Chapter 7Business strategy
Business entrepreneurship
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Chapter 7:Business strategy
The global market provides many incentives and opportunities for any business to venture. Any business can be tempted to venture into the global market. However, the global market also poses a significant risk that must be fine-tuned to reap its benefits. Businesses go global for several reasons such as to increase the market size, to take advantage of arbitrage opportunities, to enhance a product’s growth potential, to explore the reverse innovation, and to optimize the location of the value chain activity. Globalization emphasizes the increase in market capitalization in the world. It means that there is increased trade in goods and services and the exchange of money, ideas, and information.
Expansion poses several international risks that must be addressed by the corporate board. Politics is a major risk that determines the level of investment. Countries that lack the rule of law, civil unrest, and are in military turmoil may destroy one’s property and make operations impossible. Hence, the executive must assess the country of interest. Economic risks such as piracy and counterfeiting are deleterious to investors. A country’s currency may pose risk since it determines the cost of production. The management may also be forced to adapt to the local environment. Corruption risk is prevalent in countries such as Sudan, Somalia, and North Korea. To survive the risks a company must find solutions to the risks. A nation’s competitiveness is determined in part by four factors: factor endowments, demand conditions, related and supported industries, and the firm strategy, structure, and rivalry.
International strategies require the diffusion and adaptation of the mother company to meet the demands of the foreign markets. For international strategies, both pressures for local adaptation and lowering costs are minimal. For global strategies, the pressure for lowering costs is high while that for local adaptation is low. Global strategies permit for the centralization of operations as well as standardization of products. The multi-domestic strategy contrasts with the global strategy because the products and services adapt to the local market and the decisions may be decentralized. The transnational strategy seeks global competitiveness through tradeoffs. The pressure for both local adaptation and lowering costs is high.
Chapter 8: Entrepreneur strategy and competitive dynamics
The entrepreneurial strategy provides the means via which a firm creates and reestablishes its crucial sets of relationships with its environment. Good entrepreneurs know that they have to analyze the market before venturing into it. In today’s ever-changing global market, one must be focused on their goals. They must study the market. Opportunities are always available, they just require one to analyze and study the business niche. An entrepreneur must be aware of the value creation and assess the risk. The ideas can arise from many areas. New value can be created from start-up ventures, non-profit firms, established institutions, and family-owned businesses. Some may get ideas from existing customers or suppliers or even as a result of technological advancements.
Entrepreneurial strategies revolve around three concepts, opportunity, resources, and the entrepreneur. The concepts must interplay. Let’s discuss the necessity of the opportunity. First, the opportunity must be discovered and then evaluated to determine its viability and feasibility. Viable ideas are attractable, attainable, durable, and value-creating. Resources include finances, human, social, and government capital. Perhaps entrepreneurial leadership is the most important factor. For example, they must be dedicated and committed to the idea to be successful. The leader must have a vision and the ability to command her employees towards it. New ventures require an entrepreneurial strategy to understand the industrial conditions and the competitive environment. They need to determine the entry strategies, generic tactics, and combination strategies. Whichever works out must be assessed and analyzed beforehand.
Competitive dynamics elaborate on why the market responds and why the approaches evolve. New competitors may shape the market if they survive. Hence, the existing competitors often choose to react to the entry of new competitors. They respond in different ways. Hence, an entrepreneur must sit down and predict the reaction. They must understand the types of competitive actions that can be undertaken. They should do threat analysis and predict the likelihood of a given competitor reacting. Hence, this may answer questions like, how do I enter the market? How should one compete? How should one deal with the competitor’s reaction?
Chapter 9: strategic control and corporate governance
An entrepreneur must first develop the strategy, after which they proceed to implement it. A control mechanism is integrated within the system to ensure that the performance meets the strategic goals. The mechanisms are known as strategic control. There are three types of strategic control informational, behavioral, and corporate governance. To review the approach there are two methods. First, the traditional way which compares the performance against the control. It involves lengthy time lags with single-loop learning. The traditional approach is applicable where the environment is stable and simple and when the objectives can be measured with absolute certainty. It is less interactive than a contemporary approach.
The contemporary approach combines both formulation, implementation, and control. There is constant interaction between these fields. Informational control involves doing the right things. It requires continuous surveillance of the environment. It ensures that the business fits within current trends. Informational control asserts that time lags are shortened, changes are detected earlier and this facilitates a speedy and flexible response. Behavioral control is concerned with doing things right. All firms have a manner of running it. Hence they have cultures, rewards, and boundaries to make this happen. Even the smallest corporates have cultures. Therefore, scholars are trying to come up with the best cultures to teach to students. They have understood that the culture must be tailored to each institution. It is a system of unwritten rules that influence behavior. Organizations have reward systems to motivate and control employees. A good reward system must be fair and equitable. Boundaries state the dos and don’ts for all workers.
Corporate governance explains the relationship between shareholders, management, and the board of directors. A successful organization can align the interests of these groups. The three entities have their roles. For example, the management is responsible for the company, while the board of directors protects the interests of the shareholders. Shareholders have limited liability and can participate in profits. There is the question of CEO duality. There are opposers and proposers of this concept. Hence, the theories of a unit of command and agency that favors separation. Besides, there are external governance control strategies, such as market, auditors, banks and analysts, regulatory bodies, and the media that influence a corporate firm.
Chapter 10: creating effective organizational designs
An organization structure refers to the formalized patterns of interaction linking tasks, technology, and people. It ensures that delegation is successful and also asserts efficiency and effectiveness in the running processes. Organization design is essential for the successful implementation and coordination of the strategic plan. There are several forms of organizational design and choice depends on the size of the firm among other factors. Leadership is key to the successful running of operations and human resources.
The simple organizational structure is the oldest and most common form utilized by businesses. It is suitable for minor corporations that deal with single or small product lines. In this system, the owner-manager makes most of the decisions, and the staff is merely an extension of the manager’s personality. One main advantage of the system is that it is easy and faster to coordinate duties due to direct interaction with employees. It also requires little specialization. The disadvantages are that the employees may take advantage of the lack of rules. It also provides limited opportunity for upward mobility. Functional organizational structures are suitable for small firms that operate single closely-related products or services with high production volumes. The system is a little different from the previous one because here, the owner-manager may recruit specialists since the firm is much larger. However, the CEO still makes most of the decisions.
In a divisional organizational structure, products, groups, and projects are categorized internally. The divisions are autonomous and different from those other departments. Each division has its specialists and functions. The strategic business unit structure is another type. Here, similar products or markets are grouped into units to achieve synergy. It has a decentralized form of authority and allows for quicker responses to a changing market. The other types are holding company and matrix organizational structures. For firms that want to go international, they must consider the following, the type of strategy that is driving the corporate for foreign operations, the degree of diversity, and the extent to which a firm is dependent on foreign sales. Boundaryless organizational design has three types namely barrier-free, modular, and virtual. Ambidextrous designs address the challenges of maintaining adaptability and how to achieve alignment.
Chapter 11: strategic leadership
Leadership is essential for any organization or business. It is the most essential entity directly responsible for success. The usual task is to find good leaders. Leadership transforms firms from what they are to what they are supposed to be. Successful leaders are proactive, goal-oriented, and focused on the vision. The leaders set the direction, design the organization, and nurture a culture that is dedicated to excellence and ethical behavior. Setting the direction means that the leader scans the environment for knowledge about the stakeholders and salient environmental trends and events. The leaders set the vision and objectives beforehand. In designing the organization, the leader comes up with mechanisms for implementing the leader’s vision through structures, teams, systems, and processes. The leader must accept responsibility for developing and strengthening ethical behavior. They should develop and reinforce role models and corporate credos and codes of conduct.
Leadership is not an easy task. It requires appropriate character, vision, resolve, and determination to overcome barriers to change. Organizations are prone to inertia after prolonged success periods. Hence, the leader must overcome political barriers, personal time constraints, behavioral and systemic obstacles, and the status quo. The leader must exercise his or her power to influence others, overcome resistance, and also persuade others to do things.
Successful learning organizations create proactive and creative approaches that ensure that they are on toes with everything essential. The leaders are committed to change and are action-oriented. In learning organizations, the leaders inspire and motivate the employees toward specific objectives, empower employees at all levels, gather external information, and also challenge the status quo. The other crucial task of a leader is to create an ethical organization. Ethics deals with right and wrong. Organizational cultures form operation cultures and acceptable conduct. The ethical orientation of the leader unites, creates value and shapes behavior.
Chapter 12: managing innovation and fostering corporate entrepreneurship
Companies constantly conduct innovations. Innovations enable them to remain competitive, develop new products and services, and seek out novel opportunities. Innovations require new knowledge from the latest technology, experimental results, creative insights, and competitive information. There are six types of innovation. First, product innovation is common during the industry’s early life cycle. During this period, the company makes new product designs and applies technology to develop novel products. It is associated with the differentiation strategy. Process innovation occurs in the later stages of the industry. Here, the company is concerned with improving its efficiency, increase the quality, shorten the cycle time, and enhance material utilization.
Radical innovations are highly disruptive since they depart from existing practices. It is commonly seen when there is a technological change. It can practically transform or revolutionize the whole industry. Incremental innovations enhance existing practices. They make small improvements to the products and services. Sustaining innovations extend sales in an existing market. Disruptive innovations overturn the market, to meet the consumers’ needs. It appeals to less-demanding customers.
Businesses face many innovation dilemmas that must be addressed with finesse. This section shall list some of them and discuss two of them. They include seeds versus weeds, experience versus initiative, internal versus external staffing, building capabilities versus collaborating, and incremental versus preemptive launch. Leaders are often faced with the dilemma of who to entrust with innovations. Senior managers provide experience and credibility but tend to be more risk aversive, while the mid-level personnel tends to be more enthusiastic. Internal staff have greater social capital, know the firm’s culture. However, they may not think outside the box. External staff on the other hand are expensive and lack social capital but will provide a different understanding. The leader must determine the middle-ground. How does a leader manage innovations? By cultivating innovation skills, defining the scope of innovation, managing the pace of innovation and the staff.
References
Class notes review.
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