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G6_[LN‐1a] The Basics of Strategy & Corporate Governance, G6 (IBS(M)…
G6_[LN‐1a] The Basics of Strategy & Corporate Governance
:five: Components of successful strategy
strategy implementation
Management
Planning, Organizing, Leading, Control
establishing a competitive advantage
better performance than average
An effective, efficient management
strategy formula
components
setting objectives
analyzing the competitive environment
understanding intern resources & abilities
vision
What to be in the future?
value
Guide the company to achieve the vision.
mission
Things to complete.
Goals
Things to achieve.
:two: Maximize shareholder value
The goal of the firm
Increase the value of their investment
Increased profitability
Stock price appreciation
Dividend payments
Agency problem
Conlict of interest between principle and agent
Mitgating Agency Problems
Board oversight
Monitor the actions of management
Performance-Based Compensation
e.g., stock options, bonuses
:three: What is strategy
:four: Definition
A organization's prime directive before taking all actions
Pursuit S
S
uccess
S
uperior performance
S
ustainability
S
urvival
:warning:
Detail plan or program of instructions :green_cross:
Do differently
:check:
The
highest guiding principle
for the actions taken by an organization
influences profitability
long-term
goals
:red_flag:(unifying theme)
adoption of courses of action
allocation of resources
Maximizing shareholder value
:fire:Ultimate goal
overall profit growth
How to do？
Business strategy
In a given business
Go where？
Corporate strategy
The range of business
:one:
Superior performance
Return on Invested Capital (ROIC)
it's used to measure a company’s business performance
ex. Discount Retailing Industry :full_moon:
Costco
Walmart
Walmart consistently outperforms Target and Costco in ROIC over the years.
Target
Performance Differences Among Industries :star:
High-ROIC industries
Capital investment requirements vary
ex. Software, Pharmaceuticals (above 15%)
Low-ROIC industries
Balance sheet structure
ex. Airlines (0-5%), Telecommunications (5-10%)
Three Key Factors Influencing Business Performance
:two:
Firm Factors (~30-45%)
:full_moon:
Major or Department
:three:
Other Factors (~35-50%)
:sunny:
Annual Effects
Leadership Influence
ex. Apple performed significantly better under Steve Jobs' leadership.
Parent Company Support
Student’s Ability
:one:
Industry Factors (~20%)
:star:
University Reputation
relationship between Business Performance & Graduate Salaries
G6
IBS(M) Abby
IBS3 Kelly
IBS(M) Hom
IBS3 Yulisa
IBS3 Evelyn
IPCM2 Jeremy
IBS4 Laura
Manager or Senior executive
not perfectly align with the goal of maximizing shareholder value
e.g., increasing the size of the company
e.g. 7-11
Be the best retailer of convenience for emerging markets.
Integrity, sincerity, and innovation
To make daily life easier by providing modern convenience.
Strategy is
not
a detailed plan
≠ Tactic
Strategy is
not
about
doing things better
but about doing things differently. :arrow_right:→Get goal
=maximize firm value or stock price
Shareholders perspective
Principle
:explode: V.S. :fire:
Agent
To deal with
How to know the effectiveness?