BUS 6320, Global Strategic Management 1
Course Learning Outcomes for Unit II Upon completion of this unit, students should be able to:
2. Analyze the processes for formulating sustainable corporate business strategies. 2.1 Explain problems and challenges within a business. 2.2 Examine potential recommendations.
3. Synthesize the role of leadership in strategic business planning.
3.1 Examine the process that leaders use to overcome organizational challenges.
4. Summarize the role of innovation and risk management in strategic business planning. 4.1 Analyze the level of risk for varying potential recommendations. 4.2 Propose a recommendation towards strategic business planning. 4.3 Construct an implementation strategy.
Required Unit Resources Chapter 3: External Analysis: Industry Structure, Competitive Forces, and Strategic Groups Chapter 4: Internal Analysis: Resources, Capabilities, and Core Competencies Case Study: Best Buy Co., Inc. Unit Lesson Global strategic planning and management necessitates an understanding of external and internal events, trends, and capabilities. One might call this the situation analysis of an organization. Rothaermel (2019) examines the political, economic, sociocultural, technological, ecological, and legal analysis (PESTEL), which is basically an extension of the political, economic, sociocultural, and technological (PEST) analysis. As a reminder, this analysis is a tool used by strategic leaders to identify factors in the external environment that will affect their strategic planning. The PEST analysis utilizes the first four groups and the PESTEL all six of the groups. See Figure 1 for more information about the PESTEL analysis.
UNIT II STUDY GUIDE Analysis of Environment
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As a strategic leader, understanding each of these areas as it relates to an organization is necessary in order to compile an effective strategic plan rendering the organization capable of competing on a global basis. This tool, coupled with Porter’s five forces introduced in the Unit I lesson (and discussed in Chapter 3 of your textbook), will provide a detailed analysis of the external forces both within the external environment and within specific industries. The competitive analysis examines a particular company’s competitive advantage (or lack thereof) relative to other organizations within its industry. The industry analysis reviews the overall health of an industry. Are consumers purchasing significant quantities of the products within a certain industry? For instance, the health food industry enjoyed a healthy upswing in 2019. Also, think back to 2008 when the auto industry sales plummeted. Consumers were not buying automobiles, thus, every industry connected to automobiles also experienced a downturn. One method of comparing organizations within a certain industry is the use of ratio analysis and comparisons. Ratios can reveal where one organization stands in relation to another or to the industry average. Ratio analysis uses numbers from the financial statements to analyze business operations such as profitability, liquidity, activity, debt, and market. As a reminder, there are four main financial statements: balance sheets, income statements, cash flow statements, and the statement of shareholder’s equity. Access the financial statement activity to learn more. The alternative format for this activity is also available.
PESTEL Analysis
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As a leader and manager of a department, division, or entire organization, financial statements provide a barometer of how various aspects of the organization are performing. This can then be benchmarked against previous weeks, months, quarters, or years to aid in decision-making. Another helpful tool used by strategic leaders is that of a balanced scorecard, which supplements not replaces financial statements. The idea of the balanced scorecard is to measure performance from the perspective of the customers: internal business processes leading to learning and growth. This scorecard can assist strategic planners with aligning their long-term strategy with their short-term actions, which is sometimes a complicated process for organizational leaders. Kaplan (2007) examines the processes involved with the scorecard. Translating the vision is the first process enabling managerial teams the ability to rally around the vision, mission and overall objectives. The second process of communicating and linking enables leaders to share the proposed strategy through the horizontal and vertical chains of command. The third process of business planning enables leaders to understand and execute effective decisions from the financial statements. The final process of feedback and learning enables everyone within the organization to strategically learn from the review and feedback process. Ideally, leaders and management teams will modify their strategies to ensure overall organizational growth. The use of a balanced scorecard encourages accountability and responsibility of employees, which leads to effective implementation of the organization’s long-term strategy. According to Kaplan (2007), companies are using the scorecard to accomplish the following items.
• Clarify and update strategies in order to align with current industry needs. • Communicate strategies throughout the company. • Align individual employee goals with the strategies. • Link strategic objectives to long-term goals. • Compile, explain, and align strategic initiatives within the company. • Ensure that leaders are reviewing and modifying the strategic plan toward effectiveness.
A final important analysis that should be completed by organizational leaders is that of an internal analysis. This determines whether the internal resources, capabilities, and core competencies are at the point of achieving competitive advantage. Rothaermel (2019) defines core competencies as unique strengths that an organization has embedded within the firm. An example of this might be Walmart, which arguably has an internal set of purchasing agents that are superb negotiators as they purchase items at the lowest cost to enable Walmart to resell these items and still remain profitable. See Exhibit 4.3 in your textbook for additional examples of core competencies within familiar companies. A gap analysis is an internal evaluation tool used by leaders to identify performance deficiencies. It looks at where the organization is within certain identified parameters and where they would like to be in the future. This identifies a gap, which ideally leads to the modification of elements within the strategic plan. Another tool is the root cause analysis, which can be used when the strategic planner needs to dig deeper into an identified problem. Assuming the problem is identified correctly, understanding the cause versus the symptom leads to the identification of the appropriate modifications within the organization.
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One final tool to be discussed is the McKinsey 7-S Model, which analyzes how well departments within the organization are working together. This model identifies seven elements that need to interact and align with each other in order to optimize performance within the organization. Strategy, structure, and systems are identified as relatively easy to align. After identifying the strategy within the organization, the structure (how the company is organized) and systems (daily processes for accomplishing tasks) are communicated. The final four elements are more intangible and include items such as shared values, style, staff, and skills. To clarify, shared values identify the core values, corporate culture, and ethical stance of the organization. The style identifies the type of leadership adopted within the organization. The final two elements of staff and skills address the capabilities and skillset of the employees within the organization. These tools are used today within companies to analyze their internal environment with the end goal of aligning core competencies most effectively within the strategic plan. These tools will help organizational leaders gain an understanding of how to maintain a competitive
advantage. This could inevitably be the key to their long-term existence. In order to maintain this competitive advantage, differentiation must be present. Differentiation suggests that one organization is providing something of value (value proposition) to the target market that the competitors are not. Innovation and forward-thinking strategic plans need to be in place to ensure this sustainability. Think of organizations that were at one-time powerhouses within their industry, who are currently either completely out of business or failing. Some examples might be Blockbuster (video rentals), Compaq Computer Corporation (technology), Kodak (photography), Circuit City (electronics), Enron (energy supplier), Pan Am (airline), Tower Records (record albums), Polaroid (instant photography), and Sears (retail). Each of these companies maintained a competitive advantage, enjoying significant profits for many years. It could be suggested that they did not utilize a balanced scorecard to analyze results, learn/modify, and revise the strategic plan. Most of these companies were victims of not adapting to the changes and demands of their external environment. What might have happened with Blockbuster if they had researched other video distribution systems (Redbox or Netflix) or even streaming? The same could be suggested with Kodak from the standpoint of researching the digital market. This course will employ a series of case analyses. As a reminder, a case provides you with the opportunity to analyze a real-life situation utilizing a real company.
The McKinsey 7-S Model
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Cases have four different types of situations that tend to occur; these are detailed in the figure below.
Cases can include complicating factors, which include irrelevant facts or limited testimony. This mimics the real world. Managers need to manage through these complications and lead their organization toward meeting their goals. It is imperative that every organization, no matter its size, analyze and understand both their external and internal environments. Leaders within these organizations need to utilize tools such as the SWOT (strengths, weaknesses, opportunities, and threats) analysis, PESTEL analysis, and Porter’s five forces to ensure that their strategic plan is effective within their industry. The balanced scorecard, financial statements, and ratio analysis need to be reviewed continuously to ensure that benchmarks are being met in order to maintain the competitive advantage. Applying these tools to your case analyses within this course will employ practical application of these tools ensuring a better understanding of how to apply these tools for making measured decisions in future business applications.
References Kaplan, R. S., & Norton, D. P. (2007). Using the balanced scorecard as a strategic management system.
Harvard Business Review, 85(7/8), 150–161. https://libraryresources.columbiasouthern.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=25358567&site=ehost-live&scope=site.
Rothaermel, F. T. (2019). Strategic management: Concepts (4th ed.). McGraw-Hill Education.
Figure 3: Four types of case situations
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Suggested Unit Resources In order to access the following resource, click the link below. The SWOT analysis is a powerful and often used tool in strategic analysis. However, it does have some weaknesses. The article below explore other frameworks that can be used in conjunction with a SWOT analysis to help lessen the possible effects of these weaknesses. Al-Araki, M. (2013). SWOT analysis revisited through PEAK-framework. Journal of Intelligent & Fuzzy
Systems, 25(3), 615–625. https://libraryresources.columbiasouthern.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=88899342&site=eds-live&scope=site
