B6 Management, Governance and Ethics Study Notes

STRATEGIC MANAGEMENT ESSENTIALS

• Definition of Strategy: The long-term direction and scope of an organization, achieving advantage by configuring resources and competencies within a changing environment to fulfill stakeholder expectations.

• Strategic Management Stages: Formulation (vision/mission/goals), Implementation (objectives/policies/resources), and Evaluation (measuring performance/corrective action).

• Strategic Levels:

  • Corporate: Overall scope and resource allocation across business units.

  • Business: Dealing with competition in specific markets (Competitive Strategy).

  • Operational: Delivery of strategies through specific resources, processes, and people.

• Key Terms: Competitive Advantage, Strategists, Vision/Mission, Opportunities/Threats (External), Strengths/Weaknesses (Internal).

STRATEGIC ANALYSIS

• External Analysis (PESTEL): Evaluates Political, Economic, Social, Technological, Environmental, and Legal factors.

• Industry Analysis (Porter’s Five Forces):

  • Threat of New Entrants.

  • Threat of Substitutes.

  • Bargaining Power of Buyers.

  • Bargaining Power of Suppliers.

  • Intensity of Competitive Rivalry.

• Internal Analysis (Strategic Capability):

  • Resources: Tangible (physical/financial) and Intangible (intellectual capital).

  • Competences: Skills by which resources are deployed effectively.

  • VRIO Framework: Strategic capabilities provide sustainable advantage if they are Valuable, Rare, Inimitable, and Non-substitutable.

• Value Chain Analysis: Divides activities into Primary (Logistics, Operations, Sales) and Support (Procurement, HR, Infrastructure) to identify value creation.

• SWOT Analysis: Matching internal Strengths/Weaknesses with external Opportunities/Threats.

STRATEGIC CHOICE

• Strategy Clock (Bowman):

  • Routes based on Price and Perceived Benefits ($1$: No Frills; $2$: Low Price; $3$: Hybrid; $4$: Differentiation; $5$: Focused Differentiation; $6, 7, 8$: Failure strategies).

• Growth Directions (Ansoff Matrix):

  • Market Penetration (Existing products/Existing markets).

  • Product Development (New products/Existing markets).

  • Market Development (Existing products/New markets).

  • Diversification (New products/New markets).

• Portfolio Management (BCG Matrix):

  • Stars (High growth/High share).

  • Cash Cows (Low growth/High share).

  • Question Marks (High growth/Low share).

  • Dogs (Low growth/Low share).

• International Strategy (Porter’s Diamond): Analyzes national competitive advantage based on Factor Conditions, Demand Conditions, Related/Supporting Industries, and Firm Strategy/Structure/Rivalry.

STRATEGIC IMPLEMENTATION AND EVALUATION

• Organisational Structures: Functional, Customer/Product-focused, Geographical, Matrix, and Network structures.

• Management Approaches: Centralisation (efficiency/consistency) vs. Decentralisation (flexibility/empowerment).

• Strategy Evaluation (Rumelt's Criteria): Consistency, Consonance, Feasibility, and Advantage.

• Balanced Scorecard (Kaplan & Norton): Evaluates performance through four perspectives:

  1. Financial.

  2. Customer.

  3. Internal Business Processes.

  4. Learning and Growth.

RISK MANAGEMENT

• Categories of Risk: Strategic, Operational, Compliance, Market, Credit, and Liquidity Risk.

• Risk Identification Framework (COSO): Internal Environment, Objective Setting, Event Identification, Risk Assessment, Risk Response, Control Activities, Information & Communication, and Monitoring.

• Risk Responses (TARA Framework):

  • Transfer (e.g., insurance).

  • Avoid (discontinue activity).

  • Reduce (internal controls).

  • Accept (retention).

GOVERNANCE AND ETHICS

• Corporate Governance: The system by which companies are directed and controlled. Key principles include Accountability, Transparency, Probity, and Integrity.

• Agency Theory: Addresses the separation of ownership (Shareholders/Principals) and control (Directors/Agents) and the resulting potential for conflict of interest.

• Sustainable Success: Focus on the "Triple Bottom Line" (People, Planet, Profit).

• Ethical Theories:

  • Deontological: Rule-based ethics (Kant's Categorical Imperative).

  • Teleological (Consequentialist): Result-based ethics (Utilitarianism - greatest good for the greatest number).

  • Egoism: Self-interest that serves collective welfare.