31 Dec This assessment asks you to consider the long-term sustainability of a business in the ever-changing, and often hostile, global business environment. You should weigh up a range of complex
This assessment asks you to consider the long-term sustainability of a business in the ever-changing, and often hostile, global business environment. You should weigh up a range of complex issues, such as the business environment, culture, leadership, corporate governance and others when developing a strategy for an international business
6EC513
GLOBAL BUSINESS AND STRATEGY
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Week 7 – 8th November 2021
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Lecture
Welcome
The Module and Assessment
Strategy/Strategic Management/Strategic Decisions
Stakeholders
Competitive Advantage and Value
CSR
AFI model and possible issues?
Prescriptive and Emergent
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Welcome – Teaching Team
If you need any assistance outside the taught sessions, email is the best way to contact me.
Please use the module discussion board for questions about the assessment.
Module Leader from week 7 – Gemma Seda Gombau– [email protected]
Seminar Sessions: Gemma Seda Gombau
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The Module and Assessment
Course Resources
Module Outline
Study Materials
SmartBook/McGraw Hill
Discussion Board
Lecture Recordings
The Assessment
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The Assessment
Description of the Assessment
This assessment asks you to consider the long-term sustainability of a business in the ever-changing, and often hostile, global business environment. You should weigh up a range of complex issues, such as the business environment, culture, leadership, corporate governance and others when developing a strategy for an international business.
Assessment Content
You will be given a choice of five organisations and given some basic information to introduce you to each business’ fundamentals. You will be asked to choose your case study organisation in the first seminar of the Strategy part of this module, and you are encouraged to work in groups in your seminars to apply the strategic management concepts and frameworks discussed in lectures to your chosen case study organisation. This sharing of information and discussion will help you in the appropriate application of the concepts and frameworks.
Discussion in groups will support you, but you will then write an individual management report analysing the situation of the business and making strategic recommendations for the future direction of the business. You should use a variety of theoretical materials as well as company/market/sector data to complete the report.
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The Assessment
The suggested structure of your report is as follows:
Title Page (title should be specific to the report)
Contents Page
Introduction to the Report (50 words)
Here you should explain to the reader what will be covered in the report.
Brief Background to Case Study Organisation (50 words)
This should be a short section on the fundamentals of the business. Do not go into too much detail here, as it is likely that information on the business’s successes (and failures) can be better used in the following analysis sections.
External Analysis using one external analysis tool (15%) (375 words)
Here you will give a brief explanation, using support from academic texts, as to which external analysis tool you have chosen and its suitability. You will apply that analysis tool to your organisation, and use company, market or sector information to support your points (so each claim needs to be supported by a citation).
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The Assessment
Internal Analysis using one internal analysis tool (15%) (375 words)
Here you will give a brief explanation, using support from academic texts, as to which internal analysis tool you have chosen and its suitability. You will apply that analysis tool to your organisation and use company information to support your points (so each claim needs to be supported by a citation).
From the Analysis, write a Summary of the organisation’s key Strengths and Weaknesses, Opportunities and Threats using a SWOT (15%) (375 words)
Plan a Strategic Approach using a TOWS (15%) (375 words)
Make two Strategic Recommendations Based on your Analysis. For each, apply the SAF tool to decide which would be most appropriate for implementation (30%) (750 words)
Here we will want to see the use of strategic management vocabulary, and the use of academic texts, to explain the type of strategic recommendation you are making, and to debate its pros and cons.
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The Assessment
Conclusion (50 words)
Summarise what has been covered in the report.
Reference List
Appendices
10% of the mark is for the overall presentation and structure of a coherent argument from analysis through to recommendations.
Note: Tables and diagrams represent 150 words for half a page and 300 words for a whole page. You will want to put more complex diagrams and tables in appendices.
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The Assessment
Asda is the UK arm of an international group: Walmart. It comprises different sizes of stores across the UK from supercentres to convenience stores. It sells food and non-food items and has fashion line, ‘George’. It operates home delivery options and ‘click and collect’.
Netflix is a subscription-based entertainment streaming service, operating virtually everywhere except in China. Members can watch and download TV shows and movies without commercials. It has a number of pricing plans based around the number of screens/devices used. Netflix also produces its own original content. Recommendations are made to viewers based on their viewing history.
Organisations (information correct as of July 2021):
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The Assessment
Tesla builds all-electric vehicles, solutions for renewable energy generation and energy storage products. It manufactures its products in the US and China and a factory is under construction in Germany. They are developing autonomous driving solutions, vehicle software and there is also a used vehicle market.
TikTok is a Chinese owed, global social media platform on which users create and share videos. Douyin is the Chinese version, owned by the same parent company. Revenue comes from advertisements and in-app purchases.
Zara is part of the Inditex group and specialises in ‘fast fashion’ (which includes clothing, accessories, perfumes and beauty products) which it sells online and through physical stores.
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The Assessment
Hand-in date: Thursday 13th January 2022 by 11:59pm
Marks and Feedback will be available from: Friday 4th February 2022
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What is Strategy?
1. Strategy is a general plan or set of plans intended to achieve something, especially over a long period.
The group hope to agree a strategy for policing the area.
What should our marketing strategy have achieved?
Community involvement is now integral to company strategy.
2. Strategy is the art of planning the best way to gain an advantage or achieve success, especially in war.
I've just been explaining the basic principles of strategy to my generals.
https://www.collinsdictionary.com/dictionary/english/strategy
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Strategy (Rothaermel, 2020)
A set of goal-directed actions a firm takes to gain and sustain superior performance relative to competitors. (P.6)
To achieve superior performance, companies compete for resources:
New ventures: financial and human capital.
Existing companies: profitable growth.
Charities: donations.
Universities: the best students and professors.
Sports teams: championships.
Celebrities: media attention.
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What Strategy Is Not (Rothaermel, 2020, P.12)
Grandiose statements:
“We will be number 1.”
“We will win.”
A failure to face a competitive challenge:
Blockbuster didn’t address Netflix, Redbox, Amazon Prime, and Hulu.
Operational effectiveness, competitive benchmarking, or tactical tools:
Examples: “pricing strategy,” “operations strategy,” “brand strategy.”
These are good policies or initiatives, but not a strategy.
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What is Business Strategy?
A business strategy outlines the plan of action to achieve the vision and set objectives of an organisation and guides the decision-making processes to improve the company’s financial stability in a competing market.
What is Strategy? Definition, Components & Examples Explained
Business strategy is a clear set of plans, actions and goals that outlines how a business will compete in a particular market, or markets, with a product or number of products or services.
https://www.imd.org/imd-reflections/reflection-page/business-strategy/
https://www.cascade.app/blog/the-5-best-business-strategies-ive-ever-seen
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Three Levels of Business Strategy?
Corporate/Strategic
Direction of the total business
Where to invest / divest
Priorities for revenue growth & allocation of funds
Business/Tactical Unit
Identifying markets in which to compete
Agreeing where to grow / invest
Nature of the competition
Functional/Operational
Support the competitive dimensions within the market
Continuous improvement
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Corporate/
Strategic
Business/Tactical Unit
Functional/Operational
Blurring
‘A balanced organisation, is one whose senior managers have both feet on the ground and don’t get carried away by their ambition; they always remember that plans and initiatives have to be practical if they are to work, and they are relentless in their wish to keep close to the action’
Former Tesco boss Sir Terry Leahy
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On the difference between strategic and operational skills.
‘…the nature of what occurs in management requires more frequently a combination of the two skills during the whole year. Top managers need to deploy their immediate tactical operational and firefighting skills within an understanding and use of strategic issues and decisions. The separation of the two has in my experience led to failures at the operational level and a waste of time in terms of strategic planning and decisions never actually implemented.’ (Mumford, 1988, P140)
Strategic v Operational
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So have to be aware of/good at – both… so is there an ‘essence’ of strategic management?
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Strategic Management
Characteristics of Strategic Management?
‘It makes fundamental decisions about the future direction of an organisation: its purpose, its resources and how it interacts with the world in which it operates.’ (Lynch, 2015, P6)
POSSIBLY OVERLY PRESCRIPTIVE…
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Strategic Management
Internal Capabilities/Resources
+
External Environment – how it interacts
(incorporating Vision) – purpose
=
Add value – competitive advantage
(Lynch, 2015, P11)
But I question where the vision comes from, if not from the resources v external…WHAT CAME FIRST?!
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Internal Capabilities /Resources – HR, skills, investment, capital – STRENGTHS AND WEAKNESSES
External Environment – customers, suppliers, competitors, and PESTLE environment – OPPORTUNITIES AND THREATS – UNPREDICTABILITY
Add value – sustainability – long-term survival – profit – what the customer wants
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Strategy
Have to have a strategy to have strategic management…and a strategy to undertake strategic planning.
Strategy – the WHAT and the WHY?
Strategic Planning – ?
Operationalisation – ?
The HOW
The WHEN, WHO, WHERE
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The What and the Why – Incorporates Vision/Purpose
“Our vision is to create a better everyday life for the many people – for customers, but also for our co-workers and the people who work at our suppliers.” (IKEA, 2021)
“Inspiring Greatness. For over, 100 years, Rolls Royce Motor Cars has pushed boundaries of luxury, creating new realities both within and beyond automotive design”
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Strategic Management
long term direction of the organisation
achieving competitive advantage
involving vast changes to the business
containing financial or another resource implication
having an impact outside of the organisation
involving a substantial amount of risk
and has an effect on the decisions made at an operational level.
difficult to undo and can cost a vast amount of money to correct
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Strategic Decisions
(Waters, 2006)
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Strategic Decisions
Porter’s Generic Strategies
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A Good Strategy Is Based on Three Elements (Rothaermel, 2020)
A diagnosis of the competitive challenge.
Analysis of the firm’s internal and external environments.
A guiding policy to address the competitive challenge.
Formulation.
Results in corporate, business and functional strategy.
A set of coherent actions to implement the firm’s guiding policy.
Implementation.
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TURBULENCE
COMPETITORS
EXTERNAL
STAKEHOLDERS
INTERNAL
R & C
ETHICS/CSR
CULTURE
VISION
STRATEGY
STRATEGIC PLAN
STRATEGIC OPTIONS
VALUE/SCA
ANALYSIS
A GUIDING POLICY
A SET OF COHERENT ACTIONS
PESTLE
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Stakeholders (Rothaermel, 2020, P.13)
Organisations, groups, and individuals:
Can affect or can be affected by a firm’s actions.
Have an interest in the performance or survival of the firm.
Stockholders, employees (including executives, managers, and workers), and board members.
Customer’s, suppliers, alliance partners, creditors, unions, communities, media, and governments.
Consideration of Stakeholders in analysis, and/or as a ‘checkpoint’ of what is ‘competitive advantage’/’value’ and a type of strategy!
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Internal and External Stakeholders in an Exchange Relationship with the Firm (Rothaermel, 2020)
Exhibit 1.1
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Stakeholder Strategy (Rothaermel, 2020)
An integrative approach to managing a diverse set of stakeholders to gain and sustain competitive advantage.
Stakeholder management benefits firm performance:
Cooperative stakeholders reveal important information.
Increased trust lowers business transaction cost.
Can lead to greater adaptability and flexibility.
More predictable and stable returns.
Stronger reputation.
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Satisfied stakeholders are more cooperative and thus more likely to reveal information that can further increase the firm’s value creation or lower its costs.
Increased trust lowers the costs for firms’ business transactions.
Effective management of the complex web of stakeholders can lead to greater organizational adaptability and flexibility.
The likelihood of negative outcomes can be reduced, creating more predictable and stable returns.
Firms can build strong reputations that are rewarded in the marketplace by business partners, employees, and customers.
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A Decision Tool for Stakeholder Strategy (Rothaermel, 2020)
Stakeholder Impact Analysis helps to recognize, prioritize and address stakeholder needs.
Three important stakeholder attributes: power, legitimacy, and urgency:
Power: when the stakeholder can get the company to do something that it would not otherwise do.
Legitimate claims: perceived to be legally valid or otherwise appropriate.
Urgent claims: require a company’s immediate attention and response.
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Stakeholder Impact Analysis (Rothaermel, 2020)
Exhibit 1.2
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Mendelow’s Power Interest Model
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Competitive Advantage (Rothaermel, 2020)
Superior performance relative to other competitors in the same industry or the industry average.
Competitive advantage is relative, not absolute.
To assess competitive advantage, benchmark:
Compare the firm to competitors in the same industry.
Compare the firm to the industry average.
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LET’S TALK A LITTLE MORE ABOUT COMPETITIVE ADVANTAGE
In terms of stock market valuation, Tesla has appreciated much more in recent years than GM, Ford, or Chrysler, and thus appears to have a competitive advantage, at least on this dimension.
Instructors:
The digital companion to this book McGraw-Hill Connect has an animated video exercise on this section of the textbook. It provides more background with an analogy from track and field to further discuss competitive advantage. (LO 1-2).
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Sustainable Competitive Advantage (Rothaermel, 2020)
A firm that is able to outperform its competitors or the industry average over a prolonged period.
Example: Apple (smartphone industry):
Sustainable competitive advantage over Samsung.
Has lasted over a decade.
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Apple, for example, has enjoyed a sustainable competitive advantage over Samsung in the smartphone industry for over a decade since its introduction of the iPhone in 2007. Other phone makers such as Microsoft (which purchased Nokia) and BlackBerry have all but exited the smartphone market, while new entrants such as Xiaomi and Huawei of China are trying to gain traction.
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Competitive Disadvantage & Competitive Parity (Rothaermel, 2020)
Competitive Disadvantage: a firm that underperforms:
Its rivals.
The industry average.
For example, is 15% ROIC superior?
It depends on the industry.
Competitive Parity: two or more firms that perform at the same level.
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ROIC – return on invested capital.
It depends – for example, a 15% return on invested capital may sound like superior firm performance, in the consulting industry though, where the average return on invested capital is often above 20%, such a return puts a firm at a competitive disadvantage. In contrast, if a firm’s return on invested capital is 2% in a declining industry, like newspaper publishing, where the industry average has been negative (-5%) for the past few years, then the firm has a competitive advantage.
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How to Gain a Competitive Advantage (Rothaermel, 2020)
Provide goods or services that:
Consumers value more highly than those of its competitors, or
Are similar to the competitors at a lower price.
The rewards of superior value creation:
Profitability.
Market share.
A very ‘market driven’ view – what about ‘value’?
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How to Gain a Competitive Advantage
Can we look at what an organization has been doing?
And what it should do?
EXTERNAL FOCUS
INTERNAL FOCUS
MARKETING/CUSTOMER ORIENTATION
PRODUCT ORIENTATION
STAKEHOLDER VIEW
CSR
PROJECT MANAGEMENT MATURITY…
Use Porter (external view) or Barney (internal view – RBV and VRIO – more later)
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Tesla – lower emissions
Spanx – improve women’s lives!
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Strategic Positioning (Rothaermel, 2020)
A unique position within an industry that allows the firm to provide value to customers, while controlling costs.
Value creation minus costs equal economic contribution.
The greater, the better.
Enhances the likelihood of competitive advantage.
A very ‘market driven’ view – what about wider definitions of ‘value’?
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Strategic Positioning Requires Trade-Offs (Rothaermel, 2020)
Managers must make conscious trade-offs.
How to allocate resources?
Which activities to pursue?
Example: the retail industry:
Walmart: cost leader – big box outlet, low prices.
Nespresso: differentiator – professional salespeople, luxury setting.
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A Unique Strategic Position (Rothaermel, 2020)
A successful combination of strategic activities.
Competitive advantage has to come from:
Performing different activities.
Performing the same activities differently than rivals.
Example: Walmart:
Strategic activities strengthen its position as cost leader.
Big stores, low overhead, low wages.
COST LEADERSHIP, DIFFERENTIATION, FOCUS/NICHE (Porter)
CAN’T BE STUCK IN THE MIDDLE/ALL THINGS TO EVERYONE – RISK OF RED OCEAN
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Example: Walmart’s strategic activities strengthen its position as cost leader: big retail stores in rural locations, extremely high purchasing power, sophisticated IT systems, regional distribution centers, low corporate overhead, and low base wages and salaries combined with employee profit sharing reinforce each other, to maintain the company’s cost leadership.
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Value Creation (Rothaermel, 2020)
Companies with a good strategy are able to provide products or services to consumers:
At a price point that they can afford.
That enables the company to make a profit.
Value creation lays the foundation for a successful economy:
Education.
Infrastructure.
Public safety.
Healthcare.
Clean water and air.
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The Pyramid of Corporate Social Responsibility (Rothaermel, 2020) – VALUE?
Exhibit 1.3
Adapted from Carroll, A. B. (1991, July—August), “The pyramid of corporate social responsibility: Toward the moral management of organizational stakeholders,” Business Horizons: 42.Business Horizons: 42.
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This pyramid summarizes the four components of corporate social responsibility. Economic responsibilities are the foundational building block, followed by legal, ethical, and philanthropic responsibilities. Note that society and shareholders require economic and legal responsibilities. Ethical and philanthropic responsibilities result from a society’s expectations toward business. The pyramid symbolizes the need for firms to carefully balance their social responsibilities. Doing so ensures not only effective strategy implementation, but also long-term viability.
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AFI Framework (Rothaermel, 2020)
Effectively managing the strategy process is the result of:
Analysis (A).
Formulation (F).
Implementation (I).
This framework:
Explains and predicts differences in firm performance.
Helps leaders formulate and implement a strategy that can result in superior performance.
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The AFI Strategy Framework (Rothaermel, 2020)
Exhibit 1.4
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The SFA Strategy Model – an alternative view
Suitability
Feasibility
Acceptability
Johnson, Scholes and Whittington argue that a strategy must satisfy these three criteria before it can be successful, and because of this, the use of a SAF strategy model is a great way to fairly weigh up all of your options.
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The SFA Strategy Model – an alternative view
Suitability
Suitability is probably the most important factor in the SAF strategy model, as an option’s suitability is the key to whether or not the strategy will do what the company wants it to do. Suitability is usually assessed in a number of different criteria that is specifically important to the business or company such as environmental suitability, expectation suitability and capability suitability. These individual categories of suitability should then be categorised further to really reflect the company’s specific needs. In order to assess the suitability of a strategy the business should be asking questions such as “does the strategy use the company’s strengths effectively?”, “does the strategy overcome the difficulties which were identified in the analysis?” and “does the strategy fall in line with the goals the business wants to achieve?”
Acceptability
The acceptability aspect of a SAF strategy model is all about measuring the return, risk and stakeholder reactions resulting from a particular strategy. Returns will be measured based on the benefits that stakeholders expect from the strategy and could be financial as well as non-financial, depending on what the stakeholders decide. Returns calculations can be performed by any number of methods such as cost-benefit analysis, profitability analysis, real-options analysis and shareholder value analysis. In terms of risk, the probability of a strategy’s failure and any financial losses, brand or corporate impacts should also be weighed up. Risk can be measured by the impact on liquidity, sensitivity analysis and stakeholder reactions, to deem how acceptable a strategy is.
Feasibility
When it comes down to it, the feasibility portion of the SAF strategy model is really the make or break of any chosen strategy. Whether or not the business has the resources, aptitude and abilities to actually implement the strategy is key to its success, therefore financial feasibility needs to be assessed by forecasting and analysing cash-flows, performing break-even analysis and a number of other financial tests. Other questions which need to be asked in terms of a strategy’s feasibility relate to how much manpower, equipment, management power and materials a company has, as well as asking themselves do they have the organisational structure and the markets needed to make a particular strategy work. An easy way to remember everything you need to assess for feasibility is to use the M-word model: machinery, management, money, manpower, markets, materials and make-up.
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Suitability
Suitability is probably the most important factor in the SAF strategy model, as an option’s suitability is the key to whether or not the strategy will do what the company wants it to do.
Suitability is usually assessed in a number of different criteria that is specifically important to the business or company such as environmental suitability, expectation suitability and capability suitability. These individual categories of suitability should then be categorised further to really reflect the company’s specific needs.
In order to assess the suitability of a strategy the business should be asking questions such as “does the strategy use the company’s strengths effectively?”, “does the strategy overcome the difficulties which were identified in the analysis?” and “does the strategy fall in line with the goals the business wants to achieve?”
Acceptability
The acceptability aspect of a SAF strategy model is all about measuring the return, risk and stakeholder reactions resulting from a particular strategy. Returns will be measured based on the benefits that stakeholders expect from the strategy and could be financial as well as non-financial, depending on what the stakeholders decide. Returns calculations can be performed by any number of methods such as cost-benefit analysis, profitability analysis, real-options analysis and shareholder value analysis.
In terms of risk, the probability of a strategy’s failure and any financial losses, brand or corporate impacts should also be weighed up. Risk can be measured by the impact on liquidity, sensitivity analysis and stakeholder reactions, to deem how acceptable a strategy is.
Feasibility
When it comes down to it, the feasibility portion of the SAF strategy model is really the make or break of any chosen strategy. Whether or not the business has the resources, aptitude and abilities to actually implement the strategy is key to its success, therefore financial feasibility needs to be assessed by forecasting and analysing cash-flows, performing break-even analysis and a number of other financial tests.
Other questions which need to be asked in terms of a strategy’s feasibility relate to how much manpower, equipment, management power and materials a company has, as well as asking themselves do they have the organisational structure and the markets needed to make a particular strategy work.
An easy way to remember everything you n
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