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ADMG4055 relationship between corporate governance and social

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ADMG4055 Seminar in
Business Policy – Take Home Exam

 

1.             
What is the relationship between corporate governance and social
responsibility?  Does a corporation have
to act selflessly to be considered socially responsible?  Use a specific example to explain your answer

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Corporate governance can be seen as a way of
ensuring the efficient use of the corporate resources, and the social
responsibilities of a corporation are ways of ensuring an ethical treatment of
the stakeholders. In other words, corporate governance describes a management
body within the organization that is responsible for making sure all the
resources such as the employees, materials, and other related resources that is
owned by the company are used properly. Where the social responsibility of a
corporate describes ways that corporate governance can take to ensure the
protection and satisfaction of the stakeholders such as the employees,
customers, and the shareholders.

Indeed, corporate governance has a
responsibility for ensuring the safety and security of its stakeholders in and
outside the firm by providing safe and profitable products or services. Unlike
what people might think, social responsibilities do not force corporations to
act selflessly or lose profits. For example, Google is considered a global
leader in corporate social responsibilities, and their revenue has reached over
$90 billion in 2016(). The company is trying to reduce its carbon footprint by
designing products that are better for the environment and by building green
offices, stores, and service centers. This shows how any company can ensure
profits for its shareholders while creating a new and greener environment for
its stakeholders both inside and outside the organization. Yet, the corporate
governance has to make sure that they can balance between ensuring the
protection of the company resources, providing green initiatives, and
satisfying their shareholders at the same time.

 

2.             
The hierarchy of strategy
indicates that a company should build a relationship between functional,
business and corporate level strategies. 
Using your first case, explain how that company did or did not
effectively make use of the hierarchy of strategies.  Be specific in your answer by showing the
relationship (or lack thereof) between each strategic layer.

Under Armour’s
hierarchy of strategy is consistent of three related strategies at each of the
three levels; business, functional and corporate. At the business level, Under
Armour aims to differentiate itself from others by providing more advanced
products for its customers. Their goals for these products are to market them
to athlete and encourage more people to be athletic and use their product as a
way to be more active by using their products to improve their performance. At
the corporate level, Under Armour aims to expand to new markets by developing
new products that meets customers’ demand. They have made a few attempts couple
of years ago by supporting soccer teams in the UK as a part of their marketing
campaign to sell their products to European countries. The company shows its
great effort to expand its presence in the market by developing new products.

At the
functional level, the company aims to improve its work in different departments
to achieve their goals. They have a great R&D department that is
consistently introducing new and improved products along with the rest of the
departments that aim to sell them and market them in a way that matches the
company’s mission and goals. This shows how Under Armour has built a relationship
between their three levels strategies. They all match and work together to
achieve similar goals, and at the same time, they all have made a positive
impact on the company and its performance in the past few years.

 

3.             
Explain the impact of
environmental uncertainty on the strategic management process.  Give an example from one of your cases or
your Capsim company that shows how environmental uncertainty impacted the
strategic management process.

Environmental
uncertainty can be a major obstacle for any company during the decision-making
process. As the company becomes less aware or uncertain about the internal or
external environment, the harder it gets to make decisions that will be
successful. After all, all companies operate in a dynamic environment that is
consistently changing and adapting to new technologies, regulations, demand,
and other variables that effect the way the company operates. Therefore, when a
company is uncertain of these variables, they might not be able to make the
right decisions, which will reflect in less profits, high inventory, or loss of
market share.

Indeed, in
Capsim, our team, team Erie, ran into the same issue of environmental
uncertainty in the early rounds. We were not a risk takers at the beginning,
and we were calculating our projected sales based on our market share, sales
from the last round, and the growth rate. However, we have lost a huge
potential between rounds 2-5 because other teams were not producing enough or
have dropped their products. This made us lose a huge potential in selling more
products, earning more profits, and increasing our market share. The reason
behind this is the fact that we were not certain about out external environment
especially our competitors and their decisions. If we had someone who was monitoring
the activities of other teams, we might have had the chance to act on it and
make the right decisions to take the lead in the market.

 

4.             
What kind of internal factors help managers determine whether a firm
should emphasize the production and sales of a large number of low-priced
products or a small number of high-priced products?  Be specific in your answer and use your
Capsim experience as supportive evidence.

The different internal factors such as
R, finance, marketing, the corporate culture, resources, and the goals
can determine whether a company should produce a large number of low-priced
products or a small number of high-priced products. For example, if the company
has a strong R and marketing departments but they lack the resources to produce
high number of products, they might be forced to produce a small number of
high-priced products. However, if the company lacks a strong R and marketing
departments and they have a large number of minimum wage employees, they might
decide to focus on producing large number of low-priced products which will be
helpful for them in using their resources without spending more to improve
R and marketing to be able to produce and sell high-priced products.

Indeed, during the early rounds of Capsim, we
knew that we did not have the resources to keep up with the customer buying
criteria for the high-end segment. Customers required a specific age of which
we could not achieve due to the high cost of development. The same thing
happened with the low-end segment where we could not meet the customer buying
criteria. This forced us to change our approach and focus on producing small
number of high-priced products (in the size and performance segments). However,
we could have introduced new products that are able to meet the customer
demand, but it would have cost us a lot and effected our objectives which we
were not looking for.

 

5.             
Using your experiences with
Capsim, explain several of your functional strategies and their implementation
through the competition rounds.

In order to achieve our goals, we have
created several functional strategies and implemented them across four main
functional areas; R, marketing, finance, HR, and production. As for the
R strategy, we have focused on developing products that meet the customer
demand in the 3 main segments (size, traditional, and performance) while
controlling how much we spend and the movement of the products in the
perceptual map. In terms of marketing, our strategy was to achieve and maintain
a 100% promotion and accessibility by spending $13.5 million on average as a
budget for marketing our products while maintaining a fair price that suits
customers in all 3 segments.

As for finance, we focused on lowering or paying
back the debts that we owed to reduce the liabilities, issue stocks, and pay dividends
to increase the price of our stocks. In terms of HR, our strategy was to insure
a high productivity from our employees by training them while maintaining a low
turnover rate and a high recruitment budget. For our production strategy, we
focused on increasing automation every year by .5 to reduce labor cost,
increase capacity by 200-300, and maximize our production to meet the customer
demand and sales projections. All in all, these functional strategies work
together to achieve the same goals of meeting customers’ demands, lowering
expenses, increasing productivity, and increasing profits.

 

6.             
Is it possible for a
company or business unit to follow a cost leadership strategy and a
differentiation strategy simultaneously? 
Why or why not?  Use an example
from Capsim or one of your cases as the basis for your answer.

Cost leadership
refers to a strategy where a company achieves the lowest operation cost in the
market, and differentiation strategy refers to a strategy where a company
offers a premium product. These two strategies can be implemented by any
company simultaneously. Indeed, in Capsim, our team, team Erie, has managed to
achieve a cost leadership and differentiation strategy in the size segment. In
round 7, we have managed to achieve the highest numbers in performance and MTBF
with the lowest size, and these numbers are accurately chosen based on the
customer buying criteria. The product achieved a customer survey of 53 which is
the highest in the segment. In addition, the product costs us $17.89 to make
which is the lowest in the market, and the closest company to this number is
team Chester with a product that has
a lower performance numbers, low customer survey, and cost them $17.98. This
conclude that it is possible for a company to provide a product or a service
that has the lowest operation cost in the market while being the most valued
and perceived product by the customers.

 

 

7.             
Using your Capsim results, create a BCG Matrix that is representative
of the Sensor industry and your company’s products.

 

 

 

 

 

Note: Echo and
Ebb have been dropped in rounds 2 and 5, but I have used the numbers from the
last rounds when they were still in the market.

 

8.             
Use Porter’s 5 Forces Model to analyze the organic food industry.  This should be your own analysis – not one
taken from an online source.

·      Threat of New Entrants: is considered a moderate threat as the
industry is highly profitable which makes it more desirable for investors, yet
it is being controlled by large chain stores such as Whole Foods, Wal-Mart, and
Trader Joe’s. It is not impossible for new entrants to enter the industry, but
it is less likely to happen as large companies in the market will stop it.

·      Power of Buyers: is considered a high threat to the industry
as the buyers have the power to control the prices. The availability of
alternative products makes it a higher threat along with the fact that the
industry is controlled by large companies who will do their best to get and
keep their customers by offering promotions and discounts.

·      Threat of Substitute
Products: is considered a high
threat to the industry as non-organic products are still valued for their
prices and the fact that people are still not fully committed to using organic
products. Also, the high competition and control over specific products and
their prices offer the customers with many different options that can affect
one company over the other.

·      Power of Suppliers: is considered a low threat for the industry.

The suppliers have a high competition between them which reduces the prices for
the companies in the industry. Also, the high availability of suppliers
increases the chance for large chain stores to find the needed product for a
low price.

·      Rivalry Among Competitors: is considered a high threat to the companies
in the industry. Large companies and chain stores are competing with each other
to control the market by offering low prices, loyalty programs, and opening new
locations especially between the large three, Wal-Mart, Whole Foods, and Trader
Joe’s.

 

9.             
Using one of your case
companies, choose an actionable strategy within the TOWS matrix and develop a
specific implementation plan for that strategy. 
Be specific in your discussion of what the company would have to do to
implement that strategy.

One of the main
issues that Tesla is facing now is the fact that their current strategy is not
working, nor it is even implemented correctly. According to Tesla, their
strategy is based on Elon Musk’s plan of building expensive cars, selling them,
and using the money to build affordable cars, yet the company is losing around
$4,000 for each vehicle they produce. Therefore, if the company is looking to
achieve its goals, they must implement a new strategy to solve the issue of
high operation cost, high prices, and slow production. And the best actionable
strategy that will reduce the cost and increase production is to build new
factories outside the US specifically in countries that has low labor cost and
high availability of raw materials. The company should build a new factory in
Mexico, Thailand, or China and limit the US operations to the designing
process. By doing so, they will be able to cut the cost down and be able to
make profits out of their products. Within 10-15 years, the company will be
able to use the money they have saved to resume their production in the US.

They might use the factories in the US to produce luxury and high-end vehicles
and limit their international factories to producing affordable cars at a mass
production level.  

   

10.          
Strategy implementation focuses on programs, budgets and
procedures.  Using a company with which
you are familiar, evaluate their strategy implementation (from your personal
perspective) in terms of the program(s) they have chosen to implement. (ex:
loyalty program or internal program to support the company or the employees.)

Amazon has come up with a differentiation strategy
by developing their Prime service that is unique and hard to imitate. They are
focusing on creating a new and fast delivery service for low cost along with
access to their digital library. The company managed to introduce the service as
a free 2-day shipping service that allow for fast delivery of products which
usually took over 5 days. Along the way, Amazon managed to enter the film and
TV industry and provide their Prime members with an access to a digital library
with books, movies, and TV shows. They have also provided their customers with
free trails and special discounts, which allowed users to try the service and
see its benefits. In the recent years, Amazon introduced new services for Prime
members like scheduling delivery times, gift wrapping, ordering food, and scheduling
services like maid services.

The implementation of their differentiation
strategy was thoroughly planned. Indeed, they were able to define their goals
and objectives of controlling the market and managed to come up with a great
plan to do so. Despite the service being new, the company managed to implement
it and maintain it over the years. They have managed to add to the service and
not to limit it to delivery options, and this has created a more brand recognition
and brand loyalty as it became the most useful service.

 

 

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