SMBP_E5

MBA 5101, Strategic Management and Business Policy 1

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

2. Compare and contrast the integral functions of corporate governance. 2.1 Discuss the competitive and cooperative strategies available to corporations.

4. Analyze the processes for formulating corporate strategy. 4.1 Apply the directional strategies of growth, stability, and retrenchment.

Reading Assignment In order to access the following resources, click the links below: Balmer, J. T. (2012). Corporate brand management imperatives: Custodianship, credibility, and calibration.

California Management Review, 54(3), 6-33. https://libraryresources.columbiasouthern.edu/login?url=http://search.ebscohost.com/login.aspx?direc t=true&db=bth&AN=75272979&site=ehost-live&scope=site

College of Business – CSU. (2016, January 12). MBA5101 Unit V lesson video [Video]. YouTube.

https://youtu.be/V9lvAgb3ImE?list=PL08sf8iXqZn54RIuJs-skgp4omxG-UOu5 Click here to access a transcript of the video. Dye, R., & Sibony, O. (2007). How to improve strategic planning. McKinsey Quarterly, (3), 40-49.

https://libraryresources.columbiasouthern.edu/login?url=http://search.ebscohost.com/login.aspx?direc t=true&db=bth&AN=26295836&site=ehost-live&scope=site

Unit Lesson The strength, weakness, opportunity, and threat (SWOT) process is a good first step in strategic planning. It helps the strategic planning committee to align their cross-functional expertise and the internal and external

company views to be examined for careful review and analysis. Although the SWOT analysis process is important, it is limited because it consists of the strategic planning committee members’ opinions and data. These opinions and data help with the process, but should be considered with the influence of bias, prejudice, and imperfect knowledge. The next step begins the strategy formulation process. This step is often referred to as the strategic planning or long-term planning process. The strategic planning committee concerns itself with developing a corporation's mission, objectives, and policies. While the SWOT analysis provides an internal and external company, industry, and competition overview, strategy formulation begins with comparing and aligning those findings with the current company mission, objectives, strategies and policies.

Validating questions posed by the strategy formulation process include the following areas:

UNIT V STUDY GUIDE The Strategic Planning Process

Meeting room (Argerich, 2008).

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1. Are the reasons for the firm's existence still valid or must they change? 2. Will what the firm discovered change its objective results realization? 3. If the mission and/or the objectives have changed, what impact does that have on current and future

strategies? 4. Will the firm need to employ any new policies as a result of these new anticipated changes?

The strategic planning process has five steps. These steps are: review return of investment and probability, analyze performance of management and board with an alignment, review the external environments and scans, review internal environment and scans, and select strategic factors (Clayton, n.d.). There are a number of different ways to incorporate the steps into the planning process. Currently, the most common method is the use of the planning mode. The planning mode is popular because it uses a systematic gathering of appropriate information for situation analysis. This is helpful because it allows the strategic planning committee to employ the information it has carefully gathered into something that is approachable and useful for its disparate members. This enables alternative strategies and the rational selection of the most important strategy (Clayton, n.d.). The selection of strategy is influenced and determined by the members of the process, so selection is very important. In the first of these five steps, the firm carefully scrutinizes its performance in the form of return on investment and profitability. In doing so, it carefully reviews if these results are still properly aligned with the firm's current mission, objectives, strategies, and policies. This performance can be in the form of quarterly and annual reports, tax filings, stock and bond data, and surveys. The second step analyzes the performance of the firm's board of directors and top management. This ensures the company will still be able to take advantage of opportunities that are consistent with its mission and objectives. If, for any reason, there is found to be a lack of alignment between the current performance and the current mission, objectives, strategies, and policies, this is the opportunity for the firm to establish alignment again. Alignment can be established by creating or modifying the company mission, its board of directors, its top management, or any other of the elements reviewed in the first two steps. This is a difficult step because top management and board members may be entrenched in their positions, and it is difficult to remove those making the decisions. In step three, the firm is ready to review the results of the external environment scan and assessment process. The three areas within the external environment are natural, societal, and task. During this third process step, the firm will determine the strategic factors that pose opportunities and threats. This could come in the form of a SWOT analysis. Concurrently, in step four, the firm will be looking inward to review its internal environment scan and assessment. The three areas within the internal environment are structure, culture, and resources. The firm will determine the strategic factors that are strengths (especially core competencies) and weaknesses. Finally, in step five, the firm will be ready to select strategic factors in light of their current situation. In doing so, they will pinpoint the problem areas and review and revise the corporate mission and objectives as necessary. This is an important phase in developing a plan of action. By utilizing the five-step strategic decision process, the firm enables continued adherence to its mission, objectives, strategies, and policies. At the same time, leadership is using the planning mode process, systematically gathering and processing the appropriate information to make any necessary changes to best prepare it to remain a strong competitor in its industry segment. This process gives the firm the flexibility to adapt to changes in the marketplace while still ensuring the value of its internal strengths and core competencies (Clayton, n.d.). Now that the firm has carefully taken the information from the SWOT analysis and used it to evaluate its own competitive readiness, it is ready to determine what type of strategy it should implement. Raynor (2007) describes a corporate strategy as being primarily about the choice of direction for the firm as a whole. It is the

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plan that helps to allocate the personnel, resources, and energy of the company to the agreed-upon goals and vision. There are three significant issues corporate planners face: directional strategy, portfolio analysis, and corporate parenting. Each of these issues can determine how the firm will create its functional strategies. All three play some role and impact the planning phase. Directional strategy relates to the firm's overall orientation towards growth, stability, or retrenchment. If a company chooses the directional strategy growth objective, it will need to concentrate on either vertical or horizontal growth. It will consider diversification and whether it will be concentric (concentration on the current product line(s) in industry) or conglomerate diversification (diversifying into an industry unrelated to its current one) (Raynor, 2007). If a firm remains uncertain due to the stability of the industry in which it competes, it will need to use the stability objective within the corporate directional strategy approach. The firm will choose a path to pause, proceed with caution, make no change, or maximize profits. Every situation is different, so company culture plays a big part in this selection process. Finally, if the financial future of the company is in question, a retrenchment objective may be the approach taken. In retrenchment, the company may choose a turnaround strategy, sellout or divest, or choose bankruptcy/litigation as an appropriate strategy. This decision process can be expanded to include outside resources such as consultants in the business, financial, and legal fields. In many firms, portfolios will be built with strategic options and differing product lines as diverse investments for a foundation of profitability (Raynor, 2007). In using this approach, certain firms will have requirements that all business units be ranked within the top three of their industry, or face being sold off. On the opposite end of the spectrum, corporate parenting analyzes the strengths and resources of a corporation’s overall portfolio to boost business across the realm of its holdings. In this case, the higher performing units can use their resources and synergy to help other business units improve their cost structures and potential profitability. The firm's functional strategies need to be reviewed to ensure their optimal performance before final strategy selection is implemented. Within a firm, there are numerous functional areas, but there are typically eight functional strategies: marketing strategy, financial strategy, research and development strategy (R & D), operations strategy, purchasing strategy, logistics strategy, human resource management strategy (HRM), and information technology strategy (Sevilla, 2015).

References Argerich, L. (2008). Meeting room, table and paper board [Image]. Wikimedia Commons.

https://commons.wikimedia.org/wiki/File:Meeting_room,_table_and_paper_board.jpg Clayton, J. (n.d.). The five stages of the strategic management process. Chron.

http://smallbusiness.chron.com/five-stages-strategic-management-process-18785.html Raynor, M. E. (2007) What is corporate strategy, really? Ivey Business Journal.

https://iveybusinessjournal.com/publication/what-is-corporate-strategy-really/ Sevilla, C. M. (2015). Functional areas of a business. Founder's Guide. http://foundersguide.com/functional-

areas-of-a-business/

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Suggested Reading In order to access the following resources, click the links below: Read sections 8.2-8.5: Global Text Project. (2011). Business Fundamentals.

https://cnx.org/contents/[email protected]:WtnhO7lA@4/Introduction-to-external-relat