CH-1-3 Strategic Management Essentials – Strategic Management: Concepts and Cases : Book Guide

This Document Contains Chapters 1 to 3 Chapter 1 - Strategic Management Essentials Overview Chapter 1 introduces the basic terms in strategic management. This chapter presents the comprehensive model for strategic planning that appears in each subsequent chapter and provides a unifying, logical flow for the entire textbook. This chapter describes the benefits of doing strategic planning, the drawbacks of not doing strategic planning, and the pitfalls of doing strategic planning incorrectly. Learning Objectives: 1. Discuss the nature and role of a chief strategy officer (CSO). 2. Describe the strategic-management process. 3. Explain the need for integrating analysis and intuition in strategic management. 4. Define and give examples of key terms in strategic management. 5. Discuss the nature of strategy formulation, implementation, and evaluation activities. 6. Describe the benefits of good strategic management. 7. Discuss the relevance of Sun Tzu’s The Art of War to strategic management. 8. Discuss how a firm may achieve sustained competitive advantage. Teaching Tips 1. Spend about 40 minutes going over the comprehensive strategic management model in Figure 1-1, highlighting each component part with examples. This is the best way to cover the terms introduced in the chapter. Pull up the new and improved author website for this textbook, because it has great resources for students. The URL is www.strategyclub.com 2. The Edward Deming quote mentioned in Chapter 1 (In God We Trust, All Others Bring the Data) is vitally important in this course, because students tend to use vague terms throughout their case analysis. Vagueness is detrimental to development of any strategic plan. Therefore, highlight and emphasize the relevance and importance of the Deming quote and tell students that vagueness is disastrous in this course. Strategies must be formulated to the extent possible on factual, specific, underlying key internal and external factors, rather than trying to formulate strategies based on general statements, opinion, or intuition. 3. Highlight Figure 1-2 on “the benefits of doing strategic planning.” Use that exhibit to emphasize the many benefits of doing strategic planning, as well as the drawbacks of not doing strategic planning. 4. Ask students to raise their hand if they played football, basketball, or soccer for the college/university. Ask several of those athletes to “tell the class how important having a good game plan is to the success of an athletic team.” Associate their answers to the importance of a business having a good game plan, i.e., strategic plan. 5. Regarding the “Comparing Business and Military Strategy” section, emphasize to students that there are countless examples in military history where a superior army was defeated by a smaller army that had a better strategic plan. The famous general, Alexander the Great, who never lost a battle, said (paraphrased): “I’d rather face an army of lions led by a sheep, than an army of sheep led by a lion.” That quote emphasizes the importance of strategic planning, and having an excellent strategist. 6. All 45 end-of-chapter review questions are excellent to go over in class. Sometimes in class, the authors will assign every student a question and give the class 10 minutes to develop answers and then let each student give the class the answer, and then comment on the answer (answers to all questions are given later in this manual). This is a great way to promote teacher/student interaction. 7. Ask students to read the Adidas Group Cohesion Case presented after Chapter 1 because a third of all the end-of-chapter exercises apply chapter concepts to the Adidas Group case – thus preparing students for developing a case analysis on their assigned company. Divide students into 3 or 4 person teams within the first two weeks of class and assign to them one of the 26 cases in the book, and schedule a day for the teams to each give a 20 minute oral presentation revealing their recommended three-year strategic plan for the firm. The authors and most professors using this book use this approach. 8. It is important to spend some class time also on Exercise 1B that applies the strategic management process to the Adidas Group Cohesion Case. Make sure students understand the basic strategic planning process as applied to Adidas Group and revealed in that exercise. Associated exercises at the end of other chapters utilize the information obtained from Exercise 1B and collectively help prepare students for performing case analysis on their assigned company. 9. Read the “Special Note to Students” at the end of this chapter and explain its importance to students. 10. Skip over to the last three pages in book (before the cases start) and go through that basic timeline/outline for a strategic management case analysis – so students will know what is expected of them in terms of preparing their case analysis/project for the course. Refer to these three pages often in the course. Answers to End-of-Chapter Review Questions 1. Singapore Airlines has done very well in 2013. Briefly explain whether this strategy will be just as effective going forward. Answer: Singapore Airlines has achieved competitive advantage through the formulation and implementation of effective strategies. The company has effectively pursued diversification through the combination of its long-haul airlines (Singapore Airlines) and short-haul regional businesses (Silk Air). With its extensive reach, its reputation for service excellence, and fleet of technologically advanced aircraft it also beats its competitors by offering a unique value proposition to its customers. Its competitive advantage is indicated in its having been ranked as the 31st most admired company in the world (outside of the United States) as well as across-the-board improvements in load factors in a fiercely competitive industry. However, having achieved competitive advantage today is no guarantee of sustaining competitive advantage tomorrow. The effectiveness of its current strategies will depend on the top management team’s capacity to adapt the organization to emerging trends in the external environment better than will its rivals! 2. Does Singapore Airlines have its strategic plan posted on its website? Should the company do so? Why or why not? Answer: The Singapore Airlines strategic plan is not found on the company’s website. Effectively formulated and implemented strategic plans are critical components of a company’s competitive advantage. Sustaining that advantage requires the use barriers to imitation in order to prevent rivals from identifying and imitating the underlying drivers of such competitive advantage. One such barrier is the use of ambiguity by ensuring that strategic plans remain secret. 3. Compare and contrast the activities involved in strategy formulation versus strategy implementation. Answer: Strategy formulation includes developing a vision and mission, identifying an organization’s external opportunities and threats, determining internal strengths and weaknesses, establishing long-term objectives, generating alternative strategies, and choosing particular strategies to pursue. This is in great contrast with strategy implementations which includes developing a strategy-supportive culture, creating an effective organizational structure, redirecting marketing efforts, preparing budgets, developing and utilizing information systems, and linking employee compensation to organizational performance. 4. Given the political and economic collapse of various Middle Eastern and European countries, identify a list of companies for which gaining and sustaining competitive advantage has permanently changed. Answer: The Middle East and North Africa (MENA) region has experienced a significant amount of political and economic upheaval in recent years. That upheaval has led to the emergence of both opportunities and threats in the external environment. The region has experienced political upheaval in Egypt, a protracted internal conflict in Syria, and an adversarial between Western nations. And new opportunities have emerged in vibrant emerging economies in the United Arab Emirates and Qatar. Given these potentially disruptive changes what it takes to gain and sustain competitive advantage has changed irrevocably. The following is a list of companies in which strategists find themselves diligently working to navigate the changing political-economic landscape: 5. There is a dramatic shift in mass retailing to become smaller. Give four reasons for this phenomena. Give four corporate examples of this. Answer: Four reasons for this phenomenon are: • The increasing use of the internet – on line social networking sites such as Facebook, Myspace • Change of consumer habits – consumers today are flocking to blogs, short-post forums such as Twitter, YouTube • On line sales can boost in-store sales in the use of on line to promote in-store promotion • On a political map, the boundaries between countries have largely disappeared. 6. Avoid being merely descriptive in your written or oral case analysis; rather, be prescriptive, insightful, and forward-looking throughout your project. Discuss the meaning of this sentence. Answer: Do not just describe the project you will be writing but analyze the points and examine the factors affecting the rapidly changing environment. 7. Explain what Dale McConkey means when he says “plans are less important than planning” in the opening- chapter quotes. Answer: Plans are the result of planning, hence if there is no planning, plans will not be developed. 8. In terms of developing a strategic plan, what does Edward Deming mean when he says “In God we trust. All others bring data.” Answer: The strategic management process attempts to organize qualitative and quantitative information in a way that allows effective decisions to be made under uncertainty conditions which come from other people. In such uncertainty data we have to trust God that we make a correct decision. 9. Strategy formulation, implementation, and evaluation activities occur at what three hierarchical levels in a large organization? Answer: Strategic management process consists of three stages: Corporate, divisional or strategic business unit and functional. 10. What was Einstein’s rationale for saying “Imagination is more important than knowledge”? Do you agree with Einstein? Why or why not? Answer: Yes, I agree with Einstein because to be a market leader one must have competitive advantages which are derived from imagination while knowledge is common to all people and hence do not have any competitive advantages. 11. What does Drucker mean when he says “I believe in intuition only if you discipline it”? Do you agree with Drucker? Why or why not? Answer: Yes I agree with Drucker because the fast rate of change today is producing a business world in which customary managerial habits are not adequate. In the past, where changes were not rapid and small changes, experience alone was an adequate guide. However, when there are strategic decisions which affect major irrevocable consequences, intuitive and experience-based management philosophies; with our discipline, are greatly inadequate. 12. Strategic management is all about gaining and maintaining competitive advantage. Explain and give three examples. Answer: Strategic management focuses on integrating management, marketing, finance/accounting, production/operations, research and development, and information systems to achieve success. Three examples are: • Strategy formulation • Strategy implementation • Strategy evaluation 13. Based on the definition of strategists in Chapter 1, identify the top five strategists that you have ever personally spoken to and interacted with. Answer: It makes a great strategist based on their qualities. Top strategists often excel in understanding complex situations, predicting future trends, and making well-informed decisions. If you have a list of strategists or examples, I can help analyze their strategic qualities! 14. For your college or university, would collapse of the euro currency be a major threat or opportunity? Why? What is the probability in your view of such a collapse? Answer: For a college or university, a collapse of the euro could be both a threat and an opportunity. It might disrupt international student enrollments and funding, but it could also create opportunities for attracting students and partnerships from countries with a more stable currency. The probability of such a collapse is considered low by most economists, though it is always wise to monitor global economic trends for any shifts. 15. Strategic management is not a panacea for success. It can be dysfunctional if conducted haphazardly. Give five examples of potential “haphazard” aspects of the planning process. Answer: The five examples are: • Failure to involve key employees in all phases of planning • Failing to create a collaborative climate supportive of change • Becoming too engrossed in current problems resulting in insufficient or no planning • Being too formal in planning so that flexibility and creativity are stifled • Doing strategic planning only to meet accreditation or regulatory requirements 16. Explain why an important guideline for effective strategic management is open-mindedness. Answer: Open mindedness create a corporate culture which promotes collaborative climate supportive of change. This climate prompts employees to give their ideas etc and does not stifled creativity. 17. Explain how and why firms are today using social networking sites to gain competitive advantage. Answer: The internet has changed the way people organize our lives; inhabit our homes, and relate to and interact with family, friends, neighbors, and even ourselves. Consumers today are flocking to blogs, short-post forums such as Twitter, YouTube and social networking sites such as Facebook, Myspace instead of traditional communication means such as television, radio, newspapers and magazines. 18. Compare and contrast vision versus mission statements. Answer: A vision statement identifies what the company aims to be and acts as a source of inspiration. This will help in decision-making for the future. Mission statements are statements of purpose that distinguish one business from other similar firms by identifying the scope of a firm’s operations in product and market terms. 19. In your opinion, identify the top 10 external factors affecting your university. Rank your top 10 with one being most important. Answer: 1. Government Funding and Policy - Crucial for financial stability and operational capacity. 2. Economic Conditions - Affects student affordability and employment prospects. 3. Demographic Trends - Impacts student enrollment numbers and diversity. 4. Technological Advancements - Influences teaching methods and research capabilities. 5. Globalization and International Relations - Affects international student numbers and partnerships. 6. Employment Market Trends - Determines the relevance of academic programs and graduate employability. 7. Public Perception and Reputation - Impacts student applications and alumni support. 8. Legislation and Regulation - Governs accreditation, funding, and operational guidelines. 9. Competition from Other Institutions - Affects student recruitment and program development. 10. Environmental and Health Issues - Influences campus operations and student well-being. 20. In order of importance, rank the top six benefits of a firm engaging in strategic management. Answer: Student answers may vary and should draw from the section entitled “Benefits to a Firm That Does Strategic Planning”. 1. Financial benefit – it generates more revenue for the firm. 2. It allows major decisions to better support established objectives. 3. It allows identification, prioritization, and exploitation of opportunities. 4. It provides an objective view of management problems. 5. It represents a framework for improved coordination and control of activities. 6. It minimizes the effects of adverse conditions and changes. • Improved Decision-Making - Enhances the ability to make informed, strategic choices. • Competitive Advantage - Helps in positioning the firm more favorably in the market. • Enhanced Organizational Alignment - Aligns resources and efforts with long-term goals. • Risk Management - Identifies and mitigates potential threats to the business. • Long-Term Planning - Supports the development of future-oriented strategies and goals. • Increased Efficiency - Streamlines operations and optimizes resource use. 21. In order of importance, rank the top six reasons that many firms do no strategic planning. Answer: The top 6 reasons are: • Lack of knowledge or experience in strategic planning • Poor reward structure • Firefighting • Waste of time • Too expensive • Laziness 22. In order of importance, rank the top six guidelines to follow in conducting strategic management activities. Answer: The top 6 guide lines are: • Should be a people process more than a paper process • Should be learning process for all managers and employees • Should be words supported by numbers and not numbers supported by words • Should be simple and non routine • Should vary assignments, team memberships, meeting formats, and planning calendar • Should challenge assumptions underlying current corporate strategy 23. Discuss how relevant you think Sun Tzu’s Art of War writings are for firms today in developing and carrying out a strategic plan. Answer: Sun Tzu’s Art of War writings are still relevant in the following areas: • Speedy victory – similar in a war situation; launching a marketing plan should be fast so that competitors would have little time and readiness to respond. • Know your enemy and yourself – in a strategic plan, SWOT analysis is extremely important, so that we know what are our competitive advantages are as well as the weaknesses of our competitors. • Be the first is imperative in today’s strategic plan – a market leader. • Lastly like Sun Tzu’s Art of War writings, creativity is extremely relevant in developing and carrying out a strategic plan. 24. Determine the ways and means that your college or university does strategic planning and report on these efforts to your class. Answer: Student answers will vary. • The college looks at their position in the market – mission statement. • Then they look at where they want to go and in which direction i.e. the short, medium and long term objectives. • Finally, how are they achieving where they want to go – strategies Our university engages in strategic planning through a structured process involving stakeholder input, SWOT analysis, and data-driven decision-making. The process includes setting long-term goals, aligning departmental objectives with the university's vision, and regularly reviewing progress. Efforts are communicated through strategic reports, town hall meetings, and updates on the university's website to ensure transparency and engagement. 25. Go to the www.strategyclub.com website and describe the strategic planning products offered. Answer: The SMCO website provides links to websites with information useful for case analysis such as corporate websites, business analysis services, news sites, magazines, governmental sites, and financial ratio analyses. It also provides links to job search websites, graduate school websites, and websites related to strategic planning. Several software packages are available for purchase on the site including a template for generating the matrices required for case analyses. 26. Compare and contrast the extent that strategic-planning concepts are used by companies in your country versus companies in the United States? Answer: Student answers will vary. For example, companies in Singapore generally fall into two groups: subsidiary of multinational companies or domestic companies. The former follows strategies set by their parent company while the latter practice some forms of strategic planning although perhaps not as much as their counterparts. Domestic companies are looking at stabilizing their business, generating enough profits before they embark on overseas expansions. Furthermore, domestic companies do take a more reactive rather than a proactive approach. In the U.S., strategic planning is often highly formalized with extensive use of data analytics, scenario planning, and regular updates. Companies emphasize long-term goals and agility in response to market changes. In contrast, companies in my country may employ strategic planning to varying extents, with some focusing more on short-term goals and less formalized processes. The level of sophistication and integration with daily operations can vary widely. 27. Would strategy formulation or strategy implementation concepts differ more across countries? Why? Answer: These concepts differ across countries. The internal and external factors differ – such as company resources, government / political regulations; different cultural factors; technological advances. These factors impact upon strategy formulation or strategy implementation. 28. Compare strategic planning with long range planning. Answer: Long-range planning is used to optimize for tomorrow the trends of today, whereas strategic planning is used to exploit and create new and different opportunities for tomorrow. 29. What are the three activities that comprise strategy evaluation? Why is strategy evaluation important even for successful firms? Answer: Strategy evaluation consists of: Suitability, Feasibility and Acceptability. Suitability deals with the overall idea of strategy and how it addresses the organization’s strategic position. Feasibility is concerned with whether the company has sufficient resources to carry out the strategy. Acceptability is concerned with the major stakeholders of the company. Strategy evaluation is always important (even for successful firms) so they can check that the company is on the right track in terms of strategic management as well as fully maximizing the use of the resources they have invested in. Also, strategy evaluation will assure major stakeholders of the company that the various business strategies are for more future successes for the company. 30. Explain how a firm can achieve sustained competitive advantage. Answer: A firm can achieve sustained competitive advantage by constantly analyzing its competitors’ business strategies as well as updating PEST (Political, Economical, Social, and Technological) analysis. The firm should continue studying the evolving trends within as well as out of the country. The firm should also constantly conduct a SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis to be able to come up with better strategies. 31. Identify and give an overview of three social networking sites that firms are using to gain competitive advantage. Answer: In Singapore, the three most popular social networking sites used are: Friendster, Facebook and MySpace. These networking sites allow users to upload their profiles, interests, photos and videos and share them with other contacts and friends. The websites are also used for dating, and discovering new bands, events and hobbies. For example, Starbucks Singapore has a fan-page on Facebook with a total of 60,000 members. They constantly update the page with new events, promotions and products. These updates are then reflected on the “status feeds” of those who subscribed to the fan page. 32. List four strategists whom you know personally. Rank them on their effectiveness as a leader in their Organization. Answer: Mr. Khalid A. Al-Falih is the President and Chief Executive Officer of Saudi Aramco, the world’s largest energy company. Sir Tim Clark is the President of Emirates Airlines. Mr. Clark joined emirates in 1985 and has been instrumental in transforming the airline from a one-route carrier to the world’s largest airline in terms of passenger miles flown. Mr. James Hogan is President and CEO of Etihad Airways, the national airline of the United Arab Emirates. Mr. Hogan joined Etihad in 2006 and has overseen the company’s explosive growth and internationalization. Mr. Mohammed Sharaf is the Chief Executive Officer of Dubai Ports (DP) World. Mr. Sharaf has overseen the growth of DP World into a highly competitive business with operations in over 30 countries. 33. List six characteristics of objectives and give an example of each. Answer: • State direction: Example: Our sales target for year 2011 is to achieve $4 million of new business • Aid in evaluation: Example: We must build this new home in 2 years • Create Synergy: Example: In order to achieve $4 million of new business, we need Production to increase production capacity, Sales to look for new markets; Procurement to source for low priced but good quality raw materials. Everyone has to work together to make it a success. • Reveal Priorities: Example: There are two objectives: to increase Sales by 10% this year or to reduce number of staffs? • Motivating: Example: If we achieve our $10 million sales, everyone will get 10% salary increase. • Controlling activities: Example: We shall meet every Monday to know the progress of our Sales and to take corrective actions. 34. Conduct Internet research to determine what percentage of persons in your country smoke. What is the implication of this for firms in your country? Answer: The basic principles of research methodology must be utilized: research objectives, principles of questionnaires being asked, sample size, population size, data analysis and interpretation etc. If your country has a high population of smokers, consider the following: smoking can be quite sociable and many people often smoke when they go out to bars and restaurants. This will then have an impact on the food and beverage industry. Another example is that smokers often buy mints or gum and this will have an impact on the confectionary industry. 35. List four financial and four nonfinancial benefits of a firm engaging in strategic planning. Answer: Businesses engaging in strategic planning experience the following financial benefits. They show significant improvement in sales, profitability, and productivity compared to firms without strategic planning activities. Firms using strategic planning generally exhibit superior long-term financial performance relative to their industry and seem to make more informed decisions with good anticipation of both short and long-term consequences. They are also prepared for fluctuations in their external and internal environments. In addition to the financial benefits, firms using strategic planning also experience nonfinancial benefits. These include an enhanced awareness of external threats, an improved understanding of competitors’ strategies, increased employee productivity, reduced resistance to change, and a clearer understanding of performance-reward relationships. 36. Compare business strategy and military strategy. Answer: Business and military strategy are similar in many respects. Many of the ideas developed in business strategy were first formulated as military strategy. Both military and business organizations have competitors. A fundamental difference between military and business strategy is that business strategy is formulated, implemented, and evaluated with the assumption of competition, while military strategy is based on an assumption of conflict. 37. Strategic planning should be more a people process than a paper process. Explain. Answer: Strategic planning requires people to give inputs and for them to manage the process, it is not just paperwork. 38. Strategic planning should not be controlled by technicians. Explain. Answer: Strategic planning should not be controlled by technicians because they are so formal in planning that flexibility and creativity are stifled. 39. According to Sun Tzu, warfare is based on deception. Should strategic planning be based on deception? Explain. Answer: Strategic planning should not be based on deception because companies look at long term growth not just short term goal. In addition, companies have to be answerable to its stakeholders, as well as its shareholders. 40. Sun Tzu says “Generally, in war the best policy is to take a state intact; to ruin it is inferior to this.” Explain. Is this true in corporate strategic planning? Explain. Answer: It means that if we could conquer the enemies without much warfare, both sides will not suffer many casualties, and not overly used of resources as no organization has unlimited resources etc. This is true in corporate planning because no organization has unlimited resources, strategists must decide which alternative strategies will benefit the firm most. 41. What is Singapore Airlines’ competitive advantage? How can this advantage be sustained? Answer: Singapore’s competitive advantage lies in its capacity to executive on a value proposition that results in a reputation for excellence in the consistent delivery of high quality service to customers in need of access to frequent, efficient, and reliable international/long-haul transport. Competitive advantage may be sustained by ensuring that competitive strategies continue to reflect the emerging reality of evolving needs of customers and the changing dimensions of competition (e.g. price competition, the incorporation of technologically advanced aircraft, and a range of differentiated in-flight services). 42. Are there any compelling reasons why the external audit and internal audit should not be conducted simultaneously? Answer: There are no compelling reasons why the external audit and internal audit should not be conducted simultaneously. 43. Which stage of strategic management do you feel is most important? Why? Answer: Strategic management process consists of 3 stages: • Strategy formulation • Strategy implementation • Strategy evaluation Each state is equally important as they are interdependent of each other. 44. Should strategic planning be more open or closed, (i.e. hidden or transparent)? Why? Answer: Strategic planning process should be more open because of the pitfalls in strategic planning is failing to communicate the plan to employee, who continues working in the dark. 45. Discuss the extent to which strategic planning concepts would be applicable to individuals managing their own lives. Answer: Strategic planning concepts to a large extent is applicable to individuals managing their own lives for example, as managers amass experience, they may rely less on formalized planning, a result of overconfidence; or when a person has achieved status, privilege, or self-esteem, he/she often sees a new plan as a threat. Answers to the End-of-Chapter Assurance of Learning Exercises ASSURANCE OF LEARNING EXERCISE 1A: ASSESS SINGAPORE AIRLINE’S MOST RECENT QUARTERLY PERFORMANCE DATA Purpose This exercise gives you practice examining the progress a firm is making in executing its strategic plan. Singapore Airlines utilizes excellent strategic management as showcased at the beginning of Chapter 1. Instructions Step 1: Go to Singapore Airlines’ website. Click on About Us and then Investor Relations. Step 2: Review Singapore Airlines’ most recent quarterly report. Step 3: Examine the change in performance variables for that most recent quarter versus the prior year-over-year quarter. Step 4: What strategic changes were made during that quarter? What additional changes in your view are still needed? How is the company doing? What are key problem areas? ASSURANCE OF LEARNING EXERCISE 1B: GATHERING STRATEGY INFORMATION ON ADIDAS AG Purpose The purpose of this exercise is to get you familiar with strategy terms introduced and defined in Chapter 1. Let’s apply these terms to the Cohesion Case on adidas AG. Instructions Step 1: Go to the adidas corporate website. Click on Investors and then Financial Reports. Download the most recent Annual Report. This document may be quite long, so you may want to copy the document electronically. The Annual Report contains excellent information for developing a list of internal strengths and weaknesses for adidas. Step 2: Go to your college library and make a copy of Standard & Poor’s Industry Surveys for the athletic footwear and apparel industry. This document will contain excellent information for developing a list of external opportunities and threats facing adidas. Step 3: Go on the Internet and find and print information about adidas’s three major competitors: Nike, Puma, and Callaway Golf. Step 4: Using the information gathered above, on a separate sheet of paper, list what you consider to be adidas’s three major strengths, three major weaknesses, three major opportunities, and three major threats. Each factor listed for this exercise must include a %, #, $, or ratio to reveal some quantified fact or trend. These factors provide the underlying basis for a strategic plan, because a firm strives to take advantage of strengths, improve weaknesses, avoid threats, and capitalize on opportunities. Estimate the #’s as needed. Step 5: Through class discussion, compare your lists of external and internal factors to those developed by other students and add to your lists of factors. Keep this information for use in later exercises at the end of other chapters. Step 6: Be mindful that whatever case company is assigned to you and/or your team of students this semester, you can start to update the information on your company by following the steps listed for any publicly held firm. Teaching Notes Students should show their understanding of SWOT analysis - the key aspect of strategic management. In SWOT analysis students are expected to analyze the Strengths, Weaknesses, Opportunities and Threats for internal and external factors. The company’s financial resources, human resources and technological resources, and physical infrastructure comprise of the internal factors. External factors consist of Political, Economic, Social, Technology, Legal, and the Environment (competitors, suppliers) – “PESTLE”. ASSURANCE OF LEARNING EXERCISE 1C: GETTING FAMILIAR WITH THE FREE EXCEL STUDENT TEMPLATE Purpose This exercise is designed to help strategic management students become familiar with the free Excel student template for the case analysis offered by the authors. Instructions Step 1: Go to the Strategy Club’s website. Download the free Excel student template. Step 2: Write a one-page summary summarizing the template and explaining why how the template will benefit you the most in this course. ASSURANCE OF LEARNING EXERCISE 1D: EVALUATING AN ORAL STUDENT PRESENTATION Purpose Quite often in a strategic management course, a team of students is required to give a 15 to 25 minute case analysis oral presentation. This exercise gives you insight on some do’s and don’ts regarding oral presentations. Instructions Step 1 Go to Strategy Club’s website and watch the student case analysis presentation given there. Critique the presentation. What are four aspects that you liked most and four aspects that you liked least? ASSURANCE OF LEARNING EXERCISE 1E: STRATEGIC PLANNING AT NESTLÉ Purpose The purpose of this exercise is to give you experience investigating the strategic plan of large, publicly held firms such as Nestlé SA. An important aspect of formulating a strategic plan is to assess the strategic plans of rival firms. For this exercise, you are on the top management team of M&M Mars, a large chocolate company that competes with Nestlé in the confectionery business worldwide. Instructions Step 1: Go to Nestlé’s website and review the company’s recent Annual Report. List as clearly as you can the five major strategies that Nestlé is pursuing worldwide. Step 2: Go to M&M Mars’s website and determine as best you can what the privately held firm is doing worldwide to compete with Nestlé. Step 3: Write a one-page paper that summarizes your assessment of Nestlé’s strategic plan as compared to M&M Mars’s strategic plan. Include whether you feel being privately held, as M&M Mars is, enables a firm to conceal its strategic plan from rival firms. Do you feel it is advantageous to keep strategies secret from shareholders, employees, creditors, suppliers, and other stakeholders? What would be the advantages of being publicly held? Teaching Notes Refer to page 52, Table 1-2 “Seventeen Guidelines for the Strategic Planning Process to be Effective,” provides the students with the following points: • People process more than paper process • Learning process for all managers and employees • Words supported by numbers rather than numbers supported by words • Simple and nonroutine • Vary assignments, team memberships, meeting formats, planning calendar • Challenge the assumptions underlying current corporate strategy • Welcome bad news • Open-mindedness and spirit of inquiry and learning • Not be a bureaucratic mechanism • Not become ritualistic, stilted or orchestrated • Not to be too formal, predictable or rigid • Not contain jargon or arcane planning language • Not be a formal system of control • Not disregard qualitative information • Not be controlled by “technician” • Not pursue too many strategies at once • Continually strengthen the “good ethics is good business” policy ASSURANCE OF LEARNING EXERCISE 1F: INTERVIEWING LOCAL STRATEGISTS Purpose This exercise is designed to give you experience learning first hand how strategists in your city/town formulate and implement strategies. This information can be used to compare and contrast concepts presented in this textbook with practices of local strategists. Recall that strategists include owners of businesses, directors of nonprofit organizations, top managers of large firms, CEOs, presidents, and many others. ^^^Instructions Visit five strategists in your city. Interview them, asking the following questions. Prepare answers and report back to your professor. 1. How do you decide which strategies to implement in this organization? Answer: To decide which strategies to implement, I evaluate each option based on alignment with organizational goals, potential for competitive advantage, and resource availability. I also consider data-driven insights and feedback from key stakeholders. Prioritizing strategies involves assessing their impact, feasibility, and risk, ensuring they address the most critical needs and opportunities for the organization. 2. How often do you change strategies or take a fresh look at existing strategies? Answer: Strategies are typically reviewed on an annual basis or as needed in response to significant market changes, performance shifts, or new opportunities. Regular check-ins, often quarterly, help assess progress and make adjustments. A fresh look is essential if there are major internal or external developments that could impact strategic objectives. 3. How many persons assist you in formulating strategies? Answer: Strategic formulation often involves a core team of 4 to 8 key individuals, including senior leaders, department heads, and strategic advisors. This team collaborates to gather insights, analyze data, and develop strategic plans. Input from additional stakeholders or external consultants may be sought as needed to refine and validate the strategies. 4. Does your organization have written mission, vision, and objective statements? Answer: Yes, our organization has written mission, vision, and objective statements. The mission statement outlines our core purpose, the vision statement describes our long-term goals, and the objective statements specify measurable targets. These documents guide our strategic planning and ensure alignment across all levels of the organization. 5. Is the strategic planning process in your company more secret or open in regard to process and procedure? Which approach do you feel is best? Why? Answer: The strategic planning process in our company is generally open, with transparent communication of goals and procedures to relevant stakeholders. This approach fosters engagement and alignment. An open process is often best because it encourages collaboration, builds trust, and ensures that diverse perspectives are considered, leading to more robust and effective strategies. Teaching Notes Students’ answer will vary, depending on the interviews they have with their local strategists and what they practice. Students should use the above guidelines when they answer the other questions. Chapter 2 - Outside-USA Strategic Planning Overview Chapter 2 explains how to identify and manage global issues in formulating, implementing, and evaluating strategies. Special topics include business culture, business climate, labor unions, protectionism, tax rate variation, and management style variation across countries. Chapter 2 describes how communication and business practice vary across countries so that strategic planning can be more effective. The Chapter 2 Learning Objectives as stated in the textbook are as follows: 1. Discuss the nature and implications of labor union membership across Europe. 2. Discuss income tax rates and practices across countries. 3. Explain the advantages and disadvantages of entering global markets. 4. Discuss protectionism as it impacts the world economy. 5. Explain when and why a firm (or industry) may need to become more or less global in nature to compete. 6. Discuss the global challenge facing U.S. firms. 7. Compare and contrast business culture in the United States with many other countries. 8. Describe how management style varies globally. 9. Discuss communication differences across countries. 10. Discuss Africa as the newest hotspot for business entry. Teaching Tips 1. The first important issue in this chapter is the “Advantages and Disadvantages” section, because virtually all firms either have global customers or seek global customers. 2. The second important issue in this chapter is the “United States versus Foreign Business Cultures.” Ask students who have traveled or lived outside the USA and ask them to speak about differences between business cultures across countries. Tell students that being knowledgeable of business culture across countries can help you be a more effective businessperson – because almost all firms have global customers. 3. Regarding culture across countries, go to http://www.worldbusinessculture.com/ and spend some time here viewing business culture in various countries. 4. The third important issue in this chapter is “Business Climate Across Countries” which compares and contrasts key business factors across countries. This whole chapter is important for AACSB purposes and because most industries are becoming more and more global each day. 5. At the end of Chapter 2, direct student attention to the “Special Note to Students” because this is important information as the team prepares and ultimately delivers their oral case analysis presentation later in the course. 6. Regarding the end-of-chapter review questions, consider assigning one half of them one day in class giving each student a question, and letting them tell the class the answer, with you commenting on their answers. Do the other half another day. This is a fun day in class and it goes pretty quickly. 7. Several of the end-of-chapter Assurance of Learning Exercises can be used as excellent homework or classwork assignments to be completed as an individual or as a group of students. We cover at least two of these exercises each semester in each class. Answers to End-of-Chapter Review Questions 1. Honda Motor Company has been very successful in recent years. What percentage of Honda’s revenues comes from the United States versus Europe? How does this percentage compare with rival firms? Answer: 2. Explain why consumption patterns are becoming similar worldwide. What are the strategic implications of this trend? Answer: Advancements in telecommunications, such as internet, web technology and travel are drawing countries, cultures and consumption patterns closer together. With higher income and a higher level of education, consumers worldwide are more affluent. Consumers are able to buy foreign goods through the net without having to be physically travel abroad to purchase the products. With low cost air transportation, more and more people have the opportunity to travel and they are exposed to other consumption patterns worldwide and hence become more and more similar. The strategic implications are for firms to look outside its domestic market, not only selling the goods produced at home but producing the goods at host countries or other low cost producing countries so that goods could be sold globally at competitive prices. 3. What are the advantages and disadvantages of beginning export operations in a foreign country? Answer: The advantages include: 1. Increase overall sales volume, improve market share, and generate profit margins that are often more favorable 2. Increase economies of scale and therefore reduce per-unit costs of manufacturing. 3. Diversify customer base, reducing dependence on home markets. 4. Stabilize fluctuations in sales associated with economic cycles or seasonality of demand. 5. Minimize risk and maximize flexibility, compared to other entry strategies. Firm can quickly withdraw from an export market. 6. Lower cost of foreign market entry since the firm does not have to invest in the target market or maintain a physical presence there. 7. Leverage the capabilities and skills of foreign distributors and other business partners located abroad. The disadvantages include: 1. Fewer opportunities to learn about customers, competitors, and so on. 2. Exporting usually requires the firm to acquire new capabilities and dedicate organizational resources to properly conduct export transactions. 3. Exporting is much more sensitive to tariff and other trade barriers, as well as fluctuations in exchange rates. Exporters run the risk of being priced out of foreign markets if shifting exchange rates make the exported product too costly to foreign buyers 4. What are the major differences between U.S. and multinational operations that affect strategic management? Answer: The major differences are: social, cultural, demographic, environmental, political, government, legal, technological and competitive opportunities and threats. 5. Why is globalization of industries a common factor today? Answer: Globalization is the process of doing business worldwide, so strategic decisions are made based on global profitability of the firm rather than just domestic considerations. • Seek opportunities for growth through market diversification • Earn higher margins and profits • Gain new ideas about products, services, and business methods • Better serve key customers that have relocated abroad • Be closer to supply sources, benefit from global sourcing advantages, or gain flexibility in the sourcing of products 6. Compare and contrast U.S. versus foreign cultures in terms of doing business. Answer: Students should consider the following: • The importance of time • Personal space • Communication • Customs • Religious factors 7. List six reasons why strategic management is more complex in a multinational firm. Answer: Six reasons include: 1. Foreign operations could be seized by nationalistic factions 2. Firms confront different and often little-understood social, cultural, demographic, environmental, political, governmental, legal, technological; economic and competitive forces. These forces can make communications difficult. 3. Weaknesses of competitors in foreign countries are often overestimated and strengths are underestimated. Keeping informed about the number and nature of competitors is more difficult when doing business internationally. 4. Language, culture, and value system differ among countries, creating barriers in communications. 5. Gaining an understanding of regional organizations is difficult but is often required in doing business internationally. 6. Dealing with two or more monetary systems can complicate international business operations. 8. Do you feel that protectionism is good or bad for the world economy? Why? Answer: Student answers may vary. Protectionism refers to countries imposing tariffs, taxes and regulations on firms outside the country to favor their own companies and people. Most economists argue that protectionism harms the world economy because it inhibits trade among countries and invites retaliation. Protectionism can be detrimental to the world economy as it often leads to trade barriers, reduced market access, and inefficiencies. While it may benefit certain domestic industries in the short term, it generally hampers global trade, innovation, and economic growth. A more open trade environment typically promotes competition and economic prosperity on a global scale. 9. Why are some industries more “global” than others? Discuss. Answer: Student answers may vary. Different industries become global for different reasons. The need to amortize massive R&D investments over many markets is a major reason why the aircraft manufacturing industry became global. When firms manufacture a product, they select the lowest-cost source, which may be Japan for semiconductors, Sri Lanka for textiles, Malaysia for simple electronics, and Europe for precision machinery. Some industries are more "global" due to their reliance on standardized products, global supply chains, and international markets. Technology, pharmaceuticals, and automotive sectors benefit from economies of scale and uniform demand worldwide. Conversely, industries tied to local preferences, such as food and retail, may be less global due to regional tastes and regulations. 10. Wa, guanxi and inhwa are important management terms in Japan, China, and Korea respectively. What would be analogous terms to describe American management practices? Answer: In American management practices, analogous terms might include networking for building professional relationships, collaboration for teamwork and shared decision-making, and meritocracy for rewarding based on performance and achievements. These concepts reflect a focus on individual performance, professional connections, and teamwork in U.S. business culture. 11. Why do many Europeans also find the notion of “team spirit” in a work environment difficult to grasp? Answer: Many Europeans may find the notion of "team spirit" challenging due to cultural differences in workplace dynamics. European work cultures often emphasize individual expertise and formal hierarchies, which can contrast with the more collaborative and informal approach seen in some other regions. Additionally, varying attitudes towards work-life balance and collective versus individual achievement can influence perceptions of team spirit. 12. In China, feng shui, is important in business, whereas in Japan nemaswashio, is important. What are analogous American terms and practices? Answer: Americans place an exceptionally high priority on time; punctuality is a valued personal trait when conducting business in America. 13. Describe the business culture in Mexico. Answer: Mexico is an authoritarian society in terms of schools, churches, businesses and families. Employers seek workers who are agreeable, respectful and obedient; Mexican workers tend to be activity oriented rather than problem solvers. Mexicans desire harmony rather than conflict which is part of the social fabric in worker-manager relationship. Mexican employers are paternalistic, providing workers with more than a paycheck, but in return they expect allegiance. In Mexico, business associates rarely entertain each other at their homes; business meetings and entertainment are nearly always done at a restaurant. Preserving one’s honor, saving face and looking important are also exceptionally important in Mexico. Mexicans do not feel compelled to follow rules that are not associated with a particular person in authority they work for or know well. 14. Describe the business culture in Japan. Answer: The Japanese place great importance on group loyalty and consensus, a concept called Wa. Wa requires that all members of a group agree and cooperate resulting in constant discussion and compromise. Japanese managers evaluate potential attractiveness of alternative business decisions in terms of long- term effects on different groups’ Wa. Discussion is generally conducted in informal settings; entertaining is an important business activity. Many Japanese managers are reserved, quiet, distant and/or introspective and other oriented. 15. Compare tax rates in the United States versus other countries. What impact could these differences have on “keeping jobs at home?” Answer: European countries have the lowest corporate tax rates and are further lowering tax rates to attract investment. Average corporate tax rate among European Union countries is 26 percent, compared with 30 percent in Asia – Pacific region and 38 percent in United States and Japan. Ireland and Soviet-bloc nations of Eastern Europe slashed its corporate tax rates to nearly zero. Germany corporate tax rate is just under 30 percent and Great Britain is 28 percent; France is 27 percent. U.S. trade liberalization / globalization policies have encouraged corporations to seek the lowest-cost locations for their operations. This will result in loss of jobs back home in U.S. for example, the new 1,200 worker Intel semiconductor plant in Vietnam. Ralph Gomory, president of Alfred P. Sloan Foundation and former top executive at IBM warns that it is in the self-interest of companies to invest in America, otherwise, living standards will inevitably decline and American will severely weaken economically. 16. Discuss requirements for doing business in India. Answer: Joint ventures are mandatory for foreign companies doing business in India. In investment-banking industry, the Indian government has eased the joint venture restriction but not in other areas. However, many joint ventures fail. Of 25 major joint ventures between foreign and Indian companies between 1993 and 2003; only three survive, This prompted John Band, president of Zoom Cortex in Mumbai to say: “Anyone that gets into a joint venture in India should assume it will fail and should be comfortable with the terms of what happens when it does fail.” 17. Select four countries. Evaluate Honda Motor Company’s operations in those countries. Answer: The Honda Motor Company is a multinational corporation (MNC) with operations in four regions of the world. Demand for automobiles in Japan increased 9%. Sales of Honda vehicles in Japan exceeded industry demand with sales growth of 18.5%. Continued growth in demand led Honda to complete the construction of its Saitama Factory’s Yori automobile plant resulting in improved production capacity by 250,000 vehicles per year. Total demand for automobiles increased by 8% in North America. Yet, demand for Honda automobiles increased 1.5%. In order to capture the growth in demand of small cars Honda opened a new plant in Mexico which resulting in an increased production capacity of 200,000 vehicles per year. The outlook in Europe remained bleak in the automobile market with demand declining by 2%. Commiserate to market changes, Honda’s automobile sales declined by 2% with a significant reduction in production. Much like in Europe demand for automobiles in Asia declined by 2%. Despite broad decline in the market Honda was able to grow its Asian automobile sales (ex-Japan) by 1.1% with commiserate increases in production at Honda’s Asian production facilities. 18. Compare business practice and culture in northern Europe versus southern Europe. Answer: Students’ answer will be based on page 372; “Brazil – Business Culture; Germany – Business Culture.” Northern Europe tends to favor a structured, efficient business approach with a strong emphasis on punctuality, formal processes, and direct communication. In contrast, Southern Europe often embraces a more flexible, relationship-oriented style, with greater emphasis on personal connections, informal interactions, and adaptability. These cultural differences reflect varying attitudes towards hierarchy, time management, and business etiquette. 19. Explain how the Arab Spring movement in the Middle East will likely impact Pfizer. Answer: Students’ answer may vary, however, they should know the different business culture as explained in this Chapter. The Arab Spring movement could impact Pfizer by affecting regional stability and market conditions in the Middle East. Political upheaval may disrupt supply chains, alter regulatory environments, and impact local sales. However, it might also present opportunities for Pfizer to engage in humanitarian efforts or adapt to changing healthcare needs and reforms in the region. 20. What five countries in Asia have the highest GDP? What are the implications for Adidas? Answer: The five Asian countries with the highest GDP are China, Japan, India, South Korea, and Indonesia. For Adidas, this means significant market potential and competition. Expanding in these high-GDP markets can drive growth through increased consumer purchasing power, while also necessitating tailored marketing strategies and investment in local operations. 21. Africa is rapidly joining the world economic community. Give 10 examples of this. Answer: • African Continental Free Trade Area (AfCFTA) - Promotes intra-African trade and economic integration. • Increased Foreign Investment - Multinational companies are investing in diverse sectors. • Growing Digital Economy - Expansion in tech startups and digital infrastructure. • Improved Infrastructure - Investments in transportation and energy projects. • Economic Growth - Many African countries are experiencing significant GDP growth. • Trade Agreements - Partnerships with global economic powers like the EU and US. • Tourism Development - Rising global interest in African destinations. • Financial Inclusion - Growth of mobile banking and fintech solutions. • Regional Organizations - Active participation in groups like ECOWAS and SADC. • Youth Entrepreneurship - Increasing number of young entrepreneurs and startups. 22. Which six African countries do you feel are most attractive for foreign investment? Answer: The six most attractive African countries for foreign investment are Nigeria for its large market and natural resources, South Africa for its developed infrastructure and financial sector, Kenya for its growing tech ecosystem and regional influence, Egypt for its strategic location and economic reforms, Ghana for its stable political environment and mineral wealth, and Ethiopia for its rapid economic growth and large consumer base. 23. Compare business practice and culture in the USA versus your own country. Answer: In the USA, business practices often emphasize innovation, direct communication, and individual achievement, with a focus on efficiency and results. In contrast, business culture in my country may prioritize relationship-building, hierarchical respect, and consensus decision-making, with a greater emphasis on long-term stability and formality. These differences reflect varying attitudes towards authority, teamwork, and communication styles. 24. Explain in your own words the “Special Note to Students” section at the end of the chapter. Answer: Students are encouraged to be prescriptive and insightful” rather than “descriptive and mundane.” The “Special Note to Students” section typically emphasizes the importance of applying theoretical concepts to real-world scenarios. It encourages students to actively engage with course material, think critically, and develop practical skills. This section often highlights the value of connecting academic learning with professional experiences and staying informed about current industry trends. 25. Select three countries in South America. Prepare a one- page summary for each to reveal their attractiveness for foreign direct investment. Answer: Brazil Brazil offers significant attractiveness for foreign direct investment (FDI) due to its large and diverse economy, substantial natural resources, and emerging consumer market. It is the largest economy in South America, with key sectors including agriculture, mining, and energy. Recent economic reforms aim to improve the business environment, though challenges such as bureaucratic inefficiencies and political instability remain. Investment opportunities are robust in infrastructure, technology, and renewable energy. Chile Chile is highly attractive for FDI, known for its stable political environment and open economic policies. It has a strong track record of economic reforms, transparent business practices, and a solid legal framework that protects investors. Chile’s key sectors include mining, agriculture, and renewable energy. Its strategic location on the Pacific coast provides access to global markets, and it has free trade agreements with numerous countries, enhancing its appeal for international businesses. Colombia Colombia presents a growing opportunity for FDI with its dynamic market and improving business climate. Economic reforms and peace agreements have contributed to a more stable environment, fostering investor confidence. Key sectors include oil and gas, infrastructure, and technology. Colombia’s strategic position in the Andean region and its efforts to enhance trade agreements further increase its attractiveness. However, investors should remain mindful of potential challenges related to security and regulatory complexity. 26. Compare sexual harassment policies and practice across continents and countries. Answer: Sexual harassment policies vary widely across continents and countries. In the U.S., stringent laws and proactive workplace practices aim to prevent harassment and provide clear reporting mechanisms. In Europe, policies are also robust, with varying levels of enforcement and support depending on the country. Many Asian and African countries have emerging frameworks, but implementation and cultural attitudes can affect their effectiveness. Overall, global consistency is lacking, and cultural norms significantly influence the handling of harassment issues. 27. Discuss Australia as a continent for doing business. Answer: Students will have to show an understanding of “United States versus Foreign Business Culture,” as stated in page 367. Australia is an attractive continent for doing business due to its stable economy, transparent regulatory environment, and high quality of life. Its strategic location in the Asia-Pacific region provides access to growing markets. Key sectors include mining, finance, technology, and healthcare. While business opportunities are strong, companies must navigate high operational costs and rigorous environmental regulations. 28. In terms of presenting flowers as business gifts, compare and contrast practice and custom across six countries. Answer: United States: Flowers are a common business gift, symbolizing appreciation and respect. However, they are often used more casually compared to other cultures. Japan: Gift-giving, including flowers, is highly formalized, with attention to presentation and symbolism. Specific flowers are chosen for their cultural significance. France: Flowers are appreciated as gifts, with a focus on elegance and quality. The choice of flowers often reflects personal taste and occasion. China: Flower gifts are less common in business settings, but when given, they must avoid certain blooms associated with funerals or negative connotations. Brazil: Flowers are warmly received and often used to convey goodwill and congratulations, reflecting a vibrant and friendly business culture. Germany: Business gifts, including flowers, are less frequent and typically reserved for significant occasions, with an emphasis on practicality and professionalism. 29. Discuss how business etiquette at dinner varies across countries. Answer: Business etiquette at dinner varies significantly across countries. In the U.S., informal and casual interactions are common, with a focus on building rapport. In Japan, formality, respect for hierarchy, and precise etiquette are crucial. In France, dining is a refined experience with an emphasis on sophistication and conversation. In Germany, punctuality and a structured approach to meals are valued, while in Brazil, a more relaxed and sociable atmosphere is typical, reflecting the culture’s emphasis on personal relationships. Answers to the End-of-Chapter Assurance of Learning Exercises ASSURANCE OF LEARNING EXERCISE 2A: THE ADIDAS GROUP WANTS TO ENTER AFRICA. HELP THEM. Purpose More and more companies every day decide to begin doing business in Africa. Research is necessary to determine the best strategy for being the first mover in many African countries (i.e., being the first competitor doing business in various countries). Instructions Step 1: Print a map of Africa. Step 2: Print demographic data on 10 African countries. Step 3: Gather competitive information regarding the presence of shoe companies doing business in Africa. Step 4: List in prioritized order eight countries that you would recommend for adidas to enter. Country 1 is your best, and Country 2 is your next best. Based on your research, indicate how many adidas/Reebok/TaylorMade stores you would recommend building over the next three years in each country. List in prioritized order three cities in each of your eight African countries where you believe adidas should build most of its stores. Teaching Notes In answering this question; students should be aware of the dangers of globalization: 1. Foreign operation could be seized by nationalistic factions. 2. Firms confront different and often little-understood social, cultural, demographic, environmental, political, governmental, legal, technological, economic and competitive forces when doing business internationally. These forces can make communication difficult in the firm. 3. Weaknesses of competitors in foreign lands are often overestimated, and strengths are often underestimated. Keeping informed about the number and nature of competitors is more difficult when doing business internationally. 4. Language, culture and value systems differ among countries, which can create barriers to communications and problems managing people. 5. Gaining an understanding of regional organizations is difficult 6. Dealing with two or more monetary systems can complicate international business operations. ASSURANCE OF LEARNING EXERCISE 2B: ASSESSING DIFFERENCES IN CULTURE ACROSS COUNTRIES Purpose Americans can be more effective in dealing with businesspeople from other countries if they have some awareness and understanding of differences in culture across countries. This is a fun exercise that provides information for your class regarding some of these key differences. Instructions Step 1: Identify four individuals who either grew up in a foreign country or have lived in a foreign country for more than one year. Interview those four persons. Try to have four different countries represented. During each interview, develop a list of eight key differences between American style/custom and that particular country’s style/custom in terms of various aspects of speaking, meetings, meals, relationships, friendships, and communication that could impact business dealings. Step 2: Develop a 15-minute PowerPoint presentation for your class and give a talk summarizing your findings. Identify in your talk the persons you interviewed as well as the length of time those persons lived in the respective countries. Give your professor a hard copy of your PowerPoint presentation. Teaching Notes Students may find the template below useful in completing this exercise. ASSURANCE OF LEARNING EXERCISE 2C: HONDA MOTOR COMPANY WANTS TO ENTER THE VIETNAMESE MARKET. HELP THEM. Purpose More and more companies every day decide to begin doing business in Vietnam. Research is necessary to determine the best strategy for being competitive in Vietnam. Review the opening chapter boxed insert and Honda Motor Company’s website. Instructions Step 1: Print off a map of Vietnam. Step 2: Print off demographic data on 10 cities in Vietnam. Step 3: Gather competitive information regarding the presence of automobile companies doing business in Vietnam. Step 4: List in prioritized order the five cities that you would recommend for Honda to expand their business operations into. Teaching Notes Answers do vary amongst students. However, students should show understanding of the principles of globalization, advantages and its pitfalls. ASSURANCE OF LEARNING EXERCISE 2D: DOES MY UNIVERSITY RECRUIT IN FOREIGN COUNTRIES? Purpose A competitive climate is emerging among colleges and universities around the world. Colleges and universities in Europe and Japan are increasingly recruiting U.S. students to offset declining enrollments. Foreign students already make up more than one-third of the student body at many U.S. universities. The purpose of this exercise is to identify particular colleges and universities in foreign countries that represent a competitive threat to your college. Instructions Step 1: Select a foreign country. Conduct research to determine the number and nature of colleges and universities in that country. What are the major educational institutions in that country? What programs are those institutions recognized for offering? What percentage of undergraduate and graduate students attending those institutions are citizens of your country? Do these institutions actively recruit students from your country? Are any of the Schools of Business at the various universities AACSB-International accredited? Step 2: Prepare a report for the class that summarizes your research findings. Present your report to the class. Teaching Notes Students’ answer will vary, depending on the countries on the country selected. Chapter 3 - Ethics/Social Responsibility/ Sustainability Overview Chapter 3 describes the importance of business ethics, environmental sustainability, and social responsibility in strategic management, including such topics as workplace romance, bribery, pollution abatement, whistleblowing, and philanthropy. Issues related to these topics can significantly bolster or derail the best strategic plan, so Chapter 3 explains how these topics can best be managed. The Chapter 3 Learning Objectives as provided in the textbook are as follows: 1. Discuss the ethics of workplace romance. 2. Explain why concern for wildlife is a strategic issue for firms. 3. Explain why good ethics is good business in strategic management. 4. Explain how firms can best ensure that their code of business ethics guides decision making instead of being ignored. 5. Explain why whistleblowing is important to encourage in a firm. 6. Discuss the nature and role of corporate sustainability reports. 7. Discuss specific ways that firms can be good stewards of the natural environment. 8. Explain ISO14000 and 14001. 9. Discuss recent trends in bribery law. Teaching Tips 1. This is an important chapter, not only for AACSB reasons, but also because these issues have become so important in management effectiveness. Go slow and easy through the chapter. 2. The workplace romance section is of special interest to students, and of importance in managing a firm too. 3. Environmental sustainability has obviously become a key strategic issue for all organizations, so cover each of the sections on this topic. 4. We especially like to review Table 3-3 on “Songbirds and Coral Reefs” since that example serves as a reminder of the overall importance of firms being environmentally friendly and proactive. 5. The review questions are nice to go over in class. Answers to End-of-Chapter Review Questions 1. Nestle SA has done really well in 2011–2013. Visit their corporate website and determine if business ethics and sustainability issues may be key reasons for their success. Answer: The Nestle Code of Business Conduct represents the values upon which the company was founded: integrity, honesty, fair dealing, and full legal compliance. Nestle has a reputation for ensuring that employees uphold these values in their everyday responsibilities since the time of its founding. In as much, the goodwill that is stored in the Nestle reputation represents the extent to which consumer and business partners around the world appreciate the way in which Nestle conducts itself in business resulting in an enduring asset. 2. If you owned a small business, would you develop a code of business conduct? If yes, what variables would you include? If no, how would you ensure that ethical business standards were being followed by your employees? Answer: Student answers may vary; however, students should have an understanding of the meaning of the code of business conduct. The code of business conduct could be defined as principles of conduct within the organizations that guide decision making and behavior. Good business code of conduct is a prerequisite for good strategic management. Yes, I would develop a code of business conduct to establish clear ethical standards and expectations. Key variables would include integrity, respect, compliance with laws, confidentiality, and conflict of interest policies. Additionally, I would implement regular training and establish a mechanism for reporting and addressing unethical behavior to ensure adherence to these standards. 3. What do you feel is the relationship between personal ethics and business ethics? Are they or should they be the same? Answer: Student answers may vary. However, students should see the relationship between personal ethics and business ethics. Ethics are principles of conduct within a person or an organization. These principles guide decision making and behavior. Hence, a person who has good ethics will be guided to make good moral decisions which are in sync with the good business ethics of an organization. Personal ethics and business ethics are closely related, as they both stem from an individual's moral principles. Ideally, they should align to ensure consistency between personal values and professional conduct. However, business ethics may involve additional considerations, such as compliance with laws and organizational policies, which can sometimes necessitate adjustments or extensions of personal ethical beliefs in a professional context. 4. How can firms best ensure that their code of business ethics is read, understood, believed, remembered, and acted upon—rather than ignored? Answer: Merely having a code of ethics, is insufficient to ensure that ethical business behavior is being followed. A code of ethics can be viewed as a public relations gimmick, a set of platitudes, or window dressing. To ensure that code is read, understood, believed, and remembered, periodic ethics workshops are needed to sensitize people to workplace circumstances in which ethics issues may arise. If employees see examples of punishment for violating the code as well as rewards for upholding the code, this reinforces the importance of a firm’s code of ethics. 5. Why is it important not to view the concept of “whistle blowing” as “tattle-telling” or “ratting” on another employee? Answer: Whistle blowing refers to policies that require employees to report any unethical violations they discover or see in the firm. The Securities and Exchange Commission (SEC) strengthened its whistle blowing policies, virtually mandating that anyone seeing unethical activity report such behaviour. 6. List six desired results of “ethics training programs” in terms of recommended business ethics policies or procedures in the firm. Answer: 1. Firms can align ethical and strategic plans and decisions 2. Incorporating ethical considerations into long term planning 3. Integrating ethical decision making into the performance appraisal process 4. Encouraging whistle blowing or reporting of unethical practices 5. Monitoring departmental and corporate performance. 6. Procedures for discussing and reporting unethical behavior 7. Discuss bribery. Would actions such as politicians adding earmarks in legislation or pharmaceutical salespersons giving away drugs to physicians constitute bribery? Identify three business activities that would constitute bribery and three actions that would not. Answer: Bribery as defined by Black’s Law Dictionary 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. Student answers may vary but students should understand the strict enforcement of U.S Justice Department if students are residing in U.S. Students from other countries may view business activities differently, for example, in countries such as Thailand and China it is a norm to give gifts to customers. Bribery involves offering or receiving something of value to influence actions or decisions improperly. Politicians adding earmarks might not be considered bribery if it's within legal and ethical boundaries, but it can raise ethical concerns. Pharmaceutical salespersons giving away drugs can be seen as bribery if it influences prescribing practices. Bribery Activities: 1. Offering money to a government official to secure a contract. 2. Providing gifts to a manager to win a business deal. 3. Paying a kickback to a buyer to favor your product. Non-Bribery Activities: 1. Offering a discount on bulk purchases. 2. Providing industry-standard promotional gifts. 3. Giving charitable donations without expecting a business favor. 8. How could a strategist’s attitude toward social responsibility affect a firm’s strategy? On a 1 to 10 scale ranging from Nader’s view to Friedman’s view, what is your attitude toward social responsibility? Answer: Student answers may vary. For example, a strategist might be opposed to air pollution therefore they may find ways to minimize the company’s air pollution levels. A strategist’s attitude toward social responsibility can significantly shape a firm’s strategy, influencing whether the company prioritizes ethical practices and community impact or focuses solely on profit maximization. A commitment to social responsibility can lead to sustainable practices and enhanced reputation, while a profit-centric view may prioritize short-term financial gains. On a scale from 1 (Nader’s view, emphasizing strong social responsibility) to 10 (Friedman’s view, focusing solely on profit), my attitude would be around 4, advocating for a balance between ethical considerations and business objectives. 9. How do social policies on retirement differ in various countries around the world? Answer: Today, countries are facing an aging population and governments will need to consider its mandatory retirement age. For example, in Singapore, there is a problem of an aging workforce; hence, the Singaporean Government has changed its retirement legislation from the age of 55 years old to 62 years old. 10. Firms should formulate and implement strategies from an environmental perspective. List eight ways firms can do this. Answer: Students should understand the importance of environmental sustainability in answering this question. This understanding will help them in listing any 8 ways which firms could formulate and implement strategies. Student answers may vary. 1. Adopt Sustainable Practices - Implement eco-friendly processes and reduce waste. 2. Use Renewable Energy - Shift to solar, wind, or other renewable energy sources. 3. Reduce Carbon Footprint - Monitor and minimize greenhouse gas emissions. 4. Sustainable Sourcing - Choose suppliers with environmentally friendly practices. 5. Eco-friendly Packaging - Use recyclable or biodegradable materials. 6. Energy-efficient Operations - Upgrade to energy-saving technologies and systems. 7. Green Certifications - Obtain certifications like LEED or ISO 14001. 8. Promote Recycling and Reuse - Implement recycling programs and reduce material consumption. 11. Discuss the major requirements of an EMS under ISO 14001. Answer: The major requirements are: • Show commitments to prevention of pollution, continual improvement in overall environmental performance, and compliance with all applicable statutory and regulatory requirements. • Identify all aspects of organization’s activities, products, and services that could have a significant impact on the environment, including those that are not regulated. • Set performance objectives and targets for the management system that link back to 3 policies: (1.) prevention of pollution (2.) continual improvement and (3.) compliance. • Meet environmental objectives that include training employees, establishing work instructions and practices, and establishing the actual metrics by which the objectives and targets will be measured. • Conduct an audit operation of the environmental management system (EMS). Take corrective actions when deviations from the EMS occur. Answers to the End-of-Chapter Assurance of Learning Exercises ASSURANCE OF LEARNING EXERCISE 3A: SUSTAINABILITY AND NESTLÉ Purpose Nestlé is the opening case at the beginning of Chapter 3. Headquartered in Vevey, Switzerland, Nestlé is the largest food company in the world measured by revenues. Nestlé has hundreds of products that include cereals, coffee, dairy products, pet foods, snacks, baby food, and bottled water. Thirty of Nestlé’s brands have annual sales of over 1 billion Swiss francs (about $ 1.1 billion), including Nespresso, Nescafé, Kit Kat, Smarties, Nesquick, Stouffers, Vittel, and Maggi. Nestlé has around 450 factories, operates in 86 countries, and employs around 328,000 people. This exercise can give you practice evaluating a company’s sustainability efforts. At the company’s website, note the three key sustainability areas the firm engages in are 1) Nutrition, 2) CSV-Water, and 3) Rural Development. Instructions Conduct research to evaluate Nestlé’s sustainability efforts. Prepare a report for the class giving your assessment of Nestlé’s sustainability work versus rival firms. Teaching Notes Students’ answers will vary; however, they should develop their report from page 120; “What is a Sustainability Report?” ASSURANCE OF LEARNING EXERCISE 3B: HOW DOES MY MUNICIPALITY COMPARE TO OTHERS ON BEING POLLUTION-SAFE? Purpose Sometimes it is difficult to know how safe a particular municipality or county is regarding industrial and agricultural pollutants. A website that provides consumers and businesses excellent information in this regard is http://scorecard.goodguide.com. This type information is often used in assessing where to locate new business operations. Instructions Go to http://scorecard.goodguide.com/. Put in your zip code. Print off the information available for your city/county regarding pollutants. Prepare a comparative analysis of your municipality versus state and national norms on pollution issues. Does your locale receive an A, B, C, D, or F? Teaching Notes Students’ answers will vary, however, students should be able to find response after going the text under page 121; “Managing Environment Affairs in the Firm.” ASSURANCE OF LEARNING EXERCISE 3C: COMPARE ADIDAS AG VERSUS NIKE ON SOCIAL RESPONSIBILITY Purpose This exercise aims to familiarize you with corporate social responsibility programs. Instructions Step 1: Go to adidas’ Code of Conduct, which is provided within the Corporate Governance section of the corporate website. Step 2: Go to Nike’s corporate website at http://www.nikeinc.com and navigate to the Sustainability section to review Nike’s Corporate Responsibility Report. Step 3: Compare adidas’ social responsibility efforts with Nike’s. Summarize your findings in a three-page report for your professor. Teaching Notes Students should understand the meaning of sustainability in answering this question. Sustainability refers to the extent that an organization’s operations and actions protect, mend and preserve rather than harm or destroy the natural environment. Polluting the environment, for example, is unethical, irresponsible and in many cases illegal. ASSURANCE OF LEARNING EXERCISE 3D: HOW DO YOU RATE ADIDAS AG’S SUSTAINABILITY EFFORTS? Purpose This exercise aims to familiarize you with corporate sustainability programs. Instructions Step 1: Go to http://www.adidas-group.com and click on Sustainability. Review the annual sustainability reports available in this section of the website. Step 2: On a separate sheet of paper, list six aspects that you like most and six aspects that you like least about adidas’ sustainability efforts. Step 3: Provide a two-page executive summary of your assessment of adidas’ sustainability efforts. Teaching Notes Students should understand the meaning of sustainability in answering this question. Sustainability refers to the extent that an organization’s operations and actions protect, mend and preserve rather than harm or destroy the natural environment. Polluting the environment, for example, is unethical, irresponsible and in many cases illegal. ASSURANCE OF LEARNING EXERCISE 3E: HOW DO YOU RATE NESTLÉ’S SUSTAINABILITY EFFORTS? Purpose This exercise aims to familiarize you with corporate sustainability programs. Review the opening chapter company discussion. Review the material at Nestlé’s corporate website. Note that Nestlé recently kept Oxfam’s scorecard top slot. Instructions Step 1: On a separate sheet of paper, list six aspects that you like most and six aspects that you like least about Nestlé’s sustainability efforts. Step 2: Provide a two-page executive summary of your assessment of Nestlé’s sustainability efforts. Teaching Notes Students should understand the meaning of sustainability in answering this question. Sustainability refers to the extent that an organization’s operations and actions protect, mend and preserve rather than harm or destroy the natural environment. Polluting the environment, for example, is unethical, irresponsible and in many cases illegal. ASSURANCE OF LEARNING EXERCISE 3F: THE ETHICS OF SPYING ON COMPETITORS Purpose This exercise gives you an opportunity to discuss in class ethical and legal issues related to Methods being used by many companies to spy on competing firms. Gathering and using information about competitors is an area of strategic management that Japanese firms do more proficiently than American firms. Instructions On a separate sheet of paper, write down numbers 1 to 18. For the 18 spying activities that follow, indicate whether or not you believe the activity is ethical or unethical and legal or illegal. Place either an E for ethical or U for unethical, and either an L for legal or an I for illegal for each activity. Compare your answers to those of your classmates and discuss any differences. Step 1: Buying competitors’ garbage Step 2: Dissecting competitors’ products Step 3: Taking competitors’ plant tours anonymously Step 4: Counting tractor-trailer trucks leaving competitors’ loading bays Step 5: Studying aerial photographs of competitors’ facilities Step 6: Analyzing competitors’ labor contracts Step 7: Analyzing competitors’ help-wanted ads Step 8: Quizzing customers and buyers about the sales of competitors’products Step 9: Infiltrating customers’ and competitors’ business operations Step 10: Quizzing suppliers about competitors’ level of manufacturing Step 11: Using customers to buy out phony bids Step 12: Encouraging key customers to reveal competitive information Step 13: Quizzing competitors’ former employees Step 14: Interviewing consultants who may have worked with competitors Step 15: Hiring key managers away from competitors Step 16: Conducting phony job interviews to get competitors’ employees to reveal information Step 17: Sending engineers to trade meetings to quiz competitors’ technical employees Step 18: Quizzing potential employees who worked for or with competitors Teaching Notes In attempting to answer this exercise, students should note the followings: • Business ethics can be defined as principles of conduct within the organizations that guide decision making and behavior. • Good business ethics is a prerequisite for good strategic management; good ethics is just good business. • Other business actions considered to be unethical include misleading advertising or labeling, 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, moving jobs overseas and sexual harassment. Solution Manual for Strategic Management: Concepts and Cases Fred R. David, Forest R. David 9781292016894