SOM497 Business Policy & Strategy

CHAPTER 1:
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Basic Concepts of Strategic Management
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STRATEGIC MANAGEMENT & BUSINESS POLICY 10TH EDITION
THOMAS L. WHEELEN & J. DAVID HUNGER

What is Strategic Management?

Managerial decisions & actions that

determines the long-run performance of a

business
4 Types of Strategic Management

Basic financial planning (up to 1 year)

Forecast-based planning (1 to 5 years)
Externally-oriented planning
Strategic management

Why need Strategic Management?

Clearer sense of strategic vision
Sharper focus on strategic importance
Improved understanding of changing

environment

Globalization & E-Commerce

Globalization
Internationalization of markets & corporations
Markets: global than national markets
Electronic Commerce
Internet to conduct business transactions
Basis for competition on a more strategic level rather than
traditional focus on product features and costs

Basic Elements of the Strategic

Management Process

SOM497 Business Policy & Strategy

CHAPTER 2:
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Corporate Governance
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STRATEGIC MANAGEMENT & BUSINESS POLICY 10TH EDITION
THOMAS L. WHEELEN & J. DAVID HUNGER

Corporate Governance
Determining the direction & performance of

the corporation derived from the relationship

among the

Top management
Shareholders
Board of directors

Board of Directors: Degree

Board of Directors: Members

Inside directors

management directors

Outside directors

non-management directors

Theories: Agency vs. Stewardship

Agency
Objectives of owners/
shareholders & agents
(top management) in
conflict
Difficult for owners to
verify agent
performance

Stewardship
Executives motivated to
act in best interest of
the corporation than
their own self-interests.
Over time, senior
executives tend to view
corporation as
extension of selves

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Board of Directors
Codetermination
Including corporations
employees on its board
of directors
Interlocking Directorates
CEOs/board members
from other firms to be
members

Direct Interlocking

Indirect Interlocking

Direct Interlocking

Indirect Interlocking

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Sarbanes-Oxley Act
Congress passed act in

2002 to protect
shareholders
Audit committees have to
be independent of the firm
Establishes additional
steps for whistle-blowing
Firms cant grant loans to
corporate officers
Picture Copyright: CNN Money

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Top Management CEO

provide executive leadership & strategic vision
manage strategic planning process
Transformational leaders
Successful CEOs

Strategic vision
Passion for the company
Strong communication
charisma

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Case Study
How do I prepare, analyze and discuss case problems?
Preparing for in-class discussion
1. Try first to get a quick sense of the whole case
2. If this is a case requiring a decision, who is the key decision maker?
3. Reread the case for underlining or highlighting key facts and try to
identify the key problems
4. What are the possible courses of action for the decision maker?

Discussion in class
1. Be prepared to present your ideas with conviction, and to support them
with care
2. Do not wait too long to get involved in the discussion
3. If you want to raise an issue that is completely different from the one
the class is discussing, consider waiting until the class is ready to
move to another issue.
4. Try to be alert to keep the class discussion moving toward constructive
solutions to the case.
5. Dont hesitate to admit you are confused, need clarification, or simply
be wrong.
From: http://www.soc.ucsb.edu/projects/casemethod/guidelines.html

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Next Class
Case 17 (Kmart Corporation: Seeking

Survival in a Changing Marketplace) in TEXT

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