Strategic Management (Week 01) - Students

Welcome to
Strategic Management
(MGT523)
Copyright © 2018 Pearson Education, Ltd. All Rights Reserved.

Strategic Management and
Business Policy 15e, Global Edition
Chapter 1
Basic Concepts of
Strategic
Management
15WELCOME
WELCOME
To contact:
muhammad.faisal@adu.ac.ae or
037090763 or MS Team.
Syllabus
Course Outcome Program Outcome Assessment Tool(s)*

1. Apply concepts, frameworks, and PLO3 Apply appropriate knowledge Final Exam
theories of strategic management in from different business functions in the
an international context. context of managerial decisions or in
relation to financial market operations
2. Analyze and evaluate internal PLO1 Analyze organizational issues Individual Assignment
and/or external global environment of from a global perspective
an organization.
3. Analyze and evaluate corporate, PLO2 Create strategies for improving Group Capstone
business, and/or functional strategies organizational performance. Project (partial grade)
of an organization in an international
context.
4. Formulate sustainable strategies PLO2 Develop functional strategies for Group Capstone
(e.g., green strategies, technology- sustainable organizational Project (partial grade)
based strategies or Artificial performance
Intelligence strategies, etc.) for an
organization based on analysis of
internal and external environments
and understand how these strategies
should be implemented and
evaluated.

Learning Objectives (1 of 2)
1.1 Discuss the benefits of strategic management

1.2 Explain how globalization, innovation, and
environmental sustainability influence strategic
management
1.3 Discuss the differences between the theories of
organizations
1.4 Discuss the activities where learning
organizations excel

1-4
Learning Objectives (2 of 2)
1.5 Describe the basic model of strategic

management and its components
1.6 Identify some common triggering events that act
as stimuli for strategic change
1.7 Explain strategic decision-making modes
1.8 Use the strategic audit as a method of analyzing
corporate functions and activities

1-5
The Study of Strategic Management
• Management is the attainment of

organizational goals in an effective and
efficient manner through planning,
organizing, leading, and controlling
organizational resources.

1-6
• Strategy is a plan of actions that fit together

to reach a clear destination.
– That destination is dictated by a set of decisions that
sets the organization apart from its competitors,
derives from the organization’s unique
characteristics, and is hard to emulate.

1-7

1-8
Demystifying Strategy: The What, Who, How, and
Why
Source: https://hbr.org/2007/09/demystifying-strategy-the-what
1-9
• Strategic Management
– a set of managerial decisions and actions that
determines the long-run performance of a
corporation
1. Why do firms exist?
2. Why do some firms outperform others?
https://www.youtube.com/watch?v=o7Ik1OB4
TaE

1-10
• For Practice (Individual or Group) – Business Strategies
[Reading cases]
https://www.cascade.app/blog/the-5-best-business-strategies-ive-ever-seen
• Tesla - Playing the long game

• Airbnb - Forgetting all about scalability
• Toyota - Humility can be the best business strategy
• HubSpot - Creating an industry then dominating it
• Apple - iPhone launch shows tremendous restraint
• PayPal - Daring to challenge the status quo
• Spotify - Changing the rules of the music industry
1-11
Benefits of Strategic Management
(1 of 2)
• The attainment of an appropriate match, or “fit,”
between an organization’s environment and its
strategy, structure, and processes has positive
effects on the organization’s performance.
• Strategic planning becomes increasingly
important as the environment becomes more
unstable.

1-12
Benefits of Strategic Management
(2 of 2)
• Clearer sense of strategic vision for the firm
• Sharper focus on what is strategically important
• Improved understanding of a rapidly changing
environment

1-13
If Strategy Is So Important, Why Don’t
We Make Time for It? (Clark, 2018)
Companies often incentivize long hours, and keeping yourself

to your desk is rarely a recipe for innovative, strategic thinking.
Clark, D. (2018). If strategy is so important, why don’t we make time for it. Harvard Business Review.

Impact of Globalization / Innovation /
Sustainability
• Globalization
– the integrated internationalization of markets and corporations
– has changed the way modern corporations do business
• Innovation
– describes new products, services, methods, and organizational
approaches that allow the business to achieve extraordinary returns
• Sustainability
– refers to the use of business practices to manage the triple bottom
line
– triple bottom line (People, Planet, Profit)
– Increased awareness about SDGs
1-15

Regional and global strategies of Multinational
Enterprises (MNEs)
• What makes a MNE global?

• Sales?
• Production?
• Assets?
• In countries or regions?
Rosa, B., Gugler, P., & Verbeke, A. (2020). Regional and global strategies of MNEs: revisiting Rugman & Verbeke (2004). Journal of International
Business Studies, 51, 1045-1053.

Regional and global strategies
of MNEs
• TRIAD: North America; Europe; Asia
• Home-region oriented means that a firm has at least 50% of its
sales concentrated in its home market
• Bi-regional orientation, includes firms that achieve less than 50% of
their sales in their home region, and at least 20% of their sales in
another region of the Triad.
• An MNE must have more than 50% of its sales in a host region of
the Triad, for it to be classified as host-region oriented.
• Global orientation status means that an MNE has achieved at least
20% of its sales in each of the three legs of the Triad, but less than
Rosa, B., Gugler, P., & Verbeke, A. (2020). Regional and global strategies of MNEs: revisiting Rugman & Verbeke (2004). Journal of International Business Studies, 51, 1045-
50% of its sales in any of these three regions.

Basic Model of Strategic
Management (1 of 9)
Strategic management consists of four
basic elements:
1. Environmental scanning
2. Strategy formulation
3. Strategy implementation
4. Evaluation and control

1-18
Figure 1-1: Basic Elements of the
Strategic Management Process

1-19
Figure 1-2: Strategic Management Model

1-20
Management (2 of 9)
• Environmental Scanning
– the monitoring, evaluating and disseminating of
information from the external and internal
environments to key people within the
organization
– SWOT analysis: simple way to conduct
environmental scanning

1-21
Figure 1-3: Environmental Variables

1-22
Management (3 of 9)
• Strategy formulation
– process of investigation, analysis, and
decision-making that provides the company
with the criteria for attaining a competitive
advantage
– includes defining the competitive advantages
of the business, crafting the corporate mission,
specifying achievable objectives, and setting
policy guidelines

1-23
Management (4 of 9)
• Mission
– purpose or reason for the organization’s
existence
• Vision
– describes what the organization would like to
become
• Objectives
– results of planned activity

1-24
Management (5 of 9)
• Strategy
– forms a comprehensive master approach that
states how the corporation will achieve its
mission and objectives
– maximizes competitive advantage and
minimizes competitive disadvantage
– corporate, business, functional

1-25
Figure 1-4: Hierarchy of Strategy
Hierarchy of Strategy
You want the
company to
grow/shrink?
You want to compete

or cooperate with
other firms?
Who has the best

marketing/HR/IT/etc.
strategy?
1-
26

Example: Lets Find Out the Strategic
Level/Type?
You want to compete

or cooperate with
other firms?

Level/Type?
Who has the best
marketing/HR/IT/etc.
strategy?

Level/Type?
You want the

company to
grow/shrink?

Management (6 of 9)
• Policy
– a broad guideline for decision-making that links
formulation of a strategy with its
implementation

1-30
Management (7 of 9)
• Strategy implementation
– process by which strategies and policies are
put into action through the development of
programs, budgets, and procedures

1-31
Management (8 of 9)
• Evaluation and control
– a process in which corporate activities and
performance results are monitored so that
actual performance can be compared with
desired performance

1-32
Management (9 of 9)
• Performance
– result of activities
– includes actual outcomes of the strategic
management process
• Feedback/learning process
– revise or correct decisions based on
performance

1-33
Strategic Decision-making
• Strategic decisions
– deal with the long-term future of an entire
organization and have three characteristics:
1.rare
2.consequential
3.directive
– Could you identify the text/scenario related to
these types in the example?
1-34

Strategic Decision-making
1-35

Mintzberg’s Modes of Strategic Decision-making
• Entrepreneurial mode
– strategy is made by one powerful individual
• Adaptive mode
– characterized by reactive solutions to existing problems, rather than a proactive
search for new opportunities
• Planning mode
– gathering of information for situation analysis, the generation of alternatives, and
the selection of the most appropriate strategy
• Logical incrementalism
– a synthesis of the planning, adaptive, and, to a lesser extent, the
entrepreneurial
1-
36

Strategic Decision-making Process
1. Evaluate current performance results.
2. Review corporate governance.
3. Scan and assess the external environment.
4. Scan and assess the internal corporate environment.
5. Analyze strategic factors.
6. Generate, evaluate, and select the best alternative
strategies.
7. Implement selected strategies.
8. Evaluate implemented strategies.
1-37

That sounds all very easy…
•
well…
Many Strategies Fail Because They’re Not Actually Strategies
by Freek Vermeulen
Many strategy execution processes fail because “new strategies” are

often not strategies at all. A real strategy involves a clear set of choices that define
what the firm is going to do and what it’s not going to do. Many strategies fail to get
implemented because they do not represent such a set of clear choices. And many
so-called strategies are in fact goals. “We want to be the number one or number
two in all the markets in which we operate” is one of those. It does not tell you
what you are going to do; all it does is tell you what you hope the outcome will be.
But you’ll still need a strategy to achieve it.

The perils of bad strategy
(Richard Rumelt)
• Bad strategy ignores the power of choice and focus, trying instead to
accommodate a multitude of conflicting demands and interests.
• Like a quarterback whose only advice to his teammates is “let’s win”
• The hallmarks of bad strategy:
• the failure to face the challenge,

• mistaking goals for strategy,
• bad strategic objectives, and
• fluff.

The hallmarks of bad strategy
• the failure to face the challenge,
A strategy is a way through a difficulty, an approach to
overcoming an obstacle, a response to a challenge !
• mistaking goals for strategy

– the “20/20 plan.” Revenues were to grow at 20 percent a year,
and the profit margin was to be 20 percent or higher.
– The kill: “What has to happen for it to be realized?”
– Have you heard about strategies at your workplace?

• Bad strategic objectives
– A long list of things to do, often
mislabeled as strategies or
objectives, is not a strategy.
• Fluff
– A final hallmark of mediocrity and bad
strategy is superficial abstraction—a
flurry of fluff—designed to mask the
absence of thought.

• Fluff:
• “Our fundamental strategy is one of customer-centric intermediation.”

Intermediation means that the company accepts deposits and then
lends out the money. In other words, it is a bank. The buzzphrase
“customer centric” could mean that the bank competes by offering
better terms and service, but an examination of its policies does not
reveal any distinction in this regard.
• The phrase “customer-centric intermediation” is pure fluff. Remove the
fluff and you learn that the bank’s fundamental strategy is being a
bank.

Templates – Good or Bad?

The kernel of good strategy

Example
• In 1995, rival start-up 3Dfx Interactive took the lead in serving the … demand of gamers for fast
3-D graphics chips. Furthermore, there were rumors that industry giant Intel was thinking about
introducing its own 3-D graphics chip. The diagnosis: “We are losing the performance race.”
• key insight was that given the rapid state of advance in 3-Dgraphics, releasing a new chip every
6 months— instead of at the industry-standard rate of every 18 months—would make a critical
difference. The guiding policy, in short, was to “release a faster, better chip three times faster
than the industry norm.”
• To accomplish this fast-release cycle, the company emphasized several coherent actions: it
formed three development teams, which worked on overlapping schedules; it invested in
massive simulation and emulation facilities to avoid delays in the fabrication of chips.
• What would you do?
• https://www.youtube.com/watch?v=p7iwXvBnbIE&t=152s

Strategic Management and Business Policy:
Globalization, Innovation and Sustainability
Sixteenth Edition, Global Edition
Chapter 2
Corporate Governance
Copyright
Copyright © 2024
© 2018 Pearson
Pearson Education
Education, Ltd.
Ltd. AllAll Rights
Rights Reserved.
Reserved.
Learning Objectives
2.1 Describe the role and responsibilities of the board of
directors in corporate governance
2.2 Explain how the composition of a board can affect its
operation
2.3 Describe the impact of the Sarbanes–Oxley Act on
corporate governance in the United States
2.4 Discuss trends in corporate governance
2.5 Explain how executive leadership is an important part of
strategic management

Role of the Board of Directors (1 of 2)
• Corporation
– a mechanism established to allow different parties to
contribute capital, expertise, and labor for their mutual
benefit
• The corporation is fundamentally governed by the board
of directors overseeing top management, with the
concurrence of the shareholders.
• Legal Entity: A corporation is considered a separate legal entity
from its owners, providing limited liability protection to
shareholders. On the other hand, a company is not a separate
legal entity, and its owners have unlimited liability.
• Microsoft, Apple, Saudi Aramco.
Role of the Board of Directors (2 of 2)
• Corporate governance
– refers to the relationship among the board of directors,
top management, and shareholders in determining the
direction and performance of the corporation

Responsibilities of the Board (1 of 2)
1. Effective board leadership including the processes,
makeup, and output of the board
2. Strategy of the organization
3. Risk vs. initiative and the overall risk profile of the
organization
4. Succession planning for the board and top management
team
5. Sustainability

Responsibilities of the Board (2 of 2)
• Due care
– the board is required to direct the affairs of the
corporation but not to manage them
• If a director or the board as a whole fails to act with due
care and, as a result, the corporation is in some way
harmed, the careless director or directors can be held
personally liable for the harm done
• One survey of outside directors revealed that more than
40% had been named as part of lawsuits against
corporations

Role of the Board in Strategic
Management
• Monitor developments inside and outside the corporation
• Evaluate and Influence management proposals,
decisions and actions
• Initiate and Determine the corporation’s mission and
specify strategic options

Figure 2-1
Board of Directors’ Continuum
Source: T. L. Wheelen and J. D. Hunger, “Board of Directors’ Continuum,” Copyright ©

1994 by Wheelen and Hunger Associates. Reprinted by permission

Board of Directors Composition (1 of 4)
• Inside directors
– typically officers or executives employed by the
corporation
• Outside directors
– may be executives of other firms but are not
employees of the board’s corporation

• Agency theory
– states that problems arise in corporations because the
agents (top management) are not willing to bear
responsibility for their decisions unless they own a
substantial amount of stock in the corporation

• Stewardship theory
– proposes that, because of their long tenure with the
corporation, insiders (senior executives) tend to identify
with the corporation and its success

• Affiliated directors
– not employed by the corporation, handle legal or
insurance work
• Retired executive directors
– used to work for the corporation, partly responsible for
past decisions affecting current strategy
• Family directors
– descendants of the founder and own significant blocks
of stock

Codetermination: Should Employees
Serve on Boards? (1 of 2)
• Codetermination
– the inclusion of a corporation’s workers on its board
– began only recently in the United States
• Although the movement to place employees on the
boards of directors of U.S. companies shows little
likelihood of increasing, the European experience reveals
an increasing acceptance of worker participation on
corporate boards

Codetermination: Should Employees
Serve on Boards? (2 of 2)
• Direct interlocking directorate
– when two firms share a director or when an executive
of one firm sits on the board of a second
• Indirect interlocking directorate
– when two corporations have directors who serve on the
board of a third firm

Nomination and Election of Board
Members (1 of 2)
• Ninety-seven percent of large U.S. corporations use
nominating committees to identify potential board
members
• Staggered boards
– only a portion of board members stand for re-election
when directors serve more than one-year terms

Nomination and Election of Board
Members (2 of 2)
Main reasons individuals serve on a board:
• Interested in the business—79%
• Make a difference—65%
• Stay active in business community—50%
• Recruited by friend on the board—25%
• Compensation—14%
• Networking opportunities—11%
• Notoriety/prestige—9%
• Recruited by friend not on the board—4%

Organization of the Board (1 of 4)
• The size of a board in the United States is determined by
the corporation’s charter and its bylaws, in compliance with
state laws
• Although some states require a minimum number of board
members, most corporations have quite a bit of discretion
in determining board size

• The average large, publicly held U.S. firm has ten directors
on its board.
• The average small, privately held company has four to five
members.
• In UAE - The board shall consist of an appropriate number
of qualified members of not less than seven (7) and not
more than eleven (11).
• https://uaecabinet.ae/storage/uploads/files/40/Guide_to_B
oard_Governance_2020.pdf
• Central Bank of the UAE –
https://rulebook.centralbank.ae/en/rulebook/article-5-structure-and-governance-board#:~
:text=A%20Company's%20Board%20must%20be%20comprised%20of%20at%20least
%20seven,3)%20must%20be%20Independent%20Members
.
• Lead director
– consulted by the Chair/CEO regarding board affairs
and coordinates the annual evaluation of the CEO
• Ninety-four percent of U.S. companies that combine the
Chair and CEO positions had a lead director

• The most effective boards accomplish much of their work through committees
• Although they do not usually have legal duties, most committees are granted
full power to act with the authority of the board between board meetings
• Typical standing committees in order of prevalence are;
– Audit (100%)
– Compensation (99%)
– Nominating (99%)
– Finance (31%)
– Executive (30%)
– Risk (12%)
– Social/corporate responsibility (9%)

Evaluating Governance
To help investors evaluate a firm’s corporate governance, a
number of independent rating services such as Standard &
Poor’s (S&P), Moody’s, and others have their own criteria
and matrix to evaluate companies.
S&P Corporate Governance Scoring System researches
four major issues:
1. Ownership structure and influence

2. Financial stakeholder rights and relations
3. Financial transparency and information disclosure
4. Board structure and processes

Trends in Corporate Governance (1 of 2)
• Boards shaping company strategy
• Institutional investors active on boards
• Shareholder demands that directors and top management
own significant stock
• More involvement of non-affiliated outside directors
• Increased representation of women and people of color
• Establishing mandatory retirement age, typically 72
• Boards evaluating individual directors

Trends in Corporate Governance (2 of 2)
• Smaller boards
• Splitting the Chair and CEO positions
• Boards are eliminating 1970s anti-takeover defenses
• Increasingly looking for members with international
experience
• Shareholders may begin to nominate board members
• Society expects boards to balance profitability with social
needs of society

The Role of Top Management
• Top management responsibilities
– getting things accomplished through and with others in
order to meet the corporate objectives
– multidimensional and oriented toward the welfare of the
total organization

Executive Leadership and Strategic
Vision (1 of 3)
• Executive leadership
– directs activities toward the accomplishment of
corporate objectives
– sets the tone for the entire corporation
• Strategic vision
– description of what the company is capable of
becoming

Vision (2 of 3)
• Transformational leaders
– leaders who provide change and movement in an
organization by providing a vision for that change

Vision (3 of 3)
Three key characteristics of effective CEOs:
1. Articulate a strategic vision for the corporation.

2. Present a role for others to identify with and follow.
3. Communicate high-performance standards and also
show confidence in the followers’ abilities to meet these
standards.

Managing the Strategic Planning Process (1 of 2)
• Strategic planning staff

– charged with supporting both top management and the
business units in the strategic planning process

Managing the Strategic Planning Process (2 of 2)
Strategic planning staff responsibilities include:
1. Identify and analyze companywide strategic issues, and

suggest corporate strategic alternatives to top
management
2. Work as facilitators with business units to guide them
through the strategic planning process

THANK YOU FOR
YOUR ATTENTION

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Welcome to

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved.

Course Outcome Program Outcome Assessment Tool(s)*

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved.

1.1 Discuss the benefits of strategic management

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved.

1.5 Describe the basic model of strategic

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved.

• Management is the attainment of

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved.

• Strategy is a plan of actions that fit together

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Copyright © 2018 Pearson Education, Ltd. All Rights Reserved.

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved.

• Tesla - Playing the long game

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Copyright © 2018 Pearson Education, Ltd. All Rights Reserved.

Companies often incentivize long hours, and keeping yourself

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Copyright © 2018 Pearson Education, Ltd. All Rights Reserved.

• What makes a MNE global?

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Copyright © 2018 Pearson Education, Ltd. All Rights Reserved.

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved.

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You want to compete

Who has the best

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You want to compete

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You want the

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Copyright © 2018 Pearson Education, Ltd. All Rights Reserved.

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved.

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved.

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved.

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved.

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved.

Many strategy execution processes fail because “new strategies” are

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved.

• The hallmarks of bad strategy:

• the failure to face the challenge,

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved.

• mistaking goals for strategy

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved.

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved.

• “Our fundamental strategy is one of customer-centric intermediation.”

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved.

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved.

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved.

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved.

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved.

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved.

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved.

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved.