strategic management

Chapter 2

A mission statement describes the aim of existence for an organization, person or entity. It should guide the functions, overall goals, course and decision making. For the case of an organization, information included in the statement includes aim, primary stakeholders, value proposition, and a declaration of its core purpose. For example McDonald’s mission statement highlights the aspects of fast food for global target audience, tasty and competitively priced products for its value proposition, consistency and conducive environment for its competitive advantage. Essentially, the statement answers the question of what a business does, how it does it and for whom as well as what value proposition they offer.

The agency theory is a model/concept that describes why conduct or choices differ when displayed by members of a group. The concept defines the association amongst one party, known as the principal, who assigns work to another, known as the agent. The concept explains the differences in conduct and decisions between the two by noting aspects of divergences in goals, autonomy of their individual goals, and approaches toward risk. The agency problem is about conflict of interests among the various stakeholders because of divergences in goals. The two common problems are "adverse selection" and " moral hazard." Adverse selection applies when the principal is unable to determine if the representative or agent truthfully embodies his capability to do the work assigned and compensated for. The remedy to this problem is to establish suitable inducements so that agents can act according to the wish of the principals.

Chapter 3

There are many benefits that accrue to organizations that define and implement social responsibility concept benefits. Social responsibility concept continues to take an evolving meaning because it is a fairly new idea to many since its advent in the early 1970s. Social responsibility refers to acts undertaken by an organization’s management that are not part of their legal mandate but which aim to enhance the relationship between the company and other stakeholders. For example, a company can support a community based talent search academy with an objective of enhancing the development of that community. The company may in future benefit when the community has enabled neighbors earn a living and possibly having purchasing power.

The three basic philosophies of social responsibility include Utilitarian, Managerial, and Relational Theories. I would find the Utilitarian the most appealing. The Utilitarian theory states that the firm is part of the economic component and those businesses or firms are there to maximize profits. Looking at the firm we all agree that the management plays the role of an agent and the real owners are the shareholders who commit their resources to make a profit. Hence, the firm is there to serve as first priority the interest of the shareholders and not any other person.

Chapter 4

Economic

Examples of adjustments in the remote environment of U.S. business in the economic area comprise:

Interest rates

Following recent credit crisis and the ensuing recession, interest rates have gone done to 0.25 percent. Wall Street and financial institutions are particularly keen on changes of interest rates, reacting positively to declines or no adjustments and unfavorably to increases.

Outsourcing

Outsourcing is “contracting work from outside the company that was previously done from within”. Firms are responding to pressure to cutback on costs, streamline capacity or gain operational competences through outsourcing concept. Research reports that about 3.4 million jobs will move to international destinations by 2020.

Social

The consumer movement

This is an organized movement of consumers and administration to reinforce and protect the rights and of buyers in goods consumption matters. Consumerists have increasingly lobbied and acquired on many fronts such as the need and right to identify the real cost of credit, basic goods ingredients and nutrition info on food.

Multiculturalism

It pertains to managing interethnic relations. This is founded on the importance and value of diversity in customs, ethnicity, culture, and religion. The U.S is now regarded as a mixture of diverse cultures which retain individual features. This is a move away from the assimilation towards multiculturalism.

Political

Acts

There are numerous Acts that aim to tighten various segments in the US. The most recent is the Healthcare Act 2010, which is aimed at ensuring medical cover for all. Others include tighter accounting measures following recent scandals and loopholes leading to the credit crisis. Some of the recent scandals include the Enron case.

Software and Video Piracy

The ever rising challenges in Intellectual property violations have persuaded the US government to apply pressure on foreign governments to crack on these vices.

Technological

Internet and IT

The internet has become a strong networking, and research tool. All companies need to understand and harness its potential on brand, image and marketing. For example, an unhappy consumer may cause millions to know and influence their behavior.

Privacy matters

Technological revolution has increased concerns over confidentiality. Identity imitations, personal data violations, and administration surveillance are some of latest technological alterations which have appeared as strong confidentiality concerns.

Ecological

This is the way human relates with other living things and elements such as the air, soil, and water and the interdependence between them.

Pollution

Businesses are often blamed as being the mainsource of pollution and need to awake to this fact and respond accordingly. New regulations are coming up that carry heavy penalties and other consequences. Companies need to know consumer and general public perceptions to avoid backlash.

Global warming

It is regarded as the rise in temperature on the earth's atmosphere due to release of greenhouse gases.

Chapter 5

Important for a company to globalize

Firms should seek global venture in order to capitalize on existing opportunities in foreign markets. There are unexploited and emerging markets that can considerably enhance company profitability. They should also venture abroad to transfer older technology which may still be new in the foreign market. Some foreign markets are a good source of raw materials and inputs. Firms can also seek international presence to ease on domestic competition (Peteraf, 1993). An example of a company that is gradually increasing its global presence is Target Corporation.

Strategic orientations of global firms

Multinational companies have tended towards foreign undertakings. A firm with an ethnocentric alignment considers that the ideals and priorities of the mother organization ought to inform the strategic choice process of all of its processes. An example is Google Corporation. On the other hand, a company that exhibits a polycentric orientation allows the culture of the host nation to influence strategy formulation and implementation and overall dominate decision-making procedure. An example is the Coca Cola Company. In comparison, a regiocentric orientation occurs when the mother company tries to combine its own inclinations with those of the area under focus and hence attaining a regionally subtle concession. An example is the Ford Company and other car manufacturers in Asia and European locations. Geocentric orientation firms embrace a worldwide systems method to strategic decision-making, and therefore underline global integration. An example is financial institutions such as the Citi Bank.

Chapter 6

Resource-based view

Resource-based view of internal analysis refers to a strategic tool that emphasizes on distinctive and valuable resources that an organization has that offers it a continuous competitive edge (Hoopes, Madsen & Walker, 2003). A resource-based view in an organization management emphasizes on strategic design on recognizing and developing resources in areas that include branding, customer intimacy programs and product enhancement. Important resources comprise machine capacity, customer allegiance and technological edge. Resources become more valuable when they are used consistently over time, should be rare, not easy to imitate and substitute.

Swot analysis is a strategic tool or method used to establish a firm’s internal status and its external environment. The tool defines a firm’s strength, weaknesses, opportunities and threats. Swot looks at the internal condition of the firm to identify and its potential weaknesses and presents the management with information to formulate strategies to utilize its strengths and overcome its weaknesses. Potential weaknesses of the tool include its static nature in an environment that is fast evolving. The tool in its basic form does not offer strategic solution but only identify the status.

Chapter 7

Horizontal and vertical acquisition

Horizontal acquisition refers to the process where a firm acquires another‘s products or entire company in the same market sector for example, in the case of acquiring a competitor. Horizontal acquisition can grow market share and ease competition if the acquired party is a competitor. On the other hand, vertical integration entail a company acquiring another or products of another in a different market for example, acquiring a supplier of input or a distributor of firm products. Vertical acquisition offers an indirect technique of growing market share by having control of competitors’ ability to access essential supplies.

Conglomerate and concentric diversification

Conglomerate diversification happens when an organization expands its occupation into an area which is different to its core occupation. This regularly happens as a result of a merger or buyout of another organization or it can arise if the business wants to grow diverse products. The main benefit of conglomerate diversification is the potential that it unlocks and the new opportunities available.

In concentric diversification there is a technological resemblance between the industries, which implies that the company is able to influence its technical know-how to achieve some competitive advantage. For instance, a business that produces industrial pastes may choose to diversify into pastes to be sold through retailers. The technology would be similar but the marketing work would need to be amended or adjusted.

Chapter 8

A low-cost leadership strategy

A firm following the strategy should embrace three activities or capabilities that include partaking a low-cost delivery and distribution system, enhanced and tight cost control and manage a frequent comprehensive control reports (Porter, 1980). Wal-Mart stores are an example of an organization that uses and has attained low-cost leadership strategy through the stated capabilities. Wal-Mart designed the system of sharing sales information through computer systems with main dealers, such as Proctor & Gamble.

Differentiation-based strategy

These are strategies used by firms that have a wide range of products targeting diverse markets such as the middle class, low class, and the upper class (Rumelt, 1991). Differentiation strategy entails a firm using additional features to serve needs of discerning customers at a premium. Companies that use this method include the Boeing and other airline companies where aircrafts are segmented into first, economy and business classes.

References

Hoopes, D.G.; Madsen, T.L.,; Walker, G. (2003). Guest Editors’ Introduction to the Special Issue: Why is There a Resource-Based View? Toward a Theory of Competitive Heterogeneity. Strategic Management Journal, 24, 889–902.

Peteraf, M. A. (1993). The cornerstones of competitive advantage: a resource-based view. Strategic Management Journal, 14(3). 179–191.

Porter, M. E. (1980). Competitive Strategy: Techniques for Analyzing Industries and Competitors. New York, NY: Free Press

Rumelt, R. P. (1991). How much does industry matter?. Strategic Management Journal, 12(3). 167–185.