BBA 407

13 Crucial Concepts in Strategic Management BBA 407 Strategic Management Prof. Jorge Silva-Puras Lehman College, Spring 2024

13 Crucial Concepts in Strategic Management: 1. Vision and Mission: These are the foundation of strategic planning. A vision statement describes what the organization aspires to be in the future, while a mission statement outlines the organization's purpose, including who its customers are, what it does, and how it does it.

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2. SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats): This tool helps in understanding internal strengths and weaknesses, as well as external opportunities and threats, allowing a company to position itself optimally in its environment.

3. Competitive Advantage: The focus here is on identifying what sets the company apart from competitors. This could be cost leadership, product differentiation, or niche strategies.

4. Porter's Five ForcesThis model helps in analyzing an industry's competitive environment. The five forces are the threat of new entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitute products/services, and competitive rivalry within the industry.

5. Strategic Planning: This involves setting long-term goals and objectives, determining actions to achieve them, and allocating resources to implement these actions. It requires a long-term view and is typically reviewed and updated regularly.

6. Value Chain Analysis: This concept focuses on the series of activities that an organization performs to deliver a valuable product or service to the market. The aim is to add value at each step and improve efficiency.

7. Corporate Governance: This pertains to the structures, systems, and processes in place for overseeing and controlling a company, ensuring accountability, fairness, and transparency in the company's relationship with its stakeholders.

8. Corporate Social Responsibility (CSR): CSR involves businesses practicing ethical behavior by considering their impact on environmental and social well-being. It's increasingly important for reputation management and stakeholder engagement.

9. Balanced Scorecard: This tool provides a framework for tracking the effectiveness of strategic implementation by balancing financial measures with performance metrics from customer perspectives, internal processes, and learning and growth activities.

10. Change Management: Effective strategic management often involves change.

Change management refers to the approach to transitioning individuals, teams, and organizations to a desired future state to effectively implement new strategies and manage resistance.

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11. PESTEL Analysis: Examining external macro-environmental factors (Political, Economic, Social, Technological, Environmental, Legal) that can affect an organization.

12. Strategic Alliances and Partnerships: Forming cooperative agreements with other organizations to pursue mutual goals, share resources, and leverage complementary strengths.

13. Innovation and Entrepreneurship: Encouraging and managing innovation and entrepreneurial activities within an organization to drive growth and competitive advantage.

These concepts collectively provide a comprehensive framework for analyzing, planning, and executing strategies in organizations. They address both the internal dynamics and external environmental factors that affect an organization's ability to achieve its objectives.

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CONCEPT 1: Vision and Mission Vision and mission statements are foundational elements in strategic management and planning, playing distinct yet complementary roles.

Source: https://www.wordstream.com/blog/ws/2021/07/02/how-to-write-a-business-mission-statement

Vision Statement - Purpose: A vision statement articulates an organization's aspirational goals. It paints a picture of what the organization aims to become in the future. This statement serves as a guiding star, providing direction and inspiration for the organization's long-term aspirations.

- Characteristics: - Future-Oriented: It focuses on the desired future state of the organization.

- Inspirational: It aims to motivate and inspire stakeholders by presenting an ideal future.

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- Broad and Aspirational: It is deliberately broad, allowing room for growth and evolution.

- Memorable and Engaging: A good vision statement is easy to remember and resonates with employees, customers, and other stakeholders. PESTEL - Examples: - A tech company might envision "a world where every home is connected and empowered by cutting-edge technology."

- An educational institution might aim "to be a global leader in innovative learning and education excellence."

Mission Statement - Purpose: The mission statement defines the organization's core purpose and function. It explains why the organization exists and guides decisionmaking processes. It outlines the organization's key objectives and its approach to achieving them.

- Characteristics: - Present Focus: Focuses on the current objectives and operations of the organization.

- Specific and Actionable: Clearly outlines what the organization does, for whom, and how it does it.

- Reflective of Core Values: Aligns with the organization's values and culture.

- Realistic and Achievable: While aspirational, it remains grounded in what the organization can realistically accomplish.

- Examples: - A tech company might state its mission as "to design user-friendly tech solutions that enhance everyday life."

- An educational institution might define its mission as "to provide highquality, accessible education to cultivate lifelong learners and responsible citizens."

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Interplay between Vision and Mission - Guiding Strategy Development: The vision sets the destination, while the mission defines the path. Strategic planning involves formulating strategies to bridge the gap between the current state (as defined by the mission) and the desired future state (as envisioned in the vision statement).

- Aligning Activities: Both statements help ensure that the organization's activities and initiatives are aligned with its overall purpose and long-term goals.

- Communicating with Stakeholders: These statements communicate to employees, customers, investors, and other stakeholders what the organization stands for and aims to achieve, fostering a sense of shared purpose and direction.

In summary, vision and mission statements are not just formalities; they are essential tools that articulate an organization's purpose, aspirations, and operational focus. They guide strategic planning, inform decisionmaking, and align the organization's efforts towards achieving its longterm goals.

Example of a Vision and Mission Statement Here’s an example for a hypothetical company, "EcoHome Solutions," which specializes in eco-friendly and sustainable home products.

Vision Statement "Our vision is to be the world’s leading innovator in sustainable living, transforming every home into an eco-friendly sanctuary that harmonizes with the environment. We strive to create a future where every household contributes positively to the planet, fostering a global community dedicated to preserving natural resources for generations to come."

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Mission Statement "EcoHome Solutions is committed to revolutionizing the home living experience through innovative, sustainable products and solutions. Our mission is to empower homeowners with affordable, eco-friendly options that reduce environmental impact, enhance living spaces, and promote sustainable practices. We dedicate ourselves to excellence in customer service, ongoing research in sustainability, and active participation in global environmental initiatives."

Key Elements in These Statements - Vision Statement: - Aspirational: It sets a long-term, ambitious goal of global leadership in sustainable living.

- Future-Oriented: Focuses on the transformative impact the company aims to have on households and the environment.

- Inspirational: Encourages a sense of community and responsibility towards global sustainability.

- Mission Statement: - Purpose-Driven: Clearly states the company's core business of providing eco-friendly home solutions.

- Customer-Centric: Focuses on empowering homeowners and enhancing their living experience.

- Commitment to Sustainability: Emphasizes dedication to research, innovation, and participation in environmental initiatives.

- Reflects Core Values: Demonstrates a commitment to affordability, customer service, and environmental stewardship.

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These statements together provide a clear direction for EcoHome9 Solutions, reflecting its values and goals while guiding its strategies and decisions.

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CONCEPT 2: SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats) The concept of SWOT analysis is a fundamental tool in strategic management and business planning. SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. This framework helps organizations assess their internal and external environments to formulate strategies effectively. Here's a breakdown of each component:

SWOT ANALYSIS

Strengths

Weaknesses

Opportunities

Threats

External origin

Internal origin

(attributes of the organization)

Harmful

to achieving the objective

(attributes of the environment)

Helpful

to achieving the objective

Source: https://en.wikipedia.org/wiki/SWOT_analysis

Strengths

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These are internal attributes that give an organization an advantage over others.

Strengths might include a strong brand, loyal customer base, unique technology, skilled workforce, or efficient processes. For instance, a company like Apple might list its brand reputation, innovation, and loyal customer base as strengths.

Weaknesses These are internal factors that could hinder a company's performance. Weaknesses might include limited resources, inadequate infrastructure, a weak brand image, or poor customer service. For example, a small startup might struggle with limited financial resources or lack of brand recognition.

Opportunities Opportunities are external factors that an organization could exploit to its advantage.

These might include market growth, changes in consumer behavior, technological advancements, or regulatory changes that open up new avenues for business. For instance, the increasing demand for eco-friendly products represents an opportunity for companies in the green sector.

Threats Threats are external challenges that could negatively impact the organization. They might include competitive pressure, economic downturns, changes in market trends, technological obsolescence, or adverse regulatory changes. For example, a business in the retail sector might view online shopping platforms as a significant threat to their physical store sales.

In a SWOT analysis, strengths and weaknesses are typically viewed as internal factors within the company's control, while opportunities and threats are external factors outside the company's control. By understanding these elements, organizations can develop strategies that leverage their strengths and opportunities while addressing or mitigating their weaknesses and threats.

This tool is valuable for decision-making and strategic planning, helping companies to align their resources and capabilities with the external environment in which they operate.

Example of a SWOT Analysis BBA 407 Lehman

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Let's consider a hypothetical example of a SWOT analysis for a fictional company, "GreenTech Innovations," which specializes in developing ecofriendly technologies.

GreenTech Innovations: SWOT Analysis Strengths 1. Innovative Products: GreenTech has developed several cutting-edge eco-friendly technologies that reduce environmental impact.

2. Strong R&D Department: The company has a dedicated research and development team known for its expertise in green technology.

3. Brand Reputation: GreenTech is recognized for its commitment to sustainability and has a positive image among environmentally conscious consumers.

4. Partnerships: Established partnerships with key industry players and environmental organizations.

Weaknesses 1. High Costs: The advanced eco-friendly technology leads to higher production costs, making products more expensive than conventional alternatives.

2. Limited Market Penetration: Due to its focus on a niche market, GreenTech has limited presence in the broader technology market.

3. Dependence on Suppliers: Reliance on specific suppliers for rare, ecofriendly materials.

Opportunities 1. Growing Environmental Concerns: Rising awareness about climate change and environmental issues can increase demand for eco-friendly products.

2. Government Incentives: Potential to benefit from government subsidies and incentives aimed at promoting green technology.

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3. Global Expansion: Emerging markets are increasingly adopting green technologies, providing new markets for expansion.

4. Strategic Partnerships: Opportunity to collaborate with larger companies seeking to improve their environmental footprint.

Threats 1. Intense Competition: The green technology market is becoming increasingly competitive, with new players entering frequently.

2. Technological Obsolescence: Rapid technological advancements could make existing products outdated quickly.

3. Economic Downturns: Economic instability can lead to reduced investment in green technologies as consumers and businesses cut spending.

4. Regulatory Changes: Changes in environmental regulations could impact operational costs or market viability.

Strategic Implications - Leverage Strengths: GreenTech could leverage its strong R&D and innovative products to differentiate itself in the market and appeal to eco-conscious consumers.

- Address Weaknesses: Exploring ways to reduce production costs or diversify its supplier base could mitigate some of the current weaknesses.

- Capitalize on Opportunities: The company could expand into new markets where environmental concerns are growing and take advantage of government incentives.

- Mitigate Threats: Staying ahead in technology through continuous innovation and adapting to regulatory changes will help in mitigating potential threats.

This SWOT analysis provides a snapshot of Greentech’s strategic position and can guide its future strategies. By aligning its internal strengths and

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weaknesses with external opportunities and threats, GreenTech can develop robust strategies to enhance its market position.

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CONCEPT 3: Competitive Advantage The concept of competitive advantage refers to a set of unique attributes or qualities that an organization possesses, allowing it to outperform its competitors. These attributes enable the organization to create superior value for its customers and stakeholders, and they can be sustained over time. Here’s a detailed breakdown of the concept:

Source: https://www.wallstreetmojo.com/competitive-advantage/9

Key Characteristics 1. Value Creation: It involves offering products or services that customers perceive as significantly superior, different, or more valuable than those of competitors. This can be due to quality, price, service, or innovation.

2. Uniqueness: The advantage must be unique to the organization. It can arise from various sources, such as proprietary technology, patents, brand reputation, network effects, or exceptional customer service.

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3. Sustainability: It's not just about a one-time edge; the advantage must be sustainable over time. This means competitors cannot easily replicate or overcome it.

4. Difficult to Imitate: The sources of competitive advantage are often difficult for competitors to imitate due to factors like complex internal processes, unique culture, or relationships with suppliers and customers.

5. Alignment with Organizational Strategy: The competitive advantage should be aligned with the company's overall strategy, enhancing its strategic positioning in the market.

Sources of Competitive Advantage 1. Cost Leadership: Being the lowest cost producer in an industry for a certain quality level of the product. This allows a company to either undercut competitors on price or achieve higher profitability.

2. Differentiation: Offering unique products or services that are valued by customers. This can include superior quality, innovative features, or exceptional service.

3. Niche Focus: Specializing in a particular market segment or niche, often allowing for a more tailored approach or specialized service than larger competitors.

4. Operational Effectiveness: Excelling in a specific area of operations, such as manufacturing efficiency, supply chain management, or distribution.

5. Brand Strength: Building a strong, recognizable brand that resonates with consumers and creates loyalty.

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6. Technological Leadership: Using advanced technology to create innovative products or to streamline operations, often leading to cost savings or superior products.

Examples of Competitive Advantage

Apple Inc.: Known for its differentiation strategy through innovative product design, a strong brand, and a unique customer experience.

Walmart: Uses a cost leadership strategy through efficient supply chain management and economies of scale.

Importance - Market Positioning: Helps in positioning the organization effectively in the market to attract customers and defend against competitive forces.

- Profitability: Often leads to above-average profitability within the industry.

- Long-Term Success: Plays a crucial role in the long-term success and sustainability of the organization.

In summary, competitive advantage is the ability of a company to stay ahead of its competitors through unique, sustainable attributes that create superior value for its customers and stakeholders. It’s a multifaceted concept that can derive from various sources and is pivotal for an organization's success and long-term viability.

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Table of Contents No table of contents entries found.

CONCEPT 4: Porter's Five Forces Michael Porter's Five Forces framework is a powerful tool for analyzing the competitive environment in which a company operates. This model helps businesses understand the different forces that impact their industry’s profitability and competitiveness. Here's a detailed breakdown of each of the five forces:

Source: https://www.flickr.com/photos/mitopencourseware/4746285922

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1. Threat of New Entrants: This force examines how easy or difficult it is for new competitors to enter the industry. Barriers to entry can include economies of scale, high capital requirements, customer loyalty to established brands, regulatory restrictions, and the availability of technology. High barriers to entry typically reduce the threat of new entrants, which can be beneficial for existing companies in the industry.

2. Bargaining Power of Suppliers: This force assesses how much power suppliers have to drive up the prices of inputs. Factors influencing this power include the number of suppliers, uniqueness of their product or service, strength and control over the suppliers, and the cost of switching from one supplier to another. When there are fewer suppliers or when the supplier offers a unique product, they tend to have more bargaining power.

3. Bargaining Power of Buyers: This force considers how much pressure customers can place on businesses. This is influenced by the number of buyers or customers, the importance of each individual buyer to the organization, and the cost to the buyer of switching from one supplier to another. High bargaining power allows buyers to demand lower prices or higher product quality.

4. Threat of Substitute Products or Services: This force looks at the likelihood of customers finding a different way of doing what you do. If substitutes are easy to find and affordable, they pose a significant threat.

Factors influencing this threat include the relative price and performance of substitutes and the propensity of customers to switch. Industries with strong substitutes generally experience more competition and lower profitability.

5. Intensity of Rivalry Among Competitors: This force explores how intense the competition currently is in the marketplace, which is determined by the number of competitors, rate of industry growth,

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product or service characteristics, diversity of competitors, and the amount of fixed costs. High competitive rivalry can limit profitability and is often characterized by aggressive price competition, advertising battles, product launches, and increased customer service or warranties.

Application and Importance - Strategic Planning: Porter's Five Forces model is used for strategic planning and analysis. It helps companies understand the structure of their industry and formulate strategies to gain a competitive edge.

- Understanding Market Dynamics: The model offers insights into how different forces shape the market and industry dynamics.

- Decision Making: Businesses can make informed decisions about entering a new market, expanding, diversifying, or even exiting an industry based on the analysis.

Limitations While Porter's Five Forces is a robust tool, it has limitations. It primarily focuses on a single industry's structure, potentially overlooking global market dynamics, digitalization's impact, and supply chain complexities.

Additionally, the model emphasizes competition over collaboration, which might not apply in all industry contexts where strategic alliances and partnerships are crucial.

In summary, Porter’s Five Forces framework is essential for understanding the competitive forces that shape industry attractiveness and profitability, guiding businesses in their strategic decision-making processes.

CASE STUDY and ASSIGNMENT 1: The Arline Industry (Part 1) [Insert Southwest podcast link.]

CASE STUDY and ASSIGNMENT 2: The Arline Industry (Part 2) [Insert JetBlue podcast link.]

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CASE STUDY and ASSIGNMENT 3: The Arline Industry View the following interview in which Michael Porter discusses how the 5 forces apply to the airline industry: https://youtu.be/mYF2_FBCvXw?si=uu3Xxy0uJIJ0aSjN&t=133

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CONCEPT 5: Strategic Planning Strategic planning is a comprehensive process undertaken by organizations to formulate their long-term direction and actions necessary to achieve their overall goals and objectives. It involves setting priorities, focusing energy and resources, strengthening operations, ensuring that employees and other stakeholders work toward common goals, and adjusting the organization's direction in response to a changing environment. Here’s a detailed breakdown of the concept:

Source: https://commons.wikimedia.org/wiki/File:5_STEPS_STRATGIC_PLAN.png

Key Components 1. Vision and Mission Statements: Identifying the organization's core purpose, values, and long-term aspirations.

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2. Goals and Objectives: Setting specific, measurable, achievable, relevant, and time-bound (SMART) goals that align with the vision and mission.

3. Environmental Analysis: Evaluating external and internal environments to identify strengths, weaknesses, opportunities, and threats (SWOT analysis).

4. Strategy Formulation: Developing strategies to leverage strengths and opportunities while addressing weaknesses and threats.

5. Strategy Implementation: Translating strategies into actionable plans and allocating resources for execution.

6. Performance Measurement and Control: Establishing key performance indicators (KPIs) and monitoring systems to track progress and make adjustments as needed.

Process 1. Assessment of Current Situation: Understanding where the organization currently stands in terms of its internal capabilities and external environment.

2. Defining the Future State: Articulating a clear vision of what the organization wants to achieve in the long term.

3. Gap Analysis: Identifying the gap between the current state and desired future state.

4. Strategy Development: Creating strategies to bridge the gap. This includes considering various strategic options and choosing the best course of action.

5. Implementation Planning: Developing detailed action plans, assigning responsibilities, and allocating resources.

6. Execution: Implementing the strategic plans, involving the entire organization in executing the strategies.

7. Monitoring and Evaluation: Regularly reviewing outcomes, assessing progress against objectives, and making necessary adjustments.

Importance

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- Direction and Focus: Provides a sense of direction and outlines measurable goals.

- Resource Allocation: Ensures effective use of organizational resources towards the most profitable and viable areas.

- Change Management: Helps in navigating through changes in the market, technology, and competitive landscapes.

- Organizational Alignment: Aligns departments and employees with the organization’s larger goals.

- Long-Term Success: Essential for sustainable growth and long-term success of the organization.

Challenges - Dynamic External Environment: Rapid changes in technology, market trends, and competitive landscapes require continuous adaptation.

- Internal Resistance: Change management challenges as employees might resist new strategies or directions.

- Complexity in Implementation: Translating strategic plans into actionable steps can be complex and resource-intensive.

Conclusion Strategic planning is vital for any organization aiming to maintain a competitive edge and achieve long-term success. It’s an ongoing process that requires continuous assessment, adaptation, and alignment of organizational resources with the strategic objectives. This process is critical for making informed decisions and ensuring the organization’s growth and sustainability in a dynamic business environment.

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CONCEPT 6: VALUE CHAIN ANALYSIS Value chain analysis is a strategic tool used to analyze internal firm activities. Its goal is to recognize, which activities are the most valuable (i.e., are the source of cost or differentiation advantage) to the firm and which ones could be improved to provide a competitive advantage.

Source: https://aibidia.com/five-facts-about-value-chain-analysis-every-transfer-pricing-professionalshould-know/

Here's how it works: 1. Identify Value Chain Activities: The first step is to divide a company's operations into primary and support activities. Primary activities include inbound logistics, operations, outbound logistics, marketing & sales, and service. Support activities include firm infrastructure, human resource management, technology development, and procurement.

2. Analyze Value Creation and Cost: For each activity, you analyze how it adds value to the product/service and the cost involved in executing the activity. This helps in

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understanding where the company creates value and where it can optimize processes to reduce costs or increase differentiation.

3. Identify Competitive Advantage: By understanding which activities are the most valuable and which are the least efficient, a company can work on optimizing those areas. This can lead to a competitive advantage either through cost leadership (doing activities at a lower cost than competitors) or differentiation (performing activities in a unique way that adds value for customers).

4. Formulate Strategies: Based on this analysis, strategies are developed to enhance value creation, reduce costs, or a combination of both. This may involve investing in technology, reconfiguring operations, outsourcing certain processes, or focusing on key areas for innovation.

Value chain analysis is particularly useful because it focuses on how different operations within the company contribute to the creation of value for the customer, and therefore, it helps in aligning activities more closely with the overall competitive strategy of the firm.

EXAMPLE

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Source: Jorge Silva-Puras creation on DALL-E

Alright, imagine you have a lemonade stand. To make and sell lemonade, you do a bunch of different things, right? Let's think of each thing you do as a step in a chain.

This chain is called the "value chain" because each step adds something special (or value) to your lemonade.

1. Getting Lemons and Sugar (Inbound Logistics): First, you need to get lemons and sugar. This is like going to the store or maybe picking lemons from your garden.

2. Making Lemonade (Operations): Next, you squeeze the lemons and mix in sugar and water to make lemonade. This is where you're actually creating your product.

3. Pouring and Selling (Outbound Logistics and Sales): Now, you pour the lemonade into cups and sell it to people passing by your stand. You're getting your product to your customers.

4. Telling Friends (Marketing): You might also tell your friends or put up signs to let more people know about your lemonade stand.

5. Listening to Your Customers (Service): If someone says, "Wow, this is sweet!" or "I like it more sour," you listen to them and maybe change how you make your lemonade next time.

6. Other Stuff (Support Activities): There's also stuff like counting your money, deciding the price, and making your lemonade stand look nice. These are important but don't directly involve making or selling lemonade.

When you think about all these steps, you can see what makes your lemonade special (like maybe you use a secret recipe or your stand is really colorful). And if you find a step that's too hard or expensive, like if lemons are too costly, you figure out how to make it better (like maybe using less lemon in each cup).

That's what companies do with their products. They look at each step in making and selling something, try to make each step really good and not too costly, so they can make the best thing for their customers and do well in their business. Just like you with your lemonade stand!

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CONCEPT 7: Corporate Governance Covered on Chapter 10 of Hitt.

Corporate Governance pertains to the structures, systems, and processes in place for overseeing and controlling a company, ensuring accountability, fairness, and transparency in the company's relationship with its stakeholders.

Source: https://commons.wikimedia.org/wiki/File:Bob_Tricker_-_Corporate_Governance2.png

Corporate governance refers to the systems, principles, and processes by which a corporation is directed and controlled. It balances the interests of a company's many stakeholders, such as shareholders, management, customers, suppliers, financiers, government, and the community. Effective corporate governance provides a framework for attaining a company’s objectives and encompasses practically every sphere of management, from action plans and internal controls to performance measurement and corporate disclosure.

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Key Components 1. Board of Directors: The board is central to corporate governance. Its primary role is to protect the interests of the shareholders and ensure the company’s long-term success. The board makes significant business decisions and oversees the management.

2. Management Team: This includes the CEO and other senior executives who are responsible for the day-to-day operations of the company. They implement the policies and strategies set by the board.

3. Shareholders: They are the owners of the company. Effective governance gives shareholders a voice in decisions that affect their interests, usually through voting rights at company meetings.

4. Stakeholders: These include employees, customers, suppliers, and the community.

Good governance practices acknowledge the rights and needs of stakeholders and work towards sustainable and ethical business practices.

5. Regulatory Framework: This consists of laws, regulations, and guidelines that govern corporate behavior. Compliance with legal requirements is a fundamental aspect of governance.

Principles - Transparency: Ensuring that all actions and decisions are openly accessible to those entitled to such information.

- Accountability: Management and the board are accountable to the shareholders and, in a broader sense, to stakeholders.

- Fairness: Treating all shareholders and stakeholders equitably and fairly.

- Responsibility: Management should responsibly use their authority and perform their duties with due diligence and care.

Importance - Trust and Reputation: Good governance builds trust with investors and the public, enhancing the company's reputation.

- Risk Management: It helps in identifying and managing risks effectively, preventing corporate scandals and failures.

- Long-term Sustainability: Fosters long-term viability of the company by focusing on sustainable business practices.

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- Investor Confidence: Strong governance encourages investment in the company and can lower the cost of capital.

Challenges - Globalization: Managing diverse regulations and cultural expectations across different countries.

- Rapid Technological Changes: Keeping up with the implications of digital transformation and data security.

- Corporate Scandals: Addressing the trust deficit that arises from high-profile corporate frauds and collapses.

- Balancing Interests: Aligning the interests of different stakeholder groups, which can sometimes conflict.

Conclusion Corporate governance is a broad and dynamic concept, crucial for the health and stability of corporations and, by extension, financial markets and economies. As businesses grow more complex and global, effective governance becomes increasingly significant in ensuring ethical, legal, and socially responsible decisionmaking.

CASE STUDY and ASSIGNMENT: Activist Shareholders [Insert relevant podcast episode.]

Do you believe activist shareholders are good for the company, employees and/or shareholders? Why? Why not?

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CONCEPT 8: Corporate Social Responsibility (CSR) Corporate Social Responsibility (CSR) is a self-regulating business model that helps a company be socially accountable—to itself, its stakeholders, and the public. By practicing corporate social responsibility, companies can be conscious of the kind of impact they are having on all aspects of society, including economic, social, and environmental. Here’s a detailed breakdown of the concept:

To listen to Porter’s presentation on CSR, please click on the link below.

Source:https://www.ted.com/talks/michael_porter_the_case_for_letting_business_solve_social_proble ms?utm_campaign=tedspread&utm_medium=referral&utm_source=tedcomshare

Definition Corporate Social Responsibility (CSR): Refers to practices and policies undertaken by corporations intended to have a positive influence on the world. The concept implies that corporations should pursue goals beyond just profit maximization and should consider the welfare of society and the environment in their operations.

Key Aspects of CSR

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1. Environmental Efforts: Companies, particularly those involved in manufacturing, energy production, or other resource-intensive industries, focus on reducing their carbon footprints, improving sustainability, and supporting environmental initiatives.

2. Philanthropy: Businesses donate money, products, or services to social causes and nonprofits. This can range from donating a portion of profits to charities to encouraging employee volunteerism in community projects.

3. Ethical Labor Practices: Ensuring that the company’s operations respect the rights and dignity of employees, including fair wages, safe working conditions, and respecting labor rights.

4. Economic Responsibility: Conducting business in a way that is ethical and fair to all parties involved, including shareholders, customers, and suppliers. This includes transparency, integrity in marketing and sales, and fair pricing.

5. Volunteering and Community Engagement: Many companies encourage their employees to volunteer and engage in the communities where they operate. This can include supporting local events, contributing to community development projects, or participating in initiatives for social causes.

Importance - Reputation Management: CSR can enhance a company’s reputation and brand value, making it more attractive to customers, employees, and potential investors.

- Risk Mitigation: By being proactive about social and environmental issues, companies can mitigate risks that might arise from neglecting these aspects.

- Customer Relationships: Consumers are increasingly looking to buy from socially and environmentally responsible companies. CSR initiatives can strengthen customer loyalty and attract new customers.

- Employee Engagement and Retention: CSR can improve employee morale, motivation, and retention. Employees often feel more engaged when they work for a company that has a positive impact on society.

- Legal and Regulatory Compliance: CSR can help companies comply with regulatory requirements, reducing the risk of legal penalties and fines.

Challenges - Costs: Implementing CSR initiatives can be costly, especially for small and mediumsized businesses.

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- Balancing Multiple Stakeholders: Companies often face challenges in balancing the interests of different stakeholders while pursuing CSR objectives.

- Measuring Impact: Quantifying the impact of CSR initiatives can be challenging, making it difficult to assess the effectiveness of these programs.

- Greenwashing: Some companies might engage in CSR as a marketing tactic without making substantial changes in their business practices (referred to as "greenwashing").

Conclusion Corporate Social Responsibility is not just about fulfilling a duty to society; it can also bring significant benefits to a business, such as enhancing its brand, building customer loyalty, and creating a positive workplace environment. As global awareness and expectations around social and environmental issues grow, CSR becomes an increasingly important aspect of a company’s overall strategy and identity.

CASE STUDY and ASSIGNMENT: B Corporations

Source: https://en.wikipedia.org/wiki/B_Corporation_%28certification%29

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Go to https://www.bcorporation.net/en-us/ and review the five criteria to become a B Corporation.

Assignment: Summarize the 5 criteria and then choose one company among the list of those that have obtained the B certification that you identify with and summarize what are the key criteria that make it meritorious of the designation. (no less than 100 words nor more than 300 words long).

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CONCEPT 9: Balanced Scorecard This tool provides a framework for tracking the effectiveness of strategic implementation by balancing financial measures with performance metrics from customer perspectives, internal processes, and learning and growth activities.

Source: https://www.professionalacademy.com/blogs/marketing-theories-balanced-scorecard/

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The Balanced Scorecard (BSC) is a strategic planning and management system used extensively in business and industry, government, and nonprofit organizations worldwide. It was originated by Dr. Robert Kaplan and Dr. David Norton as a performance measurement framework that added strategic non-financial performance measures to traditional financial metrics. The BSC provides a more 'balanced' view of organizational performance.

Key Components of the Balanced Scorecard: 1. Financial Metrics: This perspective looks at financial performance indicators like revenue growth, profitability, cost reduction, and return on investment. It answers the question of how shareholders view the company.

2. Customer Perspective: This dimension focuses on customer satisfaction, market share, customer retention, and customer loyalty. It evaluates how well the organization is serving its customers and how customers perceive the organization.

3. Internal Business Processes: This area assesses the efficiency and effectiveness of internal processes that create value for customers. It includes measures such as process efficiency, quality, cycle time, and supply chain management.

4. Learning and Growth: Also known as the "innovation and improvement" or "organizational capacity" perspective, it focuses on the intangible assets of an organization, particularly human capital, information capital, and organizational culture. It involves employee training and development, knowledge management, and technological development.

Importance of Balanced Scorecard: - Holistic Approach: The BSC ensures that the strategic management process considers multiple facets of business performance beyond just financial results, promoting a more comprehensive approach to strategy execution.

- Alignment of Business Activities: It helps align business activities to the vision and strategy of the organization, improving internal and external communications, and monitoring organization performance against strategic goals.

- Long-Term Performance: The BSC emphasizes long-term strategy and improvement rather than just short-term financial gains.

- Enhances Strategic Feedback and Learning: Provides a framework for strategic feedback and allows organizations to adapt and learn based on performance results.

Implementation:

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- Developing Strategy Maps: These are often used alongside the BSC to visualize and communicate how value is created within the organization.

- Setting Targets and Initiatives: For each of the perspectives and their respective metrics, specific targets are set, and initiatives are identified to achieve these targets.

- Regular Review: The BSC is not a static document but a dynamic tool that requires regular reviews to be effective.

Limitations: - Complexity in Implementation: Designing a BSC can be complex and requires deep understanding and commitment.

- Risk of Overemphasis on Measurement: There's a potential risk of focusing too much on the measurement aspects rather than the strategic execution.

Conclusion The Balanced Scorecard is a versatile and holistic tool for strategic management, combining both financial and non-financial measures to provide a more complete picture of organizational performance. It’s a framework that helps organizations translate their vision and strategy into concrete actions and measurable outcomes.

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CONCEPT 10: Change Management Effective strategic management often involves change. Change management refers to the approach to transitioning individuals, teams, and organizations to a desired future state to effectively implement new strategies and manage resistance.

Source: https://www.prosci.com/resources/articles/definition-of-change-management

Change management is a systematic approach to dealing with the transition or transformation of an organization's goals, processes, or technologies. The purpose of change management is to implement strategies for effecting change, controlling change, and helping people adapt to change. It involves managing the human element of change and is a critical part of project management that often determines a project's success or failure.

Key Elements of Change Management 1. Identifying Change: Recognizing the need for change within the organization. This can arise from external factors like market trends, technological advancements, or internal factors such as performance gaps, process inefficiencies.

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2. Planning and Preparation: Developing a detailed change management plan that includes objectives, timelines, resources, communication strategies, and potential risks. This plan should align with the overall strategic goals of the organization.

3. Communication: Effective communication is vital in change management. This involves communicating the change, its reasons, the benefits, and the impact on various stakeholders clearly and consistently.

4. Stakeholder Engagement: Involving and getting the support of key stakeholders, including management, employees, and sometimes even customers. Their input and engagement are crucial for the successful implementation of change.

5. Training and Support: Providing adequate training and support to all individuals within the organization to help them understand the change and how to operate effectively post-change.

6. Implementation: Executing the change management plan while continuously monitoring its progress and impact.

7. Dealing with Resistance: Managing resistance to change through various strategies like encouraging active participation, providing incentives, or addressing concerns and anxieties.

8. Evaluation and Feedback: After implementing change, evaluating the outcomes against the set objectives, and gathering feedback to understand the effectiveness of the change management process.

Importance of Change Management - Smooth Transition: Helps ensure a smoother transition from the current state to the desired future state with minimal resistance and disruption.

- Risk Mitigation: Proper change management can identify potential risks and challenges associated with the change and develop strategies to address them.

- Enhances Adaptability: Builds a culture of adaptability and flexibility within the organization, making it more resilient to future changes.

- Improves Success Rate: Increases the likelihood of the successful implementation of changes.

Challenges in Change Management

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- Resistance to Change: One of the biggest challenges is the natural human resistance to change. People may fear the unknown, feel insecure about their capability to adapt, or be satisfied with the status quo.

- Communication Barriers: Ineffective communication can lead to misunderstandings, misinformation, and resistance.

- Resource Constraints: Implementing change can be resource-intensive in terms of time, money, and manpower.

- Inadequate Planning: Without proper planning, change initiatives can fail to achieve their objectives.

Conclusion Change management is a critical discipline in today's rapidly evolving business environment. It requires a structured approach and a deep understanding of the human aspects involved in the change process. Successful change management not only involves managing the operational aspects of change but also addressing the psychological and cultural impacts on the organization and its people.

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CONCEPT 11: PESTEL Analysis PESTEL analysis is a strategic tool used for understanding the macro-environmental factors that impact an organization. PESTEL stands for Political, Economic, Social, Technological, Environmental, and Legal factors. It's a part of the external analysis when conducting market research and gives an overview of the different macroenvironmental factors that the company must take into consideration. Here's a detailed breakdown:

Source: https://www.business-to-you.com/scanning-the-environment-pestel-analysis/

1. Political Factors: This examines the role of governments in shaping the business environment. It includes government policies, political stability or instability, tax policies, trade restrictions and tariffs, labor laws, environmental regulations, and political trends. Political factors can significantly affect how an organization operates and makes decisions.

2. Economic Factors: These are related to changes in the broader economy such as economic growth, interest rates, exchange rates, inflation, disposable income of consumers and businesses, unemployment rates, and monetary policies. Economic factors affect purchasing power and spending patterns and can influence a company's strategy significantly.

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3. Social Factors: This includes societal trends, demographic changes, attitudes towards health and wellness, population growth rates, age distribution, career attitudes, and emphasis on safety. Social factors help companies understand their customers' needs and wants, enabling them to target their products and services more effectively.

4. Technological Factors: These encompass innovations in technology that may affect the operations of the industry or the market favorably or unfavorably. This includes automation, research and development activity, technological incentives, and the rate of technological change. They can create opportunities for businesses (e.g., new markets and products) and threats (e.g., obsolescence of existing products).

5. Environmental Factors: Environmental factors have become more important with the increased awareness of climate change. This includes weather, climate, environmental offsets, and climate change policies. Companies are increasingly aware that they need to be accountable for their environmental impact.

6. Legal Factors: This involves understanding the effect of legal aspects like employment law, consumer law, antitrust law, health and safety law, and international as well as trade regulations and restrictions. Legal factors can influence a firm's operational capability, its costs, and the demand for its products.

Importance of PESTEL Analysis - Strategic Planning: PESTEL analysis helps in strategic planning by identifying the external factors that need to be taken into account.

- Market Research: It's a useful tool for understanding market growth or decline, business position, potential, and direction for operations.

- Business Expansion: Companies use PESTEL analysis to prepare for possible challenges and plan for future expansion into new markets.

Limitations - Constant Change: Macro-environmental factors are continuously changing, and it's a challenge to predict these changes accurately.

- Data Overload: Gathering and analyzing all relevant data can be overwhelming and time-consuming.

- Subjectivity: Interpreting the importance of various factors can be subjective and may differ between analysts.

Conclusion

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PESTEL analysis provides a comprehensive overview of the macro-environmental factors that a business needs to consider in its strategic planning. It's an essential tool for understanding the external environment in which a company operates and for making informed business decisions.

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CONCEPT 12: Strategic Alliances and Partnerships Forming cooperative agreements with other organizations to pursue mutual goals, share resources, and leverage complementary strengths.

Source: https://www.workspan.com/blog/strategic-alliance-definition

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CONCEPT 13: Innovation and Entrepreneurship Encouraging and managing innovation and entrepreneurial activities within an organization to drive growth and competitive advantage.

Source: https://www.visualcapitalist.com/the-history-of-innovation-cycles/

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INDEX Alliances, 38 Change Management, 2, 19, 33, 34 Competitive Advantage, 2, 12, 13, 21 Corporate Governance, 2, 24 Corporate Social Responsibility, 2, 27, 29 CSR, 2, 27, 28, 29 Entrepreneurship, 3, 39 Innovation, 3, 39 Mission, 1, 4, 5, 6, 7, 18 Opportunities, 1 Partnerships, 3, 10, 38

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PESTEL, 2, 5, 36, 37 Porter, 2, 15, 16, 17, 27 Stakeholders, 6, 25, 28 Strategic Alliances, 3 Strengths, 1 SWOT, 1, 8, 9, 11, 19 Threats, 1 Value Chain, 2, 21 Vision, 1, 4, 5, 6, 18 Weaknesses, 1

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Contact Information:

Jorge.silvapuras@lehman.cuny.edu 250 Bedford Park Boulevard West Bronx, NY 10468

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