Importance of Strategic Management in Todays Economy

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"Strategic management is a set of managerial decisions and actions that determines the long-run performance of a corporation. It includes environmental scanning (both external and internal), strategy formulation (strategic or long-range planning), strategy implementation, and evaluation and control. The study of strategic management, therefore, emphasizes the monitoring and evaluating of external opportunities and threats in light of a corporation's strengths and weaknesses. Originally called business policy, strategic management in corporate such topics as strategic planning, environmental scanning, and industry analysis." (Wheelen, T. L., & Hunger, J. D. 2008)

Strategic management refers to the daily business decision making business decisions combined with the long-term plans and the formation of a series of business management. Strategic management is the most important thing in the company and it can control profit of company. Strategic management is the basis for corporate strategic planning, it use on corporate strategy, analysis and control, especially for business and career direction of resource allocation to be constrained, it could leading to successful business process management to achieve business goals.

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The relationship between strategic and business.

Why strategic management so important in the company because it can make decision to company which way should we go. Strategic management is not a form of competitive advantage, but it can help create a competitive advantage.

Firstly, what is strategic? Strategy is a generic term. Different people have different opinion and from a different point of view, the result is different. In the book, strategy is vision, mission, strategic objectives, business competition strategy, etc. But, in reality, for one specific enterprise strategy, often not all complete. For example, a few years ago GE's Jack Welch has great influence in the business world, many people talking about business strategy; they like to get NO 1or NO 2 strategy for GE for example.

In fact, NO 1or NO 2 was GE business choice strategy, and the GE's business choice strategy is using "NO1 or NO2 to select and judge the business of their development or exit should be retained to give up."

Strategic management involves not only the strategy development and planning, and contains the strategy will be implemented to develop the management, and therefore the whole process of management. Strategic management and pursue long-term survival, development and improvement of the competitiveness strategy, emphasis on long-term interests of enterprises and development potential; operation and management of the main pursuit of the current operating results and benefits. Strategic management from the enterprise as a whole, the global point of view, the integrated use of functions of management, process design and comprehensive enterprise-wide management issues, the management of the enterprise to achieve the overall best.

Business strategy is to decide the success of failure of businesses' important key; and business strategy is to achieve their business goals prerequisite rational. Long-term business strategy is the enterprise to an important basis for efficient development. At last, business strategy is leading employees to get the right way in the business. Strategic management is to enhance the development trend of enterprises, enhance vitality, to adapt to social environment, market environment and other environmental changes.

Benefit of strategic management

On the basis of empirical studies and logical analysis if may be claimed that the impact of strategic managements is primarily that of improved performance in terms of profits and growth of firms with a developed strategic management system having major impact on both planning and implementation of strategies. Profitability is a major benefit of strategic management. By getting honest, different perspectives from business-unit chiefs, senior executives can adapt their strategic vision based on conditions on the ground. This collaborative, back-and-forth approach helps a company learn more about its clientele and spur sales later on down the road. To gauge profitability, strategy managers use on the corporate income statement, also called a statement of profit and loss.

Part B: Discuss and justify the recommendations you would make to improve the effectiveness of today's board of directors.

Firstly, board of directors is a board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization. It has a different name, such as board of governors, board of managers, board of regents, board of trustees, board of visitors. It is referred to as "the board"

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Responsibilities of the Board:

Through the establishment of broad policies and objectives of the organization governing.

Selection, appointment, support and review of the implementation of the Chief Executive.

Ensure that adequate financial resources.

Approve the annual budget.

Accounting for organizational performance of stakeholders.

Setting their own salary and compensation.

" It is the board's job to select, evaluate, and approve appropriate compensation for the company's chief executive officer (CEO), evaluate the attractiveness of and pay dividends , recommend stock splits , oversee share repurchase programs , approve the company's financial statements , and recommend or strongly discourage acquisitions and mergers .

The board is made up of individual men and women (the "directors") who are elected by the shareholders for multiple-year terms. Many companies operate on a rotating system so that only a fraction of the directors are up for election each year; this makes it much more difficult for a complete board change to take place due to a hostile takeover. In most cases, directors either, 1.) Have a vested interest in the company, 2.) Work in the upper management of the company, or 3.) Are independent from the company but are known for their business abilities.

The number of directors can vary substantially between companies. Walt Disney, for example, has sixteen directors, each of whom is elected at the same time for one year terms. Tiffany & Company, on the other hand, has only eight directors on its board. In the United States, at least fifty percent of the directors must meet the requirements of "independence", meaning they are not associated with or employed by the company. In theory, independent directors will not be subject to pressure, and therefore are more likely to act in the shareholders' interests when those interests run counter to those of entrenched management. " (Joshua Kennon,2011)

Nowadays, boards of directors become a key of company. It will affect the company's development, and leading company to a bright future.

Secondly, we can talk about justify the recommendations we would make to improve the effectiveness of today's board of directors.

For example, there should be a leader for the board who is not the CEO. In many countries, this means that two different people will hold the positions of chairman and CEO. In some meeting, this person is "lead director" or "presiding officer". Whatever the any arrangement, there is a newly developing idea, that each board must have such a leader.

"Each board should have a majority of independent directors, and the "independence" is becoming tighter. It not excludes employees but also anyone who has had any recent relationship with the company as a supplier, customer, or professional adviser." (Khurana, R.2002.)

"Independent directors, rather than the CEO. Should control the process whereby directors are selected for nomination and recommendation to the shareholders. Obviously, this will be based on consideration of the portfolio of skills and experience the board needs and should be done in consultation with the CEO, but it does mean that it is no longer acceptable for CEO to be the major voice in deciding who sits in the boardroom." (Khurana, R.2002.)

"Each board should have three core committees-audit, compensation, and corporate governance -- and their members should all be independent directors. In other words, the people who monitor management decide how much they should be paid, and who should oversee the board itself should be independent. In the United States it is now mandated by the stock exchanges and, in the case of audit committees, by the Sarbanes-Oxley Act." (Sarbanes-Oxley Act of 2002)

"The independent directors should meet periodically alone, without the CEO or other inside (executive) directors. This meeting will be led by the independent chairman or by the lead director if the CEO is the chairman. Here, the independent director's wall talk more freely and better understands their mutual ideas and concerns." (Wheelen, T. L., & Hunger, J. D. 2008)

"Boards should be expected to carry out certain activities like approval of company's strategy, as developed by management, and an assessment of its effectiveness, evaluation of the performance of the CEO and a determination of his compensation and tenure, oversight of the company's management development and succession planning & evaluation of the board's own activities to ensure that the board is working in a manner consistent with best practices." (Wheelen, T. L., & Hunger, J. D. 2008)

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According to me, the last point is very important as this will ensure good corporate governance. The Board of Directors is intended to be a powerful body, charged with the responsibility for the success of the corporation. All too often, however, directors have been only rubber stamps for the management, possibly assuming that top executives are working in the best interest of the shareholders and stakeholders of the corporation. Directly in response to the corporate scandals, Congress enacted the Sarbanes-Oxley Act, making directors and top executives criminally liable for misstatements of financial reports. Because of this, the responsibility of being a corporate director is far greater than it had been prior to the scandals.

Part C

A: Explain the relationship between corporate governance and social responsibility.

Corporate social responsibility. CSR also called corporate conscience, corporate citizenship, social performance, or sustainable responsible business. It is a form of corporate self-regulation business model. Company is also the place where they create citizens. Other citizens, they have social responsibility. In good corporate governance, management should be able to meet their social responsibilities. These measures include ensuring that their products will not endanger the people and the environment, good social sharing as a natural person or a human who will do their own profits donated to social causes, organize events to benefit the community. Other good corporate governance practices, overlap with social responsibility is consistent with applicable law, to establish good working conditions, provide good products to the community to help through fair trade practices, pay taxes and other obligations, the Government due to economic to ensure it is meeting the commitments, Troubadour, natural and legal persons alike. Good corporate governance will also ensure that the entity will continue to exist, continuing operations; it can pay its employees, pay taxes and give returns to shareholders.

The purpose of corporate governance, corporate social responsibility is to make a good citizen. It does not relate to how we normally talk about social responsibility - the environment, diversity, and so on - but good to bring more transparent corporate governance, reduce corruption, the company, which shareholders good. If a company has such a heart, it shows the responsibility of the shareholders, and can be said that the general collapse of large corporations on society - such as Enron - is beyond the range of effects, the company's investors.

Crises and their consequences

Often it takes a crisis to precipitate attention to CSR. One of the most active stands against environmental management is the CERES Principles that resulted after the Exxon Valdez incident in Alaska in 1989 (Grace and Cohen 2006). Other examples include the use of lead poisoning in toys, paint giant Mattel, which requires hundreds of millions of toy recalls, and lead the company in the global launch of the new risk management and quality control processes. In another example, Magellan Metals in the town of Esperance region of Western Australia responsible for leading the pollution killed thousands of birds. The company must immediately stop operating, and with the independent regulatory agencies to implement the clean-up work. Odwalla also experienced a crisis with sales dropping 90%, and the company's stock price dropping 34% due to several cases of E. coli spread through Odwalla apple juice. The company ordered the recall of all apple or carrot juice products, and launch a new process called "flash pasteurization" and to maintain open communication with customers continuous line.

B: Using Carroll's list of four responsibilities, should a company be concerned about discretionary responsibilities? Why or Why not?

What are Carroll four responsibilities?

"Economic responsibilities of a business organization's management are to produce goods and services of value to society so that the firm may repay its creditors and shareholder." (Wheelen, T. L., & Hunger, J. D. 2008)

"Legal responsibilities are defined by governments in laws that management is expected to obey. For example, U.S. business firms are required to hire and promote people based on their credentials rather than to discriminate on non-job-related characteristics such as race, gender, or religion." (Wheelen, T. L., & Hunger, J. D. 2008)

"Ethical responsibilities of an organization's management are to follow the generally held beliefs about behavior in a society. For example, society generally expects firms to work with the employees and the community in planning for layoffs, even though no law may require this. The affected people can get very upset if an organization's management fails to act according to generally prevailing ethical values." (Wheelen, T. L., & Hunger, J. D. 2008)

"Discretionary responsibilities are the purely voluntary obligations a corporation assumes. Examples are philanthropic contributions, training the hard-core unemployed, and providing day-care centers. The difference between ethical and discretionary responsibilities is that few people expect an organization to fulfill discretionary responsibilities, whereas many expect an organization to fulfill ethical ones." (Wheelen, T. L., & Hunger, J. D. 2008)

"Friedman's contention that the primary goal of business is profit maximization is only one side of an ongoing debate regarding corporate social responsibity (CSR).According to William J.Byron, distinguished professor of ethics at Georgetown University and past-president of catholic university of America, profits are merely a means to an end, not an end in itself. Just as a person needs food to survive and grow, so dose a business corporation need profits to survive and grow." maximizing profits is like maximizing food." thus, contends Byron, maximization of profits cannot be the primary obligation of business." (Wheelen, T. L., & Hunger, J. D. 2008)

Form above the company should be concerned about discretionary responsibilities. Any of the responsibilities should be aware of the company. For example, the economic responsibility, the company produced products need to focus on the community and shareholders, creditors, the contribution of value. So the company not only for profit, but also the people that contributes to society as the goal.

Legal responsibilities. For example, the company must go to comply with legal responsibility, because the law is all business the basic principle. Only in obeying the law in principle, each company and its employee to normal operation and maintain. For example, hiring employees not to see their characteristics, such as race, gender, religion, but to see if legitimacy.

Ethical responsibilities. The company not only to obey the law also in the management process must have the moral responsibility. Because the ethical responsibility tend to affect the whole company and staff development direction. For example, in the management of the layoffs, need to be aware of staff and the clerk situation mentality. Rather than think layoffs will layoffs. The company's way with the development of the company values is a great association, and if the company has a good moral responsibility, will be social masses and the support. Otherwise, the company without good ethical responsibility, the company will go bankrupt.

Discretionary responsibilities, Sometimes companies can volunteer obligations to society's responsibility. For example, the company does charity. Like free training on-the-job personnel, helping staff improve their vocational skills, set up a charitable foundation, to help those who are in need of help, like help people by earthquake disaster, give them food and clothes. This is all desired, if the realization of it will be affected by unexpected effect. Can let the company reached a peak.

To sum up, the company should be concerned about discretionary responsibilities. Only pay attention to these responsibilities, the company would have good development. Google is a good example, it not only concerned about the company's profits, also is concerned about the staff's life and Google to contribute to society.

"Social responsibility expands the idea of corporate governance into a form of business leadership that is unsatisfied with merely increasing profits and shareholder value. In the manner of a philanthropist, the corporation management looks beyond the corporation's own affairs and considers the effects its activity has on surrounding communities and the environment. Management further considers how it may help improve situations in either one.

"The Debate over Corporate Social Responsibility" acknowledges that the contemporary issues of responsibility are complex and critical, involving issues such as human rights, environmental protection, equal opportunity and pay for women and minorities, and fair competition in the global and local marketplace." (Steve Kent May, George Cheney, Juliet Roper; 2007)