1. Strategies provide the broad context within which one can
evaluate the optimality of elements of the management
control system. Strategies are plans to achieve organization
goals. Therefore, we must first determine some typical goals
in organizations. Then we discuss strategies at 2 levels (1) the
corporate level (2) business unit level

2. (1)Profitability-Is the most important goal. Profitability or Return on Investment
is expressed by an equation that is the product of 2 ratios:
*profit margin percentage: Revenues-Expenses
Revenues
*Investment Turnover: Revenues/ Investment
Revenues-Expenses
Revenues
Return on
Revenues
Investment
Investment
Example:
P10,000-P9,500
P10,000
12.5% Return on
P10,000
P 4,000
Investment
Investment refers to the shareholders’ investment from proceeds of stocks and
retained earnings. One of the management’s responsibilities is to arrive at the
right balance between debt and equity.
(2)Maximizing Shareholder Value- This concept is that the appropriate goal of a
for-profit corporation is to maximize shareholder value. Although the meaning of
the term is vague, it probably refers to the market price of the corporation’s
stocks. Satisfactory Profit is a better way of stating a corporations’ goal for two
reasons. First, maximizing refers to the way of finding the maximum amount that
a company can earn. Second, optimizing shareholder value.

3. What is the ROI if:
Revenue – P18,000
Expense --- P15,000
Investment – P10,000
29.99% or 30%

4. (3)Risk- The degree of risk taking varies with the personalities of individual
managers.
(4)Multiple Stakeholder Approach- organizations participate in 3 markets
*Capital Markets- public stockholders are the key constituency
*Product Market- the customers form a key constituency
*Factor Market- the key constituencies are the company’s employees, suppliers
and various communities
A strategy describes the general direction in which an organization plans to
move to attain its goals. A strategy formulations is a process that a senior
executives use to evaluate a company’s strengths and weaknesses and in the
light of the opportunities and threats present in the environment and then to
decide in strategies that fit the company’s core competencies with
environmental opportunities.
Strategies can be found at 2 levels
(1)Strategies for the whole organization
(2)Strategies for the business units within the organization

5. What is a business’s
most important goal?
PROFITABILITY

7. COPORATE
OFFICE
CORPORATE
OFFICE AND
BUSINESS UNIT
MANAGER
BUSINESS
UNIT
MANAGER

8. This describes the general direction
in which an organization plans to
move to attain its goals.
STRATEGY

9. CORPORATE-LEVEL STRATEGY
It is about being in the right mix. It is more concerned with where and how
to compete in a particular industry. Companies can be classified into one of three
categories:
(1)Single Industry firms operates in one line of business.
(2)Related Diversified firm operated in several industries and the business units that
are connected through operating synergies. The operating synergies for this are: the
ability to share common resources and ability to share common competencies. The
role of the corporate office here is (1) the CEO must make resource allocation
decisions across business units and (2) must also identify, nurture, deepen and
leverage corporate wide core competencies that benefit the whole corporation and
benefit the multiple business.
(3)Unrelated Diversified firm operated in business not related to one another. The
relation between business is purely financial.

10. Under what category do you
think these businesses belongs
to? And why?
AYALA CORPORATION
PROCTER & GAMBLE
ATENEO UNIVERSITY

11. BUSINESS UNIT STRATEGIES
Competition between diversified firms does not take place at the corporate
level. Rather, a business unit in one firm competes with business unit with other firm.
Business unit strategies deals with how to create and maintain competitive
advantage in each of the industries in which a company has chosen to participate.
The strategy of a business unit depends on two interrelated aspects:
(1)Business Unit Mission- what is the overall objectives. In a diversified
firm, one of the most important tasks of a CEO is resource deployment, that is, make
decisions regarding the use of cash generated from some business units to finance
growth in other business units. There are sets of missions from which to choose:
Build-This mission implies an objective of increased market share
Hold-geared to the protection of the business unit’s market share and competitive
position
Harvest-has the objective of maximizing short term earnings and cash flow
Divest-indicated a decision to withdraw from business either through a process of
slow liquidation or outright sale

12. HIGH
LOW
“star”
HOLD
“question mark”
BUILD
“cash cow”
HARVEST
HIGH
“dog”
DIVEST
LOW
HIGH
LOW
HIGH
LOW

13. BCG singles out market share as the primary strategy variable because of the
importance it places on the notion of experience curve. According to BGC, cost per
unit decreases predictably with the number of units produced over time. Since the
market share leader will have the greatest accumulated production experience,
such a firm should have the lowest cost and highest profits in the industry.
Although experience curve is a powerful analytical tool, it has limitations:
(1)The concept applies to undifferentiated products that where the primary basis of
competition is on price.
(2)In certain situations improvements in process technology may have a greater
impact on the reduction of per-unit cost than cumulative volume per se.
(3)An aggressive pursuit of reducing cost via accumulated production of
standardized items can lead to loss of flexibility in the market place.
(4)Commitment to the experience curve concept can be severe disadvantage if new
technologies emerge in the industry.
(5) Experience is not the only cost driver. Other drivers that affect the cost
behaviour are: scale, scope, technology, and complexity.

14. (2) Business Unit Competitive Advantage-Three
interrelated
questions have to be considered in developing the business unit’s competitive
advantage. First, what is the structure of the industry in which the business unit
operates? Second, how should the business unit exploit the industry’s structure? Third,
what will be the basis of the business unit’s competitive advantage. Michael Porter has
described two analytical approaches-industry analysis and value chain analysis-as aids in
developing a superior and sustainable competitive advantage.
Industry Analysis
Research has highlighted the important role industry conditions play in the
performance of individual firms. According to porter, the structure of an industry should
be analyzed in terms of the collective strength of five forces:
1) The intensity of rivalry among existing competitors.
2) The bargaining power of customers
3) The bargaining power of suppliers
4) The threat from substitutes
5) The threat of new entry

15. If all 5 forces mentioned
earlier are low? Will
profitability of the company
increase? YES or NO? Justify.

16. Porter claims that the business unit has two generic ways of responding to
opportunities in the external environment and developing a sustainable competitive
advantage:
Low Cost- cost leadership can be achieved thought such approaches as
economies of scale in production, experience curve effects, tight cost control
and cost minimization.
Differentiation- the primary focus of this strategy is to differentiate the
product offering of the business unit, creating something that is perceived by
customers as being unique. Approaches to product differentiation include
brand loyalty, dealer network, product design and product features, and
technology.

17. Value Chain Analysis
The value chain disaggregates the firm into its distinct strategic activities.
The value chain is the complete set of activities involved in a product, beginning
with the extraction of raw material and ending with post delivery support to
customers.
Value chain analysis seeks to determine where in the company’s operation
from design to distribution—customer value can be enhanced or costs
lowered.
 Portfolio Matrices
This typically position business unit on a grid where one axis id “market
attractiveness” and the other is axis is “market share”