GSMJ#5

BUS 6320, Global Strategic Management 1

Course Learning Outcomes for Unit V Upon completion of this unit, students should be able to:

2. Analyze the processes for formulating sustainable corporate business strategies. 2.1 Identify opportunities and problems of an organization.

7. Discuss an effective global business strategy for an organization.

7.1 Analyze multiple global business strategies. 7.2 Recommend business strategies for an organization.

Course/Unit

Learning Outcomes Learning Activity

2.1

Unit Lesson Chapter 8 Chapter 9 MiniCase 4: Nike’s Core Competency: The Risky Business of Creating Heroes,

pp. 482–486 Unit VI PowerPoint Presentation

7.1

Unit Lesson Chapter 8 Chapter 9 MiniCase 4: Nike’s Core Competency: The Risky Business of Creating Heroes,

pp. 482–486 Unit VI PowerPoint Presentation

7.2

Unit Lesson Chapter 8 Chapter 9 MiniCase 4: Nike’s Core Competency: The Risky Business of Creating Heroes,

pp. 482–486 Unit VI PowerPoint Presentation

Required Unit Resources Chapter 8: Corporate Strategy: Vertical Integration and Diversification Chapter 9: Corporate Strategy: Strategic Alliances, Mergers and Acquisitions MiniCase 4: Nike’s Core Competency: The Risky Business of Creating Heroes, pp. 482–486 Unit Lesson What is corporate strategy and how does that impact a business leader? What should business leaders understand about strategy in order to effectively manage a division or department within a corporation? Rothaermel (2019) defines corporate strategy as that which focuses on the decisions that leaders make with the goal of driving their division, department, and company toward a competitive advantage in several markets or industries simultaneously. At the crux of corporate strategy development remains the hurdles associated with actually identifying the challenges and opportunities that will inevitably manifest themselves as problems within the organization. A well-known analysis is the Pareto principle (80/20 principle), which states that 20% of the causes creates 80%

UNIT V STUDY GUIDE Corporate Strategic Management

BUS 6320, Global Strategic Management 2

UNIT x STUDY GUIDE Title

of the problems. Applying this to business scenarios, 20% of your customers provide 80% of the company’s income, and conversely 20% of your customers creates 80% of your problems. Thinking through this scenario, a company should take very good care of the 20% of customers that are providing them with 80% of their income. Additionally, it is important for leaders to identify the root cause(s) of the problem(s). Ungerer et al. (2016) identify the iceberg principle, which became popular in the 1970s and is still used today in corporate boardrooms. This systematic method of problem-solving requires that accurate, complete, and honest statements of the problems are identified, and a passionate desire to solve the problems/challenges is demonstrated. This principle of problem-solving relies on repeatedly asking “why” through each step of the process. While this seems rudimentary, the overall result is a well-thought-out, rationalized approach to problem-solving within the confines of developing corporate strategy plans. Three dimensions of corporate strategy include vertical integration along the industry value chain, diversification of products and services, and geographic scope (regional, national, or global). In reviewing each of these three dimensions, vertical integration suggests that leaders within the company will determine in which stage of the industry value chain the organization should compete. The diversification segment provides an analysis of which products or services the company should offer. Finally, the geographic scope enables the organizational leaders to consider how far the geographical scope of the organization should be. Through these dimensions, companies look for growth potential. To understand the rest of this lesson, please review the definitions of these three terms:

Organizational leaders need to formulate whether to follow the make (manufacturer) or buy a business model, or a host of other possibilities between these two extremes; strategic alliances fall somewhere between these two extremes. At its very core, strategic alliance is the sharing of knowledge, resources and/or capabilities with another company. Short-term agreements are typically less than a year, and long-term agreements extend over a year. One form of long-term agreements is the franchise. The franchise agreement is a business model that involves a corporation licensing trademarks and methods to another company or independent entrepreneur (franchisee). In order to offer franchises, an organization’s business model must be reproducible. Organizational leaders need to ask whether the business model can be replicated and explained to others and whether it is efficient. What type of assistance will be needed in order for a franchisee to operate? Is the company willing and able to fulfill governmental regulations involving franchises? Is the overall franchise model sustainable? Will the company be able to provide additional value after year one? Does the company

• Strengths embedded deeply into the organization • Provides for differentiation and competitive advantage

Core competencies

• Organization's cost/unit decreases as its output increases • Instrumental in acquiring additional market share

Economies of scale

• Organizational savings as a result of producing two or more outputs for providing services at less cost than producing each individually

Economies of scope

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have the ability to communicate its operations model in an understandable manner? Is the company in a position to be able to finance this type of growth? Once these questions have been affirmed, the company must determine the type of franchise system they will offer. Product and trademark franchises offer franchisees the ability to buy their products and use their trade name. Much more popular is the business format franchise that provides a formula to the franchisee for operating the entire business, which includes a host of significant services for the franchisee. There are advantages and disadvantages in taking an organization to franchise.

A formal franchise agreement is executed, which includes stipulations that the franchisee must follow. Several of the top global franchises are McDonald’s, Subway, 7-Eleven, Wyndham Hotel Group, Dunkin’ Donuts, Ace Hardware, Jiffy Lube, The UPS Store, and GNC. Looking at franchising from the perspective of the franchisee, there are several advantages and disadvantages of moving into this type of venture. Beginning with the advantages, there is reduced risk of failure as you are using a valuable trade name, access to a proven business system, and operating plan. Additionally, management training is typically provided. Immediate supply lines and purchasing power as well as financial support are provided. The disadvantages lie primarily in the costs because there is typically an initial franchise fee and then monthly royalty payments involved. Additionally, some franchisees feel that their creativity is stifled as they cannot deviate off the established business plan. Both the company and the franchisee must understand the agreement and the responsibilities of each. Other types of alternative strategic alliances include licensing, which allows other companies to use intellectual property for a fee or a joint venture in which two or more businesses jointly own a venture. As corporations look for additional means of profitability, restructuring has become a trending method. This methodology incorporates a process of reorganization and divesting of business units. The goal of this strategy is to be able to provide additional focus on the core competencies of the organization. Mergers and acquisitions also provide another opportunity. As two companies join together under friendly terms, a merger is formed. Mergers are popular among firms that are interested in joining forces to beat the rest of the competition. Additionally, there are some economies of scale, which manifest in overall reduced costs. Another form of restructure is that of an acquisition, which is typically performed by one company that wants to gain access to the other company’s markets and/or distribution channels. The company being acquired might also have a competency that the acquiring company does not have, thus making their overall operations more efficient, lending itself to organizational growth.

BUS 6320, Global Strategic Management 4

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A study conducted by Malnight et al. (2019) concurred that organizational growth was driven by creating new markets, serving broader customer needs, and changing the rules of the game (differentiation). While these were referred to as important key strategies, a fourth strategy—purpose—was proposed. It was suggested that many high-growth companies use purpose to stay relevant in a fast-changing world. It helped companies redefine the playing field by considering other industries and orientations. It also allowed them to reshape the value proposition by not only innovating products, services, and/or business models but to also respond to current industry trends. In conclusion, Malnight et al., (2019) suggest that a compelling purpose clarifies what a company stands for, leads to implementation, and is aspirational. From a business leadership standpoint, consideration of making purpose central to their business strategy as well as their strategic plan is paramount. Before concluding this week’s lesson, here is a question for you to ponder: How is it possible that people who have no formal business strategy trading or education have become phenomenal, experienced business strategists? Examples of this might be Jeff Bezos, founder of Amazon, or Mark Zuckerberg, co-founder of Facebook. As a basis for rationale, Ungerer et al. (2016) suggest that both of these founders had a strong theory of business and a clear understanding of how their particular businesses needed to move forward in order to remain competitively advantaged. The theory of business is characterized by environment, mission, and core competencies. Within environment, an analysis of the market, customers, competitors, and technology leads to an understanding of the value of the company’s products and services to the customer. Within mission, an understanding develops of how the organization will make a difference in the economy and in society at large. Within core competencies is an understanding of exactly what the company must excel at in order to maintain its competitive advantage. In conclusion, the global business environment is constantly changing. In order for a company to maintain its competitive advantage, it must continue to monitor its own capabilities and that of its competitors. Leaders within organizations need to understand that they need to develop new resources, competencies, and capabilities in order to continually take advantage of opportunities.

References Malnight, T. W., Buche, I., & Dhanaraj, C. (2019). Put purpose at the core of your strategy. Harvard Business

Review, 1. https://search-proquest- com.libraryresources.columbiasouthern.edu/docview/2287052482?accountid=33337

Rothaermel, F. T. (2019). Strategic management: Concepts (4th ed.). McGraw-Hill Education. Ungerer, M., Ungerer, G., & Herholdt, J. (2016). Crystallising the strategic business landscape: Strategy

analysis practices and tools for business leaders and practitioners. https://libraryresources.columbiasouthern.edu/login?url=http://search.ebscohost.com/login.aspx?direc t=true&db=e000xna&AN=1427027&site=ehost-live&scope=site