Welcome to Class 3

Corporate Governance: Part Two

TMT Responsibilities
Chapter 1

TMT Responsibilities
Embrace the organization's vision and mission
Meticulously analyze the internal and external environments
Set realistic goals and objectives
Craft, implement, and manage tactics and strategies for the
continuous achievement of above average returns

The TMT must expertly execute

5 Strategic Management Activities

TMT Strategic Management Activities

1. (SWOT)
Analyze the (internal & external) environments to assess the firms
a)
b)
c)
d)

Strengths
Weaknesses
Opportunities
Threats

2. (Strategic Intent)
Reaffirm or reestablish short & long-term goals and objectives

3. (Strategy Formulation)
Translate goals and objectives into tactical & strategic action plans

TMT Strategic Management Activities (cont)

4. (Strategy Implementation)
Communicate and activate the tactical and strategic plans

5. (Strategy Management)
Assess interim successes & failures and adjust course as conditions merit

SWOT
Analysis

1. SWOT Analysis
Environments:
Internal Environment [S-W]
(conditions within the firm)

External Environment [O-T]

(conditions outside the firm)
[a] General Environment
[b] Competitive Environment

Activities:
1. Scanning
2. Monitoring
3. Gathering Competitive Intelligence

 1. SWOT: Scanning
Changes in the external environment can occur quickly.
All employees should be encouraged to Scan.
Scanning is a general surveillance activity.
Scanning has no specific target of discovery.
Both internal and external environments should be scanned.
It is an early warning system of environmental changes that
can enable a proactive mode.

 1. SWOT: Scanning (Cont)

Information from scanning is usually incomplete and often
ambiguous.
Discoveries during scanning requires further investigation.
For example:
Scanning the general environment might reveal an aging
population and/or changes in the ethnic distribution of the
population
BUT
Discoveries to be of value in decision-making
require more review and analysis.

 1. SWOT: Monitoring
Monitoring is:
1. Tracking environmental changes (tracking mode).
2. Examining the course, range, momentum, and strength of changes underway
3. A process of closely examining trends discovered from SCANNING.
4. Focusing on how environmental changes will impact the firm.
5. A process of thoroughly analyzing the
1. Sequence of events
2. Streams
of activities that led to these changes
S

 1. SWOT: Monitoring (Cont)

Monitoring provides the organization with the opportunity to :
1. Prepare for the ultimate consequences of changes.
2. To attempt to alter situations and conditions driving
undesirable changes.
3. Influence Political/Legal factors in the general environment.
4. Hire lobbying firms to educate lawmakers of the impact of
pending legislation.

 1. SWOT: Competitive Intelligence

Gathering competitive intelligence involves identifying and
assessing competitors:
1. Strengths and Weaknesses
2. Capabilities and Intentions

Objective: Avoid being caught off guard by competitor actions.

 1. SWOT: Competitive Intelligence (Cont)

Competitive intelligence:
1. Is an important element in both offensive and defensive strategies.
2. It is not "spying"
which is an illegal and unethical activity.
3. Is intelligence that has been analyzed so that it can be
integrated into the decision-making process.

Strategic
Intent

2. Strategic Intent
Strategic intent:
1. Is an expression of pragmatic, realistic, and beneficial goals and
objectives.
2. Provides a clear and sturdy framework upon which precise strategic
and tactical plans can be crafted.
3. Should be in harmony with the firm's vision and mission.
4. Should be appropriate to the realities of:
a) Environmental conditions
b) The firms specific set of corporate capabilities.

Strategic
Formulation

3. Strategy Formulation
Strategic Formulation is:
1. A carefully crafted plan guided by Strategic Intent.
Intent It requires careful
consideration of the firm's:
a) Capabilities (resources, leadership, and competencies)
b) Limitations (lack of knowledge, skills, abilities, and resources).
2. It details how the firm will operate as it attempts to achieve performance
objectives.

3. Strategy Formulation (Cont)

Core Operating Models
and Strategic Formulation
1. First-level Corporations (business-level model)
Value creating and competitive advantage through:
Marketing products and/or services.
2. Second-level Corporations (conglomerate-level model)
Value creating and competitive advantage through:
Management of a portfolio of subsidiary companies.

 Business-level model (First-level)

Achieving sustainable competitive advantage at the business-level means firms offer products and/or services that are distinctive * and provide profit maximization opportunities.

DISTINCTIVENESS:
1. Provides customers a motive to purchase from a specific firm
2. Proves difficult for competitors to duplicate or imitate.

Four common methods of achieving DISTINCTIVENESS:

DISTINCTIVENESS
1. Uniqueness of product/service
2. Added or special components
3. Lower cost levels
4. Preferential delivery

Business level strategic formulation is

guided by the firms competitive model.
Competitive Models:
1. Low-Cost leadership
(perceived as least expensive or best value provider)

2. Differentiation
(providing a unique product or service)

3. Narrow Market Catering [NMC]

(offering a product or service not easily available anywhere else)
(often referred to as niche or focus strategy)

 Conglomerate-level model (Second-level)

Competing and achieving sustainable competitive advantage at the
conglomerate-level means:
Producing above average returns by creating a portfolio of
synergistic businesses that have each achieved competitive
advantage at the business-level
Subsidiary companies benefit other companies in the portfolio
when they provide synergistic benefits such as:
(1) Shared knowledge
(2) Operating systems
(3) Facilities
(4) Contact networks, etc.

Conglomerate-level strategies involve an

extensive array of options.
Conglomerate-level strategists have options such as:
1. Joint ventures
2. Corporate partnering
3. Other types of collaborative activities

However, the most common strategy involves

acquisitions and divestitures of operating companies.
The strategists can change the basic composition of the parent
company simply by diversifying into new lines of business.

Corporate diversifications through

acquisitions are divided into:
1. Related Diversifications
(Those that are closely related to companies currently in the
portfolio)

2. Unrelated Diversifications
(Those that are significantly different from previously owned
subsidiaries)

Strategic
Implementation

4. Strategy Implementation
Implementation of the strategic plan involves

directing resources
toward the achievement of overall organizational goals.
Strategies can and should be altered when:
1. Environmental conditions suggest change is advisable
2. It becomes clear the plan is not leading to goals
Strategy plan implementation
1. Is NOT a RIGID process.
2. It IS a vibrant,
vibrant flexible process.

4. Strategy Implementation (Cont)

Communicating the strategic plan to key management
personnel is CRUCIAL TO SUCCESS.
SUCCESS
It is essential to explain both how the plan will work
work and the
logic
logic behind the plan.
When key personnel understand the wisdom of the plan it is
more likely they will:
1. Make a true commitment to the success of the plan
2. Effectively communicate the plan further down the
chain of command.

4. Strategy Implementation (Cont)

Failure to achieve strategic objectives:
Implementation of a strategic plan involves numerous
seemingly mundane activities that some managers view too
casually.
Apparent mundane activities often involve vital elements in the
strategic plan.
Carelessness in handling these means the strategic plan has
been poorly implemented and failure is all but inevitable.

Strategic
Management

5. Strategy Management
Strategy management is the process of directing, controlling, and
supervising crucial activities related to strategic and tactical
plans.
Personnel responsible for Strategy Management need to be well
informed about:
1. Overall desired outcomes
2. Expected interim achievement targets
3. Activating contingency plans when conditions make it necessary
Continuous monitoring is crucial to effective strategy management

Summary

End Corporate Governance:

Part Two
Homework:
(1) Read Chapter 2 in your online textbook

Point of emphasis:
1. Core Operating Models are Business-level and Conglomerate-level
2. Competitive Models relate to Business-level companies and include
strategies such as cost leadership, differentiation, and niche marketing

3. Goals are a general description of a performance aim

4. Objectives are the specific target within a goal or set of goals.