaermel (2024) describes strategic leadership as the “use of power and influence to direct the activities of others when pursuing an organization’s goals” (p. 35). Think of corporate leaders considered to be effective strategic leaders—what makes them a good leader?

The Strategic Planning Process Exhibit 2.6: Top-Down Strategic Planning in the AFI Strategy Framework in Chapter 2 gives more insight into the three steps of this model. This process suggests that the future can be predicted from the past. In a static environment this approach often works well. To develop plans in a dynamic environment of change firms use a scenario or what-if approach. This scenario planning approach is illustrated in Exhibit 2.7: Scenario Planning within the AFI Strategy Framework. The strategic planning approach can be described as a systematic, fact-based process to assist in making better quality decisions. However, in practice, humans do have specific biases that limit their decision-making capabilities. These limitations have been termed bounded-rationality which is defined as “rationality. . . confined by cognitive limitations and the time available to make a decision. Thus, individuals tend to ‘satisfice’ rather than optimize,” (Rothaermel, 2024, p. 547). Another concern is that “Leaders engaged in a more formalized approach to the strategic process may succumb to an illusion of control, which refers to managers’ inclination to overestimate their ability to control events” (Rothaermel, 2024, p. 57).

Summary Global strategic management requires a comprehensive strategic plan that integrates an organization’s mission, vision, values, and culture. The use of Porter’s five competitive forces will provide leaders with a tool that analyzes the external environment in which the organization is operating. Once the external and internal organizational factors are considered, leaders can effectively compile a strategic plan. Leaders need to maintain several skills including the ability to anticipate, challenge, interpret, decide, align, and learn. These six strategic thinking skills are critical for managers. In summary, strategic management is a systematic, evidence-based approach to guiding and informing decisions related to the direction of the organization. In an increasingly technological, global, and complex socioeconomic environment, the use of strategic management can serve as a vital component in our efforts at developing a comparative advantage over our competitors.

References Dobbs, M. E. (2012, January). Porter's five forces in practice: Templates for firm and case analysis.

Competition Forum, 10(1), 22–33. https://link.gale.com/apps/doc/A313159769/AONE?u=oran95108&sid=AONE&xid=42bee552

Jones, P. (2020, June 7). Strategy vs operational effectiveness: Be clear of the difference. Excitant.

https://www.excitant.co.uk/strategy-vs-operational-effectiveness-be-clear-of-the-difference/

Porter, M. E. (1996, November-December) “What is Strategy?“ Harvard Business Review, 61-78

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Rawpixel. (n.d.). Character illustration of people with global network concept [Image]. Freepik. https://www.freepik.com/free-vector/character-illustration-people-with-global-network- concept_3585190.htm#query=strategy%20global%20business%20planning&position=2&from_view= search&track=ais&uuid=eab5dd3f-267d-4ae8-9a3a-5381e987b5ac

Rothaermel, F. T. (2024). Strategic management (6th ed.). McGraw Hill.

https://online.vitalsource.com/#/books/9781265954574 Vector4stock. (n.d.). Business process illustration infographic of business structure from idea to successful

business [Image]. Freepik. https://www.freepik.com/free-vector/business-process-illustration-infographic-business-structure-from- idea-successful-business- project_26195295.htm#query=strategy%20global%20business%20planning&position=34&from_view =search&track=ais&uuid=eab5dd3f-267d-4ae8-9a3a-5381e987b5ac

Learning Activities (Nongraded) Nongraded Learning Activities are provided to aid you in your course of study. You do not have to submit them. If you have questions, contact your instructor for further guidance and information. Activity: Case Study (Optional) Read Chapter Case 1 Part II in Chapter 1 of your textbook. In a personal journal, note how strategic decision- making assisted the growth of Tesla. Activity: Case Study (Optional) Read Chapter Case 2 Part II in Chapter 2 of your textbook. In a personal journal, answer the four questions at the end of the case. Consider how the leaders in this case have made alternative decisions.