Lecture 7 Strategy Analysis and Choice

Lecture 7 Strategy Analysis and Choice
BUS 411 Lecture 7 Strategy Analysis and Choice

Agenda Assignment 3 Not Corrected yet About 50% complete
Assignment 4 posted Covers chap 5 & 6 Due Feb 26 prior to class Lecture on Strategy Analysis and Choice

Strategic Management Concepts: A Competitive Advantage Approach
Sixteenth Edition Chapter 6 Strategy Analysis and Choice If this PowerPoint presentation contains mathematical equations, you may need to check that your computer has the following installed: 1) MathType Plugin 2) Math Player (free versions available) 3) NVDA Reader (free versions available) Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

Strategy Analysis & Choice
“Whether it’s broke or not, fix it – make it better. Not just products, but the whole company if necessary.” – Bill Saporito “Life is full of lousy options.” – General P.X. Kelley

Learning Objectives (1 of 2)
6.1 Describe the strategy analysis and choice process. 6.2 Diagram and explain the three-stage strategy-formulation analytical framework. 6.3 Diagram and explain the Strengths-Weaknesses- Opportunities-Threats (S W O T) Matrix. 6.4 Diagram and explain the Strategic Position and Action Evaluation (S P A C E) Matrix. 6.5 Diagram and explain the Boston Consulting Group (B C G) Matrix. After studying this chapter, you should be able to do the following: 6-1. Describe the strategy analysis and choice process. 6-2. Diagram and explain the three-stage strategy-formulation analytical framework. 6-3. Diagram and explain the Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix. 6-4. Diagram and explain the Strategic Position and Action Evaluation (SPACE) Matrix. 6-5. Diagram and explain the Boston Consulting Group (BCG) Matrix. 6-6. Diagram and explain the Internal-External (IE) Matrix. 6-7. Diagram and explain the Grand Strategy Matrix. 6-8. Diagram and explain the Quantitative Strategic Planning Matrix (QSPM). 6-9. Discuss the role of organizational culture in strategic analysis and choice. 6-10. Identify and discuss important political considerations in strategy analysis and choice. 6-11. Discuss the role of a board of directors (governance) in strategic planning.

Learning Objectives (2 of 2)
6.6 Diagram and explain the Internal-External (I E) Matrix. 6.7 Diagram and explain the Grand Matrix. 6.8 Diagram and explain the Quantitative Strategic Planning Matrix (Q S P M). 6.9 Discuss the role of organizational culture in strategic analysis and choice Identify and discuss important political considerations in strategy analysis and choice Discuss the role of a board of directors (governance) in strategic planning.

Figure 6-1 A Comprehensive Strategic-Management Model
This chapter focuses on generating and evaluating alternative strategies, as well as selecting strategies to pursue. Source: Fred R. David, “How Companies Define Their Mission,” Long Range Planning 22, no. 3 (June 1988): 40. See also Anik Ratnaningsih, Nadjadji Anwar, Patdono Suwignjo, and Putu Artama Wiguna, “Balance Scorecard of David’s Strategic Modeling at Industrial Business for National Construction Contractor of Indonesia,” Journal of Mathematics and Technology, no. 4 (October 2010): 20.

A quick review How many different alternative strategies are there?
Integration Strategies Intensive Strategies Diversification Strategies Defensive Strategies Generic Strategies

The Process of Generating and Selecting Strategies (1 of 3)
A manageable set of the most attractive alternative strategies must be developed. The advantages, disadvantages, trade-offs, costs, and benefits of these strategies should be determined. Strategy analysis and choice seek to determine alternative courses of action that could best enable the firm to achieve its mission and objectives. Strategists never consider all feasible alternatives that could benefit the firm because there are an infinite number of possible actions and an infinite number of ways to implement those actions.

Identifying and evaluating alternative strategies should involve many of the managers and employees who earlier assembled the organizational vision and mission statements, performed the external audit, and conducted the internal audit. Involvement provides the best opportunity for managers and employees to gain an understanding of what the firm is doing and why and to become committed to helping the firm accomplish its objectives.

Alternative strategies proposed by participants should be considered and discussed in a series of meetings. Proposed strategies should be listed in writing. When all feasible strategies identified by participants are given and understood, the strategies should be ranked in order of attractiveness. Creativity should be encouraged in the proposals of alternative strategies.

Figure 6-2 The Strategy-Formulation Analytical Framework
Called the input stage, Stage 1 summarizes the basic input information needed to formulate strategies. Stage 2, called the matching stage, focuses on generating feasible alternative strategies by aligning key external and internal factors. Stage 3, called the decision stage, involves a single technique, the Quantitative Strategic Planning Matrix (QSPM).

A Comprehensive Strategy-Formulation Framework (1 of 3)
Stage 1 - Input Stage summarizes the basic input information needed to formulate strategies consists of the E F E Matrix, the I F E Matrix, and the Competitive Profile Matrix (C P M) Stage 1 of the strategy-formulation analytical framework consists of the External Factor Evaluation (EFE) Matrix, the Internal Factor Evaluation (IFE) Matrix, and the Competitive Profile Matrix (CPM).

Stage 2 - Matching Stage focuses on generating feasible alternative strategies by aligning key external and internal factors techniques include the Strengths-Weaknesses- Opportunities-Threats (S W O T) Matrix, the Strategic Position and Action Evaluation (S P A C E) Matrix, the Boston Consulting Group (B C G) Matrix, the Internal- External (I E) Matrix, and the Grand Strategy Matrix Stage 2 techniques include the Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix, the Strategic Position and Action Evaluation (SPACE) Matrix, the Boston Consulting Group (BCG) Matrix, the Internal-External (IE) Matrix, and the Grand Strategy Matrix.

Stage 3 - Decision Stage involves the Quantitative Strategic Planning Matrix (Q S P M) reveals the relative attractiveness of alternative strategies and thus provides objective basis for selecting specific strategies A QSPM uses input information from Stage 1 to objectively evaluate feasible alternative strategies identified in Stage 2. It reveals the relative attractiveness of alternative strategies and thus provides an objective basis for selecting specific strategies.

Table 6-1 Matching Key External and Internal Factors to Formulate Alternative Strategies
Key Internal Factor Key External Factor Resultant Strategy Excess working capital (an internal strength) + Annual growth of 20 percent in the cell phone industry (an external opportunity) = Acquire Cellfone, Inc. Insufficient capacity (an internal weakness) + Exit of two major foreign competitors from The industry (an external opportunity) = Pursue horizontal integration by buying competitors’ facilities Strong research and development expertise (an internal strength) + Decreasing numbers of younger adults (an external threat) = Develop new products for older adults Poor employee morale (an internal weakness) + Rising health-care costs (an external threat) = Develop a new wellness program

The Matching Stage (1 of 3)
The Strengths-Weaknesses-Opportunities-Threats (S W O T) Matrix helps managers develop four types of strategies: S O (strengths-opportunities) Strategies W O (weaknesses-opportunities) Strategies S T (strengths-threats) Strategies W T (weaknesses-threats) Strategies The Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix is an important matching tool that helps managers develop four types of strategies.

S O Strategies use a firm’s internal strengths to take advantage of external opportunities W O Strategies aim at improving internal weaknesses by taking advantage of external opportunities SO strategies use a firm’s internal strengths to take advantage of external opportunities. All managers would like their organization to be in a position in which internal strengths can be used to take advantage of external trends and events. WO strategies aim at improving internal weaknesses by taking advantage of external opportunities.

S T Strategies use a firm's strengths to avoid or reduce the impact of external threats W T Strategies defensive tactics directed at reducing internal weakness and avoiding external threats ST strategies use a firm’s strengths to avoid or reduce the impact of external threats. This does not mean that a strong organization should always meet threats in the external environment head-on. WT strategies are defensive tactics directed at reducing internal weakness and avoiding external threats. An organization faced with numerous external threats and internal weaknesses may indeed be in a precarious position.

S W O T Matrix (1 of 2) List the firm’s key external opportunities.
List the firm’s key external threats. List the firm’s key internal strengths. List the firm’s key internal weaknesses. Match internal strengths with external opportunities, and record the resultant S O strategies. The process of constructing a SWOT Matrix can be summarized in eight steps.

S W O T Matrix (2 of 2) Match internal weaknesses with external opportunities, and record the resultant W O strategies. Match internal strengths with external threats, and record the resultant S T strategies. Match internal weaknesses with external threats, and record the resultant W T strategies.

SWOT Matrix Strengths – S List Strengths Weaknesses – W
List Weaknesses Opportunities – O List Opportunities SO Strategies Use strengths to take advantage of opportunities WO Strategies Overcoming weaknesses by taking advantage of opportunities Threats – T List Threats ST Strategies Use strengths to avoid threats WT Strategies Minimize weaknesses and avoid threats

A SWOT Matrix for a Retail Computer Store

SWOT Matrix Copyright 2012, Tony Gauvin, UMFK Strengths Weaknesses
Sells essential items with relatively inelastic demand Healthy gross profit margin Accepts food stamps Lower than industry average leverage ratio Being able to raise its dividends Better than industry average total asset turnover Its return on assets of 1.84% is higher than the industry average Its return on equity is 4%, higher than the industry average Approximately 90% of the company's products are priced below $10 In the past year, the company's stock has outperformed the average retail industry Does not do much advertising Limited market, solely in the only In the year 2008, the company's market share dropped from 1.85% to 1.75% The company's EPS is only 72% of the industry average and is not growing as quickly as the industry average Limited in variety of products being offered For the year 2008, the company's overall sales only grew by 2.18% whereas the average industry sales grew by 5.31% Does not generate enough sales from its web site due to limited technology Higher than industry average quick ratio, indicating lack of long term re-investment The company's long-term debt to equity ratio is only 31.4% of the industry average Opportunities S-O Strategies W-O Strategies The income for the middle class is diminishing, causing them to be more cautious with their expenditures The average household income is dropping due to weak economy The demand for low-priced items is growing The unemployment rate is increasing Smaller retailers are closing their stores and some have filed for bankruptcy Implement some price cuts to improve sales (S2, O1, S9, O3) Advertise to improve product variety and offerings (S1, S2, S3, O4, O5) Increase number of stores in low income areas (O2, O1, W3, W2) Expand product offerings such fruits and other perishable products (W3, W5, O3, O4, O5) Threats S-T Strategies W-T Strategies High competition among large discount retailers Dollar General has higher market share compare to Family Dollar Per square foot, Dollar General is creating more sales The industry is sensitive to economic conditions Change in demographics due to purchasing habits Increase in tariffs and trade barriers Lack of quality control in products due to being imported from and other countries Due to better return on assets ratio, the company can invest in technology, promoting online selling (S6, T1, T5) Increase advertising by offering discounts, coupons, and other special offerings (W1, W2, W3, T1, T2, T3, T4) Copyright 2012, Tony Gauvin, UMFK

Limitations with SWOT Matrix
Does not show how to achieve a competitive advantage Provides a static assessment in time May lead the firm to overemphasize a single internal or external factor in formulating strategies  Halo Error

Figure 6-4 The S P A C E Matrix (2 of 3)
Strategic Position and Action Evaluation (S P A C E) Matrix four-quadrant framework indicates whether aggressive, conservative, defensive, or competitive strategies are most appropriate for a given organization

Two internal dimensions (financial position [F P] and competitive position [C P]) Two external dimensions (stability position [S P] and industry position [I P]) Most important determinants of an organization’s overall strategic position Like the SWOT Matrix, the SPACE Matrix should be both tailored to the particular organization being studied and based on factual information to the extent possible.

The Strategic Position and Action Evaluation (SPACE) Matrix, another important Stage 2 matching tool, is illustrated on this slide. Its four-quadrant framework indicates whether aggressive, conservative, defensive, or competitive strategies are most appropriate for a given organization. Source: Based on H. Rowe, R. Mason, and K. Dickel, Strategic Management and Business Policy: A Methodological Approach (Reading, MA: Addison-Wesley Publishing Co. Inc., © 1982), 155

Table 6-2 S P A C E Matrix Axes (1 of 2)
Internal Strategic Position External Strategic Position Financial Position (F P) Stability Position (S P) Return on investment Technological changes Leverage Rate of inflation Liquidity Demand variability Working capital Price range of competing products Cash flow Barriers to entry into market Inventory turnover Competitive pressure Earnings per share Ease of exit from market Price earnings ratio Price elasticity of demand Blank Risk involved in business Variables commonly included on a SPACE matrix are listed on this slide. Example Factors That Make Up the S P A C E Matrix Axes

Table 6-2 S P A C E Matrix Axes (2 of 2)
Internal Strategic Position External Strategic Position Competitive Position (C P) Industry Position (I P) Market share Growth potential Product quality Profit potential Product life cycle Financial stability Customer loyalty Extent leveraged Capacity utilization Resource utilization Technological know-how Ease of entry into market Control over suppliers and distributors Productivity, capacity utilization Variables commonly included on a SPACE matrix are listed on this slide. Source: Based on H. Rowe, R. Mason, & K. Dickel, Strategic Management and Business Policy: A Methodological Approach (Reading, MA: Addison-Wesley Publishing Co. Inc., © 1982),

Steps to Develop a S P A C E Matrix (1 of 4)
Select a set of variables to define financial position (F P), competitive position (C P), stability position (S P), and industry position (I P). The six steps to develop a SPACE matrix are outlined on the next few slides.

Assign a numerical value ranging from +1 (worst) to +7 (best) to each of the variables that make up the F P and I P dimensions. Assign a numerical value ranging from –1 (best) to –7 (worst) to each of the variables that make up the S P and C P dimensions. For IP and SP compare to other industries For FP and CP compare to competitors

Compute an average score for F P, C P, I P, and S P. Plot the average scores for F P, I P, S P, and C P on the appropriate axis. Add the two scores on the x-axis and plot the resultant point on X. Add the two scores on the y-axis and plot the resultant point on Y. Plot the intersection of the new xy point.

Draw a directional vector from the origin of the S P A C E Matrix through the new intersection point. This vector reveals the type of strategies recommended for the organization: aggressive, competitive, defensive, or conservative Space_matrix1v1.xltx

Figure 6-5 Example Strategy Profiles (1 of 2)
Some example strategy profiles that can emerge from SPACE analysis are shown in Figure 6-5. The directional vector associated with each profile suggests the type of strategies to pursue: aggressive, conservative, defensive, or competitive.

Figure 6-5 Example Strategy Profiles (2 of 2)
Additional strategy profiles are shown on this slide. Source: Based on H. Rowe, R. Mason, and K. Dickel, Strategic Management and Business Policy: A Methodological Approach (Reading, MA: Addison-Wesley Publishing Co. Inc., © 1982), 155.

The steps to develop a SPACE Matrix:
Select a set of variables to define financial position (FP), competitive position (CA), stability position (SP), and industry position (IP). Table 6-2 provides Good examples Assign a numerical value ranging from 1 (worst) to 7 (best) for the variables that make up the FP and IP dimensions. Assign a number between –1 (best) to –7 (worst) for variables that make up the SP and CP dimensions. On the FP and CP axes, make comparison to competitors. On the IP and SP axes, make comparison to other industries. Compute an average score for FP, CP, IP, and SP by summing the values given to the variables and dividing by the number of variables included in each dimension. Plot the average scores for FP, IP, SP, and CP on the appropriate axis in the SPACE Matrix. Add the two scores on the x-axis and plot the resultant point on X. Add the two scores on the y-axis and plot the resultant point on Y. Plot the intersection of the new xy point. Draw a directional vector from the origin of the SPACE matrix through the new intersection point. This vector reveals the type of strategies recommended for the organization. Aggressive Competitive Defensive Conservative Space_matrix1v2.xltx

SPACE Matrix FP Conservative Aggressive CP IP Defensive Competitive SP
+6 +5 +4 +3 +2 +1 CP IP -6 -5 -4 -3 -2 -1 +1 +2 +3 +4 +5 +6 -1 -2 -3 -4 Defensive -5 Competitive -6 SP

Boston Consulting Group Matrix
Assists multidivisional firm in formulating strategies Autonomous divisions = business portfolio Divisions may compete in different industries Focus on relative market-share position & industry growth rate

The Boston Consulting Group (B C G) Matrix
graphically portrays differences among divisions in terms of relative market share position and industry growth rate allows a multidivisional organization to manage its portfolio of businesses by examining the relative market share position and the industry growth rate of each division relative to all other divisions in the organization Autonomous divisions (also called segments or profit centers) of an organization make up what is called a business portfolio. When a firm’s divisions compete in different industries, a separate strategy often must be developed for each business.

Relative Market Share Position
BCG Matrix Relative Market Share Position Ratio of a division’s own market share in an industry to the market share held by the largest rival firm in that industry Company’s revenue / largest company’s revenue

Figure 6-7 The B C G Matrix (1 of 4)
Based on each division’s respective (x, y) coordinate, each segment can be properly positioned (centered) in a BCG Matrix. Each circle represents a separate division. The size of the circle corresponds to the proportion of corporate revenue generated by that business unit, and the pie slice indicates the proportion of corporate profits generated by that division. Source: Based on the BCG Portfolio Matrix from the Product Portfolio Matrix, © 1970, The Boston Consulting Group

Making Pie Indicators %rev&profit.xlsx
Size of pie is relative percentage of total revenue Division revenue/ total revenue Size of pie slice is relative percentage of total profits Division profits/ total profits %rev&profit.xlsx

Question Marks - Quadrant I Organization must decide whether to strengthen them by pursuing an intensive strategy (market penetration, market development, or product development) or to sell them Stars - Quadrant II represent the organization’s best long-run opportunities for growth and profitability Divisions in Quadrant I (upper right) have a low relative market share position, yet they compete in a high-growth industry. Divisions in Quadrant II (upper left) represent the organization’s best long-run opportunities for growth and profitability, and are therefore called stars.

Figure 6-7 The BCG Matrix (3 of 4)
Cash Cows - Quadrant III generate cash in excess of their needs should be managed to maintain their strong position for as long as possible Dogs - Quadrant IV compete in a slow- or no-market-growth industry businesses are often liquidated, divested, or trimmed down through retrenchment Divisions in Quadrant III (lower left) have a high relative market share position but compete in a low-growth industry. Divisions in Quadrant IV (lower right) have a low relative market share position and compete in a slow- or no-market-growth industry

The major benefit of the B C G Matrix is that it draws attention to the cash flow, investment characteristics, and needs of an organization's various divisions. Over time, organizations should strive to achieve a portfolio of divisions that are stars.

Figure 6-10 The Internal-External (I E) Matrix (1 of 2)
But there are four important differences between the BCG Matrix and the IE Matrix, as follows: 1. The x and y axes are different. 2. The IE Matrix requires more information about the divisions than does the BCG Matrix. 3. The strategic implications of each matrix are different. For these reasons, 4. The IE Matrix has nine quadrants versus four in a BCG Matrix. Source: Based on: The IE Matrix was developed from the General Electric (GE) Business Screen Matrix. For a description of the GE Matrix, see Michael Allen, “Diagramming GE’s Planning for What’s WATT,” in R. Allio and M. Pennington, eds., Corporate Planning: Techniques and Applications l par; New York: AMACOM, 1979.

Figure 6-10 The Internal-External (I E) Matrix (2 of 2)
The I E Matrix is based on two key dimensions: the I F E total weighted scores on the x-axis and the E F E total weighted scores on the y-axis Three Major Regions Grow and build Hold and maintain Harvest or divest

Figure 6-11 An Example IE Matrix
As indicated by the positioning of the four circles, grow and build strategies are appropriate for Divisions 1, 2, and 3. But Division 4 is a candidate for harvest or divest. Division 2 contributes the greatest percentage of company sales and thus is represented by the largest circle. Division 1 contributes the greatest proportion of total profits; it has the largest-percentage pie slice.

The IFE Total Weighted Score
IE Matrix The IFE Total Weighted Score Strong 3.0 to 4.0 Average 2.0 to 2.99 Weak 1.0 to 1.99 High 3.0 to 3.99 I II III The EFE Total Weighted Score Medium 2.0 to 2.99 IV VI Low 1.0 to 1.99 VII VIII IX Copyright 2012, Tony Gauvin, UMFK

The Grand Strategy Matrix (1 of 3)
based on two evaluative dimensions: competitive position and market (industry) growth All organizations can be positioned in one of the Grand Strategy Matrix’s four strategy quadrants.

Figure 6-13 The Grand Strategy Matrix
The Grand Strategy Matrix is based on two evaluative dimensions: (1) competitive position on the x-axis and (2) market (industry) growth on the y-axis. Appropriate strategies for an organization to consider are listed in sequential order of attractiveness in each quadrant of the Grand Strategy Matrix. Source: Based on Roland Christensen, Norman Berg, and Malcolm Salter, Policy Formulation and Administration (Homewood, IL: Richard D. Irwin, 1976),

Quadrant I continued concentration on current markets (market penetration and market development) and products (product development) is an appropriate strategy Quadrant II unable to compete effectively need to determine why the firm's current approach is ineffective and how the company can best change to improve its competitiveness Firms located in Quadrant I of the Grand Strategy Matrix are in an excellent strategic position. Firms positioned in Quadrant II need to evaluate their present approach to the marketplace seriously.

Quadrant III must make some drastic changes quickly to avoid further decline and possible liquidation Extensive cost and asset reduction (retrenchment) should be pursued first Quadrant IV have characteristically high cash-flow levels and limited internal growth needs and often can pursue related or unrelated diversification successfully Quadrant III organizations compete in slow-growth industries and have weak competitive positions. Quadrant IV businesses have a strong competitive position but are in a slow-growth industry.

Weak Competitive Position Strong Competitive Position
Grand Strategy Matrix Weak Competitive Position Quadrant II Quadrant I Quadrant IV Quadrant III Strong Competitive Position Rapid Market Growth Slow Market Growth Market Development Market Penetration Product Development Forward Integration Backward Integration Horizontal Integration Related Diversification Copyright 2012, Tony Gauvin, UMFK

The Quantitative Strategic Planning Matrix (Q S P M)
objectively indicates which alternative strategies are best uses input from Stage 1 analyses and matching results from Stage 2 analyses to decide objectively among alternative strategies Other than ranking strategies to achieve the prioritized list, there is only one analytical technique in the literature designed to determine the relative attractiveness of feasible alternative actions, the QSPM.

Matrix Analysis Summary
Alternative Strategies IE SPACE GRAND BCG COUNT Forward Integration x X 2 Backward Integration Horizontal Integration Market Penetration 4 Market Development 3 Product Development Concentric Diversification Conglomerate Diversification 1 Horizontal Diversification Retrenchment Divestiture Liquidation Copyright 2012, Tony Gauvin, UMFK

Table 6-5 The Quantitative Strategic Planning Matrix (Q S P M)
Key Factors Weight Strategy 1 Strategy 2 Strategy 3 Key External Factors Blank Economy Political/Legal/Governmental Social/Cultural/Demographic/ Environmental Technological Competitive Key Internal Factors Management Marketing Finance/Accounting Production/Operations Research and Development Management Information Systems The left column of a QSPM consists of key external and internal factors (from Stage 1), and the top row consists of feasible alternative strategies (from Stage 2). Specifically, the left column of a QSPM consists of information obtained directly from the EFE Matrix and IFE Matrix. In a column adjacent to the key success factors, the respective weights received by each factor in the EFE Matrix and the IFE Matrix are recorded. Strategic Alternatives

Steps in a Q S P M (1 of 2) Make a list of the firm’s key external opportunities and threats and internal strengths and weaknesses in the left column. Assign weights to each key external and internal factor. Examine the Stage 2 (matching) matrices, and identify alternative strategies that the organization should consider implementing. There are 6 steps to developing a QSPM.

Steps in a Q S P M (2 of 2) Determine the Attractiveness Scores (A S).
Compute the Total Attractiveness Scores. Compute the Sum Total Attractiveness Score.

Positive Features of the Q S P M
Sets of strategies can be examined sequentially or simultaneously Requires strategists to integrate pertinent external and internal factors into the decision process Can be adapted for use by small and large for-profit and nonprofit organizations Developing a Quantitative Strategic Planning Matrix makes it less likely that key factors will be overlooked or weighted inappropriately.

Limitations of the Q S P M
Always requires informed judgments It is only as good as the prerequisite information and matching analyses on which it is based The Quantitative Strategic Planning Matrix has two limitations.

Table 6-6 A QSPM for a Retail Computer Store (1 of 3)
A Quantitative Strategic Planning Matrix for a retail computer store is provided on the next 2 slides. This example illustrates all the components of the QSPM: strategic alternatives, key factors, weights, attractiveness scores (AS), total attractiveness scores (TAS), and the sum total attractiveness score.

The Culture and Politics of Strategy Choice
Strategies that require fewer cultural changes may be more attractive because extensive changes can take considerable time and effort Political maneuvering consumes valuable time, subverts organizational objectives, diverts human energy, and results in the loss of some valuable employees Political biases and personal preferences get unduly embedded in strategy choice decisions All organizations are political. Unless managed, political maneuvering consumes valuable time, subverts organizational objectives, diverts human energy, and results in the loss of some valuable employees.

Tactics to Aid Strategists
Choose Methods That Afford Employee Commitment Achieve Satisfactory Results with a Popular Strategy Shift from Specific to General Issues Focus on Long-Term Issues and Concerns Involve Middle Level Managers in Decisions Because strategies must be effective in the marketplace and capable of gaining internal commitment, these tactics used by politicians for centuries can aid strategists.

Governance Issues Board of Directors
a group of individuals who are elected by the ownership of a corporation to have oversight and guidance over management and who look out for shareholders’ interests The act of oversight and direction is referred to as governance.

Board of Director Duties and Responsibilities
Control and oversight over management Adherence to legal prescriptions Consideration of stakeholders/ interests Advancement of stockholders’ rights Boards have four major duties and responsibilities.

Principles of Good Governance (1 of 2)
No more than two directors are current or former company executives. The audit, compensation, and nominating committees are made up solely of outside directors. Each director owns a large equity stake in the company, excluding stock options. BusinessWeek recently evaluated the boards of most large U.S. companies and provided the included “principles of good governance.”

Principles of Good Governance (2 of 2)
Each director attends at least 75 percent of all meetings. The board meets regularly without management present and evaluates its own performance annually. The C E O is not also the chairperson of the board. There are no interlocking directorships (where a director or C E O sits on another director's board).

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