Table of Contents

Chapter 1: Strategic Management.................................................................................................. 2

Chapter 5: Vision and Mission Analysis ........................................................................................ 3
Chapter 2: Strategic planning (Globalization) ........................................................................... 5
Chapter 3: Ethics, social responsibility, and sustainability .................................................... 7
Chapter 4: Types of strategies ....................................................................................................... 12
Chapter 6: The internal audit ......................................................................................................... 16
Chapter 7: The external audit ........................................................................................................ 18
SWOT Analysis .................................................................................................................................. 21

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Chapter 1: Strategic Management

1.1 Strategic Management – is the art and science of formulating,

implementing, and evaluating cross-functional decisions that enable an
organisation to achieve its objectives.

1.2 Stages of strategic management

Strategy 1: Strategy formulation:

✓ Developing a vision and mission.

✓ Identifying external opportunities and threats.
✓ Determine internal strength and weaknesses.
✓ Establish long term objectives,
✓ Generating alternative strategies.
✓ Choosing strategies to pursue.

Strategy 2: Strategy implementation (action stage)

✓ Requires a firm to establish annual objectives, devise policies,

motivate employees and allocate resources so that the
formulated strategies can be executed.

Strategy 3: Strategy Evaluation

✓ Revies internal and external factors that relate to the current

strategy.
✓ Measure performance.
✓ Taking correlative actions.

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Chapter 5: Vision and Mission Analysis

5.1 Vision Statement – should answer the basic question “What do we

want to become?’. At a minimum the vision statement should reveal the
type of business the organization engages in.

5.2 Mission statement – is a declaration of an organizations “reason for

being”.

5.3 The process of developing a mission and vision statement

✓ Clear vision and mission statement are needed before alternative

strategies can be implemented and formulated.
✓ As many managers as possible should be involved in the process of
developing these statements because, through involvement, people
become committed to an organisation.
✓ A clear mission is essential for establishing objectives and
formulating strategies.
✓ Mission statement is the foundation to establish priorities, strategies,
plans and work assignments.

5.4 The benefits of having a clear vision and mission statement

✓ Achieve clarity of purpose among all managers and employees.

✓ Provide direction.
✓ Provide a focal point for all the stakeholders of the firm.
✓ Resolve divergent views among managers.
✓ Provide a sense of shared expectations among all managers and
employees.

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 ✓ Project a sense of worth and intent among all stakeholders.

5.5 Characteristics of mission statement

✓ Broad in scope.
✓ Fewer than 150 words in length.
✓ Inspiring .
✓ Identifies the utility of a firm’s products
✓ Reveals that the firm is socially responsible.
✓ Reveals that the firm is environmentally responsible.

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Chapter 2: Strategic planning
(Globalization)

2.1 The nature of doing business globally, language and labour union
issues.

✓ Globalization – is a process of doing business worldwide, so

strategic business are more based on global profitability of the firm
rather than just domestic considerations.
✓ A global strategy – includes designing, producing, and marketing
products with global needs in mind, rather than considering induvial
countries alone.
✓ Multinational firms – international or multinational do business
across boarders
✓ Different languages globally

2.2 Advantages and Disadvantages of doing business globally

Advantages of doing business globally

✓ New customers globally

✓ Competitors in foreign markets may not exist.
✓ Foreign markets may result in reduced tariffs and lower taxes, and
favourable political treatment.
✓ Foreign operations can allow firms too establish low-cost production
facilities in locations close to raw materials or cheap labour.
✓ Foreign operations can absorb access capacity, reduce unit cost and
economic risk over a wider number of markets.

Disadvantages of doing business globally

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 ✓ Foreign operations can be seized by nationalist factions and political
parties.
✓ Organizations are often confronted with different and little
understood cultures, demographics, environment, legal factors, and
political situation.
✓ Competitors are often underestimated in foreign countries.
✓ Language, cultures, and value systems differ among countries.
✓ Can be difficult to deal with two or more monetary (Money) systems.

2.3 The global challenge

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Chapter 3: Ethics, social responsibility, and
sustainability

1. Business ethics - can be defined as principles of conduct within

organizations that guide decision making and behaviour.

2. Social responsibility - refers to actions an organization takes beyond

what is legally required to protect or enhance the well-being of living things.
3. Sustainability - refers to the extent that an organization’s operations and
actions protect, mend, and preserve rather than harm or destroy the
natural environment.

3.1 Why “Good ethics is good business”

Philippa Foster Black of the IBE (The Institute of Business Ethics) stated,
“Not only is ethical behaviour in business life the right thing to do in
principle, but it also pays off in financial returns. Good ethics is good
business. Bad ethics can derail even the best strategic plans.

Seven principles of admirable business ethics

✓ Be trustworthy; no individual or business wants to do business with

an entity it does not trust.
✓ Be open-minded, continually asking for “ethics-related feedback”
from all internal and external stakeholders.
✓ Honor all commitments and obligations.
✓ Do not misrepresent, exaggerate, or mislead with any print materials.
✓ Be visibly a responsible community citizen.

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 ✓ Utilize your accounting practices to identify and eliminate
questionable activities.
✓ Follow the motto: Do unto others as you would have them do unto
you.

Examples of unethical business practices:

✓ Misleading advertising or labelling

✓ Causing environmental harm
✓ Poor product or service safety
✓ Padding expense accounts
✓ Insider trading
✓ Dumping banned or flawed products in foreign markets
✓ Not providing equal opportunities for women and minorities
✓ Overpricing
✓ Sexual harassment
✓ Using company funds or resources for personal gain

3.2 Whistleblowing, bribery, and workplace romance

Whistleblowing

Whistleblowing refers to employees reporting any unethical violations they

discover or see in the firm. Employees should practice whistleblowing, and
organizations should have policies that encourage whistleblowing.

Avoid bribery

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Managers, employees, and firms must avoid bribery. Bribery is defined as
the offering, giving, receiving, or soliciting of any item of value to influence
the actions of an official or other person in discharge of a public or legal
duty.

✓ A bribe is a gift bestowed to influence a recipient’s conduct.

✓ The gift may be any money, goods, actions, property, preferment,
privilege, emolument, object of value, advantage, or merely a
promise or undertaking to induce or influence the action, vote, or
influence of a person in an official or public capacity.

Workplace romance

Workplace romance is an intimate relationship between two consenting

employees, as opposed to sexual harassment.

However, it is important to note that workplace romance can be

detrimental to workplace morale and productivity, for a few reasons that
include:

✓ Favouritism complaints can arise.

✓ Confidentiality of records can be breached.
✓ Reduced quality and quantity of work can become a problem.
✓ Personal arguments can lead to work arguments.
✓ Whispering secrets can lead to tensions and hostilities among
coworkers.
✓ Sexual harassment (or discrimination) charges may ensue, either by
the involved female or a third party.

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 ✓ Conflicts of interest can arise, especially when well-being of the
partner trumps well-being of the company.

3.3 Social responsibility and policy

Design and articulate a social policy

The term social policy embraces managerial philosophy and thinking at the
highest level of the firm.
Social policy concerns what responsibilities the firm has to employees,
consumers, environmentalists, minorities, communities, shareholders,
and other groups.
Social policies on retirement
Some countries around the world are facing severe workforce shortages
associated with their aging populations.

3.4 Environmental sustainability

✓ Ecological challenges are facing all organizations
✓ Managers are required to formulate strategies the preserve and
conserve natural resources and control pollution.
✓ Special natural environmental issues include ozone depletion, global
warming, depletion of rain forests, destruction of animal habitats,
protecting endangered species, developing biodegradable products,
waste management, clean air, clean water, erosion, destruction of
natural resources, and pollution control.
✓ Firms increasingly develop green product lines that are
biodegradable and made of recycled products.
✓ Managing environmental affairs have become very important for a
company’s public image.

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 ✓ Business must not exploit or disseminate the natural environment.
✓ Consumers, governments, employees, and societies are particularly
resentful towards companies that that harm the environment.

Sustainability Reports
✓ A sustainability report reveals how a firm’s operations impact on the
natural environment.
✓ This document discloses to shareholders information about the
firm’s labour practices, product sourcing, energy efficiency,
environmental impact, and business ethics practices.
✓ No business wants a reputation as a polluter.

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Chapter 4: Types of strategies

4.1 Long-term Objectives

Long-term objectives represent the results expected from pursuing
certain strategies.
Strategies represent the actions to be taken to accomplish long-term
objectives.
The time frame for objectives and strategies should be consistent, usually
from 2 to 5 years.
Long-term objectives are needed at the corporate, divisional, and
functional levels of an organization.

Characteristics of objectives
✓ Quantitative
✓ Measurable
✓ Realistic
✓ Understandable
✓ Challenging
✓ Hierarchical
✓ Obtainable
✓ Congruent across department

Benefits of having clear objectives

✓ Provide direction by revealing expectations
✓ Allow synergy
✓ Assist in evaluation by serving as standards
✓ Establish priorities
✓ Reduce uncertainty
✓ Minimize conflicts
✓ Stimulate exertion
✓ Aid in allocation of resources
✓ Aid in design of jobs

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 ✓ Provide basis for consistent decision making

4.2 Types of strategies

Alternative strategies
1. Forward Integration Gaining ownership or increased control over
distributors or retailers

E.g. Amazon began rapid delivery services in some U.S. cities.

2. Backward Integration Seeking ownership or increased control of a firm’s

suppliers

E.g. Starbucks purchased a coffee farm.

3. Horizontal Integration Seeking ownership or increased control over

competitors

E.g. BB&T acquired Susquehanna Bancshares.

4. Market Penetration Seeking increased market share for present

products or services in present markets through greater marketing
efforts

E.g. Under Armour signed tennis champion Andy Murray to a 4-year, $23
million marketing deal.

5. Market Development Introducing present products or services into new

geographic area

E.g. Gap opened its first five stores in China.

6. Product Development Seeking increased sales by improving present

products or services or developing new ones

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E.g. Amazon just began offering its own line of baby diapers and wipes.

7. Related Diversification Adding new but related products or services

E.g. Facebook acquired the text-messaging firm WhatsApp for $19 billion.

8. Unrelated Diversification Adding new, unrelated products or services

E.g. Kroger and Whole Foods Market are cooking meals, becoming
restaurants.
9. Retrenchment Regrouping through cost and asset reduction to reverse
declining sales and profit
E.g. Staples closed 250 stores and reduced by 50% the size of other
stores.

10. Divestiture Selling a division or part of an organization

E.g. Sears Holdings divested its Land’s End division to Sears’ shareholders.

11. Liquidation Selling all of a company’s assets, in parts, for their tangible
worth.

4.3 Integration Strategies

Forward and backward integration= vertical integration
Vertical integration strategies allow a firm to gain control over
distributors and suppliers, whereas horizontal integration refers to
gaining ownership and/or control over competitors.

Forward integration involves gaining ownership or increased control

over distributors or retailers.
Backward integration is a strategy of seeking ownership or
increased control of a firm’s suppliers.
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Horizontal integration Seeking ownership of or control over a firm’s
competitors, horizontal integration is arguably the most common growth
strategy.

4.4 Intensive strategies

Market penetration

A market penetration strategy seeks to increase market share for present

products or services in present markets through greater marketing efforts.

Market penetration includes increasing the number of salespersons,

increasing advertising expenditures, offering extensive sales promotion
items, or increasing publicity efforts.

Market development involves introducing present products or services

into new geographic areas.

Product development is a strategy that seeks increased sales by

improving or modifying present products or services

Walt Disney Company recently developed a Disney Baby line of products

and services that it expects to become a powerful baby brand for
customers ages 0 to 2.

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Chapter 6: The internal audit

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The Internal Factor Evaluation Matrix

1. Weight ranges from 0.0 (not important) to 1.0 (all-important). The sum of
all weights must equal 1.0.

2. Major weakness (rating=1), a minor weakness (rating=2), a minor

strength (rating=3), a major strength (rating=4). Strength must receive 3 to 4
rating and weaknesses must receive a 1 to 2 rating.

3. Multiply each factor’s weight by its rating to determine a weighted score

for each variable .

4. Sum the weighted score.

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Chapter 7: The external audit

7.6 The External Factor Evaluation (EFE) Matrix

The EFE Matrix can be developed in five steps:

1. List 20 key external factors as identified in the external-audit process,

including both opportunities and threats that affect the firm and its
industry. List the opportunities first and then the threats. Be as specific as
possible, using percentages, ratios, and comparative numbers whenever
possible.

2. Assign to each factor a weight that ranges from 0.0 (not important) to 1.0
(very important). The weight indicates the relative importance of that factor
to being successful in the firm’s industry. Opportunities often receive
higher weights than threats, but threats can receive high weights if they are
especially severe or threatening. Appropriate weights can be determined by
comparing successful with unsuccessful competitors or by discussing the
factor and reaching a group consensus. The sum of all weights assigned to
the factors must equal 1.0.

3. Assign a rating between 1 and 4 to each key external factor to indicate

how effectively the firm’s current strategies respond to the factor, where 4 =
the response is superior, 3 = the response is above average, 2 = the
response is average, and 1 = the response is poor. Ratings are based on
effectiveness of the firm’s strategies. Ratings are thus company-based,
whereas the weights in Step 2 are industry-based. It is important to note
that both threats and opportunities can receive a 1, 2, 3, or 4.

4. Multiply each factor’s weight by its rating to determine a weighted score.

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5. Sum the weighted scores for each variable to determine the total
weighted score for the organization.

Regardless of the number of key opportunities and threats included in an

EFE Matrix, the highest possible total weighted score for an organization is
4.0 and the lowest possible total weighted score is 1.0. The average total
weighted score is 2.5. A total weighted score of 4.0 indicates that an
organization is responding in an outstanding way to existing opportunities
and threats in its industry. In other words, the firm’s strategies effectively
take advantage of existing opportunities and minimize the potential
adverse effects of external threats. A total score of 1.0 indicates that the
firm’s strategies are not capitalizing on opportunities or avoiding external
threats.

An example of an EFE Matrix

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SWOT Analysis

Strength and Weakness (Internal)

Opportunities and Threats (external)

Strengths - are internal positives about your company that you can control
and that often provide you with a competitive advantage. Some examples
might be the quality of your product, the effectiveness of your processes,
your access to physical or team assets or other competitive advantages.
Weaknesses - is an adverse internal attribute about your company that
negatively takes away from your Strengths. Some examples might include
knowledge gaps on your team, a low-quality product, a lack of money or
other tangible assets, bad locations and more.
Opportunities - is an external factor that provides promise or is likely to
contribute to your potential success. Some examples might include the
growth rate in your industry, specific laws or policies that will benefit the
need for your product, positive customer feedback or technology
advancements.
Threats - is an external factor that you have no control over, which could
negatively impact your success. These are typically acknowledged so that
you can provide a plan to overcome each one. Some examples include
potential future competitors, costs of supply, upcoming market trends,
negative technology changes and upcoming regulations or laws.

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